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Market Pricing (11/4/2016): $77.27/share; ST-Target: $100/share; NIV: $113/share
Setting the stage for stronger growth profile
Sale of International completed for $2.4B ($1.2B for Brazil and $1.2B for rest of Lat Am); $1.7B-$1.9B net cash repatriation expected to pay for more growth projects, particularly on the gas-side. Sale price was as expected. Closing expected to occur 1Q2017 for Brazil assets and 2Q2017 for Rest of Lat Am. PNG acquisition closed October 2016 for $5B. So, we expect DUK to slightly pump-up its CAGR with next guidance in Feb. 2017. Ash basin issues are largely in rearview mirror, but still in consciousness of management. We believe DUK will make more transformative acquisitions on gas-side of business. Demographics picking-up momentum and now usage/customer is climbing too; we look for this to continue moving forward. Investments in renewables and gas-fired generation helps DUK move away from coal and is the right move. We expect DUK to surpass high-end of its 4%-6% AEPS CAGR through 2020 thru development of both organic natural gas projects and acquired natural gas businesses. We’re not excited about potential for industry moving towards cost-of-service gas programs. We believe another transformative gas-based acquisition is in the making within a year or two that would have multiple benefits.