Hedge fund wants to split up Duke Energy. NC political leaders have other ideas.

·3 min read

Gov. Roy Cooper and state legislative leaders urged North Carolina regulators Monday to “strictly scrutinize” a proposal by a Florida-based hedge fund to split Charlotte-based Duke Energy into three separate companies.

The Wall Street Journal reported that Elliott Management Corp. made the proposal in a letter to Duke’s board that Elliott released Monday. Elliott told Duke in the letter that it is one of the utility’s 10 largest shareholders, the Journal reported, and Duke says the firm has sought seats on Duke’s board.

Duke would be split into three companies based on its geographic footprint: in the Carolinas, the Midwest and Florida, the Journal reported. North Carolina’s political leaders quickly urged caution.

A bipartisan statement from Cooper, Senate leader Phil Berger, House Speaker Tim Moore and others noted Duke’s presence in the Carolinas for more than a century and the thousands of people it employs. It cited the value of a “strong, independent, in-state utility” as the state emerges from the pandemic.

“Beyond the pride of a home-state company, though, is the reality that Duke delivers reliable, cost-effective energy to millions of North Carolinians,” the statement read. “There are natural concerns that come with putting our state’s energy future in the hands of a Wall Street hedge fund, and we would expect the North Carolina Utilities Commission to strictly scrutinize any such arrangement.”

The Utilities Commission, whose seven members are appointed by the governor with legislators’ approval, would have to approve such a corporate split, as would federal agencies and other states’ commissions,.

In a lengthy response to Elliott’s proposal, Duke said the hedge fund’s announcement was the latest in a series of proposals by the fund since last July. Duke said its board had found previous proposals “not in the best interests of the company, its shareholders and other stakeholders.

“Duke Energy will review Elliott’s latest proposals as well and the company is always open to new ideas to create growth and value. However, Duke Energy and its Board of Directors will always advocate for the best long-term interests of its shareholders and other stakeholders over any narrow special or short-term interest.”

Duke defended its current financial performance, saying it is on track to deliver annual earnings growth of 5% to 7% over the next decade. Its stock price has increased 25.2% over the past 12 months, Duke said, well above the 18.7% of the S&P Utility Index. Duke’s stock dropped 61 cents Monday, closing at $102.45.

Duke is one of the largest U.S. electric power holding companies, a result of previous mergers including those with Ohio’s Cinergy Corp. in 2006 and Raleigh-based Progress Energy in 2012, deals that expanded its footprint to the Midwest and Florida. It serves 7.8 million electricity customers in six states and 1.6 million natural gas customers in the Carolinas, Ohio, Kentucky and Tennessee.

Elliott, which manages nearly $42 billion in investments, has a long record of investing in power and utility companies, the Journal reported.

Florida-based NextEra Energy approached Duke about a potential acquisition last year, the Journal and other news outlets reported last September.

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