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FirstEnergy Unit Gets 20-Year Nuclear Plant License Renewal

FirstEnergy Nuclear Operating Company (FENOC), an affiliate of diversified energy company, FirstEnergy Corp. FE, has secured approval from the Nuclear Regulatory Commission (NRC) extending the operating license of the Davis-Besse Nuclear Power Station for another 20 years through 2037.

Renewal of this single-pressurized water reactor plant’s license brings total license extensions to 81 across the country. FENOC had filed for an extension of the license, which is set to expire in 2017, in 2010. A coalition of anti-nuclear activists challenged the license extension after cracks were discovered in the plant’s containment shield building. NRC panels concluded that the cracks were attributable to a 1978 blizzard and did not pose any risk.

It took some time for the approval to be granted as the regulators closely monitored and evaluated the plant’s safety measures, operational risks and hazards as well as the environmental impact.

We believe that nuclear energy should be widely promoted as a source of clean energy on the heels of rising awareness about curbing the carbon footprint. Davis-Besse has a generating capacity of 908 megawatts (“MW”), displacing over 7.1 million metric tons of carbon dioxide emission annually.

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Even though nuclear energy’s importance in reducing emissions is beyond dispute, routine maintenance and repair work are essential for the safe running of nuclear plants. FirstEnergy spent approximately $1 billion in David-Besse to maintain safety in operations and ensure smooth functioning.

Even though nuclear power currently accounts for 60% of clean energy generated in U.S., further development of nuclear energy has stagnated. The major challenge confronting this sector is pricing pressure due to fuel, capital and operation and maintenance costs. Integrated energy utility Entergy recently announced that it will shut its Pilgrim plant in Massachusetts and FitzPatrick plant in New York in the next two years for incurring losses.

Unless the government actively takes up initiatives to encourage the use of nuclear generation and provides subsidies for the same, around 10% of America's domestic nuclear fleet could be shuttered over the next few years.

Zacks Rank

FirstEnergy carries a Zacks Rank #2 (Buy). Some of the other favorably ranked stocks in the utility industry are Korea Electric Power Corp. KEP, sporting a Zacks Rank #1 (Strong Buy) and Exelon Corporation EXC and IdaCorp, Inc. IDA, both carrying a Zacks Rank #2 (Buy).

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EXELON CORP (EXC): Free Stock Analysis Report
 
KOREA ELEC PWR (KEP): Free Stock Analysis Report
 
FIRSTENERGY CP (FE): Free Stock Analysis Report
 
IDACORP INC (IDA): Free Stock Analysis Report
 
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