Financial Risk Management in Duke Energy

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Case Details:

Case Code : FINA014
Case Length : 17 Pages
Period : 2003
Pub. Date : 2003
Teaching Note :Not Available
Organization : Duke Energy
Industry : Power
Countries : USA

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Introduction Contd...

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.

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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.

Background Note

Surgeon W. Gill Wylie founded Catawba Power Company in 1899, which had its first hydroelectric plant in South Carolina on line by 1904. The next year Wylie and James "Buck" Duke (founder of the American Tobacco Company and Duke University's namesake) formed Southern Power Company with Wylie as president.

In 1910, Buck Duke became president of Southern Power and organized Mill-Power Supply to sell electric equipment and appliances. He also began investing in electricity-powered textile mills...

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