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Duke Energy (DUK) to Divest Commercial DG Business for $364M
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Duke Energy Corp. (DUK - Free Report) recently announced its decision to divest its commercial distributed generation (DG) business to an affiliate of private equity firm ArcLight Capital Partners in a $364 million deal. The transaction is expected to reach completion by the end of 2023 and will generate about $259 million of proceeds for DUK.
The business includes distributed fuel cell projects managed by Bloom Energy, REC Solar’s operating assets, development pipeline and O&M portfolio.
Rationale Behind the Sale
The latest sale agreement preceded Duke Energy’s commitment to selling its utility-scale renewables business platform, announced last month. The company expects to receive proceeds from both these divestments by the end of 2023, which are aimed at bolstering DUK’s balance sheet. It also plans to use gains from these sale-outs to avoid holding any additional debt associated with these two assets.
Further, the company aims to utilize these sale proceeds to upgrade its grid reliability and integrate more than 30,000 megawatts of regulated renewable energy into its system by 2035.
As part of its clean energy portfolio expansion strategy, Duke Energy currently operates 1,200 MW of solar in Florida, with plans to continue adding approximately 300 MW a year going forward. We expect the proceeds from the aforementioned divestments to play a vital role in enabling DUK to duly achieve the clean energy target.
Peer Moves
Electric utilities in the United States are rapidly shifting their focus away from fossil fuels toward cleaner energy sources to meet climate goals. Like Duke Energy, other utilities that have recently made divestments to fund their clean energy promotion are FirstEnergy Corp. (FE - Free Report) , Consolidated Edison Inc. (ED - Free Report) and NiSource Inc (NI - Free Report) .
FirstEnergy signed a sale agreement in February 2023 to divest an additional 30% of its ownership interest in FirstEnergy Transmission business to Brookfield Super-Core Infrastructure Partners for $3.5 billion. FE plans to use the sale proceeds from this transaction to reduce debt and fund its clean energy transition.
FE’s long-term (three- to five-year) earnings growth rate is 6.4%. The Zacks Consensus Estimate for its 2023 sales indicates an increase of 5.8% over 2022’s reported figure.
Consolidated Edison completed the sale of its clean energy business to RWE Renewables America, LLC, in March 2023, for $6.8 billion. The sale proceeds from this divestment should aid ED in making significant investments in clean energy transmission projects, building electrification, energy efficiency, electric vehicle infrastructure and battery storage.
ED’s long-term earnings growth rate is 2%. The stock boasts a four-quarter average earnings surprise of 9.51%.
In June 2023, NiSource signed an agreement to sell 19.9% of its equity stake in NIPSCO, Indiana's largest vertically integrated electric and gas distribution company, to Blockstone Inc.’s infrastructure group for $2.15 billion. The company plans to use the sale proceeds to reduce its debt and finance its renewable energy transition.
NI’s long-term earnings growth rate is 7%. The stock boasts a four-quarter average earnings surprise of 0.51%.
Price Performance
In the past month, shares of DUK have gained 0.1% compared with the industry’s increase of 0.2%.
Image: Shutterstock
Duke Energy (DUK) to Divest Commercial DG Business for $364M
Duke Energy Corp. (DUK - Free Report) recently announced its decision to divest its commercial distributed generation (DG) business to an affiliate of private equity firm ArcLight Capital Partners in a $364 million deal. The transaction is expected to reach completion by the end of 2023 and will generate about $259 million of proceeds for DUK.
The business includes distributed fuel cell projects managed by Bloom Energy, REC Solar’s operating assets, development pipeline and O&M portfolio.
Rationale Behind the Sale
The latest sale agreement preceded Duke Energy’s commitment to selling its utility-scale renewables business platform, announced last month. The company expects to receive proceeds from both these divestments by the end of 2023, which are aimed at bolstering DUK’s balance sheet. It also plans to use gains from these sale-outs to avoid holding any additional debt associated with these two assets.
Further, the company aims to utilize these sale proceeds to upgrade its grid reliability and integrate more than 30,000 megawatts of regulated renewable energy into its system by 2035.
As part of its clean energy portfolio expansion strategy, Duke Energy currently operates 1,200 MW of solar in Florida, with plans to continue adding approximately 300 MW a year going forward. We expect the proceeds from the aforementioned divestments to play a vital role in enabling DUK to duly achieve the clean energy target.
Peer Moves
Electric utilities in the United States are rapidly shifting their focus away from fossil fuels toward cleaner energy sources to meet climate goals. Like Duke Energy, other utilities that have recently made divestments to fund their clean energy promotion are FirstEnergy Corp. (FE - Free Report) , Consolidated Edison Inc. (ED - Free Report) and NiSource Inc (NI - Free Report) .
FirstEnergy signed a sale agreement in February 2023 to divest an additional 30% of its ownership interest in FirstEnergy Transmission business to Brookfield Super-Core Infrastructure Partners for $3.5 billion. FE plans to use the sale proceeds from this transaction to reduce debt and fund its clean energy transition.
FE’s long-term (three- to five-year) earnings growth rate is 6.4%. The Zacks Consensus Estimate for its 2023 sales indicates an increase of 5.8% over 2022’s reported figure.
Consolidated Edison completed the sale of its clean energy business to RWE Renewables America, LLC, in March 2023, for $6.8 billion. The sale proceeds from this divestment should aid ED in making significant investments in clean energy transmission projects, building electrification, energy efficiency, electric vehicle infrastructure and battery storage.
ED’s long-term earnings growth rate is 2%. The stock boasts a four-quarter average earnings surprise of 9.51%.
In June 2023, NiSource signed an agreement to sell 19.9% of its equity stake in NIPSCO, Indiana's largest vertically integrated electric and gas distribution company, to Blockstone Inc.’s infrastructure group for $2.15 billion. The company plans to use the sale proceeds to reduce its debt and finance its renewable energy transition.
NI’s long-term earnings growth rate is 7%. The stock boasts a four-quarter average earnings surprise of 0.51%.
Price Performance
In the past month, shares of DUK have gained 0.1% compared with the industry’s increase of 0.2%.
Image Source: Zacks Investment Research
Zacks Rank
Duke Energy currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.