Honeywell International Inc. (HON) received its fifth major energy-conservation contract, valued at $213 million, from the U.S. General Services Administration (GSA) at the White Oak campus. As per the deal, Honeywell will aid in the ongoing development of utilities and energy infrastructure facilities of the Food and Drug Administration (FDA) headquarters, the White Oak Federal Research Center in Silver Spring, Md.
The period of the current deal is 20 years. It is one of the biggest awards to be financed from the downstream energy and operational savings generated from the work after the implementation of the energy savings performance contract (ESPC) program in 1998 by the Department of Energy. Honeywell is confident of generating adequate savings so that the project does not need a raise in operating budgets or extra finance from the taxes.
The energy saving techniques to be adopted by Honeywell for this project is expected to minimize annual consumption of electricity by 48 million kilowatt-hours and reduce carbon dioxide emissions by 24,000 metric tons annually, in comparison with the old methods. Pollution equivalent to that generated by 4,600 cars will be controlled by the new technique, as per the U.S. Environmental Protection Agency data.
Apart from the development of utilities and energy infrastructure, Honeywell will also improve the lighting systems in parking garages with high-efficiency light-emitting diode fittings and occupancy sensors. The new division of the White Oak campus is expected to be completed in late 2013. The company will be providing ongoing operations and maintenance services after the research center and central plant are completely commissioned in 2014, thus helping to maintain a good working environment for the FDA and its surrounding community.
Honeywell’s attractive collection of businesses has the potential to earn consistent above-average returns. The company’s focus on working capital management, free cash flow generation and balance sheet strength remain positive attributes in the current weak environment.
In order to expand further, the company remains focused on its growth factors, i.e., investments in new products, technology demarcation, expansion in the emerging markets and initiatives in key processes. The company believes its focus on growth and productivity positions it for growth in 2011 and ahead. However, a change in the U.S. government’s defense and aerospace funding could adversely impact sales of Aerospace’s defense and space-related products and services.
Honeywell International Inc. is a diversified technology and manufacturing company, serving customers worldwide with aerospace products and services, control, sensing and security technologies for buildings, homes and industry, turbochargers, automotive products, specialty chemicals, electronic and advanced materials, process technology for refining and petrochemicals and energy efficient products and solutions for homes, business and transportation. Honeywell was incorporated in Delaware in 1985.
We currently maintain our Neutral rating on Honeywell for the long term, with a Zacks #3 Rank (short-term Hold recommendation) over the next one-to-three months.
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