As part of Duke Energy’s ongoing divestment of non-core assets, the company announced Friday that it will exit the merchant finance business at its wholly-owned subsidiary, Duke Capital Partners LLC. The unit provides capital and financial advisory services to other companies within the energy industry.

This latest move is in tune with Duke Energy’s financial plan released earlier this year, which includes realizing proceeds of $600 million in 2003 from the sale of non-strategic assets. Exiting its merchant finance business follows earlier announcements of asset sales worth more than $250 million in proceeds this year.

“Duke Capital Partners built a sound portfolio of quality assets in its three years of operations,” said Chief Risk Officer Richard J. Osborne. “However, the energy industry has changed tremendously in that time, and the prospects for Duke Capital Partners were severely limited by Duke Energy’s decision to focus its more limited capital investments on its traditional business segments.”

Osborne is responsible for the Duke Ventures business group, which includes Duke Capital Partners and Crescent Resources, the company’s real estate development business.

Duke Energy said it expects to boost cash flows in 2003 and 2004 as Duke Capital Partners’ portfolio of approximately $350 million is sold off or matures. The company said it expects that approximately 50% of the unit’s remaining portfolio will either mature or be sold before the end of 2003, with the remainder being closed out during the first six months of 2004. Duke Energy noted that approximately $50 million in portfolio assets has already been monetized in 2003.

The Duke Capital Partners subsidiary provided debt and equity capital and financial advisory services to businesses in the North American energy industry. Formed in 2000, the company had 30 employees at offices in Charlotte and Houston.

“We are not selling the business, we are liquidating its portfolio,” said Duke Energy spokesman Terry Francisco. He noted that there are a number of items including senior secured debt instruments within the portfolio that will be marketed. As for the equity positions, the spokesman said Duke Energy “would look to monetize those in an orderly fashion.”

Francisco estimated that the unit had approximately 25-50 clients with deals ranging between $10-50 million.

Earlier this month, a top executive with Duke Energy said that the company is open to the idea of selling some of its merchant power plants as the company continues to try and shore up its battered balance sheet ( see Power Market Today, March 3).

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