Moody's considers downgrade of some Duke ratings


New York, September 20, 2002 -- Moody's Investors Service placed the securities ratings of Duke Energy and Duke Capital Corporation on review for potential downgrade.

Ratings under review are Duke Energy's Aa3 first mortgage bond rating, A1 senior unsecured and issuer ratings, and its P-1 short-term commercial paper rating. Also under review are Duke Capital's A3 senior unsecured and issuer ratings, Pan Energy's A3 senior unsecured rating and Texas Eastern's A2 senior unsecured ratings.

Duke Capital's P-2 commercial paper rating is not under review, nor are the long term Baa2 and short term P-2 ratings assigned to Duke Energy Field Services or the A1 secured rating assigned to Maritimes and Northeast.

The review is prompted by Duke's announcement that its earnings expectations will be materially lower in 2002 and 2003 based on continued weakness in Duke Capital's merchant energy subsidiary, Duke Energy North America (DENA).

Since Duke Capital's credit profile drives business and financial risks at Duke Energy, Moody's has placed the parent's ratings on review as well. DENA contributed 13% of consolidated EBIT during the first six months of 2002.

The company's revised forecast incorporates the current depressed environment for power prices and dim prospects for recovery in the intermediate term. This will impact operating cash flow relative to debt and other key measures of credit quality. With the outlook for 2003 earnings and cash flow flat at best, Duke's ability to improve credit measures will be limited. The company further announced the deferral of three merchant plants contributing to a pre-tax charge of $250-$300 million in the third quarter.

Steps to mitigate the impact of poor performance at DENA include further capital expenditure reductions and asset sales to bolster the company's overall liquidity position. Along with realized or announced asset sales proceeds of $500 million, the company expects that capex reductions of $800 million for the remainder of this year will enable cash from operations largely to cover capex with some external financing requirements.

Along with asset sales proceeds, management expects cash from operations to cover reduced 2003 capital expenditures of $3.5 billion. Duke estimates that non-core assets available for sale could realize proceeds in the $1 - $3 billion range.

The company's core regulated businesses buffer cyclicality exhibited in the merchant energy sector. Core businesses include franchised electric (Duke Power Company) a 43% EBIT contributor for the first six months of the year; and gas transmission (the Texas Eastern, Algonquin, East Tennessee Natural Gas, Market Hub Partners and WestCoast Energy assets) a 32% EBIT contributor.

Moody's review will focus on the following issues: the implementation and impact of capital expenditure reductions on the company's cash generating capabilities; the company's financial flexibility and liquidity position; longer term prospects for merchant energy and its ongoing impact on the risk profile of the company; the financial health and credit profiles of the regulated businesses; the timing and use of asset sale proceeds; and the likely outcome of various governmental investigations into the company's trading operations. In addition, we will review the appropriate relationship between the long and short-term ratings assigned to Duke Energy and to Duke Capital. Duke Energy is headquartered in Charlotte, North Carolina.

Source: Moody's

Sponsored by FLSmidth

Related Articles

Duke Energy to purchase solar power from three North Carolina projects

Duke Energy Progress (NYSE: DUK) has entered into a long-term power purchase agreement for three solar photovoltaic (PV) projects, totaling 21-MW, from Ecoplexus Inc.

Duke Energy Renewables' begins Phase I of North Carolina solar power project

SunEnergy1 has begun installing JinkoSolar panels at the Duke Energy (NYSE: DUK) Renewables-owned Capital Partners Solar Project in Pasquotank County, North Carolina.

Follow Power Engineering on Twitter

Products Showcase

Dynamic Fluoride Ion cleaning DFIC of industrial natural gas turbines Hi-Tech Furnace Systems

Dynamic Fluoride Ion Cleaning of IGT Parts

The Dynamic Fluoride Ion Cleaning (DFIC) Process from Hi-Tech Furnace Systems is able to clean deep, narrow cracks of oxides by cycling between negative, atmospheric, and positive pressure.

Latest News

Shutterstock coal production trucks

Weekly Coal Production

The Weekly Coal Production shows how much coal is being produced across the U.S.

Federal Reserve Bank of Dallas Weekly Economic Indicators financial business

The Federal Reserve Bank of Dallas' Economic Indicators

The Federal Reserve Bank of Dallas offers a glimpse into how the markets are doing domestical...

Kvaerner awarded contract for gas-fired power plant in Delaware

Kvaerner North American Construction Inc. and its joint venture partner, Parsons Brinckerhoff...

Canadian Solar purchases two solar projects

Canadian Solar Inc. has acquired a majority interest in two utility-scale solar power project...

Operators Restart Unit 2 at PPL Susquehanna

Unit 2 at the PPL Susquehanna nuclear power plant near Berwick, Pa. resumed generating electr...

Settlement agreement limits cost recovery at Edwardsport

The Indiana Utility Regulatory Commission (IURC) on Dec. 27 modified and approved a settlemen...

Toshiba in talks to sell portion of Westinghouse nuclear unit

Toshiba Corp is in talks  to sell up to 16% of its stake in the Westinghouse Electric Co...

Utah nixes nuclear waste storage facility

Plans to park radioactive waste at a storage facility in Utah have been officially called off.

Archived Articles

2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013

Power Engineering Current Issue

10/01/2014
Volume 118, Issue 10
1410pe-cover

Power Industry Wire News

Landmark Settlement Protects Colorado Roan Plateau

Landmark Settlement Protects Colorado Roan Plateau

BeneVir Biopharm, Inc. Announces Investment From HC2's Subsidiary Pansend, LLC

BeneVir Biopharm, Inc. Announces Investment From HC2's Subsidiary Pansend, LLC

Eos Petro Announces Extension of Tender Offer for Any and All Outstanding Shares of Dune Energy

Eos Petro Announces Extension of Tender Offer for Any and All Outstanding Shares of Dun...

Eureka Hunter Pipeline Announces Expansion of Its Senior Secured Revolving Credit Facility

Eureka Hunter Pipeline Announces Expansion of Its Senior Secured Revolving Credit Facil...

Cardinal Resources Moving Forward in West Africa

Cardinal Resources Moving Forward in West Africa

Power Engineering

Article Archives for Power Engineering Magazine

Continuing Education

Professional Development Hours

To access a course listing associated to a specific topic listed below, click on the topic of choice from the list below.

Latest Energy Jobs

View more Job Listings >>


Power Engineering Newscasts

EPA chief: carbon caps will boost economy
Australia, Russia enter nuclear power agreement with Argentina
Largest battery energy storage in North America now operational
EPA chief: carbon caps will boost economy Largest battery energy storage in North America now operational Australia, Russia enter nuclear power agreement with Argentina Texas’ Panda Temple combined cycle plant up and running
Siemens agrees to acquire Dresser-Rand
Safety concrete poured at UAE nuclear reactor power project
Foster Wheeler to upgrade natural gas-fired power plant’s emission controls
GE, TransCanada partner on natural gas turbine design
Energy storage global market to grow to $15.6B by 2024; DOE awards $2M to support taller wind turbine towers; Hinkley Point C nuclear project have financial incentives approved; N.J. company building waste-to-energy project in Ireland