Company Overview - The McIlvaine Company · The Babcock & Wilcox Company cautions that statements in this presentation that are ... Draft published June 2010, with final rule

Company Overview May 2013

Safe Harbor

The Babcock & Wilcox Company cautions that statements in this presentation that are forward-looking

and provide other than historical information involve risks and uncertainties that may impact actual

results and any future performance suggested in the forward-looking statements. The forward-looking

statements in this presentation include statements relating to backlog, to the extent backlog may be

viewed as an indicator of future revenues; 2013 objectives; the scope, timing and anticipated savings

associated with our Global Competitiveness Initiative; our revenue and adjusted earnings per share

guidance for 2013; the timing associated with U.S. environmental regulations; the Cooperative

Agreement with the U.S. Department of Energy and B&W mPower™, to the extent such statements

relate to management’s expectations and plans regarding the design, funding and performance of the

B&W mPower™ reactor. These forward-looking statements are based on current management

expectations and involve a number of risks and uncertainties, including, among other things, delays or

other difficulties implementing our Global Competitiveness Initiative; our inability to finance B&W

mPower™ reactor research and development efforts, including as a result of our inability to comply with

the terms of the Cooperative Agreement (including achieving specified milestones); adverse changes in

the industries in which we operate; delays and other difficulties executing on contracts in backlog and

adverse changes in Federal appropriations to government programs in which we participate. If one or

more of these or other risks materialize, actual results may vary materially from those expressed. For a

more complete discussion of these and other risks, please see B&W’s filings with the Securities and

Exchange Commission, including our annual report on Form 10-K and subsequent quarterly reports on

Form 10-Q. B&W cautions not to place undue reliance on these forward-looking statements, which speak

only as of the date of this presentation, and undertakes no obligation to update or revise any forward-

looking statement, except to the extent required by applicable law.

© 2013 Babcock & Wilcox Company. All Rights Reserved. 2

Profile

The Babcock & Wilcox Company is a leader in clean energy technology

and services, primarily for the nuclear, fossil and renewable power

markets, as well as a premier advanced technology and mission critical

defense contractor.


Headquarters: Charlotte, NC

Incorporation: Delaware

CEO: E. James Ferland

Employees: 14,000

Ticker Symbol: NYSE: BWC

Recent Highlights

Announcements & Awards

GAO Sustained B&W’s Protest of Procurement Decision for Combined Y-12/Pantex Management and

Operating Contract

Signed Cooperative Agreement with Department of Energy for Small Modular Reactor Funding

Signed Contract to Begin Second Phase of FutureGen 2.0 Carbon Capture Project

Funding Authorization for Second Virginia-Class Submarine Included in 2013 Continuing Resolution

Increased Share Repurchase Program by $250 Million to $500 Million Total


USS George H.W. Bush B&W mPower™ 2-Pack Design

Core Competencies

Innovative Technology

Solutions for Complex Challenges

Trusted Government Relationships

Power Sector Expertise


2013 Objectives

1) Leverage our competencies to increase the value of

our core businesses

2) Optimize internal efficiencies and effectiveness

3) Execute our Small Modular Reactor (SMR) strategy

4) Pursue external growth strategies, domestically and

internationally, that leverage our core competencies


Recent Corporate Initiatives

Share repurchase

Authorized $250 million share repurchase program in November 2012, and increased authorization by $250 million

to $500 million in May 2013

Through May 7, 2013, repurchased 7.5 million shares at a total cost of $193 million

Dividend

Announced a quarterly dividend of $0.08 per share in November 2012, and paid quarterly dividends in December

2012 and March 2013

Pension Changes

Adopted mark-to-market accounting; eliminates amortization of actuarial losses, approximately $80 million annually

Elected MAP21 valuation option; reduces pension contribution in 2013 by more than $100 million

Froze pension plan for salaried employees effective December 31, 2015; caps pension exposure

Global Competitiveness Initiative

Identified wide range of cost reduction activities including functional efficiency improvements, organizational design

changes, and manufacturing optimization

Expected to produce annual expense savings of $40 million to $50 million, with cost savings of between $10 million

and $15 million expected to be realized in 2013


Global Competitiveness Initiative

Key Attributes

The Global Competitiveness Initiative

(GCI) is designed to enhance B&W’s

core competitiveness by reducing

complexity, improving efficiency, and

aligning operations and structure with

a changing global competitive

landscape.

