Zacks_Analysts' Blog : Duke & Partners Complete PV Systems - Analyst Blog

A joint venture comprising Duke Energy Renewables, a subsidiary of Duke Energy Corporation (DUK), and Smart Energy Capital has completed the construction of five rooftop photovoltaic (“PV”) systems for the Bald Eagle Area School District and Bellefonte Area School District.

The PV rooftop solar arrays are installed at Bald Eagle Middle and High School, Wingate Elementary School, Bellefonte Area High School, Marion Walker Elementary School and Pleasant Gap Elementary School. Collectively, these PV rooftop solar systems have the capacity to produce approximately 1.5 megawatts of zero-emission electricity.

Under a 20-year power purchase agreement, these schools in Pennsylvania’s Centre County will purchase all the electricity generated from their respective PV systems at a fixed rate per kilowatt-hour from a project company owned by INDU Solar Holdings. INDU Solar Holdings is a 50-50 joint venture between Duke Energy Renewables and Integrys Energy Services.

These solar projects are a part of the development model that was announced by the INDU partners and Smart Energy Capital in October 2010. In October last year, Duke Energy-Integrys Energy Services (“INDU Solar Holdings”) and Smart Energy Capital had formed a partnership to build and finance distributed solar projects throughout the United States.

Integrys Energy Services is a subsidiary of Integrys Energy Group (TEG) and Smart Energy Capital is a leader in the financing and development of solar energy projects. Per the partnership agreement, the INDU partners had to focus jointly on owning rooftop and smaller ground-mounted photovoltaic solar projects that deliver electricity to various customers under long-term power purchase agreements. Smart Energy Capital was responsible for developing the projects and make financing arrangements to enable INDU Solar Holdings to create a hurdle free approach to bringing solar projects to market.

Charlotte, North Carolina-based Duke Energy Corporation 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. Duke Energy expects to complete its merger with Progress Energy Inc. (PGN) by the end of 2011.

Duke Energy Corporation’s U.S.electricity and gas operations generate a relatively stable and growing earnings stream. The company’s 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.