David Hauser, chief financial officer of Duke Energy, last week told an audience of investment professionals that his company is open to the idea of partnering its troubled Duke Energy North America (DENA) unit with an entity with deep pockets, such as a bank, as DENA continues to face tough times in the merchant power sector.

“If you had a partner with a stronger balance sheet than ours — if you had an A-rated or AA-rated bank,” there would be “significant decreases” in the cost of capital, Hauser noted in an appearance before the Deutsche Bank Electric Power Conference in New York City. “You would see a more competitive advantage,” Hauser went on to say. “You wouldn’t be putting up all the collateral that we’re putting up.”

DENA in April reported an operating loss of $521 million, compared to EBIT of $23 million in the prior year’s quarter, because of an additional $325 million non-cash loss associated with the anticipated sale of DENA’s southeast U.S. power plants and a mark-to-market loss of $93 million taken during the quarter as a result of changes in power and gas prices (see NGI, May 3).

TXU Corp. last month announced a memorandum of understanding for a 50/50 investment with Credit Suisse First Boston (CSFB) to create an energy marketing and trading entity (see NGI, May 24). The new business would become the exclusive energy marketing and trading vehicle for both parties in North America, effectively creating an “Aa3/A+” rated entity through a guarantee from a CSFB company. The energy marketing entity will market and trade power, natural gas and other energy-related commodities in North America.

Meanwhile, an analyst at the conference asked Hauser whether the company has any current plans to sell assets. “Our fundamental has changed,” he noted. “We don’t need to sell assets to strengthen the balance sheet. However, if somebody likes our assets better than we do, we would sell them.”

Duke recently entered into an agreement under which KGen Partners LLC will purchase all of Duke Energy’s merchant generation assets in the southeastern United States for $475 million.

The portfolio of assets includes eight natural gas-fired power plants in the region with a total of 5,325 MW of capacity — Hot Spring (Arkansas); Murray and Sandersville (Georgia); Marshall (Kentucky); Hinds, Southaven, Enterprise and New Albany (Mississippi); and certain other power and gas contracts.

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