Cinergy Corp. shares rose 2% to $33.05 last Thursday after the company reported that it beat the average of Wall Street estimates by about 6 cents/share with reported 2002 earnings of $2.68/share before one-time charges of 55 cents/share. The special charges were for early retirement and other employee severance programs, investments, and a cumulative change in accounting principle.

Shares fell slightly on Friday, however, after the market digested the news that Cinergy’s 2002 earnings, including one-time charges, were only $2.13/share compared to $2.75 in 2001, and the company reported fourth quarter net income of 58 cents/share compared to 69 cents in 4Q2001. Excluding one-time items, Cinergy earned 78 cents per share in fourth quarter compared to analysts expectations of 65-77 cents per share, with an average forecast of 74 cents, according to research firm Thomson First Call.

“Despite the uncertainties in the energy industry in 2002, we successfully executed on our plan of focusing on our core businesses, strengthening our balance sheet and instituting leading corporate governance practices,” said CEO James E. Rogers. He also noted that Cinergy’s favorable outlook for 2003 allowed it to approve earlier this month a 2.2% increase in its common stock dividend to $1.84 per share.

Fourth quarter earnings from the regulated operations segment rose 25 cents/share from 4Q2001 to 57 cents/share before one-time charges of 2 cents per share. Gross margins were higher as a result of colder weather as well as rate increases related to the company’s natural gas distribution business and environmental compliance construction projects. Increased wholesale transmission revenues also contributed to the earnings increase.

Cinergy’s merchant energy segment reported earnings of 26 cents per share before one-time charges 14 cents per share, compared with 39 cents per share for the fourth quarter of 2001. The decrease was primarily the result of increased operations and maintenance, depreciation, property taxes and financing costs. the company maintained a stable credit rating in 2002 in contrast to many of its merchant energy colleagues.

Cinergy owns regulated delivery operations in Ohio, Indiana, and Kentucky that serve 1.5 million electric customers and about 500,000 gas customers. Its Indiana regulated operations also own 6,000 MW of generation. Its energy merchant business owns 7,000 MW of capacity.

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