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Duke Energy emphasizes organic growth over strategic opportunities

Duke Energy Corp. executives told analysts and investors Aug. 6 that they will weigh potential strategic acquisitions but are focused on organic growth opportunities in electric and gas infrastructure as well as renewables through the company's $37 billion five-year capital plan.

Duke Energy management, which has confirmed an interest in acquiring South Carolina utility Santee Cooper, was asked whether the company would also be interested in pursuing Jacksonville, Fla., municipal utility JEA. JEA's board voted July 23 to allow the senior leadership team to again explore privatization and other ownership options to improve the utility's financial position.

"We evaluate opportunities, as you would expect, as we see things that are in our service territory that we think are a fit for us," Duke Energy Chairman, President and CEO Lynn Good said on the company's second-quarter earnings call. "But that would be evaluated within the broad context of our business plan, and we feel like our organic growth opportunities are quite strong, and that would be our highest priority."

In an interview prior to the call, Duke Energy Executive Vice President and CFO Steven Young outlined the types of investments the company plans to pursue through the second half.

"I think we will continue to make investments in the grid, particularly in the Midwest," Young said. "We will continue to make investments in renewables and in the grid in Florida under the three-year multiyear rate plan there."

Duke Energy also plans to complete the $1.1 billion Western Carolinas Modernization Project before the end of the year. The project involves retiring and replacing the 384-MW Asheville coal plant with the 560-MW Asheville combined-cycle gas plant, in addition to at least 15 MW of new solar generation and a minimum of 5 MW of utility-scale electricity storage.

"We have developed a very solid organic investment plan over our five-year horizon," Young said. "We have the largest grid, when you put our utilities together, in the country. ... As we build combined cycles, retire coal and build renewable plants, that's a very lucrative source of investment for us as well."

"We have a very rich field of investments to make across our footprint," the CFO added.

As the company awaits resolution of rate cases in South Carolina, management indicated that they plan to file new rates cases in North Carolina "later this year."

Duke Energy is challenging unfavorable cost recovery decisions by the Public Service Commission of South Carolina in the rate cases for subsidiaries Duke Energy Carolinas LLC and Duke Energy Progress LLC but sought to quell concerns about how this will impact outcomes in North Carolina.

"I want to be clear that we do not see a read through from South Carolina to North Carolina," Good said. "North Carolina has historically been a very fair, impartial regulatory jurisdiction that reaches decisions based on facts and decisions presented, follows the law. We certainly would expect that to be the case as we think about regulatory outcomes moving forward."