Duke Energy Corp. has reached an agreement to sell its commercial distributed generation business to an affiliate of ArcLight Capital Partners LLC in a deal with an enterprise value of about $364 million, including noncontrolling tax equity interest, the two companies announced July 5.
Duke expects net proceeds from the transaction of about $259 million, subject to adjustments, and said it will use the proceeds to strengthen its balance sheet and avoid additional holding company debt issuances, allowing focus on the growth of its regulated businesses. The sale is expected to close by the end of 2023.
Duke announced an agreement to sell its unregulated, utility-scale commercial renewables business to Brookfield Renewable Partners LP on June 12 in a $2.8 billion deal, including noncontrolling tax equity interests and the assumption of debt. Duke expects both sales to finalize by year-end 2023.
"The sale of our commercial renewables businesses streamlines our portfolio and provides the resources to support the long-term needs of our customers in our growing regulated territories," Duke President, CEO and Chair Lynn Good said in a statement. "Over the next decade, we plan to invest significant amounts of capital to fund the critical energy infrastructure necessary to serve our customers and support our clean energy transition."
The sale of the distributed generation business includes REC Solar operating assets, a development pipeline and operations and maintenance portfolio, as well as distributed fuel cell projects managed by Bloom Energy, according to the announcement. Employees of the distributed generation business will transition to ArcLight.
"Our investment in Duke Energy's commercial distributed generation business supports ArcLight's longstanding strategy of acquiring operating assets from leading strategics and creating strong stand-alone renewable platforms," ArcLight Managing Director Marco Gatti said. "We believe this is an attractive opportunity to acquire a first-rate commercial distributed generation portfolio, partner with a talented team and build upon longstanding, high-quality customer relationships."
The deal will leverage ArcLight's experience investing in renewables infrastructure, allowing the company to further build its portfolio and advance brownfield development opportunities, Managing Partner Dan Revers said.
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.
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 businesses 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 to fourth-quarter 2022 results on the sale of the businesses.
S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.