DTE Energy Services, Inc. ("DTEES"), a subsidiary of DTE Energy Co. (DTE), has received consent from the San Joaquin Valley Air Pollution Control District to convert an existing coal-fired power plant to operate on biomass fuel.
Per the approval, the plant known as the Port of Stockton District Energy Facility will be converted to burn 100% biomass fuel. Under this process, wood fuel will be derived from urban wood waste, tree trimmings and agricultural residues. It will produce about 45 megawatts of power.
The process of conversion will give employment to approximately 100 construction workers. Once the conversion is complete, approximately 50 employees and contract personnel will be required to operate the plant. Additionally, the project will create 100 additional jobs through agreements with fuel suppliers and other companies that will provide services to the plant.
Subsequent to conversion, the plant will provide power to PG&E Corp. (PCG) under a long-term renewable power purchase agreement to meet California's 33% renewable power requirement.
DTE Energy Services has completed a similar biomass conversion in Cassville, Wisconsin and has another under way in Bakersfield, California. It also operates biomass power plants in Woodland, California and Mobile, Alabama. It plans to continue to identify additional coal-to-biomass conversion opportunities nationwide as it works to meet its goal of investing $1 billion into green energy projects.
The growth trajectory for DTE Energy Company is ensured by its stable and growing utilities business and its complementary non-utility businesses. Going forward, growth momentum will be maintained by beneficial regulatory policies in Michigan, higher rates, an approved 11% ROE for its regulated assets, and a strong balance sheet.
However, we believe these are already priced in the current valuation, leaving little room for upside. Also, valuation continues to be restrained by the present unfavorable macro backdrop, lower demand for electricity, the dismal Michigan economy and pending regulatory cases. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.
DTE Energy Co. is a diversified energy company involved in the development and management of energy-related businesses and services nationwide, with operations in 26 states.
DTE ENERGY CO (DTE): Free Stock Analysis Report
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