ADA-ES (ADES) is expected to benefit from regulation that gives the company a large tax subsidy for its coal technology, and there is growth expected on the company’s emissions control, says Sanjay Shrestha, Managing Director and Senior Analyst at Lazard Capital Markets.
“Under the current administration, it will clearly be difficult to build a new coal-fired power plant. Specifically for ADES, the company remains a beneficiary of Section 45 tax credit. This allows a refined coal facility using clean coal technology to receive large tax subsidy, and the ADES’s JV will generate substantial cash flow,” Shrestha said.
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Shrestha remains a buyer of the stock despite current levels and despite current moves. He says the company’s joint ventures should increase free cash flow, and the emissions control is expected to expand into different chemicals.
“The company has formed a clean-coal JV with two other partners and has a 42.5% stake in the JV, which should provide FCF in excess of $130 million through 2021. Now in terms of the other emission regulations, obviously controlling mercury, SOx and NOx will remain an area of growth for the company. Over time there may be some opportunity surrounding CO2 capture,” Shrestha said.
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