) business unit, Constellation Energy Resources, LLC, has entered
into a power supply agreement with the City of Chicago.
Per the agreement, the company will supply carbon emission-free
power to the City of Chicago for a period of 25 months at a lower
market price, reflecting a 2% discount from the last electricity
contract rate. Constellation will produce electricity from its
Illinois-based nuclear and natural gas generation facilities. The
new rate will help the City of Chicago to reduce its electricity
costs by $1.2 million over two-year period.
The City of Chicago will be utilizing the power for its Fleet and
Facility Management portfolio, including police and fire stations
and libraries, as well as important buildings such as the
Cultural Center, Harold Washington Library, City Hall, and O'Hare
and Midway airports.
In Jun 2013, the U.S. President Mr. Barack Obama announced the
National Climate Plan, aimed at implementing stringent carbon
pollution standards at power generation plants. In Sep 2013, the
U.S. Environmental Protection Agency ("EPA") introduced emission
standards for new power plants.
As per World Resources Institute's report, the state of Illinois
has already taken several measures to control carbon dioxide
("CO2") emission. In 2011, CO2 emissions from the state's power
sector were 2% below the 2005 level. We believe that the present
agreement will enable the City of Chicago to reduce the state's
CO2 emission by 35% from the 2011 level by 2020.
After the Japanese nuclear plant accident, governments of many
countries implemented stringent rules on nuclear-fuelled power
generation. However, we note that Exelon has a strong expertise
in nuclear operations and generates 55% of electricity from
nuclear power plants. The company invests substantially to
maintain its nuclear set-up while scrutinizing infrastructure at
regular intervals. These positives will enable Constellation to
win more power supply awards while competing with several
We appreciate Exelon's steady effort towards diversification of
its power generation portfolio. Apart from nuclear-fuelled
generation facility, the company is also venturing into
environment-friendly power projects as well as traditional
fuel-based generation set-ups. Currently, nearly 10% of Exelon's
total production comes from renewable sources with the ratio
It is evident from past record that Constellation gets power
supply orders from several government as well as private
establishments at regular intervals. Earlier, the company had
inked an agreement to supply fixed-price electricity to 20
We believe signing long-term power supply agreements on a
frequent basis will enable Exelon to secure a stable revenue
stream going forward. A steady cash inflow will also support the
company to invest more in new projects.
Chicago, Ill.-based Exelon Corporation currently has a Zacks Rank
#2 (Buy). Other stocks from the industry that are presently
performing well include
Brookfield Infrastructure Partners L.P.
Alliant Energy Corporation
). All the three stocks carry a comparable Zacks Rank #2
BROOKFIELD INFR (BIP): Free Stock Analysis
EXELON CORP (EXC): Free Stock Analysis Report
ALLIANT ENGY CP (LNT): Free Stock Analysis
NISOURCE INC (NI): Free Stock Analysis Report
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