Duke Energy Buys Wind Service Business

Duke Energy Corporation (DUK) announced that it has acquired energy company Outland Energy Services. The terms of the deal weren’t disclosed.

Canby-based Outland Energy Services maintains and monitors wind turbines. The company has about 125 full-time employees.

Duke Energy’s acquisition of the fringe wind player is in line with the company’s strategy of lowering costs of its renewable energy portfolio. Going forward, Outland will be integrated into Duke Energy’s Energy Renewables business. Outland will service Duke’s own equipment thereby lowering the power company’s overall costs.
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.

The acquisition of Progress Energy in July 2012 made Duke Energy the largest U.S. utility in terms of market capitalization. Earlier, Chicago-based Exelon Corporation (EXC) 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 was the hardest hit by Sandy while Duke Energy has about 65% of customers in this state. Other hard-hit states include Connecticut, West Virginia, New York and Rhode Island. The biggest utilities in the path of the storm included units of Exelon Corporation, FirstEnergy Corporation (FE), Consolidated Edison Inc. (ED), Northeast Utilities (NU), Dominion Resources, Inc. (D), and Public Service Enterprise Group Inc. (PEG).

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

 

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