Duke, Entergy Profits Drop as Power Demand Declines

Comment: Again, why do we need 100 more nuke plants? People are cutting back on their power because of the recession; people keep this up even during good times! Do not give your money to the Electric Giants; therefore, our earth will not be poison from nuke power, uranium mining, or mountain top removal!

By Jordan Burke and Katarzyna Klimasinska

Aug. 4 (Bloomberg) -- Duke Energy Corp. led U.S. utility owners in reporting declines in second-quarter earnings after the recession sapped demand for power to run factories.

Duke’s profit dropped 21 percent to $276 million, according to a statement today by the Charlotte, North Carolina-based owner of utilities in the East and Midwest. New Orleans-based Entergy said its net income fell 16 percent to $226.8 million. Progress Energy Inc., Consolidated Edison Inc. and Allegheny Energy Inc. also reported declines in earnings. PPL Corp. posted a loss and suffered the biggest share decline in its history.

“Demand seems to be flattening out, and we don’t expect to see a strong rebound for probably another year and a half,” Duke Chief Executive Officer Jim Rogers said in a telephone interview. “I think the recovery will be pretty anemic, and it might be as late as 2011 before we see a full rebound.”

Wholesale prices in PJM Interconnection LLC, the largest U.S. power market, averaged $40.38 per megawatt-hour during the second quarter, down 60 percent from a year earlier. Earnings from Duke’s power-generation unit slid 66 percent. Progress, based in Raleigh, North Carolina, saw an 18 percent drop in power sales to industrial customers.

“Weak industrial sales is something that I’m seeing for every company that I cover,” said Marc De Croisset, an analyst at Macquarie Capital USA Inc. in New York.

Entergy Nuclear Plants

Beyond declining demand and prices, Entergy was stung by output disruptions, which contributed to a 44 percent drop in profit from its reactors. The company, which supplies power to about 2.7 million utility customers in Arkansas, Louisiana, Mississippi and Texas, got about 65 percent of its 2008 earnings from nuclear plants outside its service territories.

Net income at Progress fell 15 percent to $174 million. Allegheny, based in Greensburg, Pennsylvania, said its profit dropped 53 percent to $72.6 million. Consolidated Edison, owner of New York’s biggest utility, reported a 73 percent plunge in earnings to $150 million. Allentown, Pennsylvania-based PPL had a $7 million loss and cut its 2010 earnings forecast.

PPL tumbled $4.48, or 13 percent, to $29.50 in New York Stock Exchange composite trading, its biggest drop on record. Progress slid 60 cents to $39.03, and Entergy dropped $2.73, or 3.4 percent, to $78.25. Allegheny declined $1.26 to $24.50, and New York-based Consolidated Edison fell 6 cents to $39.50. Duke, which exceeded analyst earnings estimates by 1 cent a share, rose 1 cent to $15.58.

Economic Outlook

The jobless rate in North Carolina, home to the largest utilities of Duke and Progress, reached a 33-year high of 11.1 percent in May, according to the U.S. Bureau of Labor Statistics. In Pennsylvania, home of Allegheny and PPL, unemployment rose to 8.3 percent, the highest since 1985.

Consumer spending continues to slump, said Rogers, the Duke CEO. The nature of the recession may mean a gradual return to economic growth, he said.

“What I think we have experienced is a balance-sheet recession, and particularly given how hard hit the banks have been, I think recovery will be very slow,” Rogers said.

Those utility owners that are most reliant on wholesale markets, where prices are unregulated, are feeling the brunt of the demand slump, said Michael Worms, an analyst at BMO Capital Markets in New York.

Sales Slump

“These companies are doing nothing differently today than they were doing a year ago or two or three years ago, other than sales are down, pricing is down,” Worms said.

Duke supplies energy to about 4 million utility customers in North Carolina, South Carolina, Indiana, Ohio and Kentucky. PPL controls more than 12,000 megawatts of U.S. generating capacity. The company delivers power to about 4 million homes and businesses in Pennsylvania and the U.K.

Progress has about 3.1 million power customers in North Carolina, South Carolina and Florida. Allegheny, which derives most of its profit from wholesale power plants, has more than 1.5 million utility customers in Pennsylvania, West Virginia, Maryland and Virginia.

To contact the reporters on this story: Jordan Burke in New York at jburke29@bloomberg.net; Katarzyna Klimasinska in Houston at kklimasinska@bloomberg.net.


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