Costs to Achieve

Total costs to achieve projected

savings are estimated at $50-60

million, with approximately half of

these costs expected to be incurred in

2013 and the balance of costs

expected to be incurred over the

following two years.


$-

$10

$20

$30

$40

$50

$60

2013P 2014P 2015P+

Projected Savings *

Efficiency Improvements and Organizational Design Changes

Manufacturing Optimization

* Assumes identified projects are implemented and savings realized. Does

not include non-recurring costs to implement or required capital costs.

($MM)

$10-15

$25-30

$40-50

Full Year 2013 Guidance

Revenues: $3.40 billion to $3.55 billion

Based on mid-to-high single digit growth in Power Generation and Nuclear Operations segments

Adjusted Earnings Per Share: $2.25 to $2.45

Excludes mark-to-market adjustments for pension and postretirement plans and GCI restructuring

charges


Segments and End Markets

Power Generation

Environmental systems (FGD, SCR, Fabric Filter,

DSI, Oxy Coal, RSAT)

Fossil fuel-fired power

generation (coal, oil,

natural gas)

Service, operation and

maintenance

Construction and EPC

Renewable (biomass,

solar, waste-to-energy)

Nuclear Energy

Field services

Component

manufacturing and

installation

mPower

B&W mPower™ /

Generation mPower

Small modular reactor

(SMR) design

Fuel design

Nuclear Operations

Virginia-Class

submarine program

Ford-Class carrier

program

Refueling

Fuel processing and

fabrication

Technical Services

Nuclear material

handling, storage and

security

Nuclear laboratories

Weapons complex

Decontamination and

decommissioning

Specialty/classified

manufacturing

Leading technology innovator in power generation and a specialty

manufacturer of nuclear components with legacy spanning 140 years


Power Generation

Power Generation

$1.8 Billion LTM Revenue

$2.3 Billion Backlog

Headquartered in Barberton, OH

Approximately 8,600 employees

Note: All figures as of March 31, 2013.


New-Build

Environmental

New-Build Steam

Generating Systems

Global Aftermarket

B&W Positioned to Meet Environmental Needs


Total Solutions Provider

with Complete Environmental Technologies Portfolio

Wet ESP / SO3 Control

Dry ESP

Spray Dry FGD

Fabric Filter

Circulating Dry

Scrubber

Wet FGD

Industrial and WTE Scrubbers

Construction Aftermarket Services

Emissions Monitoring

Mercury Control

Acid Gas Dry Sorbent

Injection

SCR / Low NOX

Burner

CO2 Control

Multiclone

Ash Management

Status of U.S. Environmental Regulations

for Coal Plants

Rule Substances Status

Mercury and Air Toxics

Standard (MATS)

HCL as marker for acid

gases; PM for heavy

metals; Mercury (Hg)

Final rule issued 12/21/2011; Compliance date

04/16/2015; Leads to Fabric Filters, ESP retrofits

Cross State Air Pollution Rule

(CSAPR)

SO2, NOx in 28 Eastern

and Central states

Vacated by Appeals Court 08/21/2012; EPA likely will need

2-4 years to write replacement rule

Regional Haze rule, or Best

Available Retrofit Technology

(BART)

NOx, SO2 and PM First issued in 1999 and has survived most litigation;

Requires coal plants upwind to national parks to reduce

visible haze in stages to 2064

National Ambient Air Quality

Standards (NAAQS)

Six criteria pollutants

SO2, Ozone, Lead (Pb),

PM

Revised every five years to take advantage of latest

science and technology; Limits repeatedly lowered;

Eventually leads to State Implementation Plans (SIP)

which require emissions reductions

Coal Combustion Residue

Regulation (CCR)

Ash ponds and

scrubber sludge

Draft published June 2010, with final rule expected late

2013; Opportunities for dry ash transport

New Source Performance

Standard (NSPS) for

Greenhouse Gases (GHG)

