Financial Risk Management in Duke Energy
| Case Code: FINA014 Case Length: 17 Pages Period: 2003 Pub Date: 2003 Teaching Note: Not Available |
Price: Rs.500 Organization: Duke Energy Industry: Power Countries: USA Themes: Banking and Financial Management, Microfinance |
Abstract Case Intro 1 Excerpts
Introduction
Duke Energy (Duke), a leading gas and power producer and marketer in the U.S. was also the largest producer of natural gas liquids in the U.S. Duke had approximately 25,000 employees worldwide. Due to instability in the wholesale electricity market, partly due to the collapse of Enron and the ensuing financial scrutiny of other energy marketers, Duke had been downsizing and reorganizing its merchant energy businesses. The company had withdrawn from the European power trading market though it continued to market natural gas in Europe. Duke had announced plans to quite the proprietary energy trading business in North America, but planned to continue to market energy from its owned or contracted power generation and gas transportation and storage assets.
Duke was facing investigations by the SEC and other government agencies into "round-trip" energy transactions (when power was bought and sold for the same price at the same time to artificially increase trading volumes and revenues) that occurred between 1999 and 2002. To sharpen its focus on core energy operations, Duke was selling various non-strategic assets. It had plans to sell assets worth $1.5 billion in 2003. Duke had completed the $240 million sale of its Empire State Pipeline subsidiary to National Fuel Gas and the $245 million sale of its stakes in the Alliance Pipeline, Alliance Canada Marketing, and the Aux Sable refinery to Enbridge and Fort Chicago Energy Partners. The firm had also agreed to sell renewable energy facilities valued at $300 million to privately owned Highstar Renewable Fuels. It was also selling off the assets of its merchant finance business.
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