Duke to slow power plant construction program

By the OGJ Online Staff

HOUSTON, Jan. 17, 2002 — Duke Energy Corp. Thursday said it has slowed its power plant construction program and now expects to build 18,000 MW of generating capacity during the next 4 years, down from the 26,000 MW construction program previously reported.

Group Vice-Pres. Harvey Padewar said 11 plants representing 6,000 MW will be completed this year. Given the current outlook for electricity prices this year, executives said Duke is more likely to acquire rather than build generating capacity.

The integrated energy holding company reported 2001 fourth quarter earnings fell 21% from the comparable year-ago period, but were up 26% for the year, excluding one-time charges. It reported ongoing 2001 fourth quarter earnings of 35-/share on net income of $225 million, down from 47-/share on net income of $284 million in the same period of 2000. Duke blamed mild weather, a slowing economy, and weaker electricity prices for the decline.

The consensus estimate by research firm Thomson Financial/First Call was 45-/share. Duke’s shares were down $1.05 to $36.97/share in mid-day trading.

CEO Rick Priory said the company expects earnings of $2.75-$2.80/share in 2002, at the “high end” of the forecast 10-15% growth rate. He forecast capital expenditures will be $7-$8 billion, including potential acquisitions and power plant construction. He also said it expected a year of “solid” performance in 2003.

For the year, Duke reported ongoing earnings $2.64/share in 2001, up from $2.10/share in 2000. Revenues for 2001 grew 21% to $60 billion, and earnings before interest and taxes (EBIT) increased to $4.3 billion in 2001. The 2001 results excluded 13-/share for accounting changes, 3-/share for noncollateralized exposure to Enron in fourth quarter, and 3-/share for unbilled revenue receivables at Duke Power in fourth quarter.

Priory said a number of assets have recently come on the market and when prices “get into an economic zone that makes sense to us,” Duke will be interested in acquisitions in regions key to its growth plan, but he declined to be more specific.

Chief Financial Officer Robert Brace said the company has sold forward 87% of its 2002 merchant plant output, 64% of its 2003 output, and 53% of its 2004 output. The company expects to generate $75-$120/kw pretax from merchant generation, including its hedging and trading activities, he said.

The year’s gains were led by the company’s North American merchant energy and trading group, which more than tripled pretax earnings to $1.4 billion in 2001, up from $434 million in 2000, including the nonrecurring charges of $36 million for the Enron bankruptcy in 2001 and the $110 million charge against receivables related to California energy sales in 2000.

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