Summary
Duke Energy Corporation (DUK) announced on October 13, 2016, its intention to divest its entire International Energy business through two separate sale agreements. The company is selling its Brazilian power generation assets to China Three Gorges (Luxembourg) Energy S.à.r.l. for approximately $970 million, with an expected enterprise value of $1.2 billion including debt. Additionally, Duke Energy is selling its Latin American operations, including power generation, transmission, and natural gas facilities in several South American and Central American countries, to ISQ Enerlam Aggregator, L.P. and Enerlam (UK) Holdings Ltd. for approximately $890 million, with an expected enterprise value of $1.2 billion including debt. These transactions are expected to generate between $1.7 billion and $1.9 billion in cash proceeds, excluding transaction costs, and are anticipated to close by early 2017 for the Brazilian assets and the first half of 2017 for the Latin American assets. Notably, the company anticipates no immediate U.S. federal tax impact due to existing favorable tax attributes. The sale of these international businesses will lead to their classification as assets held for sale and discontinued operations starting in Q4 2016, with an estimated pre-tax impairment charge of $325-$375 million primarily related to currency translation adjustments.
Key Highlights
- 1Duke Energy is divesting its entire International Energy business, including operations in Brazil, Peru, Chile, Argentina, Guatemala, El Salvador, and Ecuador.
- 2The Brazilian assets (2,090 MW hydroelectric capacity) are being sold to China Three Gorges for an enterprise value of approximately $1.2 billion (including debt).
- 3The Latin American assets (2,300 MW hydroelectric and natural gas capacity, transmission, and gas processing) are being sold to I Squared Capital consortium for an enterprise value of approximately $1.2 billion (including debt).
- 4Total expected cash proceeds from both sales range from $1.7 billion to $1.9 billion, excluding transaction costs.
- 5The divestitures are expected to result in no immediate U.S. federal tax impact due to favorable tax attributes.
- 6The assets are being classified as held for sale and discontinued operations starting Q4 2016.
- 7Duke Energy anticipates a pre-tax impairment charge of $325-$375 million in Q4 2016 related to cumulative currency translation adjustment losses.