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Duke Energy (DUK) to Reuse Coal Ash in Concrete Products

Zacks Equity Research

Duke Energy Corporation DUK has decided to recycle coal ash stored at the H. F. Lee Plant in Goldsboro, NC for use in concrete products.

Details of the Decision

Duke Energy plans to reprocess a major portion of the 6 million tons of coal ash stored at the site into concrete products by 2028. Residue generated during the recycling process will be transferred to a safe and permanent off-site storage as Duke Energy is not currently planning to construct an on-site landfill for storage.

Note that this decision is in line with Duke Energy’s undertaken initiative to store coal ash in dry landfills and the company is currently working on safe management of the ash stored in the basins until they are permanently closed.

In 2015, Duke Energy had reprocessed nearly two thirds of the ash produced across its service territories. In Oct 2016, the company announced plans to recycle coal ash from the Buck Steam Station in Salisbury.

North Carolina's coal ash law calls for intensive recycling of the byproduct, thereby necessitating Duke Energy to locate a total of three sites across the state for reprocessing the same. As these three plants begin operating, the company would be able to process over 900,000 tons of coal ash annually. Note that the company has to declare the locations for two more coal ash recycling plants by Jan 1, 2017.

Duke Energy has been striving for the safe closure of all its coal ash basins in a bid to protect and conserve the environment. In doing so, it has safely excavated nearly 5 million tons of coal ash across the North and South Carolinas so far.

Rationale of the Announcement

Coal ash is a non-hazardous byproduct generated during the combustion of coal for electricity production. Since coal ash has high carbon content, it is unsuitable for use in the manufacturing of concrete products. However, Duke Energy is investing in technology that can convert the high-carbon content coal ash into concrete products.

Interestingly, coal ash is used for manufacturing over half the total concrete production in the U.S. based on its ability to make roads, bridges and buildings stronger and more durable. Moreover, the use of coal ash in concrete manufacturing is safer for the environment, given that every ton of coal ash that replaces Portland cement in concrete, nearly 1 ton of greenhouse gas emissions is displaced.

Price Movement

Shares of Duke Energy gained 11.1% over the last 12 months, outperforming the Zacks categorized Utility-Electric Power industry’s gain of 8.8%. This reflects the company’s robust prospects and solid cash position, which allow it to make steady and systematic investments, particularly in renewable energy.

The company has undertaken several projects and plans to invest about $25 billion to $30 billion in growth projects over the 2016–2020 time frame. It expects to make capital investment of $9.225 billion in 2016, $8.8 billion in 2017 and $8.3 billion in 2018, which should support its targeted earnings growth rate of 4% to 6% through 2020.

 

Zacks Rank & Key Picks

Duke Energy carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same space include Avista Corp. AVA, FirstEnergy Corp. FE and DTE Energy Company DTE.

Avista has seen one upward estimate revision for 2016 over the last 60 days. During this time period, its estimates increased from $2.08 to $2.10. The stock carries a Zacks Rank #2.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

FirstEnergy, another Zacks Rank #2 stock, has seen six upward estimate revisions for 2016 over the last 60 days. During this period, its estimates increased 4.7% from $2.54 to $2.66.

DTE Energy has seen three upward estimate revisions for 2016 over the last 60 days. DTE Energy carries a Zacks Rank #2 as well. During this time frame, its estimates inched up 1.4% from $5.20 to $5.27.

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