“We are confident that this independent structure and review process provides the clearest path for the company to enhance credibility with investors and maximize value,” Elliott senior portfolio manager Jeff Rosenbaum and managing partner Jesse Cohn said in the letter.
Duke was up 1% to $104.12 per share in New York after earlier climbing as much as 4.8%. Shares have gained 14% this year, buoyed by tailwinds including a settlement over coal ash in North Carolina and the sale of a stake in its Indiana utility to Singapore’s sovereign wealth fund, GIC. Duke didn’t immediately respond to a request for comment.
Investors for some time now have wanted utilities to spin off unregulated units and focus on businesses like basic utility services and transmission development, which tend to generate stable returns. Elliott’s proposal for Duke seemingly takes that a step further by asking the company to focus not just on core tasks, but core markets.
Elliott estimates the Carolinas business could have an equity value of as much as $55 billion, while the Florida business could be worth up to $23 billion and the Midwest unit could be valued at $15 billion. Duke provides electricity to 7.8 million customers across six states.
The activist investor has made similar pushes at utilities including Sempra Energy and Evergy Inc. in recent years.
”A role that Elliott has played with utilities like Sempra and Evergy is to come in and say, ‘Your core business is the most valuable and some of these tertiary business lines actually represent a drag on value,’” said Katie Bays, an analyst at FiscalNote Markets. She added that Elliott has played a big role in financing clean energy transitions for businesses that rely on coal, an approach that could work with Duke’s business.