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Duke Energy Q3 2010 Earnings Call Transcript

Duke Energy Q3 2010 Earnings Call Transcript

Duke Energy (DUK)

Q3 2010 Earnings Call

October 28, 2010 11:00 am ET

Executives

TST Recommends

Lynn Good - Chief Financial Officer and Group Executive Officer

Stephen De May - Head of Investor Relations, Senior Vice President and Treasurer

James Rogers - Chairman, Chief Executive Officer and President

Analysts

Michael Lapides - Goldman Sachs Group Inc.

Dan Eggers - Crédit Suisse AG

Paul Fremont - Jefferies & Company, Inc.

Paul Patterson - Glenrock Associates

Ali Agha - SunTrust Robinson Humphrey Capital Markets

Jonathan Arnold - Deutsche Bank AG

Ashar Khan - SAC Capital

Ivana Ergovic - Jefferies & Co

Hugh Wynne - Bernstein Research

Brian Chin - Citigroup Inc

Presentation

Operator

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Previous Statements by DUK
» Duke Energy Q2 2010 Earnings Call Transcript
» Duke Energy Q1 2010 Earnings Call Transcript
» Duke Energy Corporation Q3 2009 Earnings Call Transcript

Good day, everyone, and welcome to the Duke Energy Earnings Conference Call. [Operator Instructions] At this time for opening remarks, I would like to turn the call over to Mr. Stephen De May, Senior Vice President of Investors Relations and Treasurer. Please go ahead, sir.

Stephen De May

Thank you, Lisa. Good morning, everyone, and welcome to Duke Energy's Third Quarter 2010 Earnings Review. Leading our discussion today are Jim Rogers, Chairman, President and Chief Executive Officer; and Lynn Good, Group Executive and Chief Financial Officer. Jim and Lynn will review our third quarter results, discuss our outlook for the remainder of 2010 and provide an update on certain matters related to the business. After their prepared remarks, Jim and Lynn will take your questions.

Today's discussion will include forward-looking information and the use of non-GAAP financial measures. You should refer to the information in our 2009 10-K and other SEC filings concerning factors that could cause future results to differ from this forward-looking information. A reconciliation of non-GAAP financial measures can be found on our website and in today's materials. Note that the appendix to the presentation materials includes additional disclosures to help you analyze the company's performance.

With that, I'll turn the call over to Jim Rogers.

James Rogers

Thank you, Stephen. Good morning, everyone, and thank you all for joining us today. We appreciate your interest and investment in Duke Energy.

I'll start with the bottom line for the third quarter results. They were excellent. The weather remained hot, the economy continued to show slow but steady signs of improvement, especially in our industrial class and our employees executed extremely well. As you saw in our news release this morning, we announced adjusted diluted earnings per share of $0.51 for the third quarter of 2010 versus $0.40 for the third quarter of 2009. This is a quarter-over-quarter increase of around 28%. If you remove the impact of weather from each of these quarters, the quarter-over-quarter increase was approximately 7%.

Let me highlight the more significant drivers of our results for this quarter. First, favorable weather. We experienced well above normal temperatures in all five of our regulated jurisdictions during the third quarter. In the Carolinas, the quarter was the hottest third quarter in nearly 50 years.

Additionally, we continued to realize higher revenues from our base rate increases approved in 2009 in North Carolina and South Carolina. And our employees and fleet continued to deliver excellent performance throughout the third quarter's unusually hot weather.

Our year-to-date nuclear capacity factor was 96%, while our fossil fuel fleet had a commercial availability of 89%. This strong operational performance through the end of the third quarter puts us on target to achieve our operational metrics for 2010, some of which are outlined on Slide 18 in the appendix.

Based upon our results for the third quarter, usually our most significant quarter, we are increasing our 2010 adjusted diluted EPS outlook. We're going to increase that range to $1.40 to $1.45 per share. To put this in some perspective, at the start of the year, our 2010 adjusted diluted EPS outlook range was $1.25 to $1.30. After our second quarter results, we increased the outlook range to $1.30 to $1.35. Assumptions underlying this revised outlook include: normal weather for the rest of the year, continued costs control, continued strong operational performance and a stable economy.

Before I turn the call over to Lynn to discuss the quarterly results, let me spend a few moments on Indiana. On November 3, I will have an opportunity to reaffirm our need for Edwardsport in a technical conference at the Indiana Commission and to answer any questions that the commission, its staff or any of the parties in the proceeding may have. Edwardsport is the cornerstone of our modernization strategy in Indiana. It helps us reduce the environmental impact of our existing coal generation fleet and prepares us for the inevitable retirement of some of our older coal plants, renew environmental regulations for coal-fired plants are issued in the coming years by the EPA.

Our IRP, our Integrated Resource Plan, supports our need for Edwardsport, even at the higher costs estimates of $2.88 billion. Based on this analysis, it is the best long-term economic solution to meet the needs of our Indiana customers at this time. Edwardsport is currently around 74% complete and is scheduled to be in service, 2012.

As you may know, questions have been raised related to the recent hiring of an attorney formerly with the Indiana Commission. In response, we have retain an outside law firm to conduct an independent investigation. We're also cooperating with Indiana Commission and the Inspector General in the reviews of this matter.

Once the investigations are concluded, we will take whatever actions are appropriate. Because these investigations are ongoing, I cannot comment at this time, on the investigations or any actions we may take. However, this matter is a top priority for me, as well as my management team.

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