Duke Energy Corp. told employees last week that poor market conditions affecting its merchant energy operations and milder weather that has negatively impacted its North Carolina utility sales will force the company to take additional cost cutting measures this year, including possible job reductions and project delays, in order to meet its earnings per share target of $1.35-60 in 2003.
“In order to meet our financial goals for 2003 and 2004 we know we are going to have to make additional cuts within the company,” Duke spokesman Randy Wheeless told NGI. “Right now we are looking at the range of like 15% in the corporate areas of the company, which is basically IT [information technology], legal, public affairs and other functions, and probably 5% in the business units, which have already had a number of cuts over the last year so obviously less there than in the corporate areas of the company.
“With the problems in the merchant energy sector and the way we see the markets going right now, we still need to have some cuts to meet our earnings projections,” he said. “We cut capital expenditures earlier this year and sold a number of assets to pay down debt but we still need to cut some expenses, which may involve reductions in workforce to meet those goals by the end of the year. We don’t have exact numbers yet.”
Wheeless noted that spark spreads, which are the differences in regional natural gas and power prices, have been poor, the weather has been mild throughout most of the country this summer and there is an oversupply of power generation in the marketplace.
“I think we’re just not seeing the rebound as quickly as we’d hoped to,” Wheeless said. “The market still looks tough.”
During the meeting with employees, Duke COO Fred Fowler told them that the company continues to “see pressures on revenues and decreasing margins driven by high natural gas prices. Electrical demand has been impacted by lackluster economic growth.” Fowler said the company expects a challenging energy market through at least 2004.
“The charge is to eliminate all expenditures that are not absolutely necessary to the functioning of the business,” he told workers. Duke, which has 25,000 workers worldwide, has already cut 1,500 jobs in the past year, many within its merchant energy and trading businesses and its electric utility. About 10,000 Duke workers are in the Charlotte area, including about 3,000 tied to the human resources, finance, IT and legal departments.
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