Duke Energy agreed to sell for $6 billion nearly 20% of its electric utility company serving 2 million Floridians, fueling an expansion of its generation capacity in anticipation of rising electricity demand.
Duke’s agreement with Brookfield Asset Management staggers its cash investment, starting next year through 2028. The Charlotte-based utility will spend $2 billion of the proceeds to increase its $87 billion five-year capital plan, according to a statement earlier today. The other $4 billion will displace holding company debt.
Brookfield is buying 19.7% of the Florida unit, leaving Duke with 80.3%. The utility said it plans to continue operating Duke Energy Florida with no changes to the workforce, operations or leadership in the state.
The investment will push Duke’s spending on modernizing the grid, boosting capacity and strengthening resiliency in Florida to more than $16 billion through 2029. “It also materially strengthens Duke Energy’s overall credit profile, which in turn enables us to invest in our energy modernization plans across our entire footprint,” CEO Harry Sideris said in the statement.
Separately, Duke reported second-quarter earnings and revenue that topped analysts’ projections. It reaffirmed that it expects to have earnings per share of $6.17 to $6.42 this year, compared with $5.71 last year.
The company says it expects earnings per share to increase by 5% to 7% annually through 2029.
The stock rose more than 1% in early afternoon trading to about $116, a record level. Shares have gained 51% over the past five years, compared with about 88% for the S&P 500 Index.
More than 90% of Duke’s business is from its regulated utilities, which have their profit levels capped by state regulatory commissions. In North Carolina, Duke’s two utilities are allowed a return on equity of about 10%.
Revenue for the quarter increased 4.7% to $7.17 billion. The average number of customers increased 1.5%, but electric sales volume dipped 1.3%. Higher prices made up for the lower volume.
The Brookfield transaction requires regulatory approval and is followed by a week Duke’s agreement to sell the Tennessee division of its Piedmont Natural Gas subsidiary for $2.48 billion to St. Louis-based Spire. It plans to use $800 million of the proceeds to trim debt, with the balance helping to finance its spending to expand generating capacity.
As data centers and advanced manufacturing spur economic development, Duke is transforming approximately 320,000 miles of power lines, the largest transmission and distribution system in the U.S., according to an analyst’s presentation. The company is also building new power generation and modernizing natural gas local distribution companies.
The Duke Energy Florida investment amounts to 29 times 2024 earnings of the parent company, representing a premium over the value of public shares, Duke said. The Tennessee transaction also represents a premium to the company’s common stock valuation.
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.
New York-based Brookfield has more than $200 billion in assets under management in utilities, transportation, data and oil and gas.
