updated: 5/4/2012 8:50:02 AM
Duke Energy Corp. (NYSE: DUK) is reporting a 42 percent drop in first quarter earnings following cost overruns at its Edwardsport coal gasification plant. The utility says its first quarter profit of $295 million, compared to $511 million a year earlier, includes a $420 million charge related to Edwardsport.
May 5, 2012
CHARLOTTE, N.C., May 4, 2012 -- Duke Energy (NYSE: DUK) today announced first quarter 2012 adjusted diluted EPS of 38 cents, compared to 39 cents for first quarter 2011, and reported diluted EPS of 22 cents, compared to 38 cents for the same period last year.
Reported results for the first quarter 2012 include pretax charges of approximately $420 million related to the company's Edwardsport Integrated Gasification Combined Cycle (IGCC) project, which have been excluded from adjusted diluted EPS.
These charges are the result of the provisions of a settlement agreement related to regulatory proceedings involving the project.
Participants in the settlement include the Indiana Office of the Utility Consumer Counselor, Indiana Industrial Group and Nucor Steel-Indiana, which have been involved in regulatory proceedings related to the project.
On an adjusted basis, the effects of mild weather during the quarter were largely offset by the implementation of new customer rates in the Carolinas and reduced operation and maintenance costs at the regulated utilities.
Temperatures in the first quarter were the warmest on record for the contiguous United States, according to the National Climatic Data Center. Duke Energy Carolinas saw the lowest number of heating degree days on record.
In the non-regulated Commercial businesses, stronger results at Duke Energy International helped offset the expected reduction in earnings at Commercial Power that were the result of the new Electric Security Plan (ESP) in Ohio.
"Our first quarter adjusted results highlight the ability of our diverse business operations and cost control measures to mitigate the impacts of the mild weather we experienced," said James E. Rogers, chairman, president and chief executive officer. "The first quarter of 2012 shows we are well-positioned to achieve our 2012 adjusted earnings guidance range of $1.40 to $1.45 per share.
"With respect to our proposed merger with Progress Energy, we continue to work with federal and state regulators toward its successful completion," he added. "We are targeting a July 1 closing date."
BUSINESS UNIT RESULTS
Below is a discussion of first-quarter results on an adjusted segment income basis, which is a non-GAAP financial measure. The tables on pages 20 through 21 present a reconciliation of reported results to adjusted results.
Beginning in 2012, Duke Energy evaluates segment financial performance and allocation of resources on the basis of segment income, rather than the previous segment measure of earnings before interest and taxes from continuing operations. Segment income is calculated as income from continuing operations, which is net of interest expense and income taxes, and net of amounts attributable to non-controlling interests. In addition, unallocated corporate costs, which were previously reflected in "Other," are now allocated to each segment. As a result, prior period segment results presented in this release have been restated to conform to this change.
U.S. Franchised Electric and Gas (USFE&G)
USFE&G recognized first-quarter 2012 adjusted segment income of $344 million, compared to $341 million in the first quarter 2011.
USFE&G's quarterly results were primarily driven by the implementation of new customer rates in the Carolinas (+$0.03 per share impact), lower operation and maintenance costs (+$0.01 per share impact) and a favorable revenue true-up following a South Carolina regulatory ruling related to the company's energy efficiency programs (+$0.01 per share impact). These results were offset by unfavorable weather resulting from a mild winter (-$0.04 per share impact) and higher planned depreciation expense
(-$0.01 per share impact).
International Energy saw first-quarter 2012 adjusted segment income of $142 million, compared to $128 million in the first quarter 2011. International Energy's quarterly results increased primarily due to favorable volumes and pricing in Brazil and National Methanol (+$0.02 per share impact). This was partially offset by the prior year favorable arbitration award in Peru (-$0.01 per share impact).
Commercial Power posted first-quarter 2012 adjusted segment income of $30 million, compared to $52 million in the first quarter 2011.
Commercial Power's quarterly results decreased primarily because of lower earnings from the Midwest coal generation fleet (-$0.02 per share impact) resulting from the new ESP in Ohio, and lower margins and volumes realized by Duke Energy Retail (-$0.01 per share impact). These results were partially offset by the non-bypassable stability charge (+$0.01 per share impact) and higher results from the Midwest gas-fired generation fleet (+$0.01 per share impact).
On an adjusted basis, Other primarily includes corporate interest expense not allocated to the business units, results from Duke Energy's captive insurance company and income tax levelization adjustments.
Other recognized a first-quarter 2012 adjusted net expense of $10 million, compared to zero in the first quarter 2011.
Source: Duke Energy Corp.