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FirstEnergy (FE) Inks Deal for Environmental Preservation


FirstEnergy Corp. FE has inked a deal with an affiliate of Murray American Energy, Inc. to ship coal combustion residuals (CCRs) from the former’s Bruce Mansfield Plant in Shippingport.

Rationale of the Agreement

CCR is created by the combustion of coal and during the scrubbing process at coal-fired electricity plants. These residuals have been classified as non-hazardous by the state and federal government.

The CCRs produced from FirstEnergy’s Bruce Mansfield Plant will be sent to a site in Moundsville owned by the Marshall County Coal Company for mine reclamation.

As per the agreement, around 80% of the CCRs will be utilized for mine reclamation, while the remaining 20% will be recycled by National Gypsum Company into drywall at its Shippingport production facility. National Gypsum Company is a fully integrated building products manufacturer based in Charlotte, well known in the U.S. for its drywall gypsum boards.

Details of the Deal

FirstEnergy intends to ship nearly four to five barges of CCRs per day, drawing out excess moisture from the materials prior to shipping at the Mansfield plant’s newly constructed dewatering facility. Presently, FirstEnergy keeps a portion of the materials at the Little Blue Run disposal facility, which the company will no longer use after Dec 31, 2016.

Another Pro-Environment Move

In the light of stringent regulatory directives on emission control, and increasing usage of cheap natural gas and alternate sources of energy, FirstEnergy’s affiliate – FirstEnergy Solutions – will retire four of the seven units, with a cumulative generation capacity of 720 MW, at the coal-fired W.H. Sammis Plant in Ohio by May 2020. The company also intends to sell or shut down the last operating unit at its Bay Shore plant, which presently generates 136 MW of electricity, by Oct 2020.

Price Movement

Over the last one year, FirstEnergy has been underperforming the Utility-Electric Power industry. The company’s current rate of return stands at 3.7% while that of the industry is 6.6%.

The key reason for this is that FirstEnergy, like most other unregulated utilities, has been grappling with its 13,162 MW competitive energy business for the last few quarters, despite its consistent efforts to expand the regulated generation mix.

This is because the competitive energy business exposes FirstEnergy to market volatilities. Even though natural gas prices are on the rise, wholesale power prices have not benefitted from the trend, thus adversely affecting competitive power players.

Zacks Rank & Other Key Picks

FirstEnergy carries a Zacks Rank #2 (Buy). Other favorably placed stocks in the same space include Avista Corp. AVA, Ameren Corporation AEE and DTE Energy Company DTE.

Avista has seen one upward estimate revision for 2016 over the last 60 days. The stock carries a Zacks Rank #2.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ameren Corp., another Zacks Rank #2 stock, has seen four upward estimate revisions for 2016 over the last 60 days.

DTE Energy has seen two upward estimate revisions for 2016 over the last 60 days. DTE Energy carries a Zacks Rank #2 as well.

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