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Exelon Corporation’s (EXC - Analyst Report) business unit, Constellation Energy Resources, LLC (“Constellation”), inked a deal with Huntington Beach, CA-based turnkey solar solutions provider PsomasFMG, to construct up to 50-megawatt (MW) solar distributed generation projects in California.

Per the contract, Constellation will fund for the development activities in the project. Post completion, the company will own and control the operations of the solar power systems and sell the output to customers.

Constellation intends to provide electricity to the schools and municipalities based in California through power purchase agreements by the end of 2015. The construction for the first 10-MW solar facility has already started.

The project will create a win-win situation for both Constellation as well as the customers. Supplying electricity to the customers through long-term power purchase agreements will ensure stable revenue stream for the company. In addition, a steady focus on expanding renewable portfolio will enable Constellation to meet government’s rules on electricity generation from renewable sources and ease greenhouse gas emission.

Signing the power purchase agreements will enable the customers to install solar systems at their premises without making upfront investments. In addition, Constellation will provide electricity to its customers at fixed power costs, which is sometimes lower than projected market rates. These positives may collectively boost future solar bookings.

In addition, the contract will enable the city of Palmdale to offer clean energy to its residents besides meeting greenhouse gas reduction goals of the state.

Constellation continues to expand its renewable portfolio in the state of California. In Apr 2014, the company announced that it is constructing a 976-kilowatt direct current solar generation project in the city of Palmdale, CA. The project is scheduled to be completed in 2014.

Recently, the Obama administration unveiled its plans to curb carbon emissions from power plants by 30% by 2030 from 2005 levels. The rule will probably come into effect next year.

We believe that Exelon is well-positioned to meet stringent utility regulations. Currently, roughly 10% of the company’s total electricity comes from renewable sources with the ratio rising gradually. Constellation currently owns over 180-MW of solar installations that have been completed or are under construction phase. In 2014, Exelon’s Generation division plans to invest $0.26 billion under renewable energy projects.

Apart from Exelon, its peers NRG Energy, Inc. (NRG - Analyst Report) and Sempra Energy (SRE - Analyst Report) are investing substantially to add renewable assets to comply with stringent environmental regulations.

We believe that expanding renewable infrastructure along with inking long-term power supply agreements will help Exelon to generate a stable cash inflow going forward. A steady flow of income will support the company’s systematic investments in new ventures.

Exelon currently has a Zacks Rank #2 (Buy). A better-ranked stock from the same industry is Consolidated Edison, Inc. (ED - Analyst Report), carrying a Zacks Rank #1 (Strong Buy).

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