Duke Energy losing money on coal power plants
Duke lost 14 cents per share on revenue of $6.62 billion in the first three months of the year
Duke announced in February that it would try to unload the power plants in the Midwest that sell power into wholesale markets, instead of directly to customers. Wholesale prices have been extremely volatile, but generally low in recent years, due to extremely low natural gas prices.
The company's regulated utility operations, however, performed better than expected due to stronger demand as the economy recovers. It's also able to charge higher rates.
Duke lost 14 cents per share on revenue of $6.62 billion in the first three months of the year. Last year, the company earned $634 million, or 89 cents per share, on revenue of $5.9 billion.
Adjusted to remove the $1.4 billion write-down of the coal plants, Duke earned $1.17 per share in the latest quarter. That's up from last year's adjusted $1.02 per share and higher than the $1.12 expected by analysts surveyed by FactSet.
"We're seeing this economic recovery deepen and broaden a bit," said Duke CFO Steve Young in an interview Wednesday. "It's started to get into median income households and small businesses."
Electricity sales rose 7.1 percent in the quarter, and 2.6 percent when the effect of weather was removed.
Christopher Muir, an analyst at S&P Capital IQ, said the growth was promising. "It's not enough of a trend yet," he said. But it's definitely encouraging."
Duke also benefited from higher rates that regulators have allowed the company to charge customers.
Duke Energy Corp., based in Charlotte, is the nation's largest electric utility by market value and number of customers. It serves 7.2 million customers in North Carolina, South Carolina, Florida, Indiana, Ohio and Kentucky.
Duke CEO Lynn Good said in an interview Wednesday that Duke was working to deliver steady and strong results for shareholders, and the volatility and low returns of the Midwestern fleet was hindering that effort.
Because wholesale power prices apear likely to remain weak, Duke is unlikely to get the asking price it had originally imagined for its power plants, so it wrote down their value.
In February, a pipe at the bottom of a pond that held waste from a Duke coal plant in North Carolina burst and spilled toxic ash into the Dan River. Good said cleanup efforts cost the company $15 million in the quarter. She said while there will be more costs to come, she does not expect them to be large enough to materially affect overall results.
Duke shares rose 10 cents to $73.11 per share Tuesday in morning trading. Shares are up 6 percent so far this year and hit a new high for 2014 last week.