Exelon Unit Adds 976KW Solar Asset - Analyst Blog

Exelon Corporation's EXC business unit, Constellation Energy Resources, LLC (“Constellation”), continues to expand its renewable portfolio. The company announced that it is building a 976-kilowatt direct current (DC) solar generation project in the city of Palmdale, CA. The project is scheduled to be completed in 2014.

The solar set-up is located on three sites - Civic Center, DryTown Water Park and Marie Kerr Park at Palmdale. It has an annual power generation capacity of 1,800 megawatt-hours. The project will have around 3,200 photovoltaic panels and will be able to get rid of carbon dioxide emission by 1.8 million pounds per year.

Constellation is funding for the development activities in the project. Huntington Beach, CA-based turnkey solar solutions provider PsomasFMG and the city of Palmdale are jointly engaged in the construction functions. Post completion, Constellation will own and control the operations of the solar project.

The project will create a win-win situation for both Constellation as well as the city of Palmdale.

Constellation will sell the output from the project to the city of Palmdale at a fixed-rate, under a 20-year power purchase agreement. In addition, increasing focus on renewable portfolio will also enable Constellation to meet government's regulations on power generation from the renewable sources and reduce greenhouse gas emission.

On the other side, the contract is expected to enable the city of Palmdale to save above $40,000 in electricity costs in the first year of the system's operation, thereby reducing electricity costs.

We note that utilization of renewable energy for electricity generation is gradually rising primarily due to its clean nature and a growing awareness among the masses about its benefits. This has influenced the utility providers to shift their energy mix to solar, water, and wind from traditional sources.

We note that Exelon generates around 55% of electricity from nuclear powered units. Though the company maintains necessary safety measures, nuclear power generation has been a debatable issue since the nuclear disaster in Japan. To diversify its generation portfolio and reduce risks associated with accidents in nuclear facilities, Exelon is currently focusing more on expansion of renewable energy-fuelled power generation assets. Currently, roughly 10% of the company's total production comes from renewable sources with the ratio rising gradually. In 2013, Constellation added 38 megawatt of customer-sited solar generation to its portfolio.

Apart from Exelon, its peers ALLETE, Inc. ALE, Sempra Energy SRE and Wisconsin Energy Corporation WEC are investing substantially to construct and upgrade their renewable utility infrastructure to comply with strict regulations.

We believe that addition of renewable assets along with inking long-term power supply agreements will enable Exelon to secure a stable revenue stream going forward. A steady cash inflow will also support Exelon to invest more in new projects.

Chicago, Ill.-based Exelon currently has a Zacks Rank #2 (Buy).