Duke Energy on Friday reiterated it plans to meet a 2003 earnings forecast and affirmed that it expects to fully fund its annual dividend. The news sent shares of the Charlotte, NC-based energy company higher than they have been since January, gaining 58 cents to close at $19.53.

At its annual financial investor and analyst conference, management affirmed 2003 earnings will fall between $1.35-$1.60 a share, excluding accounting changes, and noted that it expects to fully fund the $1.10 annual dividend. Duke said the 5.8% dividend yield would remain one of the best on the Standard & Poor’s 500 Index. Analysts had expected Duke to earn about $1.42 on average, according to Thomson First Call.

“Our staying power is fueled by strong corporate character, a proven business model and solid financial fundamentals,” said CEO Rick Priory. “We take a long view of value creation. Our near-term measures are focused on preserving a strong and lasting competitive position.” Priory said Duke had taken “a number of decisive steps in 2003 to protect our financial position and to ensure that we’re positioned for growth. We had a good first quarter and are seeing some promising indicators. It’s beginning to feel like we’ve rounded the toughest curves.”

Priory, along with other senior management, discussed progress toward this year’s financial goals and prospects for the company. Among other things, management detailed Gulfstream Natural Gas System LLC’s new 23-year agreement with Florida Power & Light Company (FPL) in which Gulfstream will provide up to 350 MMcf/d of firm natural gas transportation service to FPL for its Martin and Manatee power plant expansions (see related story).

Plans also were detailed on subsidiary Duke Capital Corp.’s plans to redeem $250 million in trust preferred securities on June 30 to enhance Duke Capital’s balance sheet and reduce ongoing expense obligations of Duke Capital.

Robert Ladd, president of Duke Energy North America, unveiled new data at the conference that outlines the effects on DENA’s 2003 hedged gross margin from price movements of electricity and natural gas. And Richard Osborne, Duke’s chief risk officer, talked about DENA’s collateral “stress test” which estimates the effects on incremental outgoing collateral from price movements of electricity and natural gas. Osborne described DENA’s net credit position to its trading partners and customers, following recommendations from the Committee of Chief Risk Officers.

According to CFO Robert Brace, DENA’s current 2004 hedged gross margin expectations are approximately $400 million, and he added that this amount is expected to increase over the coming months as DENA secures new business. The $400 million of 2004 currently hedged gross margin represents a non-Generally Accepted Accounting Principles (GAAP) financial measure as defined under Securities and Exchange Commission rules.

Brace explained that the most directly comparable GAAP measure is DENA segment earnings before interest and taxes (EBIT) for 2004, which represents DENA gross margin reduced by operations and maintenance expenses, general and administrative expenses and depreciation and amortization. Later this year, after Duke Energy has completed its budget process, Brace said DENA would provide a more detailed estimate of its total gross margin and its corresponding expense and EBIT expectations for 2004.

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