Enron Corp. owes Duke Energy Corp. about $100 million, which Duke Energy North America CEO Jim Donnell said Monday would not be considered "material" exposure to the troubled Houston energy giant.
Since Enron's financial problems began to mount, other energy companies have spent much of their time on conference calls reassuring Wall Street analysts their exposure to Enron is minimal and that they have used more conservative accounting practices than those that forced Enron to write down more than $1 billion in shareholder equity, report a third quarter loss, and restate 4 years worth of earnings.
Friday, Dynegy and Enron reported a deal under which Dynegy will acquire Enron. Donnell said Duke continues to trade with Enron. Despite the turmoil of the past few weeks "we still see credit worthy buyers in the market every day," he said.
Donnell noted relative newcomer InterContinentalExchange Inc. has become the market maker for electricity in the Eastern Interconnection within the past 3-4 months.
Robert Brace, executive vice-president and chief financial officer of Duke Energy Corp., parent of Duke Energy North America (DENA), said the Charlotte, NC-based firm has about $600 million in three unconsolidated off-balance sheet entities.
Grave said the entities were "bona fide associate companies or partnerships" in which Duke has less than a 50% interest. He said the transactions didn't involve cross balance sheet debt "just to keep it off the balance sheet." Enron's write-down of shareholder equity was related to a series of off-balance sheet entities.
Donnell said it is still early to assess how the Dynegy-Enron combination will effect the market. While both Houston companies are large counterparties for Duke, Donnell said he expects the impact on Duke's business to be "quite minimal." But he declined to say if Duke planned to oppose Dynegy's acquisition of Enron.
With respect to mark-to-market accounting and accrual accounting, DENA chief financial officer Mary Gilbert said 80% of DENA's total forward position qualifies for accrual accounting. The balance is marked to market. However, Gilbert said it would be wrong to say that 20% of the unit's previous 9 months earnings were generated by the marked-to-market portfolio. The company doesn't disclose that type of earnings breakdown, she said.
Donnell said the company is still on track to deliver 2001 earnings in the previously forecasted range. He reiterated Duke views that assets represent options. The company is presently operating 8,000 Mw, has 8,400 Mw under construction, and expects 6,000 Mw to be on line next summer. About 90% of 2002 output is hedged and about 60% of 2003.
"We are not current day price takers," he said. Echoing comments made by other industry executives, Donnell said he expects more acquisition opportunities to arise because of current market dynamics.