Johnson Controls, Inc. (JCI), Duke Energy Corp (DUK): Who Benefits From a Better Battery?

Page 1 of 2

Batteries are used in many of today’s essential products, from cell phones to hybrid cars. Researchers have been working feverishly to increase capacity and longevity of batteries. Imagine the benefit of not having to charge a cell phone for several days to an electric powered car that can travel over Tesla Motors Inc (NASDAQ:TSLA)’s current 300 miles per charge.

The most beneficial application of better battery technology would be utility companies that can generate green electricity at a varying pace while the grid pulls its electricity out of a battery. All of these applications are possible, we just have to invent a battery that can stand up to the test of time – and most importantly, be cost efficient.

Intellectual property race

Apple Inc. (NASDAQ:AAPL) was just awarded a utility patent on curved batteries and Johnson Controls, Inc. (NYSE:JCI)’s joint venture has a patent pending for its graphene-based batteries. These two companies see the importance of having mobile electricity available when and where we need it, as well as the battery being of convenient size and shape. Mobile companies are in a heated battle right now over intellectual property and design, costing billions in legal fees.

Johnson Controls, Inc. (NYSE:JCI)Johnson Controls, Inc. (NYSE:JCIis currently working on a battery that uses graphene, an element that is one atom thick, and made completely of carbon. This material is more conductive than copper and has nearly ten times the storage capacity of traditional batteries. Johnson Controls, Inc. (NYSE:JCI) is hoping to transition its leading position as a parts supplier to the booming battery market.

Johnson Controls currently has an operating margin of 3.30%, which is half the industry average. It currently pays out 68% of earnings to support its dividend, that currently yields 2.60%. Johnson Controls, Inc. (NYSE:JCI) is competing in an intense industry, supplying parts to automotive manufacturers with an industry average operating margin of 7.20%.

Although these new batteries have the potential to be boons for these stocks, though it is still unclear how large scale manufacturing and costs will factor into the final product. It is also hard to say what new battery technology will be the supreme leader.

Old batteries

General Motors Company (NYSE:GM) is working with the nation’s largest utility, Duke Energy Corp (NYSE:DUK), to complete a project that will both recycle old Volt batteries and deliver a benefit to utility companies nation wide. Renewable energy like wind power is a nightmare for grid operators to manage, as the varying speeds and intensities causes spikes in power generation. Adding a storage device, like a large battery array, can dampen out the strain on the electrical grid. This is a win-win for automakers and utility companies.

Duke Energy Corp (NYSE:DUK) is the largest utility in the U.S. after its merger with Progress Energy. Duke has one of the largest windmill fleets and is looking at how to better manage their power spikes. Hybrid batteries that no longer can provide top performance for autos can still provide up to ten years of service for power companies by reducing the spikes in power generation. This will reduce costs for companies that maintain the grid long-term by increasing the efficiency of their wind projects.

Page 1 of 2