Warm Winter Hurts Electricity Sales, But Duke Profit Up Slightly

May 9, 2017

Updated 3:07 p.m.
Warmer winter weather slowed Duke Energy's electricity sales in the first three months of the year. But profits still rose slightly, and executives say overall Duke is growing.  During the first quarter, the company also logged expenses from its October merger with Piedmont Natural Gas, and saw international revenues disappear, after the December sale of its Latin American operations.

Profits at the nation's largest utility totaled $716 million, or $1.02 a share.  That was a penny less than Wall Street analysts expected, but up 3 percent from a year ago.   

"The results in our electric business were impacted by the very warm winter weather - record warm temperatures in the Carolinas and Midwest," Chief Financial Officer Steve Young said in an interview with WFAE.

The first-quarter profit included $10 million in costs related to last fall's acquisition of Piedmont. And it did not include revenues from the company's hydroelectric dams in Latin America, which were sold at year's end.  

In the electric business, Duke reported income of $635 million in the quarter that ended March 31, down from $664 million a year ago. Young said Duke was able to offset lower sales by cutting expenses and growth in other investments. He said the electric business is growing overall.  

The company's gas business, which now includes Piedmont and gas pipeline operations, earned $133 million, up from $32 million in the first quarter of 2016.

And Duke's commercial renewable energy business, which sells solar and wind power to other utilities and corporate customers, saw little change compared to a year ago, with sales of $25 million.

"Going forward we have three really good business segments," Young said. "I think this is a great, very high-quality, low risk earnings company going forward."

CEO Lynn Good said Tuesday Duke is on track to meet profit projections for the year, of $4.50 to $4.70 per share.

She told analysts the company is adapting to changes in technology, new regulations and raised expectations from customers and shareholders. 

"We will invest in areas that position us well for the future, including strengthening our energy delivery system, generating cleaner energy, and expanding natural gas infrastructure," Good said. 

Duke announced recently it plans to spend $25 million to modernize its electric grid, and $11 billion to build new plants and pipelines. 

But Duke does face challenges. The company spent $1 billion over the past couple of years to clean up toxic coal ash at its plants. That's expected to continue in the coming years, and eventually could cost at least $5 billion, Young said.

Customers will help pay for growth and cleanups through higher rates. South Carolina, Florida and Indiana recently approved Duke's requests for rate increases. And the company plans to ask North Carolina regulators for rate hikes this summer, to pay not only for new plants, but also for coal ash cleanups and hurricane recovery costs.

Hearings on those requests later this year are expected to be contentious, as rate payers and environmental groups argue against Duke's plan to charge customers for coal ash cleanup costs.

Duke now has largely completed what it calls a strategic transition, with the sale of hydroelectric dams in Latin America last winter. And it has added Piedmont, which makes it primarily a regulated gas and electric utility. 

It expects to sell more gas, and to use more at a new generation of gas-fired power plants, which are replacing old coal plants. As part of that shift, it's building new gas transmission lines, like the Atlantic Coast Pipeline. Duke is a partner with other utilities in the $5.1 billion project, which will bring fracked gas from shale-oil fields in West Virginia to customers and its own plants in North Carolina.

The pipeline is awaiting federal approval, but Young said Duke hopes construction can begin by the end of year and open by late 2019.

RELATED LINKS

May 9, 2017, Duke-Energy.com, news release with first quarter 2017 earnings