S&P: Duke Energy asset sale positive

Standard & Poor's said Tuesday that Duke Energy Corp.'s (BBB/stable/A-2) announcement that it has agreed to sell eight southeast U.S. merchant power plants with about 5,300 megawatts of capacity for $475 million supports credit quality.

S&P also said that there is no change to the rating or outlook on the company because the sale was already factored into the rating.

The asset sale is in line with Duke Energy's plan to reduce debt with asset sale proceeds and also reduce its merchant generation exposure in the southeastern U.S., where reserve margins are high. In addition to the cash proceeds from the asset sale, Duke Energy expects to receive about $500 million in tax benefits because it is selling the plants at significantly below what it cost to build them.

Duke Energy agreed to sell the plants to KGen Partners LLC, a unit of MatlinPatterson Global Opportunities Partners II. The transaction is expected to close in the third quarter of 2004.

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