Duke Energy Gets FERC Nod to Buy Out NCEMPA Assets - Analyst Blog

Duke Energy Progress, a subsidiary of Duke Energy Corporation (DUK), has obtained the Federal Energy Regulatory Commission's (FERC) approval to acquire the ownership of several power generating facilities from the North Carolina Eastern Municipal Power Agency (NCEMPA). The estimated cost of the transaction is pegged at around $1.2 billion.

The facilities – the Brunswick Nuclear Plant Units 1 and 2, Mayo Plant, Roxboro Plant Unit 4 and Harris Nuclear Plant – are currently jointly owned by Duke Energy Progress and NCEMPA, and operated by the former. The agency's partial ownership in these facilities is reflected in approximately 700 megawatts of generating capacity.

Per the deal, Duke Energy Progress will obtain the agency's ownership interest in these power generating plants, and related fuel inventories and spare parts.

The FERC's nod will allow Duke Energy Progress to ink a 30-year wholesale power contract to supply electricity to NCEMPA's existing customers. Duke Energy Progress can also serve other wholesale customers through the power supply agreement.

Duke Energy Progress had initially announced the news of the transaction in Jul 2014 and filed with the FERC in October. Upon customary approvals, the proposed acquisition is expected to conclude at 2016-end.

Once approved, the acquisition will allow Duke Energy Progress to expand both its scale of operations and customer base. It will also ensure steady cash inflow for the company.

Duke Energy follows a blend of organic and inorganic expansion strategies to enhance its traditional fuel-fired generation facilities and renewable portfolio. Between 2014 and 2018, the company plans to spend $16–$20 billion as growth capital, including $6–$8 billion for new generation facilities. The company plans to build a 1,640-MW combined-cycle natural gas plant in Citrus County, FL worth approximately $1.5 billion.

As far as its inorganic expansions are concerned, in Mar 2014, another unit of Duke Energy, Duke Energy Renewables, announced the acquisition of two 20-MW solar projects from Infigen Energy, a renewable energy developer.

As of Sep 30, 2014, Duke Energy had cash & cash equivalents of around $1.9 billion and available capacity of roughly $4.54 billion under its master credit facility. A stable financial position allows the company to follow systematic investments in growth projects as well as comply with environmental mandates.

Duke Energy currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry include Black Hills Corporation (BKH), PG&E Corporation (PCG) and Consolidated Edison, Inc. (ED). Black Hills and PG&E Corporation hold a Zacks Rank #1 (Strong Buy) while Consolidated Edison carries a Zacks Rank #2 (Buy).

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