Duke Energy to Redeem Securities

Duke Energy Corporation (DUK - Analyst Report) announced that on February 1, it will redeem the entire issue of FPC Capital I 7.10% Cumulative Quarterly Income Preferred Securities (FPCPRA), with a face value of $300 million. The securities were issued by a financing trust owned by its wholly owned subsidiary Progress Energy, Inc. The $300 million worth of FPCPRA was issued in 1999 and was originally due in 2039.

As the securities are being redeemed at par, security holders will receive $25 per preferred security held, plus accrued and unpaid distributions in the amount of $0.374722 per preferred security, payable upon presentation on the redemption date.

Based in Charlotte, North Carolina, Duke Energy is a diversified energy company with more than $100 billion in total assets. Its regulated utility operations serve approximately 7.1 million electric customers located in six states in the Southeast and Midwest. Its commercial power and international business segments own and operate diverse power generation assets in North America and Latin America, including a growing portfolio of renewable energy assets in the U.S.

Earlier, the acquisition of Progress Energy in July 2012 made Duke Energy the largest U.S. utility in terms of market capitalization. Prior to that, Chicago-based Exelon Corporation (EXC - Analyst Report) was the largest U.S. utility.

Duke Energy Corporation’s U.S. electricity and gas operations generate a relatively stable and growing earnings stream. Looking ahead, the company’s outlook is supported by its strong balance sheet and ongoing capital expansion projects, which 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, pending regulatory cases and the aftermath of Hurricane Sandy.

New Jersey, where Duke Energy has about 65% of its customers, was hit hardest by Sandy. Other hard-hit states include Connecticut, West Virginia, New York and Rhode Island. The biggest utilities in the path of the storm include units of Exelon Corporation, FirstEnergy Corporation (FE - Analyst Report), Consolidated Edison Inc. (ED - Analyst Report), Northeast Utilities (NU - Analyst Report), Dominion Resources, Inc. (D - Snapshot Report), and Public Service Enterprise Group Inc. (PEG - Analyst Report).

Duke Energy presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.