Duke Profits Rise On Higher Rates, Summer Energy Use

Nov 8, 2019

Duke Energy's profits rose 19% in the third quarter as the big utility benefited from higher customer rates, warm summer weather that drove up energy use, and lower operating expenses. 

The profit of $1.33 billion included growth in all of Duke's business lines, Chief Financial Officer Steve Young said in an interview. 

"We were strong across the board. All of our segments grew," Young said. In particular, he said, "The third quarter is a big quarter for the electric infrastructure segment. That's our largest segment, anyway."  

There, Young said, higher rates to pay for investments in new plants and other infrastructure helped boost earnings.  Warm summer temperatures also led to higher energy use. Meanwhile, the company was able to trim operations and maintenance expenses.  

The company recently has filed for more rate increases in North Carolina.  If approved, new rates could take effect next year. 

Profits also rose in Duke's gas and commercial renewable energy divisions. 

Earnings per share were $1.79, excluding the cost of a settlement with a construction contractor in Florida. That beat the average estimate among Wall Street analysts of $1.68, according to Thomson Reuters.  

Duke also slightly raised its projections for full-year profits, based on the higher third-quarter results. It's now expected earnings between $4.95 and $5.15 per share. The midpoint of the range is now $5.05, up from $5.  

AWAITING PIPELINE DECISION 

The company gave updates Friday on two legal battles: the Atlantic Coast Pipeline and coal ash cleanups. 

Duke is a partner with Dominion Energy in the $7.8 billion project to bring fracked natural gas from West Virginia to Virginia and North Carolina via the Atlantic Coast Pipeline. But construction is held up by lawsuits, including one over whether the pipeline should be allowed to cross the Appalachian Trail. A federal appeals court threw out a key permit, and the companies have appealed to the U.S. Supreme Court. A decision is expected in mid-2020.  

"We feel good about our position on this," Young said. "We think that the government authorities have acted properly in giving authorization for this pipeline, as they've done in the past. And it's certainly a very valuable piece of infrastructure for customers." 

Duke says assuming a victory at the Supreme Court, it expects to resume construction and begin service along the entire pipeline in the first half of 2022. 

COAL ASH FIGHT 

Duke also is in the midst of a battle with North Carolina environmental regulators over how it cleans up coal ash stored at its current and former N.C. coal plants. In April, the Department of Environmental Quality ordered Duke to excavate ash at all remaining sites not already subject to excavation. Duke wants to keep ash where it is, with new waterproof caps, and has appealed. No decision is expected until sometime in 2020.  

Coal ash is a toxic byproduct of burning coal. Millions of tons are stored at current and former plants across Duke's five-state territory. Duke currently projects cleanups will cost about $6.7 billion, most of that in the Carolinas. Young said digging up the six sites as ordered by DEQ would add $4-5 billion to the cost.  

Duke already has finished removing ash at three N.C. plants: Riverbend in Gaston County, Sutton in Wilmington and the Dan River plant in Eden. It's also building coal ash recycling plants at three sites, to process ash for concrete and other industrial uses.  

RELATED LINKS

See Duke's third-quarter 2019 earnings release and investor presentation at Duke-Energy.com