Duke Energy puts its Midwest merchant plants up for sale

Duke Energy (NYSE:DUK), which has been gradually shutting coal plants in the Midwest and the Carolinas, said Feb. 17 that it has initiated a strategic process to exit its Midwest commercial generation business, which includes ownership interests in 13 mostly coal-fired power plants.

“Our merchant power plants have delivered volatile returns in the challenging competitive market in the Midwest,” said Lynn Good, president, CEO and vice chairman of Duke Energy. “This earnings profile is not a strategic fit for Duke Energy and we have begun a process to exit the business.

“We remain fully committed to our Duke Energy Ohio and Kentucky regulated utilities and the 1.3 million customers we serve in those states. These utilities are not a part of this strategic process,” Good said.

The Duke announcement is the latest in a series of developments related to embattled merchant generation assets in the Midwest. For example:

  • Ameren (NYSE: AEE) recently sold its merchant coal plants in Illinois to Dynegy (NYSE: DYN) at a sharply discounted price so it could focus on its regulated utility operations in Missouri.
  • Midwest Generation, the owner of several Illinois coal plants, and parent Edison Mission Energy have been in bankruptcy protection since December 2012 and have a deal now up for approval in bankruptcy court to sell themselves and most of their assets at a discount to NRG Energy (NYSE: NRG).
  • Dominion Resources (NYSE: D) last year sold several assets, including the Kincaid coal plant in Illinois, so it could focus more on its regulated utility operations in Virginia.

Duke looking to sell about 6,600 MW of capacity at 13 plants

The Midwest generation business of Duke Energy includes 13 power plants with a total capacity of approximately 6,600 MW. These plants are owned or partially owned by Duke Energy Ohio and reported in the company’s Commercial Businesses unit.

Eleven of the plants are located in Ohio, one is in Illinois and one in Pennsylvania. The plants are dispatched into the wholesale power market by PJM Interconnection.

“These power plants are competitive in the market, equipped with significant environmental controls, and efficiently staffed by a great team of approximately 600 employees and contractors,” said Marc Manly, president of Duke Energy’s Commercial Businesses. “We will continue to focus on safely operating and managing these plants during this process, which we expect will take up to 12 to 18 months.”

As a result of this announcement, the company will take an estimated pre-tax impairment charge of $1bn to $2bn in the first quarter of 2014. Citigroup and Morgan Stanley will advise Duke Energy in the transaction.

The following is an alphabetical listing of the 13 affected power plants:

  • Beckjord Station (coal, 862 MW Duke share), located in New Richmond, Ohio. Partially owned by Dayton Power & Light (DP&L) and American Electric Power (NYSE: AEP).
  • Beckjord Station (oil, 244 MW Duke share), located in New Richmond, Ohio. Partially owned by DP&L and AEP.
  • Conesville Station (coal, 312 MW Duke share), located in Conesville, Ohio. Partially owned by DP&L and AEP.
  • Dicks Creek (natural gas, 172 MW), located in Middletown, Ohio. 100% owned by Duke.
  • Fayette Energy Facility (natural gas, 620 MW), located in Masontown, Pa. 100% owned by Duke.
  • Hanging Rock Energy Facility (natural gas, 1,240 MW), located in Ironton, Ohio, 100% owned by Duke.
  • Killen Station (coal, 198 MW Duke share), located in Wrightsville, Ohio. Partially owned by DP&L only.
  • Lee Energy Facility (natural gas, 640 MW), located in Dixon, Ill. 100% owned by Duke.
  • Miami Fort Station (coal, 640 MW Duke share), located in North Bend, Ohio. Partially owned by DP&L only.
  • Miami Fort Station (natural gas, 80 MW), located in North Bend, Ohio. 100% owned by Duke.
  • Stuart Station (coal, 900 MW Duke share), located in Aberdeen, Ohio. Partially owned by DP&L and AEP.
  • Washington Energy Facility (natural gas, 620 MW), located in Beverly, Ohio. 100% owned by Duke.
  • Zimmer Generating Station (coal, 605 MW Duke share), located in Moscow, Ohio. Partially owned by DP&L and AEP.

Duke Energy is the largest electric power holding company in the U.S. with more than $110bn in total assets. Its regulated utility operations serve approximately 7.2 million electric customers located in six states in the Southeast and Midwest. Its commercial power and international business segments own and operate diverse power generation assets in North America and Latin America, including a growing portfolio of renewable energy assets in the United States.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.