) in a move to reduce the burden of compliance costs announced
its decision to retire two coal-fired plants. The decision comes
in the wake of more stringent environmental policies being
implemented in the U.S. The plants proposed to be deactivated are
situated in the state of Pennsylvania.
Operations at the Hatfield's Ferry Power Station in Masontown
and Mitchell Power Station in Courtney will cease on Oct 9, 2013.
The lingering weak market prices of electricity also influenced
FirstEnergy to shut down these facilities. In 2012, FirstEnergy
decided to put the shutters down on nine coal plants.
The combined capacity of Ferry and Mitchell Power Stations was
2,080 megawatts (MW) and accounted for 10% of the company's total
generation capacity. However, the facilities are expected to
incur about 30% of the projected $925 million regulatory cost,
which FirstEnergy was supposed to incur to comply with the
Mercury and Air Toxics Standards ("MATS") provisions.
FirstEnergy's consolidated business would not be impacted by
these plant retirements as it will still retain a sizeable
generation capacity of over 18,000 MW. Moreover, the company will
witness some rearrangement in its resource portfolio, which will
be either non- or low-emitting, including nuclear, hydro,
pumped-storage hydro, natural gas and scrubbed coal units.
Even after the deactivations, FirstEnergy will be well
positioned to maintain an effective generation mix of 56% coal,
22% nuclear, 13% renewables and 9% gas/oil.
FirstEnergy has been reacting well to pro-environment
legislations over time and intends to further promote clean
energy generation. This is evident from the $650 million capital
outlay that it has planned for the installation of MATS-related
control technology in its existing facilities.
The company expects these high-tech environment control
equipment will curb nitrogen oxides, sulfur dioxide and mercury
emissions by 84%, 95% and 91%, respectively, from 1990 levels.
Carbon dioxide emission is estimated to decrease by 20% to 30%
from the 1990 level by 2020.
We believe FirstEnergy's encouraging growth prospects will be
backed by its significant investments in transmission assets as
well as major infrastructure initiatives.
However, the company will have to tread cautiously given the
recent Obama Climate Plan which is expected to pose headwinds.
The company currently holds a Zacks Rank #3 (Hold).
Other utilities looking good at the moment are Zacks Ranked #2
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