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With Merger Complete, Duke Posts 77% Earnings Increase

With Merger Complete, Duke Posts 77% Earnings Increase

A 14% increase in electric sales and the absence of $70 million in merger-related costs (posted in 2Q97) sent Duke Energy earnings per share soaring 77% during the second quarter to 76 cents/share, well above analysts' estimates. Duke reported earnings for common stock of $274.4 million compared to $157.6 million in 2Q97.

"This has been an event-filled first year for Duke Energy," said Duke CEO Richard B. Priory. "We've made rapid progress toward becoming a leading global energy company by closing on several acquisitions and announcing major projects worldwide. Our strong second-quarter performance reflects solid year-to-year growth for most of our major business units, plus the operating efficiency improvements resulting from last year's merger. We are well positioned to continue taking advantage of the opportunities coming about from the changing energy industry."

Record hot weather and the upbeat economy of the Carolinas led to increased sales: residential (up 18.5%), commercial (up 10.8%) and industrial (up 2.2%). Textile sales, a large component of the industrial sector, increased 4.6%. "Although the hot weather drove residential sales, the healthy economy of our territory led the industrial and commercial sectors of our sales to solid gains.," said Priory.

The company's 22,000 miles of interstate gas pipelines even brought in higher earnings. Earnings of the group before interest and taxes were $147.6 million, slightly above the $144.7 million reported in last year's second quarter. Earnings of Texas Eastern and Algonquin were $100.6 million compared to $96.6 in 2Q97. Earnings for Panhandle and Trunkline were $47.0 million this quarter, down from $48.1 million for last year's quarter.

Earnings were down slightly for the energy services division, which posted $44.5 million compared to $46.5 million last year. Duke attributed the drop to lower gas liquids prices resulting in significantly lower margins for Duke Energy's Field Services unit. Duke Energy Trading and Marketing posted increased revenues and EBIT for the quarter despite the tumultuous wholesale power market. "Our disciplined approach to trading continues to serve us well," said Priory. "Our trading operation performed well during periods of historic pricing volatility in the wholesale power market."

Other notable energy events of the quarter included Duke's Global Asset Development unit completing its $501 million purchase of three electric generating stations in California from a unit of PG&ampE Corp., starting power generation from its first merchant power plant in the Northeast at Bridgeport, CT, and purchasing the 389-mile Queensland State Gas Pipeline in Australia from PG&ampE Corp.

Perhaps the biggest surprise, however, came from Duke's real estate development arm, Crescent Resources, which reported a 169% increase in earnings to $42.3 million. A big portion of Crescent's success came in the form of a large land sale to the state of South Carolina.

Rocco Canonica

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