Duke Energy Earnings Call INSIGHTS: Settlement Discussion, Progress Impact

On Thursday, Duke Energy Corporation (NYSE:DUK) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Settlement Discussion

Daniel Eggers – Credit Suisse: Jim, just I know you’re going to probably answer on this a little bit but as it relates to the Commission’s openness to some sort of settlement discussions can you maybe give some context. Does that settlement discussion mean a financial settlement, a corporate governance settlement, a job settlement, a Raleigh settlement, can you just help us understand what that conversation is actually headed toward?

A Closer Look: Duke Energy Earnings Cheat Sheet>>

James E. Rogers – Chairman, President and CEO: Dan, I’m not going to speculate on the outcome of the Commission’s investigation or settlement discussions. We are going to continue to work closely and maintain an open dialog with the commission. Chairman Finley at the end of the hearings offered up the possibility of a settlement and we’re clearly working in that direction.

Daniel Eggers – Credit Suisse: Jim, kind of just (indiscernible) ask, what exactly are you guys settling other than the fact of their investigation as to the CEO change?

James E. Rogers – Chairman, President and CEO: I’m really, Dan, not going to address the issues that are being discussed in the settlement process, but as we get this resolved and our goal line is as quickly as possible to put this behind us and move forward, and that’s the road that we’re on.

Daniel Eggers – Credit Suisse: Then Jim, I guess just along these awkward questions. With the two Board members leaving from the Progress side, how is the Board thinking about sizing and potential replacements and I know you kind of view on balance relative to the legacy Duke Board membership?

James E. Rogers – Chairman, President and CEO: The decision with respect to whether to replace the members that left really resides with the Corporate Governance Committee and ultimately with the Board, and they will make that decision in the coming weeks and months. So, my hope is as we build this great Company, I want everyone in the Company to be part of that going forward and that includes our new Board members.

Daniel Eggers – Credit Suisse: I guess just as it relates to the Carolinas rate cases just for both utilities this fall or this winter, is there any thoughts on changing the timing given all of this going on there to give a little more breathing room you are back before the Commission?

James E. Rogers – Chairman, President and CEO: Our intent, Dan, is to file our rate cases in the Carolinas by the end of the year. We expect they will address each case on its merits. I look back over the last five years. We’ve had three certificate cases. We have had three rate cases and all of them have resulted in fair outcomes. As I look at the Commission and its history, it has had a long history of fairly and equitably balancing the interest to customers and investors and I don’t expect that to change in the future.

Progress

Jonathan Arnold – Deutsche Bank: I have a quick question on – it seems like the weakness in Progress in the first half in their numbers was largely result of these additional nuclear outage costs and if I look back to their first quarter call, it seemed they were assuming there would be an accounting order allowing levelization of those costs approved sometime later in the year, and then when we look at your slide showing the impact of the merger in the second half, it doesn’t appear that you’ve assumed success on an order like that, but I just wanted to verify if that that’s the case or not?

Lynn J. Good – Group Executive and CFO: Jonathan, your recollection is right. The 2012 earnings guidance where Progress did assume a successful regulatory order, and although we’re still evaluating that regulatory order around the matter of nuclear levelization, we are presently not planning to file it in 2012. As Jim mentioned, our focus is really on the rate cases for both Duke and Progress.

Jonathan Arnold – Deutsche Bank: So, you are not even going to file that?

Lynn J. Good – Group Executive and CFO: That’s in the present plan.

Jonathan Arnold – Deutsche Bank: Would you be able to tell us Lynn, sort of how beneficial to let’s say the ’13 outlook absence of such an accounting structure would be as you fold in a better first half from Progress next year?

Lynn J. Good – Group Executive and CFO: Jonathan, the impact of nuclear rehabilitation in any given year is dependent upon the nuclear outages and the cost considerations and so on. So I can’t give you any further insight into that. As we said, we will – are working diligently on 2013 guidance and bringing the companies together and we’ll have information around that early 2013.

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