USA: Duke 4th-Quarter Profit Falls 36% on Spinoff Costs

by Harry Papachristou and Maria Petrakis

Duke Energy Corp., the U.S. utility owner that spun off its Spectra gas-pipeline operations on Jan. 2, said fourth-quarter profit fell 36 percent partly on costs related to the spinoff.

Net income fell to $387 million, or 31 cents a share, from $606 million, or 63 cents after payment of preferred dividends, a year earlier, Charlotte, North Carolina-based Duke said today in a statement. The per-share profit reflects stock issued in the company's $9.15 billion acquisition of Cinergy Corp. in April. Sales rose 34 percent to $4.07 billion

The Spectra spinoff shed more than 18,500 miles (29,800 kilometers) of pipelines in the U.S. and Canada. Spectra also took Duke's half stake in a joint venture with ConocoPhillips that's the largest U.S. gas processor. Costs related to the settlement of contract disputes at Spectra lowered net income by 8 cents a share, Duke said. Spinoff costs were 3 cents a share.

Excluding those costs and other one-time items including the writedown of Bolivian power assets sold this month and costs to consolidate Cinergy, per-share profit was 43 cents, Duke said. On that basis, the company was expected to earn 39 cents a share, the average estimate from 14 analysts surveyed by Bloomberg.

The spinoff left Duke as owner of electric utilities in five states and power plants in eight. The acquisition of Cinergy gave Duke cheaply fueled coal-fired power plants in Ohio and swelled the number of its electricity customers by 68 percent.

Plants Sale
Duke in May completed the sale of plants in the U.S. West and Northeast operated by its money-losing wholesale power business to LS Power Equity Partners LP for about $1.54 billion. The company recorded a $180 million gain from the sale in the fourth quarter of 2005.

Duke in September sold Cinergy's trading arm to the Belgian banking group Fortis for about $475 million and a 49 percent stake in real estate unit Crescent Resources to Morgan Stanley for $415 million.

The statement was released before the opening of regular trading on U.S. stock markets. Shares of Duke yesterday rose 30 cents to $20.29 in New York Stock Exchange composite trading. The stock, which has seven buy recommendations from analysts and 13 holds, has risen 24 percent in the past year.