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Duke Energy, Siemens Agree to Build Gas Combustion Turbine

Zacks

Duke Energy Corporation DUK has entered into an agreement with Siemens to design and build a new advanced gas combustion turbine. This agreement will result in lower customer costs, regional economic growth, increased efficiency and flexibility.

Details of the Agreement

On Jun 12, Duke Energy submitted plans to the North Carolina Utilities Commission (NCUC) to expand its Lincoln County Combustion Turbine (LCCT) generation site by 400 megawatts (‘MW”). Per the proposal, Siemens will act as the Engineering, Procurement and Construction (EPC) contractor for the project, which includes supplying of the advanced gas turbine unit.

We note that construction on the new class of turbine will commence in mid-2018. This will facilitate Siemens to start extensive testing and validation of the technology before the plant becomes operational in 2024. During the testing period, the unit will stay under the ownership and control of Siemens. On completion of the construction, testing and validation, the new unit will be delivered to Duke Energy for operation.

Per the application, the unit will be manufactured in three phases to allow the extensive testing. The first stage is scheduled to be completed in 2020 with a capacity of 369 MW. The second phase will increase the capacity to 382 MW and is scheduled to be completed in 2022. Finally, the project will be finished by 2024, which will have a capacity of 402 MW. Once completed, the unit is expected to be the most competent combustion turbine in the Duke Energy fleet and around 25% more efficient than the existing 16 turbines at the Lincoln County site.

Company’s Take on the Agreement

According to David Fountain, President of Duke Energy North Carolina, the contract with Siemens will provide a considerable cost savings to its customers at the same time as providing one of the most advanced, efficient gas turbine units in the U.S. Again, the new technology will provide flexible peaking power required to complement intermittent solar energy resources for its customers as well as provide lower emissions across its fleet.

Our View

Duke Energy is a premier utility service provider offering efficient power and energy services across various states in the U.S. and several other international locations. We appreciate the company’s efforts on expanding its scale of operations and implementing modern technologies at its facilities. Additionally, the company has been pursuing additional generation projects, such as dual-fuel capabilities, and combined heat and power facilities to increase the flexibility of its system as it continues to meet growing energy demands in the dynamic environment.

Notably, Duke Energy invests heavily in infrastructure and expansion projects. Segment wise, it expects to spend about $30 billion for electric utilities and infrastructure, $6 billion for gas utilities and infrastructure, and $1 billion for commercial renewable for the period of 2017-2021. Moreover, the company boasts a robust five-year capital plan and currently plans to invest about $37 billion in growth projects over the 2017-2021 time frame compared with the investment range of $25–$30 billion planned for the 2016-2020 time frame. This investment plan will drive earnings base growth in the company’s combined electric and gas businesses of approximately 6%, over the next five years.

Over the next 10 years, this utility provider plans to strengthen its energy delivery system by investing $25 billion to create a more modern, smarter energy grid. For modernizing its system, it will invest to enhance basic services with smart meters and communications technologies, increasing power quality and improving reliability. These investments will also support more distributed energy resources on its system. Furthermore, subsequent capital spending will integrate emerging technologies, such as storage and improved remote monitoring, communications and control.

Price Movement

Duke Energy has outperformed the Zacks categorized Utility- Electric Power industry, in the last one year. During this period, the company’s shares gained 4.91% as against the industry’s loss of 0.03%.



Duke Energy’s stable regulated operations, acquisition of Piedmont Natural Gas, renewable expansion and organized transition toward a streamlined business mix are anticipated to boost the company’s performance over the long run.

Zacks Rank & Stocks to Consider

Duke Energy currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the same space include Northwestern Corporation NWE, Consolidated Edison, Inc. ED and Brookfield Infrastructure Partners L.P. BIP sporting a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Northwestern Corporation’s EPS growth is estimated to be 3.30% in the next five years. The company surpassed its earnings estimates in the last four quarters by 9.98%.

Consolidated Edison surpassed its earnings estimates in the last four quarters by 3.97%. The company’s EPS growth is estimated to be 3.60% in the next five years.

Brookfield Infrastructure Partners’ EPS growth is estimated to be 10% in the next five years. The company surpassed its earnings estimates in three of the last four quarters by 0.79%.

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