The largest U.S. utility owner, Duke Energy Corp., wants to sell its interest in 13 power plants in the nation’s Midwest after Ohio regulators denied its request to raise rates.
Citigroup Inc. and Morgan Stanley are advising Duke on the sale of stakes in the coal, oil and natural gas facilities in Ohio, Illinois and Pennsylvania that have a capacity of 6,600 megawatts, Duke said. The company will record a pretax charge of $1 billion to $2 billion in the first quarter from the sale, which it expects will take 12 to 18 months.
Ohio regulators on Feb. 13 denied Duke’s request to bill customers in the state an additional $729 million through May 31, 2015 to help cover a shortfall between power-plant costs and wholesale electricity prices. The rate request refusal “informed” the decision to sell the plants, said Tom Williams, a company spokesman.
“Our merchant power plants have delivered volatile returns in the challenging competitive market in the Midwest,” Lynn Good, chief executive of Duke, said in the statement. “The earnings profile is not a good strategic fit for Duke Energy.”
The average price of wholesale power in the market for the plants Duke intends to sell, has fallen by nearly half since the 2008 recession due to lower industrial demand and a glut of cheap gas, based on the 2013 average compiled by Bloomberg.
The 13 plants represent the bulk of Duke’s commercial power segment. Eleven of the facilities are in Ohio, one is in Illinois and another is in Pennsylvania.