Duke Energy agreed to sell the Tennessee division of its Piedmont Natural Gas subsidiary for $2.48 billion to St. Louis-based Spire.
The Charlotte-based utility said it would use $800 million of the proceeds to pay down debt, with the balance helping to finance an $83 billion, five-year capital plan. The company is investing heavily in expanding generating capacity because of increasing power demand.
The sales rice is 24 times the division’s earnings, which Duke noted was a “significant premium” to its common stock valuation. State and federal regulators still must approve the transaction, which is expected to close early next year.
Natural gas distribution companies supply the fuel to customers as an alternative to other energy sources. Like its parent company, Piedmont is a regulated monopoly that is allowed to earn a regulated profit.
“The transaction allows us to efficiently fund accelerating investment opportunities driven by record customer growth and a deepening economic development pipeline,” Duke Energy CEO Harry Sideris said in a release.
Charlotte-based Piedmont Natural Gas bought the Tennessee operation about 40 years. Duke acquired Piedmont for $4.9 billion in 2016, helping consolidate its dominance of the energy industry in North Carolina and South Carolina.
Piedmont had revenue of $1.7 billion and net income of $412 million last year, according to a Tennessee. It has the natural gas franchise for much of North Carolina and upstate South Carolina.
The Tennessee system is much smaller than Piedmont’s Carolinas operation. In Tennessee, Piedmont has nearly 3,800 miles of distribution and transmission pipeline and a liquefied natural gas facility. It has about 200,000 customers in an area stretching from Nashville to the Kentucky border.
Spire is one of the largest U.S. publicly traded natural gas utilities, with more than 1.7 million customers and about $2.5 billion in annual revenue. It was Alabama Gas Corporation before rebranding in 2016.
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