Duke, Progress Tap Chinese Banks For Part Of $6 Billion Credit Line
November 28 2011 - 8:48PM
Dow Jones News
Duke Energy Corp. (DUK) and Progress Energy Inc. (PGN) announced
Monday that they secured a combined $6 billion in credit from 30
lenders, with three Chinese banks providing 11% of the total.
Duke plans to buy Progress in an all-stock deal valued at about
$13.7 billion 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 $4 billion of the total credit line,
pointed out that the Chinese government-owned Bank of China Ltd.
(3988.HK, 601988.SH, BACHY) and Industrial & Commercial Bank of
China Ltd. (1398.HK, 601398.SH, IDCBY) agreed to provide $305.5
million each, more than 10% of the total. China Merchants Bank Co.
Ltd. (3968.HK, 600036.SH, CIHHF) is providing $46 million.
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 U.S. 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 U.S. utilities'
financing deal comes as Chinese banks, which include some of the
world's largest, look to expand overseas. The investment is
welcomed by U.S. companies like Duke, that want to spread their
banking relationships across more institutions, particularly in
regions other than the U.S. and Europe.
Williams said the agreement with the Chinese banks was a direct
result of Duke's partnership with Chinese companies including ENN
Energy Holdings Ltd. (2688.HK, 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 two companies signed an agreement in 2009 to develop U.S. 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. (0902.HK, 600011.SH, HNP).
Duke and ENN haven't built any U.S. solar power projects to
date, owing in part to an inability by ENN to benefit from tax
credits that the U.S. government offers for such projects.
Under the credit agreement announced Monday, Duke has access to
$4 billion in credit and Progress has access to $2 billion, with
the amounts to be combined following the companies' merger. The
agreement replaces a $3.14 billion line of credit Duke had that was
set to expire in June 2012. It also replaces three credit
facilities totaling $2 billion that Progress had, that expired in
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
(RBS.LN, 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 (BARC.LN,
BCS); Citigroup Inc. (C); Credit Suisse Group AG (CS, CSGN.VX);
JPMorgan Chase & Co. (JPM); and UBS AG (UBSN.VX, UBS).
-By Cassandra Sweet, Dow Jones Newswires; 415-439-6468;
cassandra.sweet@dowjones.com