Tuesday, November 29, 2011

Duke Energy's Partnerships with ENN Solar, China Huaneng Group Lead to Chinese Lines of Credit

Finding the right domestic partner is the key to success for an American or a Canadian company in the China solar market. These relationships can also bring benefits outside of Asia. Duke Energy is finding that thanks to its relationships with ENN Solar and the China Huaneng Group, it has new access to lines of credit from Chinese lenders.

The Wall Street Journal is reporting today that Duke Energy and Progress Energy secured fresh lines of credit that includes Chinese lenders. The two utilities jointly arranged $6 billion in financing ahead of the expected completion of Duke's acquisition of Progress in an all-stock deal valued at about $13.7 billion. The merger, which requires the approval of federal and state regulators, would create the United States's largest utility and could close by the end of the year.

I have written about how Duke Energy has been particularly good at forging strong partnerships with Chinese companies. The company has a particularly strong relationship with ENN Solar. There has been talk between the two of cooperating on solar projects in North Carolina and Nevada. None of these projects have advanced for a variety or reasons but this line of credit is one example of how these partnerships can still be beneficial in less direct ways. Without Duke's Chinese connections, the Chinese banks would not have lent the money.

The new lines of credit replaces existing credit facilities that expire in 2012. Ten banks each agreed to provide $305.5 million in credit, including the Chinese government-owned Bank of China and Industrial & Commercial Bank of China, according to an 8-K that Duke filed with the Securities and Exchange Commission late Friday. China Merchants Bank is among seven banks that each agreed to provide $65 million in credit.

Together, the three Chinese lenders are behind 11% of the joint credit facility. The inclusion of the Chinese lenders comes as that China's banks, which include some of the world's largest, look to expand overseas.

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