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Duke Buys Infigen's Solar Projects

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Duke Energy Renewables, a business division of the largest U.S. utility, Duke Energy Corp. (DUK - Free Report) , entered into an agreement with an Australian renewable energy firm Infigen Energy under which it acquired two California solar projects from the latter. The financial terms of the transaction were not disclosed.

Located near Bakersfield in Kern County, the two projects – Pumpjack and Wildwood – are due to begin construction in 2014. The solar energy generated from the two projects will be sold through 20-year power purchase agreements to Southern California Edison.

The acquisition will more than double Duke Energy’s solar power capacity in California. Once online, the company’s total solar capacity in the U.S. will climb to 185 megawatt (MW) from 23 utility scale facilities.

The currently favorable renewable climate in the U.S., particularly on the back of favorable legislation, is prompting diversified utilities like Duke Energy to expand their clean energy asset basket. The company is strategically streamlining its portfolio to strengthen its renewable capacity.

Last year, Duke Energy Renewables built the 21 MW Highlander Solar Power Project in Twentynine Palms. It also took over the 4.5 MW Sunset Reservoir project in San Francisco. Again, in 2011, INDU – a joint venture of Duke Energy Renewables and Integrys Energy – built eight 1 MW rooftop solar projects in southern California.

We believe Duke Energy’s green energy expansion efforts will yield lucrative returns in the coming years given the aggressive pro-environment stance in the U.S.

Recently, Duke Energy reported better-than-expected fourth quarter 2013 earnings, which also improved from the year-ago number by 42.9%. The strong performance mainly reflects lower costs from synergies from the 2012 merger with Progress Energy, along with recovered infrastructure modernization costs through revised customer rates. The company also benefited from the adoption of nuclear outage cost levelization in the Carolinas.

Duke Energy’s acquisition of fellow North Carolina based utility, Progress Energy Inc., spread the new entity’s stable U.S. electricity and gas operations to over 7.1 million electric customers in Carolinas, Florida, Indiana, Kentucky and Ohio.

Recently, Duke Energy announced its plan to divest its stake in 13 power plants in the nation’s Midwest after Ohio regulators denied its request to raise rates. The plants together have a capacity of 6,600 MW.

Duke Energy presently carries a Zacks Rank #3 (Hold). Better-ranked utility counterparts are Otter Tail Corporation (OTTR - Free Report) , Public Service Enterprise Group Inc. (PEG - Free Report) and American Electric Power Co., Inc. (AEP - Free Report) . While Otter Tail and Public Service Enterprise sport a Zacks rank #1 (Strong Buy), American Electric Power carries a Zacks Rank #2 (Buy).

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