Dive Brief:
- Duke Energy, the largest electric utility in the nation, will buy Piedmont Natural Gas for about $4.9 billion in cash, the companies announced on Monday morning. The acquisition of the natural gas distributor would add about 1 million new gas customers to Duke's service territory.
- The deal offers Piedmont investors $60 per share, a 40% premium on the company's closing price on Friday. The gas company is one of Duke's partners on the proposed 550-mile Atlantic Coast Pipeline, a major project that's slated to transport natural gas from West Virginia down through North Carolina.
- The acquisition would put Duke back in the natural gas business for the first time since 2007, the Charlotte Observer pointed out. Duke spun off Spectra Energy, an operator of pipelines and liquefied natural gas facilities, after its merger with Cinergy in 2006.
Dive Insight:
Pushed by historically low gas prices and EPA emissions regulations, utilities across the nation are relying more on natural gas for power generation, and increasingly, establishing footholds of their own in the gas industry.
In a release Monday morning, Duke officials said the acquisition of the Charlotte-based gas distributor would establish an "attractive natural gas growth platform" for the utility and enhance the company's long-term 4-6% earnings growth target.
"We look forward to welcoming Piedmont's employees and one million customers in the Carolinas and Tennessee to Duke Energy," Duke CEO Lynn Good said in a release. "This combination provides us with a growing natural gas platform, benefiting our customers, communities and investors."
Last year, Florida Power & Light got regulatory approval to begin investing in Oklahoma shale gas production, and Duke has a similar request before state utility commissioners as well. In the Northeast, power companies are exploring investments in gas pipelines, aiming to expand an often-constricted gas supply that has caused power prices to rise in the region.
Duke has a pipeline play as well — its partnership with Dominion, Piedmont and AGL Resources on the Atlantic Coast Pipeline — but this acquisition would go beyond efforts to shore up production and delivery of natural gas for power generation, and put Duke squarely in the gas delivery business.
Besides increasing its ownership stake in the Atlantic Coast Pipeline, Piedmont represents an attractive investment for Duke Energy. Reuters points out that steady natural gas supply from shale fields has resulted in stable pricing for gas suppliers, which makes an acquisition less risky, and Duke has identified the gas sector as a growth area in the coming decades.
“Clearly it expands our gas platform, which is an emerging energy sector,” Duke spokesman Tom Williams told the Observer.
Company officials said Piedmont has a higher customer growth rate than most natural gas suppliers, and its service territory in the the Carolinas and Tennessee is one that Duke knows well. Both companies are based in Charlotte, North Carolina.
Duke officials said they expect the deal to close by the end of 2016.
