The $1.9 billion sale in March of Panhandle Eastern Pipe Lineand Trunkline Gas to Michigan-based CMS Energy resulted in aone-time gain of $1.82 per share for the first quarter and anafter-tax gain of $660 million, putting Duke earnings for thequarter over results in the same quarter last year. Duke reportedearnings of $2.65 per share, compared with 87 cents in 1Q98.Without the sale, and the absence of an extraordinary item fromlast year’s quarter, basic first-quarter earnings were 83 cents pershare versus 89 cents last year.
“This quarter highlighted our ability to reposition assets tocreate greater long-term shareholder value,” said Duke CEO RichardB. Priory. “We have been able to redirect the capital gained fromthe Midwest pipeline sale to areas that offer us greateropportunities for the future.”
In trading and marketing, earnings before interest and taxes(EBIT) were $33 million versus $13 million for the same quarterlast year. A 39% increase in the amount of gas marketed helpedboost margins. “Our trading and marketing operations continue togrow and turn in solid results,” said Priory. “We have managed togrow the business through very different market conditions-fromlast year’s volatile summer to the more calmer conditions of thisquarter.”
Duke Energy completed a number of acquisitions during the firstquarter. The most notable was the $1.35 billion purchase of themidstream natural gas business from Union Pacific Resources. Italso started construction on a new merchant power plant in HidalgoCounty, TX. But Duke last week conceded defeat in its attempt togain control of a major South American power producer,withdrawingits $3 billion bid for Endesa-Chile, leaving the field to Enersis,which is majority controlled by a Spanish utility.
Earnings from electric utility operations were up $29 million to$407 million. Gas transmission results were down $1 million at $208million. Duke said earnings growth in the Northeast pipelines,spurred by expansion projects, basically offset lower earnings fromthe Midwest pipelines and the effect of a state tax refund in 1998.Lower gas liquids prices continued to hurt margins in fieldservices, but Priory said, “We are seeing a major improvement innatural gas liquids prices.” Field services EBIT for the quarterwere $12 million versus $48 million. The company’s domestic andinternational energy development businesses also posted improvedresults with EBIT for the quarter up to $32 million versus $9million in 1Q98. “Our merchant megawatt capacity has grown morethan 50% in the past year,” said Priory.
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