Duke Energy Renewables Sells 1.2GW Minority Interest in Its Wind and Solar Portfolio

Duke Energy Renewables, the
competitive renewables arm
of U.S. utility giant Duke Energy,
has agreed
to sell
insurer John Hancock a minority share of its wind and
solar portfolio, amounting to 1.2 gigawatts of generation capacity
and $1.25 billion in enterprise value. 

Wednesday’s deal with the John Hancock Infrastructure Fund
and John Hancock Life Insurance Co. will give the buyer a 49
percent stake in 37 of Duke’s operating wind, solar and battery
storage assets and a 33 percent stake in an additional 11 operating
solar assets across the country. Duke will retain majority
ownership, as well as the majority of the remaining tax benefits
from the projects. 

The sale will result in pre-tax proceeds of $415 million for
Duke Energy, which will “help fund the company’s future growth
capital plans with proceeds used to reduce future debt issuance
needs,” according to Wednesday’s press release. The deal also
allows John Hancock the right to acquire a minority interest in
“certain additional wind and solar projects” to allow Duke to
raise future growth capital.

Duke also noted that it “remains committed to growing its
commercial renewable energy business,” as some of its recent
contract wins indicate. Last month, Duke Energy, Duke’s regulated
utility in North Carolina, contracted for 602
megawatts of utility-scale solar
. The contract includes 270
megawatts of projects to be developed by Duke Energy directly, its
South Carolina sister utility Energy Progress, or by Duke Energy
Renewables, the unregulated arm, under a state RPS that allows the
utility to compete with third-party developers.

In addition, Duke Energy Renewables purchased a 150-megawatt
solar farm
in California earlier this week, which is the
largest solar project in its fleet to date. 

Today’s sale represents a big chunk of the 2,900 megawatts
of renewables that Duke’s competitive arm has developed to date, as
well as Duke’s total renewable energy portfolio, which stood at
6,400 megawatts as
of April 2018
. As a result, the deal appears to serve as a
setback to the company’s stated goal of growing its renewable
portfolio to 8,000 megawatts by 2020. However, it could also
provide the cash Duke needs to invest in the next wave of wind and
solar projects, Colin Smith, senior solar analyst at Wood
Mackenzie Power & Renewables, noted in a Wednesday
interview. 

By retaining a majority stake and the tax credits of its wind
projects, Duke is “maintaining a long-term position, but freeing
up cash, probably to invest in long-term projects,” he said.
“This is not an entirely unexpected move. We anticipate them
buying or self-developing more renewable projects, and holding
majority shares in them, in the months to come.” 

Luke Lewandowski, director of power and renewables at Wood
Mackenzie Power & Renewables, added that John Hancock’s
investment in Duke’s portfolio is “another example of the
investor community recognizing the value and stability of
renewables,” which offer stable and predictable returns. 

The sale also “represents an opportunity for Duke to unlock
capital ahead of the PTC and ITC-driven build cycle, which will
help it realize its development pipeline,” he noted.

The coming sunset of the federal investment tax credit (ITC) and
production tax credit (PTC) for renewable energy is driving a big
increase in projects seeking to take advantage of the subsidies
before they expire, and putting pressure on Duke and other
renewable energy developers to raise the money they need to build
them. 

Source: FS – GreenTech Media
Duke Energy Renewables Sells 1.2GW Minority Interest in Its Wind and Solar Portfolio