Shaw CEO Predicts Boom in Power Projects as Emissions Regulations Take Effect and Nuclear Sector Gains Lost Ground

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Researched by Industrial Info Resources (Sugar Land, Texas)--Last week, The Shaw Group Incorporated (NYSE:SHAW) released earnings results for the first quarter (ending Nov. 30, 2011) of the company's 2012 fiscal year. The company's revenues were $1.52 billion, which were on par with the first quarter of Shaw's 2011 fiscal year, and the company ended the quarter with a backlog of about $20 billion, up slightly from 1Q11.

In the conference call regarding the earnings, Shaw Group President, Chairman and CEO J.M. Bernhard spoke with a great degree of optimism about the number and dollar-amount of upcoming projects in the Power Industry, as increasingly stringent environmental regulations are implemented and the U.S. nuclear sector picks up the construction pace after a slowdown in early 2011 in the wake of the Japanese nuclear disaster and uncertainties regarding the federal loan guarantee program for nuclear projects.

Bernhard said that the market for environmental compliance projects and power plant closures caused by EPA emissions rules, such as the Cross-State Air Pollution Rule (CSAPR) and mercury emissions legislation, could exceed $50 billion. "By using all available information to a number of sources, as well as continuing relationships with our clients, we believe approximately one-third of the coal plants in the United States will have to be upgraded. Gases will have to be scrubbed. This market should result in a market of approximately $20 billion. In addition to that, we believe an additional approximately 8% to 10% of the coal facilities in the United States will be retired, and the replacement electricity for those coal facilities will likely exceed $20 billion as well." Last Wednesday, the EPA announced the details of its Mercury and Air Toxics Standards (MATS). For additional information, see December 27, 2011, article - Environmental Protection Agency Finalizes Mercury and Air Toxics Standards.

Bernhard also expressed that the company currently estimates that about 50% of U.S. coal-fired power plants will need mercury emissions reduction equipment, resulting in a market of approximately $15 billion. "So all total, with replacement power and environmental equipment that's necessary mandated by the EPA, the market for Shaw will exceed $50 billion, of which we'll be a major participant in a very short period of time," said Bernhard.

In addition, last week the U.S. Nuclear Regulatory Commission (NRC) gave final approval for Westinghouse Electric Company's (Monroeville, Pennsylvania) AP1000 model nuclear reactor, paving the way for construction to begin in earnest for unit additions at the Vogtle Nuclear Power Station in Waynesboro, Georgia, and the V.C. Summer Nuclear Power Station in South Carolina. For additional information, see December 27, 2011, article - Nuclear Renaissance Revived: NRC Approves Westinghouse AP1000 Reactor Design. Shaw is acting as engineering and construction firm on both projects.

Bernhard also discussed the progress of the Duke Energy Corporation's (NYSE:DUK) (Charlotte, North Carolina) planned grassroot W.S. Lee Nuclear Power Station in Cherokee County, South Carolina, stating that Duke had applied for the license to construct two AP1000 units at the site. "We have completed the conceptual design of various site-specific systems, and we are now in the process of doing detailed design of these site-specific systems this year for completion in 2014, as well as assisting in construction planning and development on the site-related activity," said Bernhard. "It looks like the nuclear new-build business in the next three to five years is still going to be a significant one."

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