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is looking for a new way to keep its promises to Wall Street.

The North Carolina utility rattled analysts last month by saying it had included gains from asset sales in its full-year guidance. That revelation, which sent Duke shares spiraling throughout a testy earnings call July 30, blindsided a number of observers who remembered Duke promising to exclude such gains from its earnings guidance this year.

Now Duke is backing away from the asset-sale comments, blaming the fiasco on "overexplaining." Contradicting repeated remarks on the conference call, the company insists that all along it had been excluding the gains from its earnings guidance. But in the meantime, it has gone back to its headquarters and requested significant cost cuts so that it can still please Wall Street.


CEO Rick Priory has said to you before, we're going to have to 'make our own breaks' this year in order to meet our earnings targets," operating chief Fred Fowler told Duke employees on Monday, according to a companywide email.

Fowler's address came more than a week after Duke rushed to reassure analysts that it had issued -- and maintained -- earnings guidance without expecting help from asset sales. But Fowler's comments indicate that Duke is now banking on brand-new cost cuts, beyond those already planned, to hit its profit forecast.

"We are looking for savings from the business units of about 5% from this year's projected spending," Fowler told the staff. "From corporate areas, we're seeking reductions of about 15%."

Without help from asset sales -- which generated 18 cents a share in the latest quarter alone -- Duke must battle to hit guidance even with additional cutbacks. Particularly challenging is the company's goal of snaring $200 million in EBIT (earnings before interest in taxes) from its unregulated business. That unit, Duke Energy North America, produced only $56 million of EBIT (excluding asset sales) in the first half and was off to a rocky start in the normally strong third quarter.

"For the first half, we were pretty much on track," CFO Robert Brace told analysts in last month's conference call. But "July weather has us a little behind on the third quarter. ... The $200 million for the year

is still our target, but it's a challenge."

At that time, Duke executives repeatedly indicated that the company would need help from asset sales to hit anything above the low end of its full-year earnings guidance of $1.35 to $1.60 a share. And they simply said they were "hopeful" that Duke would need no asset sales to hit the low end of that target.

During the call, Brace also denied that Duke had pledged to exclude gains from asset sales in its guidance.

"We never said that," he stated. "I remember distinctly in January on the call, when Rick

Priory was asked about that, he said that there were some asset sales included in the $1.35 to $1.60 range. But we weren't specific about it was."

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He remained vague on the matter during the call.

"I can certainly tell you what the gains are in the year," he said. "What you include and what you don't

in operating earnings, I can't."

But frustrated analysts pressed for clarity.

"I'm asking you, Robert, what you include and what you exclude," Zack Schreiber of Duquesne Capital said.

But Brace said he was unable to provide those figures. And since then, the company has gone on to say that asset sales haven't impacted its earnings at all.

Contacted Thursday by

, Duke said the company quickly clarified the mix-up through one-on-one meetings with analysts in New York and Boston. But Wall Street remains skeptical. Bernstein analyst Hugh Wynne, who downgraded the stock to underperform last week, actually raised his profit forecast for Duke to reflect generous asset sale gains. But he dropped his expectations for operating profits at DENA.

Wynne expects DENA to generate only $135 million of EBIT this year and lose $120 million next. He says that DENA's safest income, generated through locked-in contracts, will dive from $600 million to $360 million next year. And he points out that DENA has been unable to muster the riskier profits, from noncontracted sales, that it has promised the market this year. By mid-year, DENA was already 50% behind on its goal of securing $400 million in noncontracted sales in 2003. Meanwhile, DENA's costs are actually rising. Wynne projected that DENA's expenses will jump by $200 million in the second half of 2003 alone.

Given the risks at DENA, and the murky outlook for Duke in general, Wynne views the stock as overvalued.

"At a utility industry average of 12.1

times earnings -- potentially generous in light of the volatility of Duke's earnings -- this would seem to justify a share price of some $14.50 to $15," he wrote last week. "There seems little scope ... for the current price to absorb adverse developments in the direction of future earnings."

Meanwhile, Duke itself has acknowledged internally that it faces a tough road ahead.

"We see a challenging market at least through next year, and we're going to have to take decisive action to manage through it," Fowler told employees. "We can all help deliver results every day by managing our operations and costs as efficiently as possible, and by minimizing activities that do not directly and positively impact earnings."

Duke slipped a nickel Friday to $17.11.