Duke Energy reports a loss, announces $300M in cost cuts, including layoffs
Duke Energy reported a $531 million loss for the fourth quarter as it wrote down the value of its commercial renewable energy business that's up for sale. The Charlotte-based company also announced plans to cut $300 million in expenses this year, partly through layoffs mainly in Charlotte.
Duke CFO Brian Savoy did not say how many jobs are being eliminated, but said they include a "modest" number of staff positions as well as outside technology contractors and consultants.
"It's a mix of internal labor spend and external spend — heavier on the external spend," Savoy told WFAE this morning. "We prioritized what is mission-critical and what's not … And those elements have all driven down how we buy services from third parties."
Savoy said many of those cuts have already happened.
Duke also is saving money on office space by consolidating employees from four buildings in uptown Charlotte into its new corporate headquarters on South Tryon Street. It has sold two buildings and exited leases at two others, including its former headquarters across South Tryon Street, which is owned by Wells Fargo.
A spokeswoman said other savings will come from digital automation, lower costs from suppliers and looking for ways to reduce Duke's tax liability.
As part of the cost-cutting, Duke took a one-time charge during the fourth quarter of $105 million to cover severance pay and the real estate consolidation.
A loss on commercial business
Meanwhile, Duke says the planned sale of its commercial renewables business is taking longer than expected. Savoy said the company now plans to sell the division in two pieces — one that runs large solar and wind farms, and the other that sells rooftop solar projects to commercial customers, like the home improvement retailer Lowe's.
"We've got two sets of assets with different buyer sets for both, because the folks interested in the rooftop solar (are) different groups than would be interested in utility scale. So we have two separate processes underway," Savoy said.
"We do have a lot of interested parties. The portfolios are complex. They have a lot of financing on them, joint ventures associated with them. So the parties are just working through the details trying to fine-tune the price they're willing to pay for this," he said.
Duke hasn't said how much it expects to raise from the sale, but it's likely to be lower than the $3 billion book value the company has discussed previously. On Thursday, Duke said it wrote down the value of the business by $1.28 billion. Savoy said that's because the business generates the most revenue as solar and wind installations start up and becomes less profitable over time.
"We're not commenting on value or timing at this point, except that we were on track to close later this year," Savoy said
Despite charges, Duke meets expectations
Excluding the commercial renewables write-down and other one-time expenses and gains, the Charlotte-based company reported a profit of $869 million, or $1.11 per share, for the quarter that ended Dec. 31. That beat Wall Street analysts' expectations.
Executives reiterated their confidence that earnings per share will grow 5% to 7% over the next 5 years. Savoy said the company is on track to earn $5.55 to $5.75 per share in 2023. He said that growth in profits will be fueled by both cost-cutting and rate increases. Rates have already gone up in Ohio and Florida recently, and Duke expects regulators to approve higher rates later this year in the Carolinas.
"So we feel very good about our prospects for 2023 and delivering on the commitments we're making to investors," Savoy said.