The scandal-ridden, cash-starved merchant energy sector endured another punishing storm Tuesday. As has often been the case, only industry leader

Duke

(DUK) - Get Report

held steady as its rivals teetered.

Alone in an unusually strong torrent of red ink Tuesday morning, Duke kept its footing even as the company trimmed its annual profit forecast. Meanwhile, competitors such as

Mirant

(MIR)

,

Dynegy

(DYN)

,

Williams

(WMB) - Get Report

and

Calpine

(CPN)

suffered yet another bloodbath, spurred by eroding cash-flow projections at Dynegy and downgrades of other big players.

Despite the sharp fall in its stock over the last month, Duke continues to carry a market valuation of around $16 billion as risk-averse investors continue to bet on the company's strong cash flows, solid balance sheet and relatively simple business model. Meanwhile, shares in the other players have plunged below $5 amid a scrutiny-driven meltdown in the energy-trading business that so many companies had bet their futures on.

Bad News First

Investors cut Dynegy's stock price in half after the Houston-based energy trader slashed its cash flow outlook for 2002. Blaming a downturn in energy trading and power prices, Dynegy said it expects to fall up to $400 million short of the $1 billion in cash flow it originally projected for the year. That announcement, coupled with Dynegy's loss Monday of an investment-grade credit rating, sent the company's stock spiraling 52% to an unprecedented $1.63 a share.

Williams suffered its second pounding in a row Tuesday, tacking a 35% loss onto a 60% dive Monday. The stock has shed 75% of its value, toppling from $5.16 to $1.28 this week following the disclosure of a major quarterly loss.

Peter Cohan, a Massachusetts author and investment strategist, predicted the end may be near for Williams.

"They've paid a high price for misleading the market," said Cohan, who has no financial stake in the stock. "The stock is gone. It's clearly history.

"It's only cheap if you think the company is going to survive."

Shares of Calpine and Mirant tumbled as well, following stock downgrades by Banc of America Securities. Calpine, dropped from neutral to underperform, shed 25% to hit $3.08. Mirant, cut from buy to market perform, fell 26% to $3.

Only a year ago outfits like Mirant, Calpine, Dynegy and Williams traded at 10 and 20 times their current prices, as investors bet that the merchant energy sector would continue the strong growth that had made

Enron

a market favorite. But since the collapse of the onetime industry trendsetter, investors have soured on the companies' weak business fundamentals and the smell of scandal coming out of the sector. Players in the industry are now the subject of a number of regulatory and criminal probes of its business and accounting practices.

Lone Bright Spot

In contrast, Duke -- which beat second-quarter earnings estimates -- recovered from a slight morning dip to actually post a gain. The stock was up 7 cents to $19.37 in midday trading.

Duke is now expecting full-year earnings of $2.45 to $2.55, at or just below the lower end of its guidance, due to a downturn in the sector. But in contrast to its troubled rivals, Duke boasts of a strong generating business and a healthy, investment-grade balance sheet.

Duke itself has been hit in recent weeks by its admission that it too engaged in so-called roundtrip power trades -- trades that carried no economic value but served to boost trading volumes and other closely scrutinized numbers. Still, the company has said that the trades were few and far between, and thus far the company hasn't been implicated in any of the aggressive financing tactics that have laid low many of its competitors.

In a summer of scandal on Wall Street, investors are hoping Duke's a stock to hold onto.