Duke-ATC Buy Zephyr Project - Analyst Blog
December 20 2011 - 11:03AM
Zacks
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
American Electric 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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