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Virginia utility, Dominion Resources Inc.’s (D - Snapshot Report) business wing Dominion Bridgeport Fuel Cell LLC entered into an agreement with Danbury based FuelCell Energy Inc. (FCEL - Snapshot Report) for the acquisition of a fuel cell power generating facility under development in Bridgeport, Connecticut.  Dominion will be the owner of the fuel cell park while FCEL will supervise the construction, maintenance and operation aspects of the facility.  The project is slated to be complete and operational by the end of 2013.

As per the agreement, FCEL will deliver five proprietary stationary fuel cell systems for the Bridgeport facility. The facility is estimated to generate 14.9 megawatts (“MW”) of electricity by incorporating a reactive process that will convert natural gas to electricity in a clean and efficient manner unlike conventional combustion reaction. Dominion will sell the output from Bridgeport fuel cell unit to Connecticut Light & Power for a period of 15 years.

The Dominion Bridgeport Fuel Cell facility falls under Project 150, a state-sponsored initiative backed by Clean Energy Finance and Investment Authority (“CEFIA”). The program serves as a platform for augmenting the development of clean energy projects in Connecticut by 150 MW. CEFIA is the first full-scale clean energy finance body in the U.S. that leverages public and private funds to boost investments and step up clean energy deployment in Connecticut. The electricity generated from fuel cell technology will power 15,000 houses in Connecticut.

Dominion’s other key eco-friendly ventures include wind farms in Virginia and Indiana, a hydroelectric project in Virginia and Carolina and a biomass power station in Virginia. Recently the company’s subsidiary Dominion Virginia Power received approval from the state’s regulators for the construction and operation of a 30 MW solar power demonstration project in Virginia.

We believe the fuel cell park will certainly upgrade Dominion’s green asset basket and will sit well with the current trend in the U.S. market that favors sustainable pro-environment energy generation.

The fuel cell technology has the potential to offer cleaner, more efficient alternatives to power generation and is expected to gain significant ground in the future. We expect a cash-rich company like Dominion to capitalize from this project thereby securing higher returns, going forward.

However, the cost of fuel cell power systems is still high and has to be brought down to competitive levels with conventional technologies. Moreover, the durability and heat recovery systems of this fuel cell technology are challenges that still need to be worked upon.  Dominion presently retains a Zacks #3 Rank (Hold rating).

Another Zacks #3 Ranked operator United Technologies Corporation (UTX - Analyst Report) is heavily investing in the fuel cell technology. Recently its business wing UTC Power under an Energy Supply and Services Agreement will provide energy from the fuel cell to the South Coast Air Quality Management District in California. The fuel cell unit is expected to be installed and come online by mid-2013.

The Zacks Consensus Estimate for the fourth quarter and full year 2012 currently stand at 69 cents and $3.06 per share, respectively. With a market capitalization of $29.41 billion, the company has a total 15,800 employees.

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