Duke Energy continued a major divesture program last week, selling about $138 million in surplus power generation and power plant equipment to two separate counterparties and unloading US$1.238 billion (A$1.69 billion) in pipeline and power plant assets in Australia and New Zealand to Australian combination utility company Alinta Ltd.

“The decision was made to exit the Asia-Pacific market either through a sale of our assets or a public offering and, with this transaction, we’re delivering on our plan,” said CEO Paul Anderson, who succeeded Rick Priory last November. “This sale will go a long way towards meeting our asset divestiture target for 2004, and will further strengthen the Duke Energy balance sheet.

“This was a very competitive process and I am pleased that a strong player like Alinta will be taking the business forward,” Anderson added. “Ultimately, the transaction came down to certainty of execution, and Alinta provided the best package in that regard.” Closing is anticipated in the second quarter.

Duke’s Asia Pacific net operating assets include 366 MW of power generation and 1,439 miles of pipeline in Australia and 112 MW of generation from one power plant in New Zealand. The assets include undersea gas pipelines to Tasmania and other pipelines in the eastern Australian state of Queensland.

Standard & Poor’s Ratings Services lauded Duke’s (BBB/Stable/A-2) agreement with Alinta Ltd. because Duke plans on using all of the asset sale proceeds to reduce debt during 2004. The sale will “form the first part of the company’s 2004 debt reduction strategy, which includes total debt reduction of $3.5 billion to $4 billion,” S&P noted.

The surplus power equipment Duke sold last Tuesday included eight 7EA gas turbine-generators, two 7FA gas turbine-generators, two heat recovery steam generators and miscellaneous plant equipment. The $138 million in proceeds represent the approximate net book value of those assets, the company said. All items sold represented surplus equipment which had been held in storage since initial delivery.

“We are limiting further investment in the merchant energy sector and are maintaining a smaller, more focused generation fleet,” said Robert B. Evans, president of Duke Energy Americas. “These sales significantly reduce our inventory of surplus equipment and provide positive cash generation.”

Duke also plans to sell eight power plants (5,300 MW) in the Southeast as part of a major restructuring plan announced in January. The asset sales are designed to reduce the leverage on Duke’s balance sheet and unload under performing operations.

Duke had one of its worst years ever in 2003, reporting a net loss of $1.3 billion, or ($1.48) per share, compared to net income of $1 billion, or $1.22 per share in 2002.

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