Duke's Trading Unit Sends Earnings Soaring
Led by its unregulated wholesale energy operations, Duke Energy put
in a whopper quarter, exceeding analysts expectations. Earnings before
interest and taxes from its wholesale group jumped 175%.
Power sales rose 164% to 89,967 gigawatt hours. Wholesale gas sales
grew 15% to 12 trillion Btu/d (11.7 Bcf/d) from 10.4 TBtu/d (10.1 Bcf/d).
Excluding a one-time pre-tax gain of $407 million, or an after-tax gain
of 67 cents per share, on the sale of Duke's interest in BellSouth Carolina
PCS, third quarter earnings were $1.41 compared with $1.20 for the third
quarter of 1999, an 18% increase, and earnings before interest and taxes
totaled $1.6 billion, a 71% increase.
"We have kept our eye on the ball with disciplined, focused growth
and have exceeded expectations throughout the year," said CEO Richard
James M. Donnell, CEO of Duke Energy North America (DENA), which is
the wholesale energy division, said the company has a three-pronged strategy
for success: developing its resources through a holistic approach; making
a commitment to remaining competitive; and embracing technology. Donnell
was a keynote speaker at PowerMart 2000.
"These are fun times for our industry, but we still face substantial
challenges," Donnell said last week at the PowerMart 2000 meeting
in Houston. "Technology will bridge the gap to meet our customers'
Pointing to DENA's venture into InterContinental Exchange (see NGI,
July 31), a B2B trading platform, Donnell
said that these types of platforms offer shareholders a way to instantly
"know the score." He predicted that by 2005, there would be a
"clear segmentation" between the retail and wholesale energy
markets, with even more consolidation of players.
"I see a handful of national players, with a handful of niche players
operating regionally," Donnell said, adding that he expects Duke Energy
to be one of those national players.
But technology overall will be the "wildcard," said Donnell.
"It's not difficult to imagine almost anything happening. Imbalances
will be a thing of the past." He said that on the retail side, more
corporate giants such as AT&T, Sprint and American Express will enter
the energy market. On the wholesale side, he predicted that companies will
"fight it out" over bandwidth.
"We have to be challenged by different ways of thinking,"
he said. "It's the only way to close the gap."
Carolyn Davis, Houston