Renewable Energy M&A: Duke Energy to sell its commercial distributed generation business to ArcLight for $364mn

published on 06 July 2023

Deal details: The sale comprises over 272 MW of operating solar and storage assets, a development pipeline, and O&M portfolio managed by REC Solar, which it acquired in Dec'17. The transaction also includes 44 MW of distributed fuel cell projects managed by Bloom Energy, which were acquired in Jul’19. Duke Energy anticipates generating proceeds of ~$259 million from this sale.

Deal rationale: Duke Energy's current transaction follows closely the sale of its commercial utility-scale renewables business to Brookfield for ~$2.8bn. This strategic move reflects a broader trend observed with other utilities such as AEP and Consolidated Edison, who have divested their assets in deregulated markets to focus on growing earnings in regulated service areas. The motivation behind this shift is the desire to navigate away from intense competition in deregulated markets, which has been further amplified by the enactment of the Inflation Reduction Act (IRA). By concentrating efforts on its regulated assets, Duke Energy aims to benefit from a more stable pricing environment, reducing uncertainties associated with project financing and earnings. Moreover, the combined proceeds from these sales will bolster the company's balance sheet and obviate the need for additional holding company debt issuances related to these assets.

For Arclight, the deal will help the company establish itself in the rapidly growing sub utility-scale solar sector in the US. Arclight already has a presence in the country's renewable energy sector, through the $2bn takeover of Great River Hydro and the $1.75bn purchase of RNG firm OPAL Fuels. With this latest transaction, Arclight will continue to expand its portfolio of standalone platforms, investing across the country to strengthen its position in the renewable energy market.

The above analysis is proprietary to Enerdatics’ energy analytics team, based on the current understanding of the available data. The information is subject to change and should not be taken to constitute professional advice or a recommendation.

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