County opposes call for Duke breakup

Duke Energy’s $1.5 billion Citrus Combined Cycle Station is shown in this 2019 file photo. The utility counts more than 66,000 customers in Marion County. [Submitted]

The recent call from an activist investor for Duke Energy to break up into smaller, geographically separate companies has faced resistance, not only from Duke Energy itself but also from the Marion County Board of County Commissioners.

At its regular meeting on June 1, the board unanimously adopted a resolution stating its opposition to the breakup.

“Duke Energy’s size, scale and geographic diversity are critical to its ability to serve the Marion County market effectively and efficiently,” the resolution stated.

The breakup “could cause job loss, decreased reliability and service interruptions to Marion County citizens,” according to the document.

Duke has more than 66,000 customers in Marion County.

Last month, Elliott Investment Management LP, a hedge fund led by activist investor Paul Singer, in a letter to the Duke Energy board of directors urged it to consider restructuring the energy giant into three separate companies, one serving each of Duke’s three distinct geographies: Florida, the Carolinas, and Indiana.

Elliott, among Duke’s top ten investors, suggested in the letter that the nation’s largest electric utility, has been underperforming its peers and that locally managed companies could serve their own customers better. The publicly released letter also said that “Duke has suffered numerous operational setbacks and investment and strategic missteps over the past decade, at significant cost to both shareholders and customers.”

Elliott Investment Management is not new to pushing for the breakup of companies. In 2019, Elliott acquired a multibillion-dollar stake in AT&T and called for a dramatic restructuring of the telecommunications giant, including breaking the enterprise up into smaller companies. Elliott subsequently sold its AT&T holdings during the pandemic last year.

Duke’s May 17 response to the letter noted this was the latest in a series of proposals from Elliot dating back to mid-2020. The board reviewed all previous proposals and determined that they were not in the best interests of the company, its shareholders and other stakeholders, according to the letter. 

The Marion County board’s resolution refers to Duke as an “exceptional corporate and community partner” for its support of local nonprofit organizations. The county’s most recent financial report indicates that Duke is the largest property taxpayer in the county.

“We hope this resolution calls attention to the great work Duke Energy does in Marion County. They invest heavily here, create jobs here, and have been committed to supporting our community. Splitting Duke Energy into multiple smaller entities could mean higher utility costs and less reliable service for our citizens, without any real benefit,” Marion County Commission Chairman Jeff Gold said in a prepared statement.

The Board’s resolution also calls on Gov. Ron DeSantis and the Florida Public Service Commission to lend their support in opposing the corporate restructuring.

While the resolution is a ceremonial document it does put the county on record and adds support against the breakup idea.

Others are also not sold.

“Color us skeptical that separating Duke into smaller utilities would prompt a near-term re-rating in Duke’s share price,” wrote Wells Fargo analyst Neil Katon in a letter to clients, according to Bloomberg.com.

Bloomberg also reported that South Carolina Gov. Henry McMaster wrote a letter to Duke chief executive Lynn Good stating, “Duke should remain an independent company.”

Ana Gibbs, a Duke spokeswoman from the company’s Tampa office, said the breakup would only be good for Elliott.

“Breaking up the company will only help the hedge fund, but it won’t help the state, its customers, or help advance the state’s leadership in clean energy development. Elliott’s recent utility dealings have resulted in lost jobs and massive value destruction for shareholders. So, no one wins, but them.”