Preliminary Analysis of Costs to the City of Clearwater, Florida to Assume Duke Energy Florida’s Distribution System

Concentric Energy Advisors (Concentric) was retained by Duke Energy Florida (Duke Energy) to analyze the potential costs for the City of Clearwater (Clearwater or the City) to assume Duke Energy’s grid within Clearwater. The results of our preliminary analysis indicate that the cost to Clearwater to potentially acquire Duke Energy’s operations within the City may exceed $1.1 billion, assuming a transaction date of January 1, 2029 (2029$). This analysis was conducted following the Clearwater City Council’s decision to examine the feasibility of assuming Duke Energy’s operations within Clearwater.  

We developed a high-level valuation analysis based on: 

• The value of Duke Energy’s assets and operations in Clearwater.  
• The costs associated with delineating and separating a portion of the grid.  
• The startup and transaction expenses for establishing a new city-owned utility.  
• Financial obligations Clearwater would be required to compensate Duke Energy associated with Duke Energy’s investments in electric-generating power plants, assuming Clearwater does not continue to purchase its energy from Duke Energy.  

The basis for valuing Duke Energy’s assets is the net book value of its physical assets, such as poles, wires, transformers, meters, other equipment, and ongoing system investments. However, Florida statute suggests that the purchase price of utility assets should not be just the underlying book value. Instead the purchase price should be reflective of the market value of the assets. Concentric calculated the market value of Duke Energy’s assets by applying a market-based transaction multiple to the net book value. The market value multiplier is based on other purchases of utility assets and the value reflected in publicly traded utility stocks.    

Additional costs include separating the portion of the grid that lies within Clearwater and replacing substations and underwater cables that serve Clearwater. This process will be complicated by Clearwater’s unique city boundaries that have many irregular borders and unincorporated areas within the City. Clearwater would also need to establish new administrative and operational functions to operate a new electric utility.