Duke Reports First-Quarter Loss on Power Plant Writedowns

May 07, 2014 4:25 pm ET

(Updates with closing share price in last paragraph.)

May 7 (Bloomberg) -- Duke Energy Corp., the largest U.S. utility owner, reported a first-quarter loss following a $1.4 billion charge in relation to Midwest power plants being sold, its biggest writedown in a decade.

The loss of $97 million, or 14 cents a share, compared with net income of $634 million, or 89 cents, a year earlier, Charlotte, North Carolina-based Duke said today in a statement. Profit excluding one-time items was $1.17, 5 cents higher than the average of 12 analysts’ estimates compiled by Bloomberg. Sales rose 12 percent to $6.6 billion.

The writedown was the biggest since the fourth quarter of 2003. The company expects its stakes in the 13 power plants, which have a combined capacity of 6,600 megawatts, to fetch about $2.1 billion, Chief Executive Officer Lynn Good said today in a phone interview. Duke put them up for sale after Ohio regulators denied a rate increase.

“The impairment basically reflects the difference between book value and what we expect fair market value to be,” Good said in today’s interview. “We’re still targeting end of ’14, early ’15 for resolution.” Power generators and private equity firms have expressed an interest in the assets, she said.

Demand for heating rose 11 percent from a year earlier for 3.1 million customers in North Carolina, Duke reported today. The state’s winter was the second-coldest first quarter since 1981, according to the National Climatic Data Center.

Increased generation boosted savings promised customers from the takeover of Progress Energy in 2012, Good said.

‘Strongest Quarter’

“We had the strongest quarter yet,” the CEO said. “We delivered in the first quarter of 2014 $85 million in savings, bringing the total to $275 million since the merger.”

Sales volumes rose 1.3 percent after discounting for the colder weather. “We’ve had three pretty good quarters,” Good said. “We’re more optimistic than we have been.”

Duke said last month the costs of cleaning up an estimated 39,000 tons of wet ash that spilled into the Dan River from a shuttered coal plant in February are not expected “to be material” to the company.

The spill triggered a federal investigation of the state’s oversight of Duke. The permanent relocation of all 33 North Carolina ash ponds, as demanded by several environmental groups, may cost $10 billion and take 30 years, Duke said.

The state legislature probably will discuss the coal ash ponds when it convenes this month, Good said. Duke rose 1 percent to close at $73.82 in New York. The shares have 13 buy, 11 hold and one sell recommendation from analysts.