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Duke Energy's (DUK) New Wind Project to Supply 160MW to AT&T

Zacks Equity Research

Duke Energy Corp.’s DUK business unit — Duke Energy Renewables — recently signed a 15-year virtual power purchase agreement (VPPA) for its Frontier Windpower II with AT&T Inc. T.

Duke Energy Renewable is building its largest wind power project — Frontier II — with a 350-megawatt (MW) capacity in Kay County, Ok. Under this agreement, AT&T will receive 160 MW once the project gets completed in 2020. Nordex Acciona will supply 74 4.8-MW wind turbines for the site. Moreover, development support will be provided by Amshore US Wind, while Wanzek Construction is the contractor of the project.

Prior to the recent agreement, Ball Corporation BLL signed a 15-year VPPA agreement with the company to purchase 161 MW of clean energy from the Frontier II project.

Increasing Focus on Wind Energy

The company is undertaking initiatives to expand its wind portfolio. The recent project was an expansion of Frontier Windpower. When completed, Frontier I and II will cumulatively generate a total of 550 MW of wind energy. Recently, the company also signed a 12-year VPPA agreement with Sprint Corporation S.  Sprint will buy 173.3 MW of 182 MW Texas-based wind project — Maryneal. Till date, Duke Energy has invested more than $4 billion to build wind power business. In 2018, the company generated 2,300 MW of power at 21 wind farms.  The new wind projects will expand the company’s wind power generation capacity beyond 3000 MW.

The company’s Commercial Renewables segment comprises non-regulated utility scale wind and solar generation assets in the United States, which contributed 5.1% to revenues in the first half of 2019. The figure is higher than 3.7% contributed in the second quarter of 2018. Duke Energy has plans to invest $2.6 billion in the segment during the 2019-2023 period. The Frontier II project is in line with the company’s renewable investment plan.

Per a recent release by the U.S. Energy Information Administration (EIA), wind energy will become the leading source of renewable electricity generation and surpass hydropower generation. Per the report, the trend will continue in 2020 as well. Hence, the company’s initiatives to expand wind portfolio is well timed.

Focus on Low Emission

Per EIA, carbon emission is expected to decline 2.5% in 2019 and another 1.0% in 2020 in the United States. Electric utility companies have increased their focus toward cleaner power generation and trying to reduce carbon-emission volumes.

Many Utility companies have set carbon emission reduction target from their respective production portfolio by lowering dependency on coal. The companies are concentrating on shifting to natural gas and renewable sources of energy over the next decade.

Till 2018, Duke Energy has lowered carbon emissions by more than 30% since 2005. The company has set goals to reduce emission at least 50% by 2030 and net-zero by 2050, considering nuclear fleet operations as the key generating source.  The latest project is expected to drive earnings in the future.

Zacks Rank & Price Movement

Duke Energy currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Duke Energy have gained 19.7% in the past 12 months compared with the industry’s rise of 15.9%.

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