Duke Energy Corp. has reached an agreement to sell its unregulated, utility-scale commercial renewables business to Brookfield Renewable Partners LP in a deal with an enterprise value of about $2.8 billion, including noncontrolling tax equity interests and the assumption of debt, the two companies announced June 12.
Duke expects net proceeds from the transaction of about $1.1 billion, subject to adjustments, and said in an announcement it will use the proceeds to strengthen its balance sheet and avoid additional holding company debt issuances, allowing it to focus on the growth of its regulated businesses. The sale is expected to close by the end of 2023.
"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," Duke Energy Chair, President and CEO Lynn Good said in a statement. "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 sale agreement for the commercial renewables business includes more than 3,400 MW of utility-scale solar, wind and battery storage across the country, net of joint venture partners ownership, in addition to operations, new project development and projects under construction, Duke said. The primary operations of the commercial renewables business will remain in Charlotte, NC, and the Duke employees at the business will transition to Brookfield.
"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," Brookfield Renewable CEO Connor Teskey said. "We are also adding to our pipeline of renewable development projects, solidifying our position as one of the largest renewable energy businesses in the US with almost 90,000 MW of operating and development assets."
'Immediately accretive' – Brookfield
The development pipeline associated with Duke's renewable business consists of about 6,100 MW for $1.05 billion in equity proceeds, or about $265 million net to Brookfield, the company said in its own deal announcement. The deal also presents the opportunity for significant repowerings of the wind portfolio over time, Brookfield said.
The deal is "immediately accretive to [funds from operations] with strong cashflow visibility," Brookfield said, with the assets expected to be at least 3% accretive to funds from operations in 2024, with about 90% of cashflows contracted with a weighted average 13 years remaining life.
Brookfield Renewable Partners LP and Brookfield Renewable Corp. also announced concurrent equity offerings for total gross proceeds of $500 million on a bought-deal basis by underwriters co-led by Scotiabank, BMO Capital Markets, TD Securities Inc., CIBC Capital Markets and RBC Capital Markets.
The sale of Duke's commercial renewables business is still subject to the satisfaction of closing conditions, including regulatory approval by the Federal Energy Regulatory Commission and expiration of the waiting period under the Hart-Scott-Rodino Act.
Duke said it continues to make "strong progress" on a separate sale underway for its distributed energy business, also expected to close by year-end 2023.
In Duke's first-quarter 2023 earnings call in May, Good said the company was in the late stages of the process for both transactions and was in discussion with select bidders. The split into two different transactions was because "there are two different types of buyers that would be interested in those," Duke CFO Brian Savoy told S&P Global Commodity Insights in May.
Duke took an impairment related to the business up for sale of approximately $175 million to first-quarter results, according to the company's May earnings release. In February, Duke reported a $1.3 billion impairment on the sale of the business.
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