On the strength of its portfolio management energy strategy, Duke Energy’s third quarter results posted on Tuesday showed a 46% gain, with earnings per share (EPS) of $1.02, up from 70 cents per share a year ago. Revenues also rose 7% to $16.7 billion, primarily because of the Charlotte, NC-based company’s wholesale natural gas and power sales.

The earnings excluded a gain of 34 cents on the sale of DukeNet Communications’ interest in the BellSouth PCS business. All 2000 numbers also were adjusted for a Jan. 26, 2001, two-for-one stock split, said Duke.

Year-to-date, Duke earned $2.30 per share (excluding a 13-cent one-time charge related to an accounting change in the first quarter of 2001), which represented a 41% increase over the $1.63 per share earned in the first three quarters of 2000, and did not include the DukeNet Communications gain and the one-time $54 million gain on the sale of liquefied natural gas (LNG) ships during first quarter 2000. Year-to-date revenue totaled $48.8 billion, up 44% over last year’s total of $33.9 billion.

Duke’s total segment year-to-date earnings before interest and taxes (EBIT) climbed 33% to $3.5 billion, from $2.7 billion for the same period a year ago, excluding one-time items. Duke said its competitive businesses contributed 60% of segment EBIT for the first three quarters of the year.

“Duke Energy’s integrated strategy continues to deliver outstanding results to shareholders, even in periods of economic uncertainty,” said CEO Richard B. Priory in a statement. “Our third-quarter performance underscores our ability to find the upside reward in volatility, and to continue growing and shaping our businesses to meet the energy challenges of this decade.”

Among the highlights in the last quarter was an announcement in September that Duke would expand its position in the North American natural gas marketplace by acquiring Canadian-based Westcoast Energy in a cash and stock transaction valued at US$8.5 billion, including debt (see Daily GPI, Sept. 21). The acquisition is expected to close in first quarter 2002.

“Duke Energy’s 2001 earnings have been driven by outstanding execution of a solid business strategy, as well as by exceptionally strong market conditions,” Priory said. “While such market conditions are unlikely to continue, we do expect to continue superior performance. Looking ahead, we’d anticipate delivering earnings in 2002 that will be toward the high end of our guidance of 10% to 15% annual EPS growth from our 2000 base of $2.10 per share.”

In earnings broken out by business segment, Duke Energy Services delivered a stellar third quarter performance, with third quarter EBIT of $670 million, a 169% increase over third quarter 2000. Year-to-date, Duke Energy Services EBIT is $1.4 billion, an increase of more than 140% over the same period in 2000, excluding the LNG ship sales.

Also outstanding was performance in the North American Wholesale Energy segment, comprised of Duke Energy North America (DENA) and Duke Energy Merchants (DEM), which reported another quarter of record earnings, delivering $618 million in EBIT — a 163% increase over third quarter 2000. Year-to-date, EBIT is $1.2 billion, an increase of 185% over a year ago.

In the third quarter, DENA’s portfolio increased to more than 13,000 MW operating or under construction, with the addition of five DENA- built facilities and the acquisition of New Albany, a 350 MW peaking facility in Mississippi. DENA also closed on the sale of its remaining 77% interest in the McClain Energy Facility to NRG and the asset swap of the Madison and Cadiz generating facilities with Cinergy Capital & Trading.

D/FD, North America’s largest thermal generation engineering, procurement and construction (EPC) company, grew its position for construction of natural gas-fired power projects in the United States in the third quarter, with D/FD announcing it had been awarded contracts to perform EPC services for 3,000 MW in Florida and Oklahoma. For the first three quarters of 2001, D/FD has been engaged for EPC work at new power generating plants representing more than 10,000 MW of capacity. D/FD also has a backlog of 8,000 MW to 10,000 MW of projects per year over the next three years.

In Duke’s Natural Gas Transmission segment, third-quarter EBIT was $143 million compared to $132 million in the same period last year. The company said earnings benefited from its Market Hub Partners, the natural gas salt dome storage business acquired in September 2000, and other expansion projects. For the year to date, EBIT for Natural Gas Transmission was $460 million, compared to $418 million for year-to-date 2000. Year-to-date EBIT benefited from new businesses acquired last year — East Tennessee Natural Gas Company and Market Hub Partners.

Also in the third quarter, DEGT’s East Tennessee Natural Gas (ETNG) subsidiary filed an application with the Federal Energy Regulatory Commission (FERC) seeking approval of the Patriot project to meet the growing energy needs of the southeastern United States. The $289 million project will bring natural gas service to portions of southwest Virginia for the first time and introduce a competitive supply of natural gas to North Carolina from Appalachian and Gulf Coast producers.

DEGT also announced that the first sections of offshore Florida pipe were laid in Tampa Bay as offshore construction activities continue on the 753-mile Gulfstream Natural Gas System. The $1.6 billion Gulfstream system, a joint venture with Williams, will have capacity to transport approximately 1.1 Bcf/d. It is the first new natural gas transportation system to serve Florida in more than 40 years.

In its Field Services business segment, representing Duke’s majority interest in Duke Energy Field Services, EBIT was $75 million, a decline of 12% from the same period of 2000. Duke said the decline came from reductions in natural gas liquids prices, which were partially offset by cost reductions and asset integration. Also, DEFS benefited from the acquisitions of Canadian Midstream Services Ltd., which doubled DEFS’ net natural gas processing capacity in western Canada, and Gas Supply Resources, Inc., a propane distribution company serving New England.

Year-to-date EBIT for DEFS increased 23%, mostly, said Duke, because of the combination of Duke Energy’s natural gas gathering and processing business with Phillips Petroleum’s gas processing and marketing business and the acquisition of assets from Conoco in March 2000.

A Duke earnings conference call is scheduled for 10 a.m. EST on Wednesday. CFO Robert Brace will discuss highlights. The conference call can be accessed via Duke Energy’s Web site at https://www.duke-energy.com or by dialing (800) 946-0782 in the United States or (719) 457-2657 outside the United States. The confirmation code is 723536.

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