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The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.



) --

Duke Energy


(DUK) - Get Free Report

annual shareholder meeting last week was marked by protests from environmentalists who are opposed to the company's coal and nuclear projects.

Duke has bid $13.7 billion for

Progress Energy


. The deal, if approved, will make it the largest combined electrical utility in the U.S. competing with

American Electric Power

(AEP) - Get Free Report


Exelon Energy

(EXC) - Get Free Report


Allegheny Energy



The merged company will attract environmental scrutiny as it will become one of the country's largest polluters, producing more than 50% of electric power from coal, which is responsible for 37% of the country's greenhouse gases.

Regulators are planning to tighten many of the clean air and clean water regulations. As a result of these initiatives, the costs for utilities are expected to increase as they will have to make a lot of changes to their operations in order to produce and deliver cleaner power.

In addition, utility revenues have been slow to recover as power prices have remained low with people and businesses using less electricity, a continuation of tends seen during the recent downturn.

Under a scenario of rising costs and slugging revenues, there can be a downside to our EBITDA margin forecast for Duke's U.S. Franchised Electric & Gas division. If the EBITDA margin falls to around 35% by the end of our forecast period, it will result in a downside of 30% to our current price estimate for Duke Energy's stock.

We have a $19.33 stock value for Duke Energy, which stands roughly in line with market value.

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