Storms, hedging trims Duke Energy 3Q by 65 pct

NEW YORK - Duke Energy Corp., one of the nation's largest electric power companies, said Wednesday its third-quarter profit fell 65 percent due to what it called the worst Midwest storm-related outages ever, worsening economic conditions and mild weather.

The company posted net income of $215 million, or 17 cents per share, compared with $607 million, or 48 cents per share, in the year-ago period.

Excluding impairment charges and other one-time items, Charlotte, N.C.-based Duke earned 33 cents per share.

Revenue dipped about 5 percent to $3.51 billion from $3.69 billion.

Wall Street had expected earnings of 44 cents per share on $3.92 billion in revenue, according to a Thomson Reuters poll. Analysts typically exclude one-time items.

Shares fell 7.7 percent, or $1.30, to close at $15.62 Wednesday.

Duke, like dozens of other companies that hedge commodity costs, made a number of wrong-way bets in this year's volatile markets.

Falling coal and power prices forced Duke to record a mark-to-market charge of $119 million, or 6 cents per share.

"We are disappointed in the third quarter results, but our strong performance earlier in the year will help mitigate the impact of these results on our year-end performance," Chairman, President and Chief Executive Officer James E. Rogers said.

Remnants of Hurricanes Ike and Gustav barreled across the Midwest late in the summer, knocking out power to thousands of Duke's customers. The storms, combined with milder-than-average weather, cut earnings by 8 cents per share, the company said.

There have been some industry concerns about environmental regulations under an Obama administration.

Duke has two coal-fired power plants under construction and Rogers said he has spoken with President-elect Barack Obama about the nation's energy needs.

"I have confidence that he will handle the situation in a way that recognizes the importance coal plays to our country," Rogers said.

Duke recorded a $124 million charge in the quarter related to its residential real estate joint venture with Morgan Stanley Real Estate Fund, called Crescent Resources LLC. Crescent Resources is a real estate development and land management company focused on the Southeast and Southwest.

With the housing market crumbling , Duke has recorded $230 million in equity earnings losses to date this year. Last year, Crescent Resources turned $29 million in earnings for Duke.

"By writing off our total investment, we won't incur additional losses for the business," Rogers said, noting he doesn't expect any income from Crescent in the fourth quarter.

Utilities are heavily reliant on credit to fund huge projects and in September, Duke pulled $1 billion from a $3.2 billion credit facility as credit markets dried up.

On Wednesday, Duke said its liquidity position remains "strong."

"We're in a very good place, and would not anticipate any more draws from our credit facility," Chief Financial Officer David Hauser said in a phone interview.

The stock has traded between $13.50 and $20.78 in the past 52 weeks.

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