Duke Energy Earnings Call Nuggets: General Guidance and International Side

Duke Energy Corporation (NYSE:DUK) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.

General Guidance

Greg Gordon – ISI Group: I just want to go over the general guidance you’ve given for the balance of the year maybe review it. You said you are still on track to meet your overall guidance expectation with the regulated utilities being better than forecast, international being slightly below and generation being sort of uncertain depending on the outcome of Ohio, is that a fair recap?

Lynn J. Good – President and CEO: No I think the success of commercial Greg, will depend on where Ohio comes out, but we also have third quarter in front of us for commercial and just seasonally you can expect more earnings from the base operations in the third quarter.

Greg Gordon – ISI Group: But a big piece of change in the utility I’m looking in the appendix which you referenced during your comments, Page 22, is a potential second half impact of the change in accounting for nuclear outage levelization, but it looks like one of the outages already happened, so I presume that if that decision goes in your favor that, that would in fact be retroactive?

Lynn J. Good – President and CEO: So, Greg if I could refer you to Slide 7, I think you’ve got a comprehensive list of drivers to the second quarter, and let me just talk for a moment about nuclear outage levelization. For the Duke Energy Carolinas plant that accounting method will be adopted prospectively. So, you’ll see the benefits in the fourth quarter of the outages in the Duke Carolinas fleet. The Duke Progress adoption of levelization was retroactive to January. So, you see a couple of cents in Progress’s results in the second – fourth quarter on levelization and you’ll see another $0.04 in the back half of the year for the Progress piece of levelization…

Greg Gordon – ISI Group: Then prospectively if you think about our forecasting that means that there’ll be much less volatility in underlying O&Ms such that, it actually will be sort of less of all things equal, less of a benefit in years where you have fewer outages?

Lynn J. Good – President and CEO: And less of a detriment in years that we have one. So, I think – that stabilization is helpful. Yes, that’s right, you got it.

Greg Gordon – ISI Group: But it won’t change the cash flow, obviously the ongoing cash expense profile of the Company in years where you have outages you will be booking those cash expenses?

Lynn J. Good – President and CEO: That’s right. The next rate case, we think that beyond 2015, rates will be set in the future, based on levelized outage. So, you’ll see cash impact at that point.

International Side

Stephen Byrd – Morgan Stanley: I just wanted to talk broadly, Lynn you mentioned the third of the strategic priorities positioning the Company for long-term success and the International business, we have seen volatility in the performance of the business over time and as you think about the long-term vision for the Company, how might we think about that volatility in the long-term, ways to address that, to reduce that to be more in line with the U.S. core utility business?

Lynn J. Good – President and CEO: There is natural volatility in International around foreign exchange rates and to some extent the national methanol entity is impacted by oil prices or other commodity influences, and that volatility as you know has been in our favor in recent years as the U.S. dollar has weakened. Now the U.S. dollar is strengthening, it’s going the other direction. We continue to look at ways to position the International business and address that volatility. I don’t have any specific plans that I can share with you at this point, but positioning international to complement the growth of the Company is a priority.

Stephen Byrd – Morgan Stanley: Just on the overall O&M position of the Company you’re obviously making great progress in looking at your cost structure. Should we be thinking about sort of continual review of that or as you look out at the cost structure of the Company, do you see further opportunities that are as yet untapped or areas that you would want to focus more on down the road or is it more likely to be relatively stable from here.

Lynn J. Good – President and CEO: I think (boasting) on cost structure has become a way of life and we’ll continue to be such. You think about the merger and acquisition plans that we developed a lot of that work was in 2010 and early 2011, the business is continuing to change and we continue to look for ways to deploy continuous improvement looks for ways to optimize labor and contract labor to continue to drive cost savings. And I think you are hearing that throughout the industry as we grapple with a low growth environment and we are very keenly focused on improving our cost structure.

A Closer Look: Duke Energy Earnings Cheat Sheet>>