Noting a drop off in excess power generation capacity in the West, Duke Energy CEO Paul Anderson last Wednesday told a gathering of financial professions that he thinks the Western energy market will recover “more strongly than others” over the next couple of years.

“I hesitate to make any kind of predictions as to what’s going to happen in the marketplace because I’m always wrong, but in general there’s less excess capacity in the West and I would say the fundamentals [make it] one of the strongest areas in the country,” Anderson said at the Morgan Stanley 2004 “Global Electricity and Energy” conference in New York City.

Anderson noted that Duke has a “good capacity position” in the West “with good plants.” But the company has “also sold forward a lot of that capacity. Now, for this year, we’ve sold forward over 90% of our expected production in that market. For next year, that drops down to about two-thirds of our expected production.”

Anderson said that Duke has “a very low expectation” in terms of forward sales. “We don’t want to get ahead of ourselves there, so there’s some room to actually sell more volumes going forward. But if you just said, what’s the base case of volumes that we’d expect to produce, we’ve sold forward about 90%, so there isn’t a lot of room for the market to affect us one way or the other of those volumes.” The Duke CEO added that the “real key” is whether the company can “sell over and above those expected volumes.”

Duke has three power plants located in the West that are not yet completed and “we’re looking at each one separately,” Anderson noted at the conference. The plants are located in Nevada, Washington State and New Mexico. “We either have to bring in a partner to complete those plants or sell our partial interest in those plants.”

The review of those power plants is part of a broader restructuring plan announced by the company earlier this year. Another element of the restructuring plan involves selling all of Duke’s merchant power plants in the Southeast. Specifically, the company plans to sell as many as eight power generation plants (5,300 MW) in Georgia, Mississippi, Kentucky and Arkansas, despite likely receiving only a fraction of their original cost.

When asked about the status of the sale of the Southeast plants, Anderson kept his cards close to the vest. “I’m very cautious as to what I might say about those assets because we’re in the middle of a sale process right now and obviously anything we say will be interpreted by potential buyers to their advantage,” the Duke CEO said.

“I would just say that the process has gone smoothly. There’s a fair amount of interest out there,” Anderson told the conference. A Duke spokesperson previously said that the company hopes to complete the sale of the Southeast plants by the end of the year.

Anderson in January said that Duke plans to keep its wholesale power plants in California, the Northeast and Midwest because power markets in those regions have lower capacity reserve margins and fewer regulatory restrictions.

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