Contract boosts firm's shares

Environmental Elements to design power plant systems

Anti-pollution

February 05, 1999|By William Patalon III | William Patalon III,SUN STAFF

Shares of Environmental Elements Corp. jumped 25 percent on nine times their normal trading volume yesterday after the company announced a four-year contract worth more than $100 million, its largest ever.

The Baltimore-based company's shares closed at $3.75, up 75 cents each. Nearly 102,000 shares changed hands, compared with a three-month daily average of 11,092.

"This will definitely add to earnings over the next few years," said analyst David D. Weaver, who follows the company for Legg Mason Wood Walker Inc. in Baltimore.

Weaver said he is reviewing whether to upgrade his "market perform" rating on the shares.

Environmental Elements, which is expected to report sales of about $70 million for its fiscal year ending in March, is teaming up with DB Riley Consolidated Inc. of Massachusetts to design and install pollution control equipment for nine Wisconsin Electric Power Co. plants in five locations. The Baltimore company designs the pollution-control systems, contracts out construction of the components, supervises installation and conducts testing. DB Riley, a unit of a Germany company, makes special boilers that help reduce emissions.

The two companies and the utility have been working together on other projects for several years.

"This is an especially complex undertaking," said Kristine

Krause, vice president of fossil-fuel operations at Wisconsin Electric, a subsidiary of Wisconsin Energy Corp.

"With a project of this magnitude, engineering early in the process will be the key to success, which is why we turned to two companies that can provide some of the best talent available."

The contract announced yesterday is worth $250 million, and Environmental Elements expects to get more than $100 million from the deal. That's an average of about $25 million a year -- or roughly a third of its current annual sales.

"Overall, this is the single-largest contract we've ever had as a company," said E. H. Verdery, the company's chairman and chief executive officer. "We expect more like this, as other utilities realize that they need to optimize" their power plants in order to meet lower emissions requirements enacted by the federal government in September.

U.S. Environmental Protection Agency regulations require utilities in 22 states east of the Mississippi River to slash nitrogen oxide emissions by 60 percent to 70 percent by 2003. That's just the boost Environmental Elements needed to really jump-start its business. The 1990 Clean Air Act had raised investors' performance expectations for companies in the pollution-control business, but the regulations were so convoluted that the business never materialized, Verdery said.

The new regulations, however, should create numerous business opportunities, he said.

Indeed, Environmental Elements officials have been conducting a "road show" to try and pique the interest of institutional investors, Verdery said.

One possible problem: Many institutions and mutual funds do not invest in stocks trading below $5 per share, considering them to be speculative.

During the past 52 weeks, Environmental Elements shares have traded between $2.4375 and $6.875.

Pub Date: 2/05/99

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