In what appears to be a win-win transaction, Brookfield Renewable  (CA:BEP.UN, US:BEP) announced on June 12 that it would acquire North Carolina-based Duke Energy’s (US:DUK) unregulated commercial renewables business for $2.8 billion (all figures in U.S. dollars), including the assumption of debt and non-controlling tax-equity interests.

Duke’s commercial renewables portfolio includes 3,400 megawatts (MW) of utility-scale solar, wind, and battery storage in the U.S. It also has 2,500 MW of capacity under construction and another 6,100 MW in the development pipeline. The deal is expected to close in the latter half of this year.

BEP stock is up 15.3% so far in 2023 while DUK stock is down 12.5%.

The deal has the potential to boost institutional interest in BEP stock. On Fintel’s Fund Sentiment scoreboard, the US-traded shares garner an 83.24. DUK stock currently scores 73.47 on the proprietary model that ranks companies based on levels of ownership accumulation.

Valuation Discount

“With this acquisition, we are adding a scale operating renewable platform located in highly attractive markets that we expect will immediately contribute meaningful cash flows with significant upside from potential asset repowering and synergies,” said Connor Teskey, CEO of Brookfield Renewable.

The $2.8 billion enterprise value reflects a 30% discount to the valuation its management discussed on earnings calls, trade journal PV Magazine reported Tuesday. The sale is just the latest in a trend of regulated utilities shedding their regulated operations from power generation and commercial renewables business assets, according to the report.

Capacity AND Cash Flow

As of March 31, Brookfield had 3,652 MW of wind capacity in the U.S. While its Q1 2023 results don’t break out solar capacity by region, it had 4,266 MW worldwide as of the end of March. Assuming 75% is in the U.S., its solar capacity would be 3,200 MW, which suggests the Duke acquisition will boost its U.S. wind and solar capacity by 50%, with more to come.

Approximately 90% of the cash flow from these assets is from contracts with a weighted average life of 13 years, Brookfield stated in its press release. Those are expected to provide a 3% boost to its 2024 funds from operations (FFO).

In the trailing 12 months ended March 31, Brookfield generated 63% of its overall revenue from its North American facilities. In Q1 2023, its North American hydroelectric revenue attributable to Brookfield unitholders accounted for 43% of $772 million overall. Globally, wind and solar generated 30% of its overall revenue.

At the same time it announced its U.S. acquisition, Brookfield said it completed a bought deal and a private placement simultaneously, raising $650 million to fund its ongoing expansion.

Over the past 18 months, the company and its institutional investors have agreed to invest as much as $21 billion in renewable projects worldwide, with Brookfield committing $3.9 billion.

Through June 12, it has also raised $600 million in funding in 2023 from selling existing non-core assets. It expects to grow its annual FFO per unit in 2023 by at least 10% or more.

Duke Focus on Regulated Renewables

Duke Energy’s estimated net proceeds of $1.1 billion will be used to pay down its debt and invest in its regulated renewables business. It expects to add more than 30,000 MW capacity by 2035. The sale allows it to focus on its regulated markets, where it can pass on the costs of growing this segment of its business.

“As one of the country’s largest renewable energy operators, Brookfield has the resources to support the continued growth and success of the Commercial Renewables’ portfolio,” Duke Energy CEO Lynn Good said in the company’s press release. ‘This sale is an important step in our transition into a purely regulated company with significant grid and clean energy investment plans that will deliver benefits to our customers and stakeholders.”

This article originally appeared on Fintel

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