8-K: Spire to Acquire Piedmont Natural Gas Tennessee Business for $2.48 Billion

Spire Inc. announced an agreement to acquire Piedmont Natural Gas Company, Inc.'s Tennessee natural gas local distribution company business from Duke Energy for $2.48 billion, expanding its regulated utility footprint.

Summary

• Spire Inc. entered into an Asset Purchase Agreement with Piedmont Natural Gas Company, Inc., a wholly-owned subsidiary of Duke Energy Corporation, to acquire its Tennessee natural gas local distribution company business.
• The purchase price for the business is $2.48 billion, subject to adjustments based on net working capital, regulatory assets and liabilities, and capital expenditures at closing.
• The transaction is expected to close in the first quarter of calendar 2026, pending customary closing conditions including Hart-Scott-Rodino Antitrust Improvements Act review and approval of the Tennessee Public Utility Commission.
• The acquisition is not subject to a financing condition; Spire has obtained debt financing commitments and expects permanent financing to consist of a combination of long-term debt and/or equity.
• Spire intends to explore the possible sale of its Midstream segment's Storage Assets (Spire Storage West LLC and Spire Storage Salt Plains LLC) to offset financing arrangements related to the Transaction.
• The acquisition will significantly increase Spire's scale, adding over 200,000 customers in the Nashville area and expanding its utility customer base to nearly two million homes and businesses.
• The acquired business includes approximately 3,800 miles of distribution and transmission pipelines and an estimated 2026 rate base of $1.6 billion.
• The acquisition is expected to be accretive to adjusted earnings per share and supportive of long-term 5-7% adjusted earnings per share growth.
• The combined five-year capital plan (2025E-2029E) for Spire will increase by over 25% to $4.4 billion.
• The purchase price represents a multiple of 1.5 times the estimated rate base in 2026.

Sentiment

Score: 8

Explanation: The filing announces a significant strategic acquisition that is expected to be accretive to earnings, support long-term growth, and expand Spire's regulated utility footprint in a favorable market and regulatory environment. The financing plan is outlined, and potential asset sales are being explored to support it, indicating a well-considered approach.

Positives

• Expands regulated utility footprint, significantly increasing the scale of the regulated business.
• Diversifies and de-risks growth in a highly constructive regulatory environment, with Tennessee ranked 'Above Average / 3' by Regulatory Research Associates.
• Adds robust growth driven by new customer additions and system integrity investments, complementing the existing capital plan.
• Expected to be accretive to adjusted earnings per share and supportive of long-term 5-7% adjusted earnings per share growth.
• Generates significant cash flow to support investment in the business, shareholder returns, and dividend growth.
• Increases the five-year capital plan (2025E-2029E) by over 25% to $4.4 billion.
• Increases the utility customer base to nearly two million homes and businesses, adding approximately 205,000 customers.
• The Nashville metro area is one of the fastest-growing regions in the U.S., with population growth approximately three times the national average and low unemployment rates.
• Tennessee has a supportive business environment and strong legislative support for natural gas, including a law ensuring fuel choice.
• An established Annual Rate Review Mechanism (ARM) framework in Tennessee allows for regular rate updates and supports capital investment.
• Piedmont Natural Gas consistently ranks as a leader in customer service by Net Promoter Score (NPS) and J.D. Power.

Negatives

• Significant transaction costs are associated with the Transaction.
• There is a risk that disruptions from the Transaction will harm the businesses, including current plans and operations.

Risks

• Conditions to the completion of the Transaction, such as receipt of required regulatory clearances, may not be satisfied.
• Closing of the Transaction may be delayed or not occur at all.
• The occurrence of any event, change, or other circumstance or condition could give rise to the termination of the Purchase Agreement.
• Spire may be unable to obtain financing as currently contemplated.
• Spire may be unable to achieve the anticipated benefits of the Transaction.
• The acquired assets may not perform as expected.
• Spire may assume unexpected risks, liabilities, and obligations of the acquired assets.
• The ability to retain and/or hire key personnel may be impacted.
• Potential adverse reactions or changes to business relationships may result from the announcement or completion of the proposed Transaction.
• Other factors relating to operations and financial performance discussed in Spire's filings with the SEC, including its Annual Report on Form 10-K for the year ended September 30, 2024, and subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, could affect outcomes.

