Duke Energy Engages Advisers to Sell South American Power Plants

  • International unit hurt by drought, slow growth in Brazil
  • Company earnings miss estimates on warm December weather

Duke Energy Corp., the largest U.S. utility owner, has engaged advisers to sell its Central and South American power plants after drought conditions and an economic downturn in Brazil hurt operations.

Duke’s international energy unit saw adjusted income fall about 30 cents a share last year from 2014, Chief Executive Officer Lynn Good said in a telephone interview Thursday. Duke announced Feb. 4 it was weighing the sale of about 4,400 megawatts of generating capacity in Argentina, Brazil, Chile, Ecuador, El Salvador, Guatemala and Peru. About two-thirds of the portfolio is hydro and about half of the plants are in Brazil, according to a statement.

“We have engaged advisers and we have made a decision,” Good said. “We are very early in the process. We believe the assets are very valuable.”  

Results in Brazil suffered in part because of drought conditions that have hurt hydroelectric generation in Sao Paulo, Good said.

The Charlotte, North-Carolina-based company’s 25 percent stake in National Methanol Co., a Saudi Arabian producer of methanol and methyl tertiary butyl ether, a gasoline additive, is not included in the potential transaction. Duke is seeking cash for the assets, Good said.

December Shorts

Good did not provide a timeline for closing the sale of international assets or completing the $4.9 billion acquisition of Piedmont Natural Gas Co., a southeastern gas distributor. Duke plans to help finance the Piedmont deal with about $500 million to $740 million in equity plus debt and “other proceeds,” she said.

Even with the sale of the international unit, Duke will see negative free cash flow “persist for a few years” because of utility spending, Good said.

Duke reported adjusted earnings per share of 87 cents in the fourth quarter, up from 86 cents a year earlier, the company said in a statement Thursday. That missed the 91-cent average estimate of 17 analysts in a Bloomberg survey.

Earnings were lowered by 12 cents per share because of “record breaking mild winter weather” primarily in the Carolinas and the Midwest, according to the statement.

“We finished the year well but one of the challenges right at the end of the year was extraordinarily warm weather,” said Good. “If you were in the Carolinas in December, you were in shorts.”

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