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Duke and Progress Energy tap Chinese banks for credit line
DUK, PGN
Duke Energy Corp. (
DUK
) and Progress Energy Inc. (
PGN
) announced Monday that they secured a combined US$6-B in credit
from 30 lenders, with 3 Chinese banks providing 11% of the
total.
Duke plans to buy Progress in an all-stock deal valued at
about US$13.7-B that the companies have said they hope to close
by the end of this year. The merger, which requires the approval
of federal and state regulators, would create the nation's
largest utility.
Duke, which has access to US$4-B of the total credit line,
pointed out that the Chinese government-owned Bank of China Ltd.
(HK:3988), (SH:601988), (PK:BACHY) and Industrial &
Commercial Bank of China Ltd. (HK:1398), (SH:601398), (PK:IDCBY)
agreed to provide US$305.5-M each, more than 10% of the total.
China Merchants Bank Co. Ltd. (HK:3968), (SH:600036), (PK:CIHHF)
is providing US$46-M.
China Merchants Bank is independent, though indirectly
controlled by the Chinese government through a number of wholly
owned companies that hold shares in the bank, according to
documents issued by the US Federal Reserve Bank.
"It was a nice coming together of China's desire to bank with
businesses outside China and our desire to diversify the banks"
with which Duke does business, said Duke spokesman Tom
Williams.
The Chinese banks' participation in the US utilities'
financing deal comes as Chinese banks, which include some of the
world's largest, look to expand overseas. The investment is
welcomed by US companies like Duke, that want to spread their
banking relationships across more institutions, particularly in
regions other than the US and Europe.
Mr. Williams said the agreement with the Chinese banks was a
direct result of Duke's partnership with Chinese companies
including ENN Energy Holdings Ltd. ( HK:2688),(PK:XNGSF) and
China Huaneng Group.
In December, Duke said it signed an agreement with ENN to
exchange knowledge on advanced energy and building technologies
and work with ENN on an "Eco City" ENN was building in Langfang,
China. The 2 companies signed an agreement in Y 2009 to develop
US solar power projects.
In August 2009, Duke signed a similar agreement with China
Huaneng Group, a government-owned enterprise that owns several
energy subsidiaries including power-plant operator Huaneng Power
International Inc. (HK:0902), SH:600011),(
HNP
).
Duke and ENN have not built any US solar power projects to
date, owing in part to an inability by ENN to benefit from tax
credits that the US government offers for such projects.
Under the credit agreement announced Monday, Duke has access
to US$4-B in credit and Progress has access to US$2-B, with the
amounts to be combined following the companies' merger. The
agreement replaces a US$3.14-B line of credit Duke had that was
set to expire in June 2012. It also replaces 3 credit facilities
totaling US$2-B that Progress had, that expired in Y's 2012 and
2013.
Duke plans to use the credit line primarily to support its
issuance of commercial paper, although it could also be used for
short-term debt, the company said.
Wells Fargo & Co. (
WFC
) served as administrative agent, and Bank of America Corp. (
BAC
) and Royal Bank of Scotland Group PLC (LN:RBS),(RBS) served as
syndication agents for the credit agreement.
Documentation agents included units of Bank of China;
Industrial and Commercial Bank of China; Barclays PLC (LN:BARC),
NYSE:BCS); Citigroup Inc. (C); Credit Suisse Group AG (CS),
(VX:CSGN); JPMorgan Chase & Co. (JPM); and UBS AG
(VX:UBSN),(UBS).
Paul A. Ebeling, Jnr.
Paul A. Ebeling, Jnr
Paul A. Ebeling, Jnr. writes and publishes The Red
Roadmaster's Technical Report on the US Major Market Indices, a
weekly, highly-regarded financial market letter, read by opinion
makers, business leaders and organizations around the world.
Paul A. Ebeling, Jnr has studied the global financial and
stock markets since 1984, following a successful business career
that included investment banking, and market and business
analysis. He is a specialist in equities/commodities, and an
accomplished chart reader who advises technicians with regard to
Major Indices Resistance/Support Levels.