NEW YORK (AP) — Duke Energy reported strong earnings for the second quarter on higher electric rates, but newly acquired subsidiary Progress Energy saw earnings plummet as a result of planned refueling shutdowns at three nuclear power plants.
Duke became the nation's largest utility last month after it completed what became an acrimonious combination with in-state rival Progress. The poor results at Progress — and the good results at Duke — may take some pressure off Duke's board. State regulators are investigating the board's controversial decision to oust former Progress CEO Bill Johnson only hours after he was handed the top job at the combined company.
"They needed a good quarter to brighten the mood around there," said Andy Smith, an analyst at Edward Jones. "It's something they want and needed to get the attention on the actual results."
Duke said Thursday that it earned $444 million, or 99 cents per share, on revenue of $3.58 billion in the quarter. A year earlier, the company earned $435 million, or 98 cents per share, on revenue of $3.53 billion. Adjusted earnings of $1.02 per share topped analysts' forecast of 97 cents per share, according to FactSet.
Duke CFO Lynn Good called the quarter "extraordinary" in an interview. Duke's biggest division, regulated utilities that deliver power to customers in the Carolinas, saw earnings rise because regulators allowed Duke to charge more for electricity. Also, last year's results were hurt by high storm-related maintenance costs.
Residential demand for power slipped in Duke's service territory, partly because of cooler weather, while industrial demand rose slightly.
Power demand typically grows with the economy as factories turn out more goods, businesses serve more customers, and families move into bigger houses with more gadgets. Good said Thursday that the automotive and heavy equipment sectors were going strong, but textiles and fabricated metals were somewhat weak.
"We remain cautions on the overall economic recovery," she said.
Duke reported results for Progress separately. Progress's net income fell 64 percent to $63 million, or 21 cents per share. The shutdown of three nuclear reactors in the Carolinas for refueling drove up operating costs. Also, power demand fell across all sectors in Progress's territory, mainly because of lower demand for cooling in the April-June period.
Jim Rogers, who got the CEO job after Johnson's dismissal, said in an interview that Progress's poor second quarter results could be blamed on unique timing issues — with three nuclear reactors down at once, Progress wasn't able to generate as much power as a year earlier.
In the wake of the CEO switch, top executives and board members who had come to Duke from Progress have resigned, and North Carolina's utilities regulator has launched an investigation to determine if the state was misled during the merger approval process. Duke board members who have testified in the case say the board lost confidence in Johnson's ability to lead the company.
They also cited ongoing problems fixing a former Progress nuclear reactor in Florida that has been out of service since 2009. Duke is conducting a review of the facility and will decide whether to shut it permanently or try to fix it. Rogers said Thursday that the cost to repair it, estimated at $900 million to $1.3 billion last year, is "trending higher."
Rogers said the integration of the two companies is going well despite the management turmoil. "We have our 350 top leaders in place, and they are focused on results," he said.
On a conference call with investors, Rogers said Duke is exploring a way to settle the North Carolina investigation, a move proposed by the chairman of the state's utilities commission.
The rancor between Duke and regulators prompted Standard & Poor's to downgrade the company's debt. Duke is scheduled to ask regulators for a rate increase this year, and the poor relationship between regulators and the company hangs over those negotiations.
Rogers doesn't think it will have any affect. "We expect they will address each case on its merit," he said.
Duke filed a proposal with regulators on Wednesday to reduce customer rates slightly in the Carolinas to reflect lower fuel costs and electricity delivery costs as a result of the merger. The savings, which would go into effect Sept. 1, would reduce average customer bills in both states by 80 cents to 92 cents per month.
Rogers expects Duke to hit its full-year earnings target for the combined company of between $4.20 and $4.35 per share. Duke shares slipped 45 cents to $67.07 in trading Thursday.
Duke, based in Charlotte, N.C., is now the largest U.S. utility by number of customers. It serves 7.1 million residential and business customers in North Carolina, South Carolina, Ohio, Kentucky, Indiana and Florida.
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