Duke Energy and GIC have announced they have entered into a definitive agreement for acquisition of a 19.9% interest in Duke Energy Indiana (DEI), a subsidiary of Duke Energy, by an affiliate of GIC Private Limited, Singapore’s sovereign wealth fund. Duke Energy also announced its 2021 adjusted earnings per share (EPS) guidance range of $5.00 to $5.30. The transaction with GIC bolsters the company’s growth potential and supports its increased long-term adjusted EPS growth rate of 5 to 7% through 2025, based off of a 2021 adjusted EPS midpoint of $5.15. This is up from the previously stated 4 to 6% rate.
Courtesy of Duke Energy
Under the terms of the agreement, GIC will acquire a 19.9% indirect minority interest in Duke Energy Indiana for a total purchase price of $2.05 billion.
Proceeds from the transaction will fund Duke Energy’s increased $58 to $60 billion capital plan – a five-year plan that will accelerate its clean energy transition – and redeploy capital to support increased growth investments within its portfolio of regulated utilities.
Given the innovative transaction structure, Duke Energy will receive proceeds in two, separate phases to efficiently align with the company’s capital needs. The transaction allows Duke Energy to forego its previously announced plan to raise $1 billion of common equity.
Duke Energy will continue to operate DEI and will remain the majority owner, with an 80.1% stake in the business.
“We are pleased to have GIC as a long-term investor in DEI,” said Lynn Good, Duke Energy’s chair, president and chief executive officer. “This agreement with GIC allows Duke Energy to not only partner with a highly respected global investor, it also strengthens our confidence as we increase our long-term adjusted EPS growth rate to 5 to 7 percent. With this agreement, Duke Energy is well positioned to effectively finance our robust investment plan in a clean energy future and continue delivering sustainable value to our investors.”
Ang Eng Seng, GIC’s Chief Investment Officer of Infrastructure, said, “As a long-term investor, GIC strongly believes that companies focused on meaningful sustainability practices will create better risk-adjusted returns over the long term. Duke Energy’s proven management team and clear commitment to a clean energy transition make this an attractive partnership opportunity for GIC. This capital will help create long-term value by directly supporting Duke Energy’s ability to capitalize on their stated ESG and decarbonization goals. We look forward to a successful transaction and long-term investment.”
The $2.05 billion in proceeds will be received in a staggered, two-phase closing, structured in evenly split payments. The first closing is expected to occur in the second quarter of 2021. Under the terms of the agreement, Duke Energy has the discretion to determine the timing of the second closing, but it will occur no later than January 2023.
GIC will invest in a newly formed intermediate holding company of which DEI will be a wholly owned subsidiary. GIC will receive certain limited rights commensurate with the minority stake.
The transaction is subject to customary closing conditions, including approval from the Federal Energy Regulatory Commission (FERC) and completion of review by the Committee on Foreign Investment in the United States (CFIUS).