Duke Energy’s Latin America Power Bids Have Problems
Latin America power bids are finally getting drawn up for the power plants of Duke Energy, the U.S.’s second-largest utility by market value, but some previously unknown issues are pushing bid prices much lower than expected.
Optimistic expectations were that the sale could rake in as much as $2 billion for the company, but that is looking increasingly unlikely.
The power plants represent a combined 4,400 megawatts of generating capacity in Central and South America, specifically Brazil, Peru, Chile and Argentina. Each asset is likely to get its own bid, rather than one big bid for all the assets.
The problem with Brazil, according to insiders, is a potential legal liability on the concession agreements. Several of the bidders have already decided to drop their bids altogether because of issues they encountered while performing due diligence. Brazil makes up some half of the assets, so that’s a big hit.
The valuations for the remaining projects outside Brazil are now looking like they’ll add up to $800 million or so, insiders say. That’s also a less exciting prospect than Duke had hoped for. No red flags there, but the merchant nature of the portfolio and largely expired contracts make them less appealing to a broad range of buyers.
We’re still eagerly anticipating the results. Final bids are being drawn up next week.