Duke Energy Corporation (DUK) announced that it would spend $8 billion–$9 billion in the twin states of Carolina for new capital expansion projects over the period 2011–2012. The company spent more than $2 billion constructing new plants and solar farms in the Carolinas in 2010.
Duke Energy’s, in the Carolinas, will also receive a boost when the ongoing merger proceedings with Progress Energy Inc. (PGN) are completed. Earlier in January 2011, both companies have unanimously approved the definitive merger agreement to combine the two companies in a stock-for-stock transaction. Duke Energy expects the merger would enable the customers to save $600-800 million in fuel costs in the Carolinas over the next five years.
The combined entity would have approximately $65 billion in enterprise value and $37 billion in market capitalization. Per the merger agreement, Progress Energy’s shareholders will receive 2.6125 shares of Duke Energy in exchange for each share of Progress Energy. In the combined entity Duke Energy shareholders will own an approximately 63% stake and Progress Energy shareholders will own 37%. Duke Energy expects the merger to be completed by fiscal-end 2011.
Charlotte, North Carolina-based Duke Energy Corp. is a diversified energy company with a portfolio of domestic and international, natural gas and electric, regulated and unregulated businesses. Its regulated utility operations serve approximately 4 million customers in North Carolina, South Carolina, Indiana, Ohio and Kentucky, comprising a population of approximately 11 million.
Duke Energy’s stable U.S. electricity and gas operations provide a relatively stable and growing earnings stream. Looking ahead, higher rates through recent settlement agreements in Kentucky, North Carolina and South Carolina will stand the company’s long-term goal of 4%–6% earnings growth in good stead.
Duke Energy’s 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 in February 2011, Duke Energy reported strong sales in its fourth quarter 2010 results. The company generated total revenue of $3.4 billion in the fourth quarter versus $3.1 million in the year-ago quarter. The year-over-year growth was driven mainly by higher rates in the Carolinas and favorable weather.
Duke Energy currently has a short term Zacks #3 Rank (Hold), which translates into a long-term Neutral recommendation for the stock. This is consistent with the ranks of its closest peers, American Electric Power Co. Inc. (AEP) and Ameren Corporation (AEE).
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DUKE ENERGY CP (DUK): Free Stock Analysis Report
PROGRESS ENERGY (PGN): Free Stock Analysis Report
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