Future Outlook

Spire expects the acquisition to be accretive to adjusted earnings per share and support long-term adjusted earnings per share growth of 5-7%. The transaction is anticipated to close in the first quarter of calendar 2026, subject to regulatory approvals. Spire plans to fund the acquisition through a balanced mix of debt, equity, and hybrid securities, and is evaluating the sale of non-utility assets like natural gas storage facilities. The acquisition is expected to significantly increase Spire's scale, diversify growth, and generate strong cash flow to support future investments and shareholder returns.

Management Comments

• "This acquisition is a natural fit for Spire, allowing us to expand our core utility business and increase our utility customer base to nearly two million homes and businesses." Scott Doyle, president and chief executive officer of Spire.
• "We look forward to serving customers in the Nashville area and safely delivering the energy they need." Scott Doyle.
• "We're eager to build on the foundation of exceptional customer service and community engagement that Piedmont Natural Gas customers in Tennessee have enjoyed for years." Scott Doyle.
• "The transaction allows us to efficiently fund accelerating investment opportunities driven by record customer growth and a deepening economic development pipeline." Harry Sideris, Duke Energy president and chief executive officer.
• "We're confident Spire will support the continued growth and success of the Tennessee natural gas business and serve as an incredible operator for the benefit of employees, customers and communities." Harry Sideris.

Industry Context

This acquisition reflects a trend in the utility sector where established players seek to expand their regulated asset base in growing regions to ensure stable, predictable returns. The Nashville metro area's rapid growth makes the acquired business particularly attractive, aligning with Spire's strategy to invest in infrastructure and expand its core utility operations. The focus on a constructive regulatory environment in Tennessee further de-risks the investment, a key consideration for utility companies. The evaluation of selling non-utility assets (Midstream) by Spire to fund the acquisition also indicates a strategic pivot towards a more utility-focused portfolio, which is often favored by investors for its stability.

Comparison to Industry Standards

• Tennessee's regulatory environment is ranked "Above Average / 3" by Regulatory Research Associates (RRA), indicating a supportive framework for utility investment, comparable to Spire's existing "Above Average / 1" (Alabama) and "Above Average / 3" (Mississippi) jurisdictions, and better than Missouri's "Average / 2".
• Piedmont Natural Gas earned the No. 1 spot in customer satisfaction with residential natural gas service in the South among large utilities, according to the J.D. Power 2024 U.S. Gas Utility Residential Customer Satisfaction Study, indicating a high standard of operational excellence.
• The Nashville metro area's population growth (approximately three times the national average) and low unemployment rates position the acquired business in a high-growth market, potentially outperforming utilities in stagnant or declining regions.

Stakeholder Impact

• Shareholders: Expected to benefit from accretive earnings, long-term EPS growth (5-7%), increased scale, diversified growth, and potential for dividend growth.
• Customers (Nashville area): Will be served by a new Spire business unit, Spire Tennessee, with a commitment to safety, reliable service, and community engagement, building on Piedmont's strong customer satisfaction record.
• Employees (Piedmont Natural Gas Tennessee): Spire looks forward to welcoming them and building on their operational excellence.
• Duke Energy: Receives $2.48 billion for its Tennessee LDC business, allowing it to fund accelerating investment opportunities.

Next Steps

• Filing for Tennessee Public Utility Commission (TPUC) approval within 45 days of July 29, 2025.
• Completion of Hart-Scott-Rodino Antitrust Improvements Act review.
• Closing of the Transaction, expected in the first quarter of calendar 2026.
• Integration of the Piedmont Natural Gas business into a new Spire business unit, Spire Tennessee.
• Spire will file the full Purchase Agreement with its Annual Report on Form 10-K for the year ended September 30, 2025.
• Spire will explore the possible sale of its Storage Assets.

Key Dates

Recommendation

The acquisition is highly strategic, expanding Spire's core regulated utility business in a high-growth region with a favorable regulatory environment. The transaction is expected to be accretive to adjusted EPS and support long-term growth targets of 5-7%, which is a strong indicator for utility investors seeking stable and growing returns. The outlined financing plan, including potential asset sales, demonstrates a clear path to funding without a financing condition. This move significantly enhances Spire's scale and diversifies its growth profile, making it a compelling investment for long-term value.

Keywords

Natural Gas Utility, Acquisition, Energy Infrastructure, Utility Sector, Tennessee, Piedmont Natural Gas, Duke Energy, Spire Inc., Regulated Utility, Asset Purchase, Midstream Assets, Capital Expenditure, Earnings Per Share Growth, Rate Base, Customer Growth