Earnings Preview: Duke Energy to post 1Q results

Jonathan Fahey, AP Energy Writer
Associated Press

NEW YORK (AP) -- Duke Energy Corp.'s first quarter earnings were likely helped by colder weather than a year ago and higher electric rates. The earnings report will be released on Friday.

The weather in Duke's service territory and around the country during this year's first quarter was closer to normal than it was last year, when the country experienced the warmest January, February and March on record. When winters are mild, electric customers need less electricity for heating.

Regulators in North Carolina approved higher rates last year that went into effect in the middle of last year's first quarter. The company's revenue and profit should get a boost this year from having those higher rates for the full quarter.

But investors worry that neither the favorable weather nor higher rates can be counted on in the future. A cool summer will reduce demand for electricity to run air conditioners, and forecasters predict a slightly cooler summer this year compared with last year.

And there's a chance the North Carolina rate hike will be rolled back. The North Carolina Supreme Court ruled last month that regulators did not properly consider the effect of the hike on the state's customers, and has directed them to reevaluate Duke's rate hike request. The state's Attorney General asked a regulatory panel on Monday to abandon the higher rates until the matter is settled.

WHAT TO WATCH FOR: Investors will want to hear about the status of Duke's rate case in North Carolina and its efforts to increase rates in its other service territories. They will also look closely at power demand after the effects of the weather have been removed. Duke CEO Jim Rogers has warned that electric demand growth will be "anemic" because of efficiency programs and a sluggish economy.

Investors will also want an update on the company's efforts to get a new coal plant in Edwardsport, Ind. up and running. Construction costs soared far over budget, and investors are anxious to see the plant burning coal instead of cash.

WHY IT MATTERS: Duke is the largest utility in the U.S. by market value and number of customers. It serves 7.2 million customers in North Carolina, South Carolina, Florida, Indiana, Ohio and Kentucky. Because electricity demand rises with economic activity, the company's results can reflect changes in the broader economy.

WHAT'S EXPECTED: Analysts expect Duke to earn $1.03 per share on revenue of $5.69 billion on average, according to FactSet.

LAST YEAR'S QUARTER: Duke, which had not yet completed its acquisition of Progress Energy, earned $295 million, or 22 cents per share, on revenue of $3.63 billion in the first quarter of 2012. Earnings in the quarter were reduced by cost overruns at the Edwardsport coal plant.