Duke Energy Corp.’s
New finance chief is weighing a potential sale of its commercial renewable energy business and searching for savings as the company awaits a key decision by regulators in North Carolina.
Brian Savoy on Thursday became chief financial officer of the Charlotte, NC-based electric power and natural gas holding company, succeeding Steve Young, who had been CFO since 2013. Young moved into the role of chief commercial officer.
Mr. Savoy has been with Duke since 2001, holding a number of leadership and finance roles, including most recently the position of strategy chief and commercial officer.
Duke announced the CFO transition last month, just days before saying it would review whether to sell its commercial renewable energy business. With more than five gigawatts of wind, solar and battery generating capacity, the entity is among the 10 largest solar and wind businesses in the US, according to the company.
Consideration of a sale followed a hard look at Duke’s capital allocation priorities and after North Carolina, where the company has many customers, approved a law requiring energy companies to cut their greenhouse gas emissions by 70% from 2005 levels by 2030, Mr. Savoy said.
Duke spent $5.1 billion on capital spending during the first six months of this year, up around 10% from the same period last year.
“The commercial business (…) may have a hard time competing for capital at Duke Energy when we have these strong regulated franchises,” Mr. Savoy said, referring to the company’s regulated gas and utilities businesses. “If we were to move forward with a divestiture of the commercial business, we’d be 100% regulated and it narrows our focus.”
Income for Duke’s commercial renewables business fell due to fewer new projects, to $30 million in the second quarter from $47 million in the prior-year-period. The unit made up less than 5% of the company’s annual earnings.
Regulated utility operations, which include renewable energy projects for consumers, make up the remaining 95% of Duke’s earnings. Income for its electric and gas utilities rose $41 million to $993 million in the quarter thanks to favorable weather and increased demand for electricity, the company said.
Mr. Young in his new role will oversee the review of the commercial renewables portfolio, which Duke expects to complete by the end of this year or in early 2023. Analysts’ views are mixed about how much a sale would affect the company’s outlook. Shar Pourreza, a senior managing director at financial services firm Guggenheim Partners LLC, said it likely won’t materially affect Duke’s forecast, as the company will likely use proceeds to pay down debt.
“It’s really going to be about how to effectively message around the plan, whether it’s growth, whether it’s capital, post this asset sale,” Mr. Pourreza said.
A sale would create an “increased risk” that Duke would need to adjust its growth projections of 5% to 7% earnings growth through 2026, analysts at Credit Suisse Group AG
said in a note last month. Earnings dilution due to the sale plus interest rate pressure tied to debt make it difficult for Duke to hit its targets, Credit Suisse said. Mr. Savoy declined to comment on how the potential sale would affect the company’s guidance.
Duke is also looking to cut costs in response to rising interest rates and inflation. The company will eliminate around $200 million in expenses next year, in part through automation. “We’re moving very quickly to realize this,” Mr. Savoy said, adding the effort has been under way for months.
Additionally, Duke is waiting on a decision from North Carolina regulators that will likely affect its future investments. The company in May filed a plan with the state’s utilities commission detailing how it plans to cut greenhouse gas emissions. The plan details four different paths for hitting the 70% carbon reduction target by at least 2034.
Under all four paths, Duke will be carbon neutral by 2050. The plan may cost Duke as much as $101 billion and increase bills for residential customers, the company told state regulators in May. Duke is seeking the commission’s approval for the plan.
Environmental and renewable energy groups have challenged Duke’s proposal, arguing it relies too much on unproven technologies and natural gas. A hearing on the plan is set for Sept. 13, Mr. Savoy said. If approved, the plan would give Duke clarity for at least the next three or four years on where to direct its investments, he said.
Duke expects a commission order in response to its plan by the end of the year.
Write to Jennifer Williams-Alvarez at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8