Shaw braces for nuclear era

• By GARY PERILLOUX
• Advocate business writer
• Published: Jan 9, 2009 - Page: 1D - UPDATED: 12:05 a.m.

• Print
• Email
• Save
• Reprints
• Twitter
• Share

• Del.icio.us
• Digg
• Facebook
• Reddit
• 

Against a backdrop of $13 billion in looming nuclear power contracts, The Shaw Group Inc. recorded one of its most profitable recent quarters, earning $63 million, or 75 cents per share, at the start of its fiscal 2009 year, the company reported Thursday.

That’s a 66 percent gain for the three months that ended in November, compared with the same quarter a year earlier. Then, Shaw earned $38 million, or 45 centers a share. The 75 cents-per-share in net income also beat analysts’ projections of 66 cents, and Shaw’s record $1.9 billion in quarterly revenue rose 11 percent from the year-ago period.

Those earnings, however, exclude an investment in its nuclear energy partner, Westinghouse Electric Co., that were it concluded in the quarter would have placed a $161 million pretax drain on Shaw earnings.

Including the $1.1 billion investment in bonds to buy 20 percent of Westinghouse two years ago, Shaw’s financial performance falls significantly to a $40 million net loss in the latest quarter, down from $2.2 million in net income a year ago.

And the per-share performance drops to a 48-cent loss, down from a 3-cent gain a year earlier. Federal regulators require Shaw to include the Westinghouse numbers in financial results as a non-cash loss that tracks outside the company’s actual operating results.

By this point, analysts following the company are familiar with Shaw’s Westinghouse strategy — one that cements Shaw as the exclusive builder of nuclear projects using Westinghouse AP 1000 nuclear reactors — and interest in the company’s financial performance Thursday moved heavily in the nuclear direction.

Shaw Chairman Jim Bernhard confirmed Thursday for the first time that its nuclear power contract with Progress Energy Florida Inc., announced earlier this week, will be worth more than $4 billion.

“We signed our largest contract ever,” Bernhard said of the rural nuclear power site to be built southwest of Gainesville, Fla., near the Gulf Coast. Previous contracts with Georgia Power Co. and South Carolina Electric & Gas Co. will be worth almost as much, with each of the two-reactor sites generating $13 billion in revenue.

That revenue has yet to hit a Shaw backlog of work now from $15.6 billion in the previous quarter to $14.8 billion at the end of November. Bernhard said the company can meet the construction demand on the horizon because it has been building employee talent for years in its power and maintenance groups and continues to hire more people.

Next year, Shaw’s backlog will approach $37 billion, but the U.S. nuclear projects will take years to build, with the first coming online in 2016. The company also expects to add nuclear reactor work internationally beyond its work in China.

The nuclear work will add $125 million more annually in earnings (before interest, taxes and other items) by 2011, said Brian Ferraioli, Shaw’s chief financial officer. That figure for the entire company in the fiscal 2008 year was $317 million.

Shaw also forecast that the Lake Charles manufacturing center it’s building with Westinghouse to make nuclear power components will pick up $1 billion in business from the initial six U.S. nuclear reactors that have been ordered.

“The facility is going to be very, very busy,” Bernhard said, adding later that the recession hasn’t dampened commitments to the nuclear business because the projects represent multiyear commitments.