Duke Energy Posts $2B 4Q Loss Due to Special Items
Hindered by absorbing $3.4 billion in pre-tax charges during the fourth quarter due to actions taken to reduce exposure to merchant generation and international businesses, Duke Energy on Thursday reported a 2003 net loss of $1.3 billion, or ($1.48) per share, compared to net income of $1 billion, or $1.22 per share in 2002. For the fourth quarter, Duke Energy posted a $2 billion loss, or ($2.23) per share, compared to a $52 million loss, or ($0.06) per share in fourth quarter 2002.
Withholding special items, Duke Energy for the year posted ongoing earnings per share (EPS) of $1.28, a $0.60 decline from the company's $1.88 in ongoing EPS in 2002. Ongoing earnings per share for fourth quarter 2003 were $0.22 versus $0.32 in fourth quarter 2002.
"To establish a stable platform for future growth, Duke Energy sold non- strategic assets, cut expenses and paid down debt in 2003 -- while still funding capital expenditures at our core regulated businesses," said Paul Anderson, Duke Energy CEO. "We also announced our intention to exit the Australian and European markets, as well as the merchant generation business in the southeast United States."
In the segment breakdown, Duke Energy Gas Transmission (DEGT) contributed year-end 2003 earnings before interest and taxes (EBIT) of $1.3 billion -- an increase from $1.2 billion in 2002. The segment reported fourth quarter 2003 EBIT of $308 million, compared to $294 million in fourth quarter 2002. The company said gains of $16 million from asset sales and increased earnings from new projects, partially offset by foregone earnings on assets sold, drove the increase.
For the year, more than 99% of customers in the northeast United States whose transportation contracts permitted notice of termination, decided to renew. The segment also placed in service several projects totaling 850 MMcf/d of pipeline capacity.
Duke Energy North America (DENA) contributed a loss in year-end 2003 of $3.3 billion, compared with positive EBIT of $169 million in 2002. For 4Q2003, DENA chipped in an EBIT loss of $3.16 billion, compared to EBIT of $26 million in fourth quarter 2002. Of the 4Q loss, $3.1 billion came from special item charges including:
- selling DENA's merchant plants in the southeast United States;
- reducing DENA's interest in deferred plants;
- winding down its trading and marketing joint venture with ExxonMobil; and
- redesignating certain hedging contracts to mark-to-market.
Duke's Field Services business segment, which represents Duke Energy's 70% interest in Duke Energy Field Services, contributed year-end EBIT of $192 million compared to $148 million in 2002.
The segment reported fourth quarter 2003 EBIT of $52 million compared to $49 million in fourth quarter 2002. The company attributed the increase to the favorable impact of higher natural gas liquids prices during the period, partially offset by the effects of hedging results related to the price movements of NGLs, higher natural gas prices and increased general and administrative costs.
"Going forward, we expect our $1.10 dividend and modest earnings growth to provide an attractive return for long-term investors," Anderson added. "Reducing debt by $2.2 billion in 2003 was an important achievement in strengthening Duke Energy's financial position. This effort will continue, as we expect to reduce debt between $3.5 billion and $4 billion during 2004."
The company noted that as a result of the decision to exit Europe and sell its Australian assets, the Duke Energy International (DEI) reporting segment will now include only operations in Latin America and its investment in National Methanol.