Duke Energy to Lower Capital Spending by $200 Million after Posting 65% Drop in 3Q Profit

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Researched by Industrial Info Resources (Sugar Land, Texas)--Duke Energy Corporation (NYSE:DUK) (Charlotte, North Carolina) has announced a 65% drop in third-quarter profit to $215 million compared with $607 million in the same period last year. Chairman, President and CEO Jim Rogers said the company attributes the decline to milder temperatures and storm-related costs. "Last year, we had record-setting hot weather in our Franchised Electric business," he said. "This year, the weather was more normal. In September, we had the Midwest storm. It resulted in increased storm restoration costs, as well as lost revenue from sustained outages." As a result, Rogers said the company is scaling back its capital expenditures by about $200 million this year. The company will provide a snapshot of a five-year capital spending program on November 21, he said.

Business Segments

Franchised Electric & Gas (Duke Energy's largest business segment)

• Earnings before interest and taxes (EBIT): $726 million, down from $760 million in the same period last year
• Primarily because of $163 million in weather-related spending
• Partially offset by $41 million increase in rates in Indiana and Ohio; $23 million increase in wholesale and bulk power marketing results; and $19 million increase in equity allowance for funds used during construction

Commercial Power

• Report EBIT: deficit of $108 million, down from a $163 million gain in the same period last year
• Adjust EBIT: $93 million, down from $159 million
• Adjusted EBIT decreased mainly because of a $69 million impact of the timing of recovery of fuel and purchased power costs, as well as $18 million lower results from Midwest gas-fired assets
• Partially offset by $19 million of lower purchase accounting expenses

Duke Energy International LLC

• EBIT: $77 million, down from $92 million
• From unfavorable results in Peru and Central American because of unfavorable hydrology and lower prices in Peru
• Partially offset by favorable results from increased demand and higher contracted prices in Brazil, improved results at National Methanol and favorable FX variance

Crescent

• Reported EBIT:$124 million loss, down from $10 million gain in 2Q07
• Adjusted EBIT: $10 million loss, down from $10 million gain
• Because of continued downturn in residential and commercial real estate

Industrial Info is tracking 71 Duke Energy projects worth approximately $29.34 billion as part of the Power Tracker database. Two of the largest projects are unit additions at the Edwardsport Generating Station in Indiana worth $2.35 billion and the Cliffside Steam Station in North Carolina worth $2.4 billion. Duke Energy continues to make progress on the two plants, Rogers said. "Both of these plants provide us an opportunity to begin cash recovery of financing costs before the plants are fully constructed and put in service," he said. "Assuming we receive a favorable order from the Indiana Commission this year, we will have current recovery of financing costs associated with our construction work in progress on Edwardsport." Industrial Info has been tracking the Edwardsport project since February 2001 and the Cliffside project since May 2005.

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Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.