Replies to post #28 on Eagle Materials Inc (EXP)

[Democritus_of_Abdera]

Reason for abandonment of cement plant expansion plans....

As I mentioned in #msg-49959903, I was surprised last year when EXP decided to derail their Mountain (and subsequently Nevada) cement expansion plans despite the fact that they had received permits to do so. In Wednesday’s Q&A at the BB&T Conference, Steven Rawley explained why the decision was made....

So we permitted the plant and it had the ability to go ahead and that happened about three years ago, and you have a time constraint as to when you can start construction once you have the permit to construct. We asked for an extension, got an extension, which gave us another year. That was about to run out in March and the market just isn’t ready. It’s – Northern Nevada market is weak, Northern California market is very weak, and this is a large investment and we just thought the timing wasn’t right to put this kind of money into a new cement plant.

And in addition to that, while we might have been able to start a – the construction at a very slow pace, we also had kind of a ruling from the EPA as to whether we had to follow under an existing plant regulation or new plant regulation as far as this rule that was promulgated last August, which is for hazardous air pollution, it’s called the NESHAP Rule. The levels to apply for a new plant are much lower than those for an existing plant. And we were a little bit concerned about new capital investment to make sure we met those more stringent standards.

And in fact, as we reviewed the new standards to build a new plant, really became convinced that there probably is never going to be another cement plant built in the United States after that rule was promulgated. So we just said it’s just not worth the risk.