AT Atlantic Power Corporation

Duke-American Transmission Co. (DATC) – a Duke Energy Corporation (DUK) and American Transmission Co. joint venture – has entered into a purchase sale agreement with Atlantic Power Corporation (AT). As per the agreement DATC will purchase Atlantic Power’s stake in the Path 15 transmission project including Atlantic Path 15 Transmission, LLC, Atlantic Holdings Path 15, LLC and Atlantic Path 15, LLC for approximately $56 million.

Per the terms of the agreement, DATC will acquire a 72% interest in the Path 15 transmission line. Pacific Gas & Electric, a subsidiary of PG&E Corp. (PCG), has an 18% interest in the project through its ownership and operation of the connecting Los Banos and Gates substations. The remaining 10% interest is owned by Western Area Power Administration, which will continue to operate and maintain the line.

Located in central California, the Path 15 transmission project is an 84-mile, 500-kilovolt transmission line. The project was placed into service in 2004 and since then it has maintained a strong operating track record. The line is capable of providing access to several California load centers.

With a capacity of approximately 1,500 megawatts of power, the line is fully integrated into the California Independent System Operator grid. Moreover, it plays an important role in maintaining regional electric system reliability and market efficiency.

Going forward, the deal will prove to be an important step for the Duke Energy joint venture. The purchase will place DATC in a favorable position in its commercial transmission business. Subject to customary closing conditions and approvals, the deal is expected to be closed in the second quarter of 2013.

Based in Charlotte, North Carolina, 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.

Looking ahead, our bullish outlook for the company is supported by its mega merger with Progress Energy Inc. thereby creating the largest utility in the country, its strong balance sheet and ongoing capital expansion projects. However, we remain concerned about the present unfavorable macro backdrop, predominantly fossil-fuel based generation assets, tepid demand for electricity and pending regulatory cases. The company presently retains a short-term Zacks Rank #3 (Hold).

In the near term, we would advise investors to accumulate Duke Energy’s short-term Zacks #1 Rank (Strong Buy rating) peer Huaneng Power International, Inc. (HNP).

 
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