CHARLOTTE, N.C., May 17, 2021 /PRNewswire/ -- Below is Duke
Energy's (NYSE: DUK) statement in response to Elliott Management's
announcement today:
Today's announcement by Elliott is the latest in a series of
proposals that the hedge fund has offered to Duke Energy since
July 2020. Throughout, Duke Energy's
Board of Directors has reviewed their proposals in depth and
determined that they are 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.
Strong operational performance
Guided by Duke Energy's management team and world-class Board of
Directors, Duke Energy is performing at a high level by executing
its clean energy strategy, delivering strong, sustainable value for
shareholders, customers, communities and its employees, and
outlining a clear vision for future growth, grounded in the largest
clean energy transition in the country.
The company is poised to deploy over $125
billion of capital over the next decade and deliver 5% to 7%
annual earnings growth along the way. As a result, Duke Energy has
increased its long-term EPS growth rate and driven the company's
share price to outperform the S&P Utility Index in both 2020
and year-to-date. Over the last 12 months, Duke Energy's stock
price has increased 25.2% versus 18.7% for the S&P Utility
Index.
Duke Energy's strategic goals are supported by its history of
strong safety and operational performance, and excellent customer
services, allowing it to consistently pay shareholders a dividend,
which the company has increased for 15 consecutive years.
Elliott's proposals
Duke Energy and its Board have engaged in discussions and
reviews with Elliott since July 2020.
Elliott's specific proposals, some of which are outlined in its
letter, are summarized here:
- Preferential Equity Transaction. Elliott initially tried
to induce Duke Energy to issue up to $7 billion of common equity securities to
Elliott and its hedge fund allies at a material discount to the
public market value of Duke Energy's equity, essentially
transferring approximately 10% of the value of Duke Energy to
Elliott. Instead, Duke Energy executed on its highly successful
minority stake sale in Duke Energy Indiana at an attractive premium
to Duke Energy's public market valuation satisfying Duke Energy's
equity needs for the next five years. Duke Energy's share price has
outperformed ever since.
- Breaking Up the Company. Elliott then proposed a
double-spin-off of Duke Energy's Midwest and Florida utilities. This "shrink-the company"
strategy that underlies all of Elliott's proposals runs counter to
the strategic direction of the entire industry at a time when scale
is needed to efficiently finance the company's unprecedented
capital investment and growth opportunities. It also ignores the
obvious capital structure and credit issues, material equity
issuance requirement, dis-synergies, dividend sustainability risk,
regulatory issues and overall execution risks.
- Demand for Board Seats. Elliott has demanded to appoint
new directors to Duke Energy's board despite the broad and deep
experience of Duke Energy's current board, which has recently added
several new members. In addition, Elliott has demanded that Duke
Energy put in place a "strategic review," although Elliott refuses
to share the details behind its myriad proposals with
management.
Elliott's approach to Duke Energy thus far is reminiscent of
Elliott's decidedly mixed results in the utility industry, as shown
by recent activity with Sempra Energy, FirstEnergy and Evergy.
These utilities' share prices have materially underperformed the
sector to date since Elliott became involved, establishing an
unenviable track record of shareholder value destruction.
Duke Energy's climate strategy and a clear financing
strategy
Duke Energy has worked to clearly articulate its $59 billion five-year clean energy plan that
drives its long-term strategy, and to transition to cleaner energy
as the company aims to cut carbon emissions by at least 50% by 2030
and reach net-zero carbon emissions by 2050. The five-year plan
will deliver significant customer benefits and create jobs in its
communities. Duke Energy is also committed to modernizing and
strengthening the energy grid, generating cleaner energy, and
expanding its smart energy infrastructure.
A series of accomplishments have positioned Duke Energy to
successfully execute its clean energy transformation:
- On Jan. 28, the company announced
the sale of 19.9% of Duke Energy Indiana to GIC, raising
$2.05 billion at a 50% premium to its
last-12-months' trading P/E valuation. Proceeds from this
transaction will help fund Duke Energy's $59
billion capex plan and satisfy all equity capital raising
needs for the next five years.
- As part of that announcement, the company increased its
expected earnings growth rate to 5% to 7%, up from 4% to 6% through
2025.
- The company received approval of a comprehensive settlement
agreement with the North Carolina
Attorney General's Office, North Carolina Public Staff and Sierra
Club which resolved all remaining major coal ash issues, provided
clarity on recovery treatment of coal ash costs for the next
decade, and achieved a return of and on coal ash expenditures.
- On May 4, the company received
regulatory approval for a multi-year rate plan agreement with
consumer and business groups in Florida that includes nearly $5 billion in investments to advance its clean
energy vision. The Florida Public Service Commission noted in their
ruling that the settlement was the culmination of extensive
engagement with many interested parties, including the Office of
Public Counsel, which demonstrated the company's strong
collaborative relationships in that state. Florida's constructive regulatory framework
and significant potential in renewables and clean energy make
Florida a central element of Duke
Energy's business and investment plans.
