Duke-ATC Buy Zephyr Project - Analyst Blog

Duke-American Transmission Co. ("DATC"), a joint venture of Duke Energy Corporation ( DUK ) and American Transmission Co. ("ATC"), has bought Zephyr Power Transmission Project from a subsidiary of Pathfinder Renewable Wind Energy LLC. The terms of the transaction were not disclosed.

The Zephyr project would extend from Chugwater and end at Eldorado Valley just south of Las Vegas, Nevada. The 500-kilovolt, high-voltage direct current project will include an AC/DC converter station at each terminus.

Pathfinder is developing a wind power project on more than 100,000 acres near Chugwater, Wyoming. Of the 3,000-MW of the Zephyr project's generation capacity, Pathfinder will utilize at least 2,100-MW. The Zephyr high-voltage direct current line will bring wind power from the Chugwater region of Wyoming to California and several other regions in the southwestern US.

Post acquisition, the joint venture will continue the design and development of the proposed $3.5 billion Zephyr project. In 2012, DATC will begin environmental analysis and continue designing and routing of the project before seeking regulatory approvals. If approved, the transmission line would be in service in 2020.

Wind generation and transmission development are being pursued separately. However, Pathfinder and DATC have agreed to work together to increase the feasibility of the integrated projects.

Only this month, Pioneer Transmission, a joint venture formed by AmericanElectric Power Co. Inc. ( AEP ) and Duke Energy, announced that they will begin the engineering and permitting activities of their Greentown-New Reynolds project in 2012. The total cost of the venture is expected to run into $245 million.

Duke Energy's U.S. electricity and gas operations generate a relatively stable and growing earnings stream. In addition, a strong balance sheet and ongoing capital expansion projects add visibility to the story.

However, 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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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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