A Florida-based hedge fund is urging Duke Energy Co. to break off its Sunshine State operations.
In a letter to the energy company’s board Monday, Elliott Investment Management said Duke Energy Florida and its Midwestern energy company are not generating as much value for shareholders as they could. By spinning those two companies off on their own and focusing more deeply on the regions they serve, Elliott said, Duke could generate between $12 billion and $15 billion in value.
“We are confident that a standalone Duke Energy Florida could achieve the highest valuation of any regulated utility,” Elliott said in the letter.
In a statement, Duke said its board will review the proposal but “will always advocate for the best long-term interests of its shareholders and other stakeholders over any narrow special or short-term interest.”
Elliott said it is a “top 10″ investor in the utility but declined to say how large its investment was. It has previously pushed for similar moves at other utilities, and has gone back and forth on several proposals with Duke since July 2020.
One of the hedge fund’s main criticisms was that Duke’s Florida company doesn’t perform as well as its peers in the state. It has higher outage times than Tampa Electric Co. and Florida Power & Light, it said, and its customer rates are often higher than those companies. Duke also ranked lowest among Florida power companies in a J.D. Power customer satisfaction ranking last year.
And its balance sheet hasn’t grown as significantly as Tampa Electric and Florida Power & Light, Elliott said. It recommended leaning into renewable energy, investing more in critical infrastructure and keeping customer bills lower. Elliott also asked for new board members and changes to the company’s leadership.
Neil Nissan, a spokesperson for Duke, said the company does not currently have plans to spin off its Florida or Midwest arms.
It is particularly concerned, he said, about entering any sort of regulatory process that would affect its recent Florida rate approval. Earlier this month, Florida regulators approved Duke’s plan to raise customer rates over three years between 3 and 4 percent to revamp its energy grid and retire its coal plants ahead of schedule. The plan came after months of negotiation between customer advocates and the power company, and was widely regarded as being in the best interest for customers.
“One thing we don’t want is to derail that progress,” Nissan said.
As part of the plan, the power company agreed to a lower return on equity, a measurement of how much profit a utility earns with shareholder money. Duke is allowed to earn a median of 9.85 percent under the plan, the lowest of the state’s power companies. Florida Power & Light, meanwhile, is requesting an increase to 11.5 percent. That puts less money in the company’s pocket but allows customers to pay less.
Any further movement on Elliott’s proposal is up to Duke’s board of directors.