PNM Resources (PNM) Cuts Down Emission, Shuts Coal Units

PNM Resources (NYSE:PNM) announced that it has completed the shutdown of two coal fired units of San Juan Generating Station (SJGS) near Farmington, NM. The move is expected to lower carbon emission and reduce usage of coal and water by nearly 50%.

The shutdown of the coal fired units was per agreement, under the Revised State Implementation Plan (Revised SIP) and reduction of output by nearly 836 megawatt (MW). The company aims to replenish the loss of production through additional generation from renewable energy, existing nuclear power and natural gas.

Emissions & Utilities

Per a U.S. Energy Information Administration (EIA) release, the overall emission of carbon dioxide declined 1.7% in 2016 and 0.8% in 2017, courtesy of the initiatives undertaken by the utilities. However, EIA carbon dioxide emission is to rise 1.8% in 2018, due to higher coal usage.

The coal friendly move from the new U.S. administration and likely hike in natural gas prices are going to increase usage of coal in utilities thereby increasing the emission levels.

However, utilities like NextEra Energy (NYSE:NEE) , Dominion Resources (NYSE:D) and Duke Energy Corporation (NYSE:DUK) have already invested and plan to spend more to create green energy generation portfolio. Even without Clean Power Plan, utilities are focusing on investment in renewable energy and natural gas-based generation. The utilities are also closing old coal fired production units paving way for further decline in emission.

PNM Resources’ Long-Term Goals

Management expects 2018 and 2019 earnings in the range of $1.70-$1.80 and $2.00-$2.16, respectively. The company aims to invest nearly $2.7 billion during 2018-2022 period, which will strengthen infrastructure and renewable generation.

The company is targeting a long-term dividend payout ratio in the range of 50-60% and is aiming for an average annual earnings growth of 6% in 2017 to 2021 period.

Price Movement

PNM Resources has outperformed the industry in the last six months. The company’s shares have gained 24.8% compared with the industry’s rally of 7.0%.

The outperformance can be attributed to the company’s impressive results and strong cash generating ability.

Zacks Rank

PNM Resources currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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