CO2, CH4, SF6, etc. Require carbon capture and storage (CCS) on new coal

plants, after the first ten years of operation


Mercury and Air Toxics Standard (MATS)

Timeline for Compliance


Covers Filterable Particulate Matter as a marker for heavy metals,

HCl or SO2 as a marker for acid gases, and Mercury

Compliance

Begins

State Extensions Available

Nominal Compliance Deadline

Rule was published in

Federal Register on

February 16, 2012

Negotiated Enforcement Orders Possible

2012

2017

Nuclear Operations

Nuclear Operations

$1.1 Billion LTM Revenue

$2.9 Billion Backlog

Headquartered in Lynchburg, VA

Approximately 3,900 employees



Heavy Naval

Nuclear Component

Engineering, Design

and Manufacturing

Naval Nuclear

Fuel Design and

Manufacturing

Commercial

Nuclear Material

Downblending

Nuclear Operations Delivers Key Components


Proud Nuclear Heritage


Six Decades of Contributions

2000 1960 1970 1980 1990 1950

Nimitz

Class

Sturgeon

Class

Los Angeles

Class

Seawolf

Class

Ohio Class

Replacement

Ohio

Class Seawolf

Destroyer

Prototype

NR-1

Ford

Class

Nautilus

2010 2017-2020

Virginia

Class

Technical Services

Technical Services

Headquartered in Charlotte, NC

Approximately 600 employees

as of March 31, 2013


NNSA Manufacturing,

Lab Operations and

Facilities Management

Environmental and

Nuclear Materials

Management

Specialty/Classified

Manufacturing

Partial List of Sites

Nuclear Security

Idaho National Laboratory

Idaho; Contract Expires 2014, with Extensions

Los Alamos National Laboratory

New Mexico; Contract Expires 2018, with Extensions

Lawrence Livermore National Laboratory

California; Contract Expires 2018, with Extensions

Nevada National Security Site

Nevada; Contract Expires 2016

Y-12 National Security Complex

Tennessee; Contract Expires 2013

Pantex Plant

Texas; Contract Expires 2013

Environmental Management

Savannah River Liquid Waste Disposition

Program

South Carolina; Contract Expires 2015, with Extensions

Portsmouth Gaseous Diffusion Plant D&D

Ohio; Contract Expires 2016, with Extensions

Uranium Conversion Operations

Kentucky and Ohio; Contract Expires 2016

Advanced Mixed Waste Treatment Project

Idaho; Contract Expires 2015

West Valley Demonstration Project

Decommissioning and Facility Disposition

New York; Contract Expires 2017

Waste Isolation Pilot Plant (New Mexico)

New Mexico; Contract Expires 2017, with Extensions


Nuclear Energy

Nuclear Energy

$303 Million LTM Revenue

$239 Million Backlog





Nuclear Reactor

Equipment

Nuclear Services

Nuclear Projects

Commercial Nuclear Reactor Equipment

A special heritage and capability …

Primary supplier for CANDU nuclear plants

Industry leading steam generators (> 300 delivered)

Engineered heavy components for all technologies

Largest “nuclear clean-room” in North America


… powers a strong, vibrant business

Steam generators for TVA Bellefonte 1 Completion

Reactor components for Embalse in Argentina

250 Dry Storage Containers for OPG used fuel

Replacement steam generators for First Energy

B&W mPower™ reactor system and heat cycle

TVA Steam Generators

455 tons

Global supply chain

Only North American reactor supplier for 50 continuous years

Commercial Nuclear Services

Leverage recognized “Best in Class”

capabilities

Robotic tooling technology

Conduct of Operations

Work management

Deliver best cost, schedule, dose

Steam generator inspections

Reactor modifications

Balance of plant repairs

Safety equipment maintenance

All Canadian utilities (20 units)

16 U.S. utilities (50 reactors)

Selected global utilities

(France, Romania, China, Korea)


