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Duke CFO sees no need for further asset sales in 5-year plan

Duke Energy Corp.'s CFO said the company does not plan to pursue further asset sales even as industry peers and the market have reacted enthusiastically to the premium fetched by the partial sale of Duke Energy Indiana LLC.

"Going forward, we've got a five-year plan that is pretty set for us," Duke Energy Executive Vice President and CFO Steven Young said in a May 10 phone interview prior to the company's first-quarter earnings call.

Duke Energy announced in late January that it would sell a 19.9% interest in subsidiary Duke Energy Indiana, or DEI, to GIC Pte. Ltd. affiliate EPSOM Investment Pte. Ltd. in a $2.05 billion all-cash deal.

The transaction with the Singaporean sovereign wealth fund is expected to close in two phases and will allow Duke Energy to forgo previous plans to raise $1 billion in common equity.

In conjunction with the transaction announcement, Duke Energy increased its long-term adjusted EPS growth rate to 5% to 7% through 2025 from 4% to 6%.

Duke Energy said proceeds from the transaction will fund an increased $59 billion five-year capital plan for 2021 through 2025 focused primarily on grid and clean energy investments.

At least one peer utility team has noted that the transaction's forward multiple is "like issuing common equity at $50 a share."

Young said Duke Energy does not have any further equity needs in its five-year plan but is cognizant of the market value in the DEI sale as well as the valuation of recent gas utility sales.

"First of all, I'm glad to see in the marketplace in general that energy infrastructure is being highly valued," the CFO said.

In 2016, Duke Energy closed its $6.7 billion acquisition of Piedmont Natural Gas Co. Inc., but executives have not hinted at whether they will grow their gas infrastructure business.

"We like the businesses we have," Young said.

Clean and green

When it comes to Duke Energy's investment strategy, the CFO said the company's capital plan is in line with U.S. President Joe Biden's ambitious infrastructure and clean energy goals.

"I feel like the Biden administration, without question, is pursuing a very green energy profile," Young said. "What we're encouraged by and agree with is the move to decarbonize."

Biden wants to produce 100% carbon-free electricity by 2035 and achieve economywide net-zero emissions by 2050.

Duke Energy has set its own goal to achieve a 50% reduction of carbon emissions by 2030 from 2005 levels and net-zero emissions by 2050.

The company, which has retired 51 coal units since 2005, plans to focus on retiring more coal plants while adding renewables, battery storage and natural gas to hit its emissions goals.

While the Biden administration has set a goal of installing 30,000 MW of offshore wind capacity in the U.S. by 2030, Duke Energy believes that more technology and infrastructure development is needed before the company invests in the nascent industry.

"It is a technology and a capability that still needs a fair amount of work to happen here [in the Carolinas]," Young said.

Duke Energy reported first-quarter adjusted EPS of $1.26, compared to adjusted EPS of $1.14 for the first quarter of 2020.