Brookfield Renewable to acquire Duke’s commercial renewable business

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Duke Energy reached an agreement to sell its commercial renewable energy business which comprises close to 3.5 GW of utility solar, wind and energy storage projects for cash consideration of $1.1 billion and the assumption of $1.7 billion total debt.

The North Carolina investor-owned utility initiated a sale process for its commercial renewables business in September 2022 with sellside advisor Morgan Stanley. In November, the company said the value for the renewables business could exceed a book value of $4 billion, and on its Q4 2022 earnings call the company continued to defend the broad valuation of its commercial renewables business.

Despite a back and forth with industry analysts about the division’s valuation on its recent earnings calls, the utility saw a haircut valuation for the commercial division in its announced sale, with the $2.8 billion enterprise value reflecting a 30% discount to the valuation its management discussed on earnings calls.

The utility will utilize sale proceeds to strengthen its balance sheet and avoid additional holding company debt. This will allow the company to focus on the growth of its regulated businesses, including investments to enhance grid reliability and help incorporate over 30 GW of regulated renewable energy into its system by 2035.

In November 2022, Duke launched an auction for its commercial renewable energy platform, which is expected to close in the second half of 2023. The sale is subject to satisfaction of customary closing conditions, including regulatory approval by the Federal Energy Regulatory Commission (FERC) and the expiration of the waiting period under the Hart-Scott-Rodino Act.

“As one of the country’s largest renewable energy operators, Brookfield has the resources to support the continued growth and success of the Commercial Renewables’ portfolio,” said Lynn Good, president and chief executive officer of Duke Energy. “This sale is an important step in our transition into a purely regulated company with significant grid and clean energy investment plans that will deliver benefits to our customers and stakeholders.”

The primary business operations of Duke’s commercial renewables business will remain in Charlotte, N.C. and the Duke employees that support the business will transition over to Brookfield to maintain business continuity for its operations and customers.

Connor Teskey, chief executive officer of Brookfield Renewable said:

With this acquisition, we are adding a scale operating renewable platform with a full suite of in-house capabilities and a proven management team experienced in operations and development. We are also adding to our pipeline of renewable development projects, solidifying our position as one of the largest renewable energy businesses in the U.S. with almost 90,000 megawatts of operating and development assets.

Morgan Stanley and Wells Fargo Securities advised Duke Energy on the sale, while Skadden, Arps, Slate, Meagher & Flom was its legal advisor.

Separately, Duke Energy is continuing to progress on the sale process for its distributed generation business, which is also expected to close by the end of the year.

The sales represent a trend over the past few years of regulated utility companies separating their regulated operations from power generation and commercial renewables business assets.

New York’s largest utility Con Edison in October 2022 closed the sale of its 7 GW Con Edison Clean Energy Businesses to German power and utility company RWE AG in a $6.8 billion transaction, which represented the largest corporate solar mergers and acquisition deal of the year.

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