Duke Energy Corp. (NYSE:DUK) and Progress Energy Inc. (NYSE:PGN) Borrow in China

Duke and Progress Energy tap Chinese banks for credit line


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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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