Duke Energy, the publicly listed energy giant that serves 7.8 million retail electric customers in the U.S. through its regulated utilities, announced this week that it is selling a 19.9 percent interest in its subsidiary, Duke Energy Indiana (DEI), to an affiliated of GIC, Singapore’s sovereign wealth fund and an experienced investor in U.S. infrastructure.
Under the terms of the agreement, GIC will acquire a 19.9 percent indirect minority interest in Duke Energy Indiana for $2.05 billion, at a premium to Duke Energy’s current public equity valuation.
Money from the deal will fund Duke Energy’s five-year, $60 billion capital plan to accelerate its clean energy transition, and redeploy capital toward growth investments within its regulated utility portfolio.
The transaction has been structured so that Duke Energy will receive proceeds in two, separate phases, allowing the company to forego a previously announced plan to raise $1 billion of common equity.
Duke Energy will remain the majority owner of DEI with an 80.1 stake in the business and will continue to operate the firm.
“We are pleased to have GIC as a long-term investor in DEI,” said Duke Energy President, Chair and CEO, Lynn Good, in announcing the deal. “This agreement with GIC allows Duke Energy to not only partner with a highly respected global investor, it also strengthens our confidence as we increase our long-term adjusted EPS growth rate to 5 to 7 percent. With this agreement, Duke Energy is well positioned to effectively finance our robust investment plan in a clean energy future and continue delivering sustainable value to our investors.”
“Our agreement with GIC highlights the value and growth potential of DEI and recognizes the continued hard work and commitment of our people,” said Stan Pinegar, DEI state president. “Delivering safe and reliable service to our customers and serving our communities remains our top priority.”
Ang Eng Seng, GIC’s Chief Investment Officer of Infrastructure, said, “As a long-term investor, GIC strongly believes that companies focused on meaningful sustainability practices will create better risk-adjusted returns over the long term. Duke Energy’s proven management team and clear commitment to a clean energy transition make this an attractive partnership opportunity for GIC. This capital will help create long-term value by directly supporting Duke Energy’s ability to capitalize on their stated ESG and decarbonization goals. We look forward to a successful transaction and long-term investment.”
Higher guidance
The $2.05 billion in proceeds will be received in a staggered, two-phase closing, structured in evenly split payments. The first closing is expected to occur in the second quarter of 2021. Under the terms of the agreement, Duke Energy has the discretion to determine the timing of the second closing, but it will occur no later than January 2023.
GIC will invest in a newly formed intermediate holding company of which DEI will be a wholly owned subsidiary. GIC will receive certain limited rights commensurate with the minority stake.
The transaction is subject to customary closing conditions, including approval from the Federal Energy Regulatory Commission (FERC) and completion of review by the Committee on Foreign Investment in the United States (CFIUS).
Following the GIC deal, Duke Energy also raised its 2021 adjusted earnings per share (EPS) guidance range from $5.00 to $5.30, citing a stronger case for an increased long-term adjusted EPS growth rate of 5 to 7% through 2025, up from the previously stated 4 to 6% rate.
