Duke Energy Boosts Solar Suite - Analyst Blog

Zacks Investment Research
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Posted: Dec 13, 2011 5:59 PM
Duke Energy Boosts Solar Suite - Analyst Blog

Duke Energy Corporation (DUK) has purchased two more solar projects with a total electricity generation capacity of 20 MWs from Recurrent Energy, a unit of Sharp Corporation. Under two 25-year power purchase agreements, all the output generated from these two PV projects will be bought by Arizona Public Service Co. (“APS”). The agreement was originally signed between APS and Recurrent Energy. 

The first 5 MW project, known as Ajo Solar Project, is located in Pima County and uses approximately 21,000 photovoltaic (PV) solar panels. It began commercial operation in September 2011.

The other 15 MW project, known as the Bagdad Solar Project, is located in Yavapai County, near the town of Bagdad, and uses 72,000 solar panels. It is expected to begin commercial operation by the end of 2011.

Both the projects are designed and built by an international engineering and project management company, AMEC. Moreover, under five-year service agreement contracts with Duke Energy, AMEC will be responsible for operation and maintenance of the projects.

Besides these two cumulative 20 MW projects, the company already owns seven PV facilities that are in operation which include one 14-MW solar farm in San Antonio, Texas, one 6-MW project in Orlando, Florida, and five 1-MW sites in North Carolina. Also, the company is building a 5-MW facility in Murfreesboro, North Carolina.

Energy has invested $1.75 billion in the renewable energy space, including wind and solar, since 2007. The purchase of two more solar enterprises will improve the portfolio of the company’s commercial solar projects that are in operation, simultaneously expanding its footprint to the western United States.

Duke Energy Corporation’s U.S. electricity and gas operations generate a relatively stable and growing earnings stream. In addition, its ongoing merger proceedings with Progress Energy Inc. (PGN), capital expansion plans and strong balance sheet add visibility to the story.

However, the valuation continues to be restrained by a number of factors, including the present unfavorable macro backdrop, predominantly fossil-fuel based generation assets, tepid demand for electricity, foreign currency exchange volatility and pending regulatory cases. The company presently retains a short-term Zacks #2 Rank (Buy). We have a long-term Neutral recommendation on the stock.

Charlotte, North Carolina-based Duke Energy is a diversified energy company with a portfolio of domestic and international, natural gas and electric, regulated and unregulated businesses which supply, deliver, and process energy for customers in North America and selected international markets.


 
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