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Calgon Carbon's Phoenix Contract

CCC MWV

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Calgon Carbon Corporation (CCC - Analyst Report) was selected by the City Council of Phoenix, Arizona to negotiate a contract to provide reactivation services in Maricopa County, Arizona.

This ten-year project also includes the construction of a reactivation facility at the site, which would be owned and operated by Calgon Carbon.

The reactivation facility would serve as a regional center, providing custom reactivation services for other municipalities that utilize GAC to treat their drinking water, including two additional cities in Arizona whose representatives served on the selection panel for the project. During the construction of the facility, Calgon Carbon would utilize its existing reactivation capacity to meet Phoenix’s requirements.

Phoenix is using GAC in response to the U.S. Environmental Protection Agency’s Stage 2 Disinfectants and Disinfection Byproducts Rule, which establishes maximum levels at which disinfection byproducts (DBPs) are permitted to be present in drinking water. The GAC removes organic compounds from the water, reducing the formation of byproducts after the addition of chlorine.

In 2009, Phoenix awarded Calgon Carbon a $14.3-million contract to provide the initial virgin carbon for its drinking water plants.

Last month, Calgon Carbon reported a profit of 15 cents per share in the first quarter of 2011 compared with 17 cents in the year-ago quarter. Sales in the quarter increased 20.8% to $124.4 million.

The company expects the margins of Calgon Carbon to continue improving throughout 2011. In order to meet customer demand, the company expects to supplement activated carbon that it produces with lower-margin outsourced products this year.

Calgon will continue to progress by implementing its pricing and reactivation strategies, which is anticipated, in turn, to improve its Carbon and Service business.

Calgon competes with MeadWestvaco Corporation (MWV - Analyst Report) and ITT Water & Wastewater Herford GmbH.

We currently maintain a Zacks #3 Rank (short-term Hold recommendation) on Calgon and a long-term Neutral recommendation.

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