Duke Energy
's (
DUK
) commercial arm Duke Energy Renewables has entered into an
agreement with Sumitomo Corp.'s U.S. subsidiary, Sumitomo Corp. of
America.
Per the agreement, Sumitomo will have equal ownership rights
over Duke's two Kansas wind projects, the 131-megawatt ("MW")
Cimarron II Windpower Project and the 168-MW Ironwood Windpower
Project. Sumitomo has already invested approximately $353 million
to meet construction and operating expenses.
Once the project comes online, Duke will be in charge of
operations and maintenance of the wind farms, while Sumitomo will
focus on project management.
Duke had already signed two 20-year contracts with Kansas City
Power & Light and
Westar Energy, Inc.
(
WR
) to sell all of the electricity and allied renewable energy
credits ("RECs") produced by Cimarron II and Ironwood projects.
Both the companies are expected to complete the construction work
later this year.
We view Duke Energy as a well positioned organization with
accelerating investment in power plants and transmission, and
ongoing cost containment efforts. Besides, the company has also
planned a strategic merger with another utility holding company,
Progress Energy Inc.
(
PGN
). This initiative bodes well for the company's future growth.
We believe this contract with Sumitomo will be incremental to
Duke's future revenue and earnings. Green power generated from
these projects will enable Duke to meet the guidelines of the
Kansas Renewables Portfolio Standard Program. Per the guidance,
utilities are required to produce or acquire 20% of their power
from renewable sources by 2020.
But, at the same time, we are concerned about an unfavorable
macro backdrop, predominantly fossil-fuel based generation assets,
commodity risk at the company's Commercial Power segment, foreign
currency exchange volatility and pending regulatory approval for
the merger. However, we currently retain a Zacks #3 Rank on Duke
Energy, which translates into a short-term Hold rating.
Duke Energy is slated to release its first-quarter 2012 numbers
on May 4, 2012. The Zacks Consensus Estimate for the first quarter
2012 is currently pegged at 36 cents per share.
Based in Charlotte, North Carolina, Duke Energy is a diversified
energy company with a portfolio of domestic and international,
natural gas and electric, regulated and unregulated businesses.
These businesses supply, deliver, and process energy for customers
in North America and selected international markets.
DUKE ENERGY CP (
DUK
): Free Stock Analysis Report
PROGRESS ENERGY (
PGN
): Free Stock Analysis Report
WESTAR ENERGY (
WR
): Free Stock Analysis Report
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