Why Duke Energy Is All Set For Growth

Oct. 1, 2014 4:55 AM ET | 4 comments | About: Duke Energy Corporation (DUK)

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any
positions within the next 72 hours. (More...)

Summary

The Indian government is planning to rapidly increase wind energy

generation capability, adding an ambitious 10,000 MW every year, as the
Modi government wants to reduce India's dependency on imported energy.

Suzlon is focusing on global as well as local market. It will invest $50

million in a manufacturing plant in Brazil, its first investment in Latin
America. The company is already manufacturing turbines in India, China,
Germany, Portugal and the US.

Sulzon is restructuring its debt and will complete its programme by

March 2015. Since the announcement of this restructuring, Suzlon has
regained its spot as Indias top wind-turbine maker.

Duke Energy (NYSE:DUK) seems to be focusing on growth strategies for the

firm to benefit from in the near future. DUK gets approximately 85% of
revenues from its U.S. operations, but considering the fact that energy
demand in the U.S. would grow slowly in the coming years, the firm is vying
to explore the international market to not only sustain its businesses but
eventually grow as well.
Global Expansion
The Latin American market should grow in the future, given that the per
capita electricity consumption in countries of the region is still very low. While
the consumption stands at 11,900 kWh for individuals in the U.S., Chile only
has a consumption of 3,300 kWh. Furthermore, the consumption of electricity
is expected to increase by 4.5% in Brazil alone, which connotes that energy
firms would have to gear up their operations to cater to the demand hike.

Given that the demand in the global market for electricity is expected to
grow, prices in these areas are also bound to rise. The international market
prices are already higher than those in the United States for a bevy of
reasons including high generation costs and transmission losses.
Wind Power In Texas
DUK has recently announced that it would be investing in the building of a
110-megawatt wind power project, Los Vientos V, in Texas.
DUK has signed a 25-year agreement with Bryan Texas Utilities, Garland
Power & Light and Greenville Electricity Utility System, which will purchase
power from this project once it becomes operational.
The completion date is expected to be in 2015 and it is estimated that power
from the project would supply electricity to almost 33,000 homes. The project
would upgrade Duke Energy's wind generation capacity to more than 2,100
megawatts.
One of the major advantages of the projects in Los Vientos for DUK is that
most of the power generated there is during the day. And of course the
customer demand is much higher during daytime.
Better Supply
DUK is also working on improving services with the company filing a plan with
Indiana's utility regulatory commission to upgrade its electricity grid in order
to reduce power outages.
The plan is believed to be worth $1.9 billion. If the plan does go through and
is approved by the regulatory commission, DUK would be able to pass off
80% of the investment to consumers through provisions. The firm itself
indicated that customers in Indiana could see an increase in electricity rates
of 1% every year for 2016-2022 and that the project should create around
5,000 jobs in Indiana.
Financial report card

DUK recently announced financial results for Q2 of 2014 and announced

earnings per share of $1.11. This is an increase of 27.6% from its $0.87
earnings per share that was announced in Q2 of 2013.
The firm reported an increase in revenues which were reported at $5,283.
Operating income was reported at $1,116 million, which is a year-on-year
increase of 35.9%.
The company's income from its international business recorded an increase
of $87 million to $146 million as a result of more consumption and higher
pricing in the Latin American region.
The company has set its earnings guidance of $4.50-$4.65 per share for the
full year.
Epilogue
Considering that DUK earns most of the revenue from U.S. operations, the
firm's revenue streams and earnings growth should remain stable this year.
As new projects queue up, the firm would increase revenue generation and in
turn enhancing its earnings. The expansion projects are the pivot on which
company's growth hinges.
Furthermore, the global growth opportunities could benefit Duke Energy, if
the firms eyes expansion in other regions; like Brazil.
As far as the finances are concerned DUK is stable and can flaunt a robust
balance sheet to support itself. DUK is a shoo-in for a lucrative investment
opportunity, especially in the long run. The firm has been posting promising
results and has planned sustainable capital expansion projects that would
lead to revenue and earnings growth for the company. This, coupled with a
higher than industry average dividend yield, makes DUK one of the most
lucrative investment opportunities for investors in future years.

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