Proprietary services technology provides competitive advantage

Bruce Power

Bruce Unit 3: 2011-2012

West Shift Reactor Maintenance

30% reduction in radiation exposure

from previous project

4x scope increase from previous project

~3x faster than previous project

Duke Energy

Large Nuclear Power Station

2011-2012: 4 outages

Sustained World Class Performance

Steam Generator Inspection, Repair

48% less time

58% less radiation exposure

20% fewer technicians

mPower

mPower



as of March 31, 2013


B&W mPower™ /

Generation mPower

Small Modular

Reactor Design

Fuel Design

B&W mPower™

Innovative Design

Single integrated nuclear module

Underground reactor and used fuel

Air-cooled main condenser

Passively safe design, gravity powered

Breakthrough Performance

180 MWe increments with no “size-premium”

100 times safer than latest standard

4-year operating cycle (2x standard)

7+ days “station blackout” capability


Recent Highlights

Signed a Cooperative Agreement with DOE under

its Small Modular Reactor Licensing Technical

Support Program

Signed TVA Clinch River Construction Permit

Application for mPower™ America Project

Integral Systems Test (IST) facility at full power and

delivering design validation and input

Fuel Technology Center operational and fabricating

components

Commenced operation of Small Modular Reactor

Control Room Simulator

“Disruptive Technology” … stepping beyond traditional limits

Summary – DOE Cooperative Agreement

Total Budget for Design, License and Certification of B&W mPower™ Small Modular Reactor:

Government Award $150.0 million

Cost Share 615.8 million

Total Qualifying Costs $765.8 million

Government Award may be increased to $226 million, or higher

Government Award includes $2.3 million to be paid directly to national labs for work being done by

labs in support of this project

Match is targeted to be 50% of qualifying costs, provided DOE funds are available

Government funding requires annual appropriations; $78.8 million appropriated as of April 1, 2013

Other potential funding sources to support mPower program may include additional funding from

the DOE and private sector investors

Initial funding includes reimbursement of pre-award qualified costs incurred from October 1, 2012

to March 31, 2013, with approximately $22 million submitted for reimbursement

Total qualifying costs in each of 2013 and 2014 are expected to be approximately $150 million per

year; B&W expects our net annual spend on mPower to be $85-95 million over this time period


Summary – DOE Cooperative Agreement

Term of the program is 5 years, from April 1, 2013 to March 31, 2018

– Includes costs incurred in Pre-award Period (October 1, 2013 to March 31, 2013)

Cooperative Agreement limits the use of DOE funds for qualified activities, such as engineering

and design certification of mPower Plant and licensing of mPower Plant at TVA’s Clinch River site

– Costs and activities outside of scope of FOA include SG&A, business development, development of fuel design

and manufacturing, and a portion of standard plant design not included in design certification application

B&W mPower will retain exclusive patent ownership right for any inventions that are first conceived

or reduced to practice during award program

– U.S. Government will receive a non-exclusive, non-transferable, paid-up license to such inventions and could

receive ownership of such inventions if B&W mPower fails to comply with certain terms of patent waiver

B&W mPower has certain obligations to substantially manufacture products that use such

inventions in the United States unless certain other conditions have been met


Integrated Part 50/52 Lead Plant Deployment Schedule

Key Cooperative Agreement Milestones


CY CY CY CY CY CY CY CY CY CY CY

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

mPower America Project with TVA at Clinch River site in Oak Ridge, Tennessee – 10 CFR 50 Process

Submit CPA

NRC CPA Review

CP Issuance

Submit DCA

NRC DCA Review

DC Rulemaking

mPower Standard Design DCD & COLA – 10 CFR 52 Process

Cooperative

Agreement

Milestone

Internal

Projected

Target

NRC Docketing of CPA

NRC DCA Preparation

NRC CPA Preparation

CPA 25% Complete

CPA 50% Complete

CPA 75% Complete

Start CPA Preparation

Site Borings

Start Site Borings

Borings 50% Complete

Finish Site Borings

DCA 25% Complete

DCA 50% Complete

DCA 75% Complete

Preliminary;

Subject to

Change

Financials


Summary Financial Information


$ in millions, except per share amounts First Quarter

2013 