Babcock & Wilcox Sees Improvement Ahead for Power, Renewable Businesses in 2017

---

Researched by Industrial Info Resources (Sugar Land, Texas)--Despite a sharp decline in revenues and earnings in 2016, executives at Babcock & Wilcox Enterprises Incorporated (NYSE:BW) (B&W) (Charlotte, North Carolina) are optimistic about the energy-services provider's upcoming year, attributing the declines to productivity and scheduling issues that they expect to improve. Industrial Info is tracking $2.54 billion in active projects involving B&W.

B&W reported a net loss of $115.6 million for full-year 2016, compared with net income of $16.3 million in 2015; revenues stood at $1.58 billion, a 10.18% decrease from the previous year. The project backlog stands at $2.1 billion, compared with $2.3 billion for 2015. The decline was driven by weaker backlogs in the Power and Renewable segments, although they were partially offset by improvements in the Industrial segment.

On the plus side, the Industrial segment saw a sharp increase in revenues, largely from the addition of B&W SPIG, a cooling system and services business, which the company acquired in July. The segment also accounts for one of B&W's highest-valued projects in North America: ArcelorMittal's (NYSE:MT) (Luxembourg City, Luxembourg) proposed, $130 million boiler addition at the Hamilton Steel Works facility in Hamilton, Ontario. One of B&W's TSSG Boilers is expected to replace three obsolete boilers, providing 450,000 pounds per hour of steam to generate 20 megawatts (MW). The project is in its preliminary design phase, and is not expected to kick off until first-quarter 2018, at the very earliest. For more details, including contact information, see Industrial Info's project report.

But B&W's Power segment, its largest, saw a 33% drop in revenues in the fourth quarter as activity related to retrofits, new-build utility and environmental work, and industrial steam generation declined. Among the retrofit projects under construction is Cabot Corporation's (NYSE:CBT) (Boston, Massachusetts) $30 million in upgrades at the Carbon Black Plant in Franklin, Louisiana. The project involves installing selective catalytic reduction technology to reduce NOx pollution, as well as a wet gas scrubber system to reduce SO2 emissions. For more information, including current schedules, see Industrial Info's project report.

European subsidiary Babcock & Wilcox Vølund is at work on Bodens Energi's (Boden, Sweden) $83.91 million biomass-fired boiler addition at a waste-to-energy station in Boden, Sweden. The owner wants to add a 35-MW boiler to reduce emissions of metals and dioxin. For more information, see Industrial Info's project report.

"Based on the level of activity in the fourth quarter, we believe a majority of the market decline that we projected in the second quarter of 2016 for the U.S. coal power generation portion of our business has occurred," said Jim Ferland, the chairman and chief executive officer of B&W, in a quarterly earnings conference call. "We also believe the decline in demand from our industrial steam customers has reached an inflection point and will begin to improve."

Ferland added that the company expects "one to two large contract bookings in late 2016 or early 2017."

The Renewables segment also took a hit, with revenues dropping more than 50% in the fourth quarter from the same period last year, as completion costs for active projects jumped and many schedules proved to be longer than previously expected. B&W has a slew of active renewables projects in Europe, including E.ON SE's (Düsseldorf, Germany) $9.9 million Rampion offshore windfarm substation near Brighton, England, which is under construction. The 400-kilovolt (kV) substation is designed to service the 400-MW windfarm; Babcock & Wilcox Vølund is contracted for engineering, procurement and construction (EPC) work. For more information, see Industrial Info's project report.

Revenue is expected to increase to $1.8 billion in 2017, about half of which will be attributed to the Power segment. Ferland said: "Our pipeline for the Power segment remains strong. Our aftermarket parts and services business, driven by book-and-bill type work, remains robust, and we're seeing strength in U.S. service in retrofit opportunities, including a number of coal-ash projects for some of largest utilities in the country. We expect Power segment revenues to be around the $1 billion in 2017, with the larger potential coal booking providing upside for 2018."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.