Duke Energy Renewables, a unit of Duke Energy Corporation (DUK), has entered into an agreement with Sumitomo Corporation of America (“SCOA”), a part of Tokyo-based Sumitomo Corporation. Per the deal, SCOA will become an equal equity partner in two large scale wind farms built by Duke Energy in Kansas. The deal is expected to close in April 2012.

Sumitomo Corporation of America will hold a 50.0% stake each in Cimarron II Windpower Project in Gray County and Ironwood Windpower Project in Ford County with a generation capacity of 131 megawatt (MW) and 168 MW, respectively.

The partnership plans to complete the construction of both the farms later in fiscal 2012. Once the farms come online Duke Energy will be responsible for its operation and SCOA will remain an active partner and look after the management of the projects. Currently, the collaboration is seeking for opportunities for funding the cost of constructing and operating the projects.

Per a 20-year agreement, the electricity and the associated renewable energy credits generated from the Cimarron II project will be purchased by Kansas City Power & Light and the power generated by the Ironwood wind farm will be sold to Westar Energy.

Duke Energy’s stable U.S.electricity and gas operations are spread over the five states of North Carolina, South Carolina, Indiana, Ohio and Kentucky. Together they generate a relatively stable and growing earnings stream. Besides, its planned and strategic merger with another utility holding company, Progress Energy Inc. (PGN), would be synergistic to earnings.

However, these positives are offset by the present unfavorable macro backdrop, predominantly fossil-fuel based generation assets, tepid demand for electricity, foreign currency exchange volatility and pending regulatory cases. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

Duke Energy is a diversified energy company with a portfolio of domestic and international, natural gas and electric, regulated and unregulated businesses which supply, deliver, and process energy for customers in North America and selected international markets.

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