Shaw Group seeing nuclear power grow, albeit slowly

Louisiana-based Shaw Group (NYSE: SHAW) expects to see an increase in nuclear plant construction nationally and internationally in the coming years although the approval of new U.S. plants by the Nuclear Regulatory Commission (NRC) has been slower than Shaw had hoped, the company said in a quarterly earnings report.

Shaw is already involved with construction of several new nuclear units in China and hopes to win contracts to build some of the planned new nuclear plants in Saudi Arabia that should be awarded in 2013 and 2014.

“Additionally, the ramp up of our nuclear projects has been slower than planned due to the delays in the combined licenses for the U.S. projects,” said Shaw Chairman, President and CEO J.M. Bernhard Jr. in a July 10 earnings news release. “Those projects are now moving forward, and we expect them to continue to have a positive impact on our Power and Fabrication & Manufacturing segments.”

The engineering, procurement and construction (EPC) contractor reported a net income loss of $6m on $1.6bn worth of revenue during the three-month period ending May 31.

Development continues at the two nuclear projects that Shaw is involved with in the Southeast. Southern (NYSE: SO) subsidiary Georgia Power is leading a group of utilities that have received a combined construction and operating license (COL) from NRC for two new units at the Vogtle nuclear station. Also, SCANA’s South Carolina Electric & Gas (SCE&G) has a license for two new units at V.C. Summer in South Carolina.

Gross profit on U.S. nuclear projects is expected to be in excess of 10%, Shaw said.

Levy County schedule slips; work continues at current nuclear units

One future nuclear plant has slipped backward, however. Shaw said it has removed Progress Energy’s proposed Levy County nuclear plant in Florida from its backlog “due to a client decision to delay the project beyond a 5-year time frame.” The delay of the Levy County units by Progress Energy, which is now part of Duke Energy (NYSE: DUK), resulted in a net backlog reduction of $1bn.

Shaw Group has added the Wolf Creek nuclear plant in Kansas as one of its maintenance clients. Shaw now serves 45 of the 104 U.S. nuclear power plants.

The company is also reaping plenty of business from increasing generating capacity for nuclear power plants. Shaw recently completed a major nuclear plant uprate valued at about $400m. Additional uprate opportunities are projected at between $5bn and $8bn during the next 10 years.

Shaw’s subsidiary, Nuclear Energy Holdings, intends to exercise put options to sell its 20% investment in Westinghouse back to Toshiba, with bonds settled in March 2013, the company said.

  • Shaw also recently completed development of the Dominion Resources (NYSE: D) Virginia City Hybrid coal and biomass plant in Virginia.
  • Shaw reached a settlement with GenOn Mid-Atlantic and received a cash payment of $107m in Q-4. The settlement with GenOn resulted in a charge of $20.1m pre-tax ($12.4m after tax).
  • Shaw continues to expect to see a rebound in the air quality control market for coal plants within the next 12-to-18 months. Shaw can adapt to the market to handle anything from coal plant retrofits to new gas plant construction to serving the nuclear power industry, Bernhard said.
  • Shaw also expects to win business to develop new gas plants domestically as well as selected coal plant construction opportunities internationally.
About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.