Duke Energy Thinks Out of The Box - Analyst Blog

Charlotte, North Carolina based Duke Energy Corporation (DUK) is thinking beyond its traditional electricity generation utility space. Trying to diversify its renewable energy portfolio, the company signed an agreement with Tokyo-based ITOCHU Corporation to collaborate on advanced energy technologies. The duo will initially focus on creating a new market for the used and discarded electric vehicle (EV) batteries in other applications.

Duke Energy's out-of-the-box thinking will open up a new market. Currently, EV batteries that can no longer charge to approximately 80% of their original capacity have been discarded. However Duke Energy believes batteries that become unsuitable for use in EVs can have alternative applications, which require less than 80% of their capacity. The company is already exploring the use of such batteries in supplementing residential electricity supply.

Duke Energy will be able to procure used car batteries at a much lower cost compared to new ones, which will have a distinct affect on installation costs. The company will provide engineering design support for battery installations, as well as supply test sites and personnel. On the other hand, ITOCHU will provide its energy storage infrastructure expertise to enable the re-use of automotive batteries.

Duke Energy is one of the largest electric power holding companies in the U.S. Its regulated utility operations serve approximately 4 million customers located in 5 states in the Southeast and Midwest, comprising a population of approximately 11 million. Its Commercial Power and International Business segments own and operate diverse power generation assets in North America and Latin America, including a growing portfolio of renewable energy assets in the U.S.

Duke Energy Corporation's stable U.S. electricity and gas operations, spread over the five states of North Carolina, South Carolina, Indiana, Ohio and Kentucky, provide a relatively stable and growing earnings stream. Looking ahead, our bullish outlook for the company is supported by higher rates, strong balance sheet, ongoing capital expansion projects and an above average dividend yield for the industry.

Duke Energy based on forward earnings estimates is trading at a premium compared to its peers like FirstEnergy Corporation (FE), Public Service Enterprise Group Inc. (PEG) and Edison International (EIX).

Also the present unfavorable macro backdrop, fossil-fuel based generation assets, lower demand for electricity, foreign currency exchange volatility and pending regulatory cases continue to restrain valuation. Thus we maintain our long-term market Neutral recommendation on the Zacks #3 Rank (Neutral) stock.

 
DUKE ENERGY CP (DUK): Free Stock Analysis Report
 
EDISON INTL (EIX): Free Stock Analysis Report
 
FIRSTENERGY CP (FE): Free Stock Analysis Report
 
PUBLIC SV ENTRP (PEG): Free Stock Analysis Report
 
Zacks Investment Research