Why Duke Energy is cashing out of Tennessee gas now—and what Spire gains in the $2.48bn deal

Duke Energy Corporation (NYSE: DUK) is divesting a major portion of its gas utility footprint, announcing on July 29 that it will sell its Piedmont Natural Gas Tennessee local distribution company business to Spire Inc. for $2.48 billion in cash. The move, which covers nearly 3,800 miles of pipelines and approximately 205,000 customers in the Greater Nashville area, marks a clear retrenchment from gas distribution as Duke Energy doubles down on its electric utility operations and energy transition investments.

The deal is expected to close in the first quarter of 2026, pending regulatory approval from the Tennessee Public Utility Commission and clearance under the Hart‑Scott‑Rodino Antitrust Improvements Act. Spire, already one of the largest publicly traded natural gas utilities in the U.S., will fold the Tennessee operations into its regulated utility portfolio, expanding its customer base to nearly two million homes and businesses.

Why is Duke Energy cashing out of Tennessee gas and where will the $2.48 billion go?

The sale proceeds will provide Duke Energy with liquidity to fund its $83 billion five‑year capital plan, which focuses heavily on grid modernization, renewable generation and customer growth initiatives. Of the total cash consideration, approximately $800 million will be used to retire debt at Piedmont Natural Gas, with the remaining $1.5 billion earmarked for capital projects across the utility’s broader electric operations.

Duke Energy leadership said the $2.48 billion price reflects a “significant premium” over the business’s current valuation, equating to 1.8× the 2024 year‑end rate base and 24× 2024 earnings. The company expects to use existing tax credits to offset most of the transaction‑related cash tax burden.

Harry Sideris, Duke Energy’s president and chief executive officer, framed the divestiture as a way to “efficiently fund accelerating investment opportunities” in regions where customer growth and economic development remain strong. He also acknowledged the Tennessee workforce, noting they had set a high bar for operational excellence over decades of service.

How does this acquisition fit into Spire’s strategy for scale in regulated utility markets?

Spire sees the deal as an opportunity to build scale in a high‑growth geography. The acquisition will give the St. Louis‑based utility a meaningful presence in the Nashville metropolitan area and surrounding counties, expanding its customer base and asset footprint at a time when gas utilities are seeking efficiencies through consolidation.

Scott Doyle, Spire’s president and chief executive officer, said the Tennessee business is a “natural fit” that allows the company to extend its core utility operations into an attractive market. Spire intends to retain all Duke Energy employees who primarily support the Tennessee gas operations, ensuring continuity for customers and maintaining institutional knowledge in the transition.

Industry participants said the acquisition aligns with Spire’s broader strategy of leveraging regulated assets for steady earnings and cash flow. By adding Piedmont’s Tennessee operations, Spire gains more system scale to absorb modernization costs and improve margins through operational synergies.

What do investors and analysts say about the premium valuation?

Analysts highlighted the valuation multiples—1.8× rate base and 24× earnings—as evidence of the attractiveness of regulated gas utility assets in the current market. The sale price is substantially higher than Duke Energy’s enterprise multiple, a factor that institutional investors are likely to view positively.

While the divestiture removes a stable source of regulated earnings from Duke Energy’s portfolio, market observers said the deal could be neutral‑to‑positive for earnings per share over the medium term if the net proceeds are deployed into higher‑return electric utility capital projects or used to further deleverage the balance sheet.

For Spire, analysts said the acquisition expands regulated earnings capacity in a growing market and helps strengthen the company’s credit profile by broadening its customer base. The lack of a financing contingency in the agreement was noted as a sign of deal certainty, reducing execution risk.

What hurdles remain before the transaction closes in early 2026?

The deal remains subject to standard closing conditions, including the expiration or termination of the Hart‑Scott‑Rodino waiting period and approval by the Tennessee Public Utility Commission. The companies have set a targeted close in the first quarter of 2026, with a long‑stop date of April 27, 2026 if regulatory approvals are delayed.

JP Morgan Securities LLC and RBC Capital Markets LLC advised Duke Energy on the transaction, while Skadden, Arps, Slate, Meagher & Flom LLP provided transactional legal counsel. McGuireWoods and Holland & Knight supported the company on regulatory matters.

What are the broader strategic implications for Duke Energy and Spire?

