“Vulture” Hedge Fund Trying To Break Up Duke Energy Has Ugly Record

May 14, 2021

Mama always said: “Don’t judge someone by their looks.”

Mama’s never met Elliott Capital.

The Wall Street Journal reports the Vulture Hedge Fund – led by a man the New Yorker calls the “Doomsday Investor” – has taken a financial stake in North Carolina’s largest power company. While the Vulture Fund hasn’t publicly stated its “objectives” for investing in Duke Energy, the report alludes to plans to break up the utility by selling off assets.

While the mainstream media have largely ignored the story, a Vulture Hedge Fund raid on North Carolina’s largest power company has big implications for jobs and power bills in our state.

A quick internet search of Elliott Capital’s recent “investments” turns up an ugly record of draconian job cuts, regulatory troubles, higher energy bills, big profits for wealthy financial backers, and windfalls for the multi-billion-dollar fund that caused The Atlantic to proclaim “Some Hedge Funds Only Seem Like Pirates – This One Stole a Ship.”

And the fund’s forays into the utility sector are especially hideous:

In 2019, the fund took a financial position in AT&T.  Reuters reports an Elliott-backed restructuring plan resulted in the elimination of 23,000 jobs.  In September of 2019 AT&T’s stock price was about $38. Today it sits at $32.

In 2020, Elliott amassed a stake in Kansas-based energy company Evergy. The Vulture Hedge Fund immediately announced plans to “address underperformance” and “unlock up to $5 billion in value.”

Kansas utility regulators were not convinced. Regulators voted to investigate over concerns the Vulture Hedge Fund’s plan wasn’t in the public interest and would result in customers “paying higher rates or receiving lower quality of service in order to support an increase in shareholder value.”  The Kansas City Star reported:

“The Kansas Corporation Commission on Thursday voted to initiate an investigation, saying it’s concerned that New York-based activist investor Elliott Management Corporation’s ideas for Evergy would likely result in increases in electricity rates paid by Evergy customers and may not be in the public’s interest.

KCC staff petitioned its board on June 11, saying it disagreed with the assumptions Elliott made in its analysis and believed the investor’s recommendations for Evergy would result in higher rates.

“Staff is very concerned that Elliott’s focus on increasing shareholder value will place Evergy’s customers at a high risk of paying higher rates or receiving lower quality service in order to support an increase in shareholder value,” the KCC said.

The Citizen’s Utility Ratepayer Board, an agency that serves as a watchdog for Kansas utility customers, largely agreed with KCC’s analysis.

David Nickel, consumer counsel for CURB, said it’s important that any savings resulting from Elliott’s recommendations be over and above what was promised in the KCP&L and Westar merger, and those savings should benefit ratepayers rather than company shareholders.”

Nickel, in an interview, said CURB was skeptical of Elliott’s proposals. He said cutting operations and maintenance expenses likely means cutting jobs.

“If it’s too deep, it could run into reliability of service, which is core to why we have electric utilities in the first place: To provide safe and reliable service,” Nickel said.

Investors and the market don’t seem too impressed, either. Evergy’s stock was valued at $72 per share when Elliott bought in. Today its stock trades at $62.

North Carolina’s press, politicians and citizens should sit up, pay attention and speak out.  Our home-state public utility company has been something of a political piñata over the past decade. And Duke clearly made missteps, like the Dan River coal ash spill that hurt its reputation. But North Carolina’s business and residential electricity customers continue to benefit from some of the lowest electricity rates in the region and Duke employs well over 10,000 people across our state.

Do you really want to put an out-of-state hedge fund known as a “pirate” and a “vulture,” run by the “Doomsday Investor,” with a track record of draconian job cuts, in charge of keeping the lights on in North Carolina?