- Last fall, the company submitted its integrated resource plans
(IRPs) for the Carolinas, which outlined paths to providing
cleaner, more sustainable energy to customers, and were positively
received by customers, regulators and investors.
- Over the last 12 months, Duke Energy's 2022E P/E multiple has
increased from 14.5x to 18.9x, significantly outpacing the multiple
expansion of the median UTY P/E multiple. This has improved the
company's relative valuation from a P/E discount of (0.6)x to now
trading at a premium of 1.0x compared to the UTY constituents
median.
A consolidated company and balance sheet have clear
benefits
Duke Energy's business is stronger and more impactful as a
consolidated, standalone entity that remains as one. The company
can better support its customers, employees, investors and their
dividends, and other stakeholders by staying together.
- All of its businesses play a critical role in Duke Energy's
clean energy transformation, and the company has made crucial
investments and built relationships in each region where it
operates.
- Duke Energy's size, scale and geographic diversity are
recognized as credit attributes by the rating agencies and
contribute to Duke Energy's strong credit quality and lower cost of
capital.
- A break-up would result in smaller entities, each allocated a
proportional share of Duke Energy's parent-level debt, which would
erode credit quality.
- To avoid credit rating downgrades, each entity would be forced
to recapitalize through dilutive equity issuances that have no
benefit to customers or shareholders.
- A consolidated company allows for a growing dividend to the
company's shareholders, investments in its clean energy plan, and
benefits from diversified cash flows.
Significant risk of incremental costs
Given the performance of the company, there is no strategic
logic to breaking the company apart, and there is serious risk of
dis-synergies that would weigh down the various spun-off entities
and raise questions about the viability of the dividend to
shareholders. For example:
- A break-up would require extensive regulatory review at the
state and federal level, introducing significant execution
risk.
- Standing up smaller, independent utilities would require
considerable new costs and would reverse a decade of cost cutting
efforts by integrating corporate functions of predecessor
companies.
- These unavoidable new costs would put pressure on utility rates
without any tangible benefit to customers and would be highly
unlikely to be recoverable from customers, impacting the credit and
growth rate of the smaller utilities.
Employees and customers at the center
Duke Energy continues to be laser-focused on serving its
communities during the pandemic. The company provided significant
support for its customers by suspending disconnections and waiving
late-payment and other fees. The company donated more than
$8 million to various relief
organizations to help support communities in need during the
pandemic.
The company is also working to keep its employees safe and has
navigated the pandemic while preserving jobs and avoiding furloughs
and cuts to base salaries. The company remains committed to those
objectives.
Duke Energy
Duke Energy (NYSE: DUK), a Fortune 150 company headquartered in
Charlotte, N.C., is one of
America's largest energy holding companies. Its electric utilities
serve 7.9 million customers in North
Carolina, South Carolina,
Florida, Indiana, Ohio
and Kentucky, and collectively own
51,000 megawatts of energy capacity. Its natural gas unit serves
1.6 million customers in North
Carolina, South Carolina,
Tennessee, Ohio and Kentucky. The company employs 27,500
people.
Duke Energy is executing an aggressive clean energy strategy to
create a smarter energy future for its customers and communities –
with goals of at least a 50 percent carbon reduction by 2030 and
net-zero carbon emissions by 2050. The company is a top U.S.
renewable energy provider, on track to operate or purchase 16,000
megawatts of renewable energy capacity by 2025. The company also is
investing in major electric grid upgrades and expanded battery
storage, and exploring zero-emitting power generation technologies
such as hydrogen and advanced nuclear.
Duke Energy was named to Fortune's 2021 "World's Most Admired
Companies" list and Forbes' "America's Best Employers" list. More
information is available at duke-energy.com. The Duke
Energy News Center contains news releases, fact sheets, photos
and videos. Duke Energy's illumination features stories
about people, innovations, community topics and environmental
issues. Follow Duke Energy on Twitter, LinkedIn, Instagram and
Facebook.
Cautionary language concerning forward-looking
statements
This document includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Forward-looking
statements are based on management's beliefs and assumptions. These
forward-looking statements are identified by terms and phrases such
as "anticipate," "believe," "intend," "estimate," "expect,"
"continue," "should," "could," "may," "plan," "project," "predict,"
"will," "potential," "forecast," "target," "outlook," "guidance,"
and similar expressions. Various factors may cause actual results
to be materially different than the suggested outcomes within
forward-looking statements; accordingly, there is no assurance that
such results will be realized. These risks and uncertainties are
identified and discussed in Duke Energy's most recent Annual Report
on Form 10-K and subsequent quarterly reports on Form 10-Q filed
with the Securities and Exchange Commission ("SEC") and available
at the SEC's website at www.sec.gov. In light of these risks,
uncertainties and assumptions, the events described in the
forward-looking statements might not occur or might occur to a
different extent or at a different time than Duke Energy has
described. Duke Energy expressly disclaims an obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.
Media contact: Neil Nissan
800.559.3853
Analysts contact: Jack
Sullivan
980.373.3564
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SOURCE Duke Energy