For Duke Energy, exiting the Tennessee natural gas business reflects a sharpened focus on its regulated electric operations, where it sees higher growth potential and stronger alignment with its decarbonization goals. The freed‑up capital will help finance projects in grid hardening, battery storage and renewable energy, as well as support record levels of customer growth in core territories.

Spire, meanwhile, gains a rare opportunity to acquire a mature, regulated utility business in a fast‑growing metropolitan region. Analysts said the company can leverage its scale to improve operational efficiency while maintaining strong service and safety standards.

How does this deal illustrate the wider trend of utilities reshaping portfolios for higher returns?

The deal underscores a broader industry trend of regulated utilities realigning their portfolios to concentrate capital where returns and regulatory support are strongest. Over the past five years, multiple U.S. utilities have exited non-core or slower-growth businesses—particularly gas distribution and merchant generation—to redeploy capital into regulated electric transmission and renewable energy assets. Analysts said the sale of Piedmont Natural Gas Tennessee fits this pattern, with Duke Energy sharpening its focus on the electric side of its business at a time when decarbonization mandates and customer electrification trends are accelerating.

From an investor standpoint, Duke Energy’s decision highlights how capital allocation priorities are shifting toward projects with clearer return profiles, stronger regulatory cost recovery mechanisms, and higher long-term growth potential. Institutional investors have increasingly rewarded utilities that demonstrate discipline in pruning non-core assets, particularly as interest rates and capital costs remain elevated. Divestitures like this one can improve balance sheet flexibility, reduce earnings volatility, and enable companies to maintain or improve credit ratings—key factors as utilities plan multi-decade energy transition investments.

Industry participants also noted that natural gas distribution assets, while stable, are facing mounting regulatory and environmental pressures. The push for electrification in building heating and transportation, as well as state-level policies targeting greenhouse gas reductions, could challenge long-term demand for gas in certain regions. By selling the Tennessee business at a premium multiple now, Duke Energy is effectively monetizing a mature asset before potential demand headwinds become more pronounced.

For Spire, the acquisition is more than a scale-building play; it provides immediate geographic diversification and entry into one of the fastest-growing metropolitan areas in the U.S. The Nashville region has experienced sustained population and economic growth, translating into steady customer additions and higher system utilization for utilities operating in the area. Spire will inherit an established customer base and regulated earnings stream in Tennessee, with opportunities to deploy additional capital into system upgrades, safety enhancements, and infrastructure expansion.

Analysts said the integration of Piedmont’s Tennessee operations could allow Spire to leverage its existing operational expertise and technology platforms, potentially driving efficiencies and margin expansion. Spire will also gain additional liquidity to support its broader capital investment plans, as larger scale generally translates into improved access to capital markets and lower financing costs.

The transaction may also signal more portfolio reshaping across the sector. Other large utilities, particularly those balancing aggressive net-zero commitments with heavy capital spending plans, could follow a similar path in divesting slower-growth assets. Asset sales have become a common way to free up funds for grid hardening, battery storage, renewable generation and other investments required to modernize energy systems.

For customers, the long-term implications will hinge on how the companies reinvest proceeds and integrate operations. Duke Energy said its $83 billion five-year capital plan will help strengthen grid reliability and resilience, expand renewable energy resources, and support record levels of customer growth in its core electric utility territories. Spire, meanwhile, has pledged to maintain strong customer service and safety performance as it brings Piedmont’s Tennessee operations under its umbrella, with a focus on continuity during the transition.

Market observers believe the transaction could help set a template for utilities seeking to balance financial discipline with the need to invest heavily in the energy transition. “This is a classic example of a utility monetizing a stable but non-core business to fund higher-growth opportunities,” one industry consultant said. “It demonstrates capital discipline at a time when the sector is navigating unprecedented change.”

Both Duke Energy and Spire are expected to use the transaction as a springboard for long-term growth and customer value creation amid shifting energy dynamics, rising regulatory expectations, and a competitive capital environment. With the deal on track to close in early 2026, the two companies will now turn to executing their respective strategies: Duke Energy in accelerating its electric utility modernization and clean energy initiatives, and Spire in leveraging its expanded footprint to deliver stable regulated returns and enhanced service to its nearly two million gas utility customers.