Spire Inc. to Acquire Tennessee Piedmont Natural Gas Business from Duke Energy for \$2.48 Billion

Key Highlights from the Abbreviated Financial Statements

• Acquisition Announcement: Duke Energy Corporation has agreed to sell the Tennessee Piedmont Natural Gas Business to Spire Inc. for \$2.48 billion in cash. The transaction is expected to close on March 31, 2026, pending regulatory approval.
• Regulatory Review: The sale is subject to approval from the Tennessee Public Utility Commission (TPUC), with a decision expected on March 16, 2026. The Federal Energy Regulatory Commission (FERC) has already granted necessary waivers for the transaction.
• Business Overview: The Tennessee Piedmont Natural Gas Business serves approximately 205,000 customers and operates nearly 3,800 miles of pipelines, including a liquefied natural gas facility in Nashville, Tennessee.
• Financial Performance:
  • 2025 Revenues: \$326.3 million (up from \$289.2 million in 2024)
  • 2025 Excess of Revenues Over Direct Expenses: \$121.6 million (compared to \$124.9 million in 2024)
  • Key direct expenses include cost of natural gas, operation and maintenance, depreciation, and taxes.
• Assets and Liabilities:
  • Total Assets Acquired (Dec 31, 2025): \$1.95 billion
  • Total Liabilities Assumed (Dec 31, 2025): \$236.6 million
  • Net Property, Plant & Equipment: \$1.80 billion (after depreciation)
• Regulatory Mechanisms:
  • Rates and cost recovery are subject to annual review and adjustment mechanisms approved by TPUC, supporting stable and predictable cash flow.
  • Regulatory assets and liabilities are significant, with total regulatory assets at \$56.7 million and regulatory liabilities at \$161.7 million as of year-end 2025.
• Pending Legal Matter:
  • A Tennessee trial court issued an adverse judgment against Piedmont Natural Gas (PNG) in a condemnation case. PNG has appealed, and no accrual has been made, but a potential loss of up to \$13.9 million plus interest could be incurred if the appeal is unsuccessful. This could impact future earnings if not recoverable through regulatory proceedings.

Detailed Analysis and Shareholder Insights

The proposed acquisition of Tennessee Piedmont Natural Gas Business by Spire Inc. represents a substantial expansion of Spire’s regulated utility footprint in Tennessee. The acquired business is a well-established, regulated gas utility with a stable customer base and significant infrastructure assets, including extensive pipeline systems and storage facilities.

Financial Performance: The business has shown consistent revenue growth, with total revenues rising from \$289.2 million in 2024 to \$326.3 million in 2025. Direct expenses increased from \$164.2 million to \$204.7 million over the same period, reflecting higher natural gas costs and continued investment in operations and maintenance. Despite higher expenses, the business maintained a robust margin, with an excess of revenues over direct expenses of \$121.6 million in 2025.

Asset Quality: The business brings with it high-quality regulated assets worth \$1.80 billion (net of accumulated depreciation), supporting long-term regulated earnings and cash flows. Additional assets include regulatory assets of \$56.7 million and inventories of \$11.3 million.

Regulatory Environment: The business benefits from favorable regulatory mechanisms, including the Annual Review Mechanism (ARM) and the Purchased Gas Adjustment (PGA) clause, which allow for timely recovery of costs and adjustments to rates, mitigating the impact of commodity price volatility and operating cost changes.

Legal and Environmental Matters: Investors should note the unresolved legal judgment involving BlueRoad Fontanel, LLC. While no accrual has been made, the possible loss (up to \$13.9 million plus interest) could be material if the appeal fails and if costs are not recoverable through future rates. Environmental liabilities are modest, with reserves of \$3.7 million at year-end 2025.

Transaction Structure and Financial Reporting: The abbreviated financial statements have been prepared to comply with SEC Rule 3-05(e) and reflect only the assets and liabilities to be acquired or assumed by Spire under the purchase agreement. Notably, income taxes and certain corporate overheads are excluded, and the statements are not indicative of the business’s stand-alone future performance.

Price-Sensitive Considerations:

• Closing of the transaction and regulatory approval: The TPUC’s decision (expected March 16, 2026) remains a critical milestone. Any delays or additional conditions could affect the transaction timing and value.
• Legal outcome on PNG condemnation case: A negative outcome on appeal could result in a material charge, potentially impacting Spire’s future earnings if not recovered through rates.
• Regulatory asset/liability balances and annual rate adjustments: These will affect future cash flows and returns, but overall, the business’s regulated nature supports earnings stability.

Operational Outlook: The Tennessee business serves a growing market with nearly 205,000 customers. Rate structures and regulatory reviews are designed to ensure recovery of prudent costs and provide a reasonable return on equity (currently 9.8% ROE under the ARM). Recent rate adjustments have supported ongoing investment in infrastructure and customer growth.

Conclusion

The acquisition of Tennessee Piedmont Natural Gas Business by Spire Inc. is a transformative transaction that will significantly increase Spire’s regulated asset base and market presence in Tennessee. The deal’s completion is subject to regulatory approvals, and the outcome of ongoing litigation could have a near-term impact. Overall, the transaction is expected to enhance Spire’s earnings and cash flow stability, subject to final closing conditions and regulatory outcomes.

Disclaimer: This article is for informational purposes only. It is not investment advice. Investors should conduct their own due diligence and consult with their financial advisors before making any investment decisions. The information herein is based on financial statements and disclosures made as of March 11, 2026, and may be subject to change.

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