Babcock & Wilcox execs talk coal, carbon, small nukes

Babcock & Wilcox (NYSE:BWC) expectations on coal plant retirements remain “largely intact” although the power industry vendor was surprised at seeing retirement announcements for a couple of supercritical power plants.

Company officials said during an Aug. 8 earnings conference call that they will watch to see if these larger coal units, once thought safe, are actually retired or merely mothballed with the option of being revived later.

President and CEO James Ferland also expects that it will probably be 2014 before B&W successfully brings in another partner for the its mPower small modular reactor affiliate.

There is much interest in small modular reactors, but it takes a lot of time and effort to work through the “scope, risk and liability” issues, associated with starting this new commercial sector, Ferland said.

Earlier this year B&W formally signed its Department of Energy (DOE) cost-sharing agreement to build small reactor units at a Tennessee Valley Authority (TVA) site.

Company officials said B&W’s nuclear energy sector will increasingly be intertwined with the future of small reactors. B&W officials also said the nuclear energy equipment market in Canada looks promising in 2014 and 2015.

Meanwhile, the company continues to monitor potential policy developments on both carbon dioxide and more conventional pollutants that can be affected by B&W pollution control equipment.

B&W executives said they see positives and negatives in the climate control plan that President Obama announced earlier this summer.

If the policy moves electric power generation closer to embracing carbon control technology, B&W is well-positioned on that front.

The company also expects it will take one-to-two years before a replacement policy is drafted for the Cross-State Air Pollution Rule. The U.S. Supreme Court said in June that it will review the D.C. Circuit Court of Appeals 2012 decision that effectively struck down Cross-State.

Babcock & Wilcox saw second quarter 2013 revenues of $886.1m, an increase of $33.5m, or 3.9%, from 2Q12. GAAP earnings per share for 2Q13 were 65 cents compared to 65 cents in 2Q12.

“Overall, B&W’s second quarter results reflect solid performances across our business units, highlighted by improved bookings and revenue, as well as the benefit of the DOE grant,” said Ferland.

“What would have been an exceptionally strong quarter for operating income and margin was impacted by the recognition of significant losses on a single project. Claims against the customer are substantial in value and any recovery of these additional losses will be realized in future periods,” Ferland said.

The decrease in the Power Generation segment operating income was driven by the recognition of $30.2m of additional contract losses related to revised cost estimates to complete a biomass boiler project largely due to unforeseen worksite conditions, for which losses previously were recorded in the fourth quarter of 2012.

During questions from financial analysts, Ferland did not identify the biomass power plant project in question. A company press release published in September 2011 indicated that B&W had been awarded a $186m contract to engineer, procure and construct (EPC) a biomass power plant for Berlin Station, LLC in Berlin, N.H. A subsidiary of Delta Power Services, LLC

In July of this year, B&W also announced that its joint venture with Burns & McDonnell had been awarded a $110m contract to replace auxiliary equipment at an Alliant (NYSE:LNT) power plant in Ottumwa, Iowa.

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.