By JONATHAN FAHEYNEW YORK (AP) â¿¿ With three nettlesome financial issues resolved, Duke Energy Corp. CEO Jim Rogers says the company is now ready to face a future in which homes and businesses will no longer consume increasing amounts of electricity. Duke reported fourth-quarter earnings Wednesday that beat analyst expectations as electric rates rose and more extreme weather increased demand for power. But Rogers said underlying demand for power, not including the up-and-down effects of weather, would likely remain weak for the foreseeable future because of a slow-growing economy and efficiency programs that are making homes and businesses less energy hungry. "The growth in demand is not going to be the same as we've experienced in the past," he said. "Our industry is going to have to change its cost structure." Duke reported net income of $435 million, or 62 cents per share, for the fourth quarter. Adjusted to remove the effect of costs from the recent acquisition of Progress Energy and other one-time charges, Duke earned 70 cents per share. Analysts had expected the company to earn 65 cents per share on an adjusted basis. Duke shares fell 6 cents to $68.68 in midday trading. Duke, based in Charlotte, acquired Progress Energy in June, making it the nation's largest utility in the U.S. by market value and number of customers. The company serves 7 million electric customers in six states. The company's results for the quarter are not directly comparable a year earlier because Progress was still independent. As a stand-alone company, Duke posted net income of $288 million in the last three months of 2011. Performance at Duke's regulated utilities improved as a result of the addition of Progress Energy's territories in the Carolinas and Florida. Higher power prices and an income tax benefit also helped, and electricity demand was boosted by more extreme weather.
Adjusted for the effect of weather, electricity demand grew slightly less than 1 percent for the year, according to Duke Chief Financial Officer Lynn Good. She said Wednesday that's about how fast she expects demand to grow in the coming months and years.Good said that in Duke's service territory, auto manufacturers and metals companies have been increasing activity but textile manufacturers and chemical companies have been cutting back. Rogers said lower power demand is likely to affect the entire industry. That could mean cost-cutting in the months ahead. He cited the need to lower costs as a chief reason behind his company's acquisition of Progress Energy, and said the combination of the companies will function as a catalyst to lower the company's costs. Seven hundred employees have accepted buyouts to leave the company since the merger was completed, and Duke expects another 400 to leave in 2013. Duke took a charge of $164 million in the quarter, accounting for 13 cents per share, to pay merger-related expenses. For all of 2012, the company posted net income of $1.77 billion, up from $1.71 billion in 2011. Revenue rose to $19.78 billion from $14.62 billion as the company benefited from 6 months of revenue from Progress Energy after the merger. Over the past three months, Duke has resolved three issues that have hung over the company and concerned investors. In December the company reached a settlement with North Carolina regulators over surprise executive changes in the hours after Duke's merger with Progress was completed. Rogers will retire by the end of this year as part of the settlement. Also in December, Indiana regulators approved a settlement over payment terms for coal plant there that is well over budget. Customers will pay $2.6 billion and Duke will absorb $900 million. The plant was originally supposed to have cost $1.9 billion. The overruns cost Duke $28 million in the quarter, or 2 cents per share. Cost overruns cost the company $628 million in 2012.
Earlier this month Duke announced it would close the crippled Crystal River nuclear station in Florida rather than spend as much as $3.4 billion to try to repair it. The plant, acquired in the Progress deal, has been shut since 2009 when part of its structure cracked during maintenance."They've done a good job of accomplishing a lot of things we were hoping they would," said Andy Smith, an analyst at Edward Jones who called the company's performance in the quarter "solid." He says the company is now poised to perform well over the long term. "We've had a lot of issues to deal with," Rogers said in an interview Wednesday. "But now we're positioned to harvest savings, to change our cost structure, and get prepared for the future." Follow Jonathan Fahey on Twitter at http://twitter.com/JonathanFahey .