Volatility in Brazil pushes Duke to pursue selling international business

Dive Brief:

Volatility in Brazil and the completion of a cash repatriation program led Duke Energy to consider the sale of its international unit, SNL Energy reports.
Earlier this month Duke announced it was weighing the sale of Duke Energy International, which owns approximately 4,400 MW of generation in Central and South America.
Duke Vice President and CFO Steven Young said the company last year determined it needed to improve its access to cash and this year finished a repatriation program aimed at more than $1 billion. Completing that strategy was a factor leading to the company considering a sale.

Dive Insight:

Duke International produces strong cashflows, but volatility is growing and poor conditions in Brazil led the company to earlier this month it was announce a possible sale.

The company's international segment owns generation in Argentina, Brazil, Chile, Ecuador, El Salvador, Guatemala and Peru. But about two-thirds of that is hydro generation located in Brazil, where conditions have not been ideal.

"The economy and therefore the foreign exchange rate, and hydrology, continued to move negatively. And, of course, owning hydro assets in Brazil, we're impacted by that," CFO Young told SNL Energy. "So, we saw a level of volatility in 2015 that we had not ever seen before and it was reflected in the results."

Earnings from the international segment have been fallen by about half since 2013, to 30 cents per share.

The sale will not include Duke Energy's 25% equity investment in National Methanol Co., a Saudi Arabian regional producer of methanol. But as SNL points out, that unit saw lower prices and as a result dragging down International earnings by about $4 million, to $68 million last quarter.

Duke told SNL the utility plans to focus on its $4.9 billion acquistion of Piedmont Natural Gas Co. as it forges ahead with the Atlantic Coast Pipeline.

If approved, the merger would add about 1 million new gas customers to Duke's service territory, returning the company to the gas business for the first time since 2007. Duke's bid to purchase Piedmont Natural Gas will force a restructuring of the Atlantic Coast Pipeline's ownership due to clauses that no party can own a majority stake and keeping Dominion as the lead owner.

The utility expects the deal to close by the end of 2016; the merger was announced in October.