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

Video: Duke Energy acquires Halifax Solar Project in North Carolina

Duke Energy Renewables (NYSE: DUK) has acquired a 20-MW solar project in Roanoke Rapids, North Carolina, from Geenex and ET Solar Energy Corp.

Duke Energy completes ash excavation at W.S. Lee Steam Station

Duke Energy (NYSE: DUK) has submitted filings, to state regulators, outlining additional ash excavation plans for its W.S. Lee Steam Station in Belton, South Carolina.

Follow Power Engineering on Twitter
Latest News

S. Africa court dismisses Westinghouse nuclear generator replacement dispute

A South African court dismissed a filing from Westinghouse Electric Co. asking to reopen bidd...

IAEA urges India to tighten nuclear safety regulations

The International Atomic Energy Agency (IAEA) is pressing India to tighten its nuclear safety...

Caterpillar's C280 Genset enters China offshore market

Caterpillar Oil & Gas will supply six of its Cat C280-16 offshore generator sets (gensets...

Justices divided over EPA mercury limits

The Supreme Court's conservative justices cast doubt on the Obama administration's first-ever...

Report: Global wind power installations increased by 42% in 2014

Global wind power installations grew 42 percent year-over-year, according to a new report con...

Low carbon standard passes Ill. Senate committee

An Illinois Senate committee passed a bill that would establish a low carbon standard that wo...

Russia to build two nuclear power reactors in Jordan for $10bn

Russia signed a $10 billion deal to build Jordan’s first nuclear power plant.

Iowa top officials on opposites sides in EPA lawsuit

Iowa's governor and attorney general were on opposite sides of a case argued Wednesday at the...

Power Engineering Current Issue

03/01/2014
Volume 118, Issue 3
1403PE-cover
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.

Archived Articles

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

Power Industry Wire News

Earthstone Energy, Inc. Reports Fourth Quarter and Full Year 2014 Results

Earthstone Energy, Inc. Reports Fourth Quarter and Full Year 2014 Results

Chicago's Lakeshore Recycling Systems Helps Change a Life on March 27 Airing of the Steve Harvey Show

Chicago's Lakeshore Recycling Systems Helps Change a Life on March 27 Airing of the Ste...

East West Petroleum Corp.'s CEO David Sidoo Interviewed by The Energy Report

East West Petroleum Corp.'s CEO David Sidoo Interviewed by The Energy Report

Perma-Fix Schedules Fourth Quarter 2014 Earnings Conference Call

Perma-Fix Schedules Fourth Quarter 2014 Earnings Conference Call

Murray Energy's Controlling Interest of Foresight Creates U.S. Coal Mining Giant, an Industrial Info News Alert

Murray Energy's Controlling Interest of Foresight Creates U.S. Coal Mining Giant, an In...

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 >>