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Duke Sees ‘Robust Market’ for Sale of $4 Billion Renewable Unit

The Duke Energy solar panel project in Andrews County, Texas, US. Photographer: Matthew Busch/Bloomberg

(Bloomberg) —

Utility giant Duke Energy Corp. is planning to spin off its $4 billion US solar and wind portfolio in what would be one of the nation’s biggest renewable sales ever.

The potential move comes as Duke builds more clean power generation within its regulated business. Its unregulated commercial renewables operation consists of over five gigawatts of wind and solar farms across the US, but primarily in the western US, far from the company’s regulated customers.Play Video

“I believe there will be a robust market for these assets, given that it’s not only operating assets, but also the development pipeline,” Duke Chief Executive Officer Lynn Good said on the company’s second-quarter earnings call Thursday morning. 

The sale would be one of the largest sales ever of solar and wind assets in the US, according to BloombergNEF solar analyst Pol Lezcano. 

Wall Street has encouraged US utility companies to slim their businesses to focus on their core, regulated operations. Investors see a big upside to utilities boosting their guaranteed returns by investing capital in grid upgrades and renewable projects within their regulated businesses, where they can pass the spending on to their customers. 

“It is a broad trend,” Duke Chief Financial Officer Steve Young said in an interview Thursday. “You can look and see that others have done this.”

The announcement by Duke follows other industry peers, including CMS Energy selling its home-improvement lender, Southwest Gas considering a spinoff of its construction unit, as well as Consolidated Edison Inc. weighing the sale of its renewable energy portfolio.

Duke’s unit is among the top ten solar and wind businesses in the US, but represents less than 5% of the company’s consolidated earnings, according to its earnings presentation

If sold, the majority of proceeds would be used for debt repayment and avoidance, the company said. 

Duke is trying to decarbonize its regulated business and increase clean energy generation. The geographic realities of the commercial renewables projects make them a poor fit for Duke’s regulated customers in the Southeast US. “Physically getting the power there would be prohibitive,” Young said. He added that he’s encouraged by the energy tax provisions in the Inflation Reduction Act, which he said could reduce customer bills. 

Analysts approved of Duke’s plan to potentially sell the unit. “It is positive to see Duke moving to a more regulated earnings profile sooner than expected,” Credit Suisse utility analysts wrote in a note. “There are now numerous utilities working to divest renewable portfolios.”

Duke shares were down less than 1% in Thursday trading.

(Updates with CEO comments, BloombergNEF analysis and shares in final paragraph.)

–With assistance from Angel Adegbesan and Mark Chediak.

© 2022 Bloomberg L.P.

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