Duke Energy Announces Transfer of DENA Contracts to Barclays Capital
CHARLOTTE, N.C. – Duke Energy today announced it has signed an agreement to transfer substantially all of Duke Energy North America’s (DENA) portfolio of derivatives contracts to Barclays Capital, the investment banking division of Barclays Bank PLC.
Under the agreement, Barclays Capital will acquire substantially all of DENA’s outstanding gas and power derivatives contracts. Excluded from the transaction are derivative contracts associated with the near-term value of DENA’s West and Northeast power generation assets and certain remaining gas transportation and structured contracts.
By Jan. 3, 2006, Barclays will receive from Duke approximately $700 million in cash which primarily reflects the amount by which the portfolio is below current market value as well as certain transaction costs. This payment will be substantially offset by the return of collateral to Duke Energy. The transaction falls within the parameters of the previously announced financial impacts associated with Duke Energy’s decision to exit DENA’s business outside the Midwest.
The agreement with Barclays essentially eliminates Duke Energy’s credit, collateral, market and legal risk associated with DENA’s derivative trading positions effective on the date of signing. The underlying contracts will transfer to Barclays over a period of months.
“Today’s announcement is a major step forward in our plan to exit DENA’s business outside the Midwest,” said Paul Anderson, chairman of the board and chief executive officer. “With Barclays acquiring the lion’s share of DENA’s book and assuming the associated risks, we’ve achieved a significant strategic objective in just two months, well ahead of our initial schedule.
“We’re pleased to have reached a win-win agreement with such a premier organization as Barclays,” Anderson continued. “This deal allows the company to focus our efforts on divesting the remaining DENA assets, and more importantly on the merger with Cinergy and Duke Energy’s future.”
On Sept. 13, Duke Energy announced plans to pursue the sale or other disposition of substantially all of DENA’s physical and commercial assets outside the Midwestern U.S. The company anticipates resolving the disposition of DENA's power generation assets in the West and Northeast before Sept. 2006.
Barclays Capital is the investment banking division of Barclays Bank PLC. With a distinctive business model, Barclays Capital provides large corporates, government and institutional clients with solutions to their financing and risk management needs. Barclays Capital has the support of an AA rated parent bank with a balance sheet of over £560 billion (US$1 trillion*). With offices in 25 countries, the firm employs over 8,000 people and has the global reach and distribution power to meet the needs of issuers and investors worldwide.
In January 2005, Barclays Capital received recognition from two of the finance industry’s most prestigious publications by being named IFR magazine’s ‘Bank of the Year’ and Risk magazine’s ‘Derivatives House of the Year’. For further information about Barclays Capital, please visit our website www.barclayscapital.com.
*US$ figure was derived using the average US$/£ exchange rate for the six month period ending 30 June 2005 of US$1.88/£1
Duke Energy is a diversified energy company with a portfolio of natural gas and electric businesses, both regulated and unregulated, and an affiliated real estate company. Duke Energy supplies, delivers and processes energy for customers in the Americas. Headquartered in Charlotte, N.C., Duke Energy is a Fortune 500 company traded on the New York Stock Exchange under the symbol DUK. More information about the company is available on the Internet at: http://www.duke-energy.com.
This release includes statements that do not directly or exclusively relate to historical facts. Such statements are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Those statements represent Duke Energy’s intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, many of which are outside Duke Energy’s control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. Those factors include: state, federal and foreign legislative and regulatory initiatives that affect cost and investment recovery, have an impact on rate structures, and affect the speed at and degree to which competition enters the electric and natural gas industries; the outcomes of litigation and regulatory investigations, proceedings or inquiries; the weather and other natural phenomena; the timing and extent of changes in commodity prices, interest rates and foreign currency exchange rates; general economic conditions, including any potential effects arising from terrorist attacks and any consequential hostilities or other hostilities; changes in environmental and other laws and regulations to which Duke Energy and its subsidiaries are subject or other external factors over which Duke Energy has no control; the effect of accounting pronouncements issued periodically by accounting standard-setting bodies; the amount of collateral required to be posted from time to time in Duke Energy’s transactions; competition and regulatory limitations affecting the success of Duke Energy’s divestiture plans, including the prices at which Duke Energy is able to sell its assets; the performance of electric generation, pipeline and gas processing facilities; the extent of success in connecting natural gas supplies to gathering and processing systems and in connecting and expanding gas and electric markets; conditions of the capital markets and equity markets during the periods covered by the forward-looking statements; and opportunities for Duke Energy’s business units, including the timing and success of efforts to develop domestic and international power, pipeline, gathering, liquefied natural gas, processing and other infrastructure projects.
In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than Duke Energy has described. Duke Energy undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.