Chesapeake Utilities to Build Heat & Power Plant in Florida - Analyst Blog

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Chesapeake Utilities Corporation ( CPK ) has announced that its unit, Eight Flags Energy, LLC (Eight Flags), will build a combined heat and power plant. The construction site, based in Fernandina Beach on Amelia Island in Nassau County, FL is to be leased from Rayonier Advanced Materials, Inc.'s subsidiary, Rayonier Performance Fibers, LLC. The construction of the plant is subject to numerous approvals. If approved, the company plans to start construction in 2015 and the plant is expected to come online in Jul 2016.

Chesapeake Utilities will install a Solar Turbines Titan 250 industrial gas turbine generator set at this plant. The plant will get its supply of natural gas from the company's intrastate natural gas pipeline subsidiary, Peninsula Pipeline Company.

Once completed, the combined heat and power plant will be able to generate around 20 megawatts (MW) of base load electricity. Chesapeake Utilities will sell the output to its wholly owned subsidiary, Florida Public Utilities Company (FPU), which will subsequently distribute the same to its retail customers.

The heat and power plant lies in close proximity to a cellulose specialties plant owned by Rayonier Performance Fibers. The steam generated from the plant will be sold to Rayonier Performance Fibers for running its operations.

Both Chesapeake Utilities and Rayonier Advanced Materials will stand to benefit from this collaboration. The power plant will enable Chesapeake Utilities to provide reliable and cost-effective energy services to its customers on Amelia Island. The steam produced from the plant will be supplied to Rayonier Advance Materials under a contract yet to be finalized. Rayonier Advance Materials already has boilers at its Fernandina Beach site, which produces steam to run its production facility. The extra electricity produced is sold to FPU. The cost-effective supply of steam from the Chesapeake unit will optimize operations at the Rayonier plant.

Dover, DE-based Chesapeake Utilities offers a wide array of products and services, distribution, transmission and marketing of natural gas, and distribution of electricity and propane to its customers.

Chesapeake Utilities primarily follows an organic growth strategy to expand its operations. In the first half of 2014, the company invested $42.8 million and plans to invest a total of around $145.9 million in 2014 of which a significant portion will be allocated for regulated utility operations. Chesapeake Utilities is on track with its Florida Gas Reliability Infrastructure Program. These initiatives will enable the company to meet increasing customer demand.

Chesapeake Utilities maintains a stable liquidity position, with cash and cash equivalents of $2.5 million and $165 million available under its credit facilities as of Jun 30, 2014. A favorable liquidity position and cash generation capacity will allow the company to pursue a systematic capital investment program and strengthen its utility systems.

Chesapeake Utilities currently holds a Zacks Rank #3 (Hold). Other better-ranked stocks in the sector include AGL Resources Inc. ( GAS ), Black Hills Corporation ( BKH ) and WGL Holdings Inc. ( WGL ), each with a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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