Duke Said to Work With Citigroup on Sale of Midwest Plants

Duke Energy Corp. (DUK), the largest U.S. utility owner, is working with Citigroup Inc. (C) on plans to sell more than a dozen Midwestern power plants, according to people familiar with the matter.

While a sales process hasn’t started, bidders expect to be asked to submit offers in early 2014, said the people, who asked not to be identified because the matter is private. The plants may fetch $1.5 billion to $2 billion together, the people said.

Duke, American Electric Power Co. (AEP) and other utilities have struggled to maintain profitability from Midwestern plants that sell power on the wholesale market run by PJM Interconnection LLC from Chicago to Washington. PJM prices have fallen by more than half since 2008, due to lower industrial demand and a glut of cheap natural gas.

Duke rose 0.5 percent to $71.13 at 2:37 p.m. in New York trading. The company has a market value of about $50 billion.

The plants Duke may sell comprise the bulk of its commercial power segment, which earned $27 million in the third quarter, down from $41 million in the second, according to data compiled by Bloomberg. The plants have total capacity of about 6,800 megawatts; more than half burn coal and the rest burn natural gas.

Duke Chief Executive Officer Lynn Good has told investors the company would wait for a regulatory decision about how much it can charge customers for costs that exceed market-based prices before determining the fate of the Midwest plants.

Strategic Question

Duke, based in Charlotte, North Carolina, doesn’t comment on mergers and acquisitions, Tom Williams, a spokesman, said today in a telephone interview. Rob Julavits, a spokesman for Citigroup, also declined to comment.

Whether to sell them is “certainly a strategic question that we’ll need to answer,” Good said on a conference call to discuss earnings on Nov. 6, according to a transcript compiled by Bloomberg.

Duke wants to bill Ohio electric customers an additional $729 million through May 31, 2015, for power-plant related costs not included in current rates. The company is focused on winning approval of that request from the Public Utilities Commission of Ohio by the end of the year, Good said.

Duke supplies electricity to 7.2 million customers in North Carolina, South Carolina, Indiana, Ohio, Kentucky and Florida, according to its website.

To contact the reporters on this story: Matthew Monks in New York at mmonks1@bloomberg.net; Jim Polson in New York at jpolson@bloomberg.net

To contact the editors responsible for this story: Jeffrey McCracken at jmccracken3@bloomberg.net; Susan Warren at susanwarren@bloomberg.net

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