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Trading, Wholesale Power Boost Duke's Earnings 27%

July 18, 2001|THOMAS S. MULLIGAN | TIMES STAFF WRITER

Pushed by the explosive growth of its trading and wholesale-power businesses, Duke Energy Corp. on Tuesday reported a 27% increase in second-quarter profit, narrowly topping Wall Street estimates.

Duke's net income was $419 million, or 53 cents per share, in the quarter ended June 30, up from $329 million, or 44 cents, in the year-ago quarter. The consensus estimate of industry analysts was 52 cents per share.

Revenue for the quarter leaped 43% to $15.6 billion.

Shares rose 38 cents to close at $42.03 on the New York Stock Exchange.

Charlotte, N.C.-based Duke, like other out-of-state independent power producers, is under fire from Gov. Gray Davis for allegedly overcharging for electricity from its California generating plants.

Duke does not break out its California results, but its profits from soaring spot-market prices in California during the quarter probably amounted to no more than a penny or two per share, according to analyst Jeff Gildersleeves of Argus Research in New York.

California accounts for about 10% of Duke's U.S. wholesale-power business, and about 90% of its California power is sold through long-term contracts rather than on the spot market, the company has said.

Those long-term contracts are a source of worry for investors, Gildersleeves said. Neither Duke nor the state has disclosed whether the contract prices can be adjusted downward if spot-market prices fall, he said. If the prices are not firm, it could represent a risk to future profits, he added, especially if spot prices continue to fall.

Duke's North American Wholesale Energy business unit posted second-quarter operating earnings of $251 million, up 128% from $110 million a year earlier.

Analyst Timothy M. Winter of A.G. Edwards in St. Louis said the overall quarter was "very good," considering that Duke's earnings from its regulated-utility business in North and South Carolina actually were flat because of mild weather, a slowing economy and increased costs associated with some nuclear generating facilities being out of operation.

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