Duke reconsidering field services IPO

Duke Energy Corp. officials say the company is reconsidering making an initial public offering (IPO) of stock in Duke Energy Field Services LLC, its 69.7%-owned midstream energy unit. Sue Becht, head of investor relations for Charlotte, NC-based Duke, told analysts attending the Dain Rauscher Wessels conference Tuesday in Houston the company will be making a decision soon regarding the IPO.


Karen Broyles
OGJ Online

HOUSTON�Duke Energy Corp. officials say the company is reconsidering making an initial public offering (IPO) of stock in Duke Energy Field Services LLC, its 69.7%-owned midstream energy unit. Duke shelved the idea in May citing volatile market conditions.

Sue Becht, head of investor relations for Charlotte, NC-based Duke, told analysts attending the Dain Rauscher Wessels conference Tuesday in Houston the company will be making a decision soon regarding the IPO.

Duke Energy Field Services owns and operates 70 plants and 57,000 miles of pipeline. The Duke Energy unit also has ownership interests in an additional 13 plants and has total net processing capacity of about 8 bcf/day (bcfd) of natural gas. It gathers and transports about 7.3 bcfd, produces an average of about 400,000 b/d of natural gas liquids (NGL), and markets and trades about 486,000 b/d of NGLs.

Becht said Duke will keep pursuing its strategy of developing gas and electricity assets and overlaying its asset system with trading and marketing operations. The company plans to continue expanding its gathering and processing capabilities to meet growing demand for natural gas.

US power plant, gas storage plans
Becht added that more than 200,000 Mw of new generation is needed in the US over the next 12 years to serve demand and replace aging facilities scheduled for retirement. Gas-fired generation will likely make up 90% of that new generation. Duke estimates that 81% of the growth in US gas demand is coming from power generation.

Duke units plan to bring on line 10-11 new power facilities during 2002-2003. Duke has invested about $104 million in 16 power generation projects for a total of 7,800 Mw with potential gas burn of 1.6 bcfd along its Texas Eastern, Algonquin, and Maritimes pipeline systems.

Duke is currently negotiating to build 32,200 Mw of additional generation with a capacity to burn up to 6.4 bcfd of gas, Becht said. To supply the gas, Duke also has expanded its gas storage capabilities.

Additional storage is already available at Duke's Moss Bluff, Tex., and Egan, La., facilities, where capacity has been expanded at both to 16 bcf from 11.3 and 11.4 bcf, respectively. Duke also is developing the Tioga and Copiah facilities in Pennsylvania and Alabama. Tioga and Copiah will have capacity of up to 15 bcf and 9 bcf, respectively.

But Duke isn't ruling out the sale of electric generation facilities, Becht said, characterizing current conditions as a "sellers market." On Sept. 7, Duke subsidiary Duke Energy North America reported it would sell for an undisclosed sum its 500 Mw Attala combined cycle, natural-gas fired power facility under construction in central Mississippi to PG&E National Energy Group.

Overseas operations
Overseas, Duke will seek to expand its operations in Latin America, where stabilizing economies are projected to boost gas demand by 5% and power by 4.5% over the next several years. Much of that demand is the result of economies that are allowing people to buy refrigerators, televisions, and other electronic equipment.

Duke currently owns 5,100 Mw of generating facilities, NGL facilities, and gas transmission lines, as well as trading and marketing operations in Brazil, Peru, Argentina, and San Salvador.

Becht likened the growing market for electricity in South America to the wave of Americans buying homes and appliances after World War II. Still, Becht said, it will take time for Duke to pursue the growth opportunities for gas transmission, greenfield generation, and privatization of generating facilities in Latin America.

High asset prices and falling electricity prices have dimmed Duke's initial enthusiasm for the European market, where gas and power demand are projected to grow 4% and 2%, respectively. Duke intended to invest $2-3 billion in Europe.

But Becht said the company has backed into that market by buying a gas marketing company through which it plans to develop alliances rather than buy generating assets. Duke still sees growth opportunities for gas and power in Europe, such as developing a European power trading operation based in the UK and trading hubs for gas in central and northwestern Europe, she said.

In Asia, Duke has concentrated its efforts in New Zealand and Australia. Duke expects gas and power demand in the Asia-Pacific region to grow by 3.6% and 3%, respectively, over the next 12 years. The company owns 825 Mw of generation capacity, 308 MMcfd of pipeline capacity, and trading and market operations in Australia and New Zealand.

Duke recently completed the Eastern Gas pipeline, which it said has brought competition to gas transportation for the cities of Sydney and Melbourne.

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