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Duke Revenues Up, But Storms And Severance Pay Affect Profits

Duke Energy headquarters in Charlotte

Higher electric rates helped push revenues at Duke Energy up slightly during the last three months of 2018, but storm cleanup costs, severance pay and other expenses kept profits lower than a year ago.

Executives told analysts Thursday that they expect continued 4 to 6 percent annual profit growth through at least 2023, though delays in the Atlantic Coast Pipeline could slow that slightly.

The Charlotte-based utility earned $464 million in the quarter, down from $703 million a year ago. Earnings per share were 84 cents — short of the consensus estimate of 89 cents per share by Wall Street analysts and 10 cents less than a year ago.

Profits for all of 2018 were about $2.7 billion, down from a little more than $3 billion in 2017. After adjusting for one-time gains and expenses, 2018 earnings per share were $4.72, up from $4.57 a year ago.

Duke says profits were affected by costs related to cleanups after big storms, including Hurricanes Florence and Michael. Other one-time expenses also cut into profits. Duke paid out $144 million in severance to employees whose jobs were eliminated last fall, including in the nuclear and information technology areas.

Meanwhile, CEO Lynn Good said future profits could be at the lower range of Duke's projections because of legal delays and cost increases on the planned Atlantic Coast Pipeline from West Virginia to Virginia and North Carolina. She told analysts Duke expects 2019 earnings around $5 per share — the middle of its previous projection of $4.80 to $5.20 per share.

"Certainly the midpoint has been affected by the near-term uncertainty around the Atlantic Coast Pipeline — both the schedule delay and the cost increase," Good said.

Good said the projected cost of the pipeline has risen again, from about $7 billion to as much as $7.8 billion. Duke and the pipeline's builder, Dominion Energy of Virginia, say they're appealing court decisions that halted key environmental permits.

Good also updated analysts on Duke's plan to seek a minority investor for Duke Energy Renewables, a non-regulated subsidiary that sells wind and solar energy to companies and other utilities. She said a deal could be announced this spring and could close this summer. Good said taking on a partner would allow Duke to spend that capital on other areas of potential growth.

[ Related Link:Feb. 14, 2019, Duke profit announcement (PDF)]

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