Utility players go back to what they're best at.

• Position: UTILITIES - Perfomance of energy industries

The companies that own the two largest utilities in the state spent much of 2003 and 2004 peeling away superfluous layers, hoping to showcase the still-serviceable assets beneath and make money to pay down debt. They're likely to continue the practice this year, as Charlotte-based Duke Energy and Raleigh-based Progress Energy focus on traditional regulated businesses such as power generation and distribution.

Among Duke's castoffs were its Asian and Pacific energy assets, sold in April to Perth, Australia-based Alinta for $1.2 billion, and its wholesale-power plants in the Southeast, sold in August to Matlin-Patterson Global Opportunities Partners II, a New York-based private-equity fund, for about $975 million, including tax benefits. Overall, Duke's asset sales last year generated proceeds of $3.1 billion, including tax benefits--twice the amount projected, spokesman Pete Sheffield says. Duke cut long-term debt from $20.6 billion to $17.1 billion the first nine months of 2004. Earnings per share through three quarters jumped from 76 cents in 2003 to $1.22 in 2004.

Progress didn't jettison as much as Duke in 2004, but it followed its $425 million sale of North Carolina Natural Gas to Charlotte-based Piedmont Natural Gas in 2003 with an agreement in November to sell oil and gas assets in Texas for $225 million. Progress said in December that it would shed some operating costs, which were growing 4% to 5% annually--about twice as fast as revenue.

It plans to show 3,500 of its 15,300 employees the door by making them eligible this year for early retirement. It reduced the number of senior management positions from 67 to 55. "When you get back to focusing on your core business, which is what we've been doing, then you go back to focusing on things like cost control, making sure you're spending your capital wisely," says Bill Johnson, who became president and chief operating officer in January. The COO job had been vacant since the promotion of Bob McGehee to CEO last March.

Progress cut its long-term debt from $10 billion to $9.6 billion the first three quarters of 2004. But EPS through three quarters fell from $2.94 in 2003 to $2.33 in 2004.

Investors enjoyed the show but didn't respond with the enthusiasm they once did. Duke's price, adjusted for splits and dividends, rose 23% to $25.33 during the year, compared with an 84% gain in 2000. Progress' increased 5% to $45.24, compared with a 74% increase in 2000.

Executives at both companies...