Duke Energy faces pressure from activist group Elliott Management

Activist investor Elliott Management Corp. released a letter on Monday that was addressed to Duke Energy’s (NYSE: DUK) board, urging the company to undergo transformation which could potentially unlock $12 billion to $15 billion in value for the shareholders.

Duke Energy is one of the largest utility companies in the U.S., providing electricity to nearly 8 million customers across six states including the Carolinas, some Midwestern states and Florida.

Elliot Management’s proposal

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Elliot disclosed in its letter that it is one of Duke’s 10-largest shareholders. The activist investor is seeking board seats while not disclosing how many seats it wanted.

The investment firm is pushing the company to consider splitting itself into three companies that would focus on the three main geographic regions of operations — the Carolinas, Florida and Midwest. It argued that Duke’s investors will be better served by locally managed utilities, unlocking billions in shareholder value.

It further added that such a model would also address the underperformance of the company’s stock in recent years versus its peers while attributing the underperformance to Duke’s lack of focus on its businesses outside of the Carolinas.

Duke Energy’s response

Duke, in a response released yesterday, said that the proposals are not in the best interests of the company and its shareholders.

On breaking up the company, Duke added that the proposal “runs counter to the strategic direction of the entire industry at a time when scale is needed to efficiently finance the company’s unprecedented capital investment and growth opportunities.”

The company also called into question Elliot’s track record based on its experience with Sempra Energy, FirstEnergy and Evergy, companies that Elliot got involved with and then underperformed.

Shares of the company have been relatively flat since the release of the letter and are up by 17% for the trailing one-year period.