Duke Energy (NYSE:DUK) recently purchased two solar projects with a total generation capacity of 20MW from Recurrent Energy, a subsidiary of Sharp Corporation. Previously we mentioned about the company negotiating with Iberdrola Renewables to buy power produced from the company’s proposed 300 megawatt (MW) Desert Wind project in North Carolina. These acquisitions demonstrate the company’s move toward developing renewable energy sources, particularly with the rise in fuel costs and the tightening environmental norms. Duke Energy is one of the largest electric utilities in the U.S. with approximately 35,000 megawatts of electric generating capacity in the Carolinas and the Midwest as well as natural gas distribution services in Ohio and Kentucky. Its competitors include companies like Exelon Energy Corp and Allegheny Energy (NYSE:AYE).
Our price estimate for Duke is about $21, which is roughly in line with the current market price.
- Earnings Review: Lower Maintenance Costs Help Duke Post A Profit
- Earnings Preview: Spotlight On The Future As Duke’s Revenue Growth Stalls
- What’s Driving Duke’s Regulated Utilities Revenue Growth?
- What Has Driven Duke’s EPS Growth In The Last Four Years?
- Duke’s Q1 Earnings Decline By 8% On Special Items, Unfavorable Weather Conditions
- How Has Duke Energy’s Revenue Composition Changed In The Last Five Years?
Renewable energy in focus ((Duke Energy Boosts Solar Suite, Zacks))
Stringent environmental norms and the rising fuel costs has diverted the focus of the utility giant to renewable sources of energy, which are more viable in the longer run. Duke’s recent purchase comprises of a 5MW Ajo Solar Project that began commercial operation in September 2011 and a 15MW Bagdad Solar Project in Yavapai County that will begin commercial production by the end of 2011.
The company has entered into a service and maintenance agreement with AMEC, the company that has designed and constructed both the projects, wherein AMEC will operate and maintain the plants for the next five years. With a total investment of $1.75 billion in renewable energy projects since 2007, Duke Energy continues to expand its portfolio with a greater focus to the West coast.
Duke-Progress merger may face competition worries ((Duke-Progress merger facing competition worries, Associated Press))
The Federal regulators tried to block the proposed Duke-Progress merger to create United State’s largest electric utility company by citing that they may not have taken adequate steps to protect competition in North Carolina and South Carolina markets. The sheer size and monopoly that the merged entity will have in these markets may be anti-competitive for the customers. The regulators had previously suggested the companies to sell some assets (power plants) or set up new facilities or perhaps lease the operations to a regional service provider in order to reduce the company’s influence. Responding to this issue, the companies suggested that they would sell excess electricity at a fixed price to the wholesale buyers in the region, which was rejected by the regulators.
The companies are reviewing their applications and would respond to the latest order, citing the potential benefits of the merger and by suggesting some more solutions to the issue of creating an anti-competitive scenario.((Duke Energy and Progress Energy Moving Forward with Planned Merger – Reviewing FERC Order, Duke Energy)) The current order pushes the merger date further back, with the earliest possible close date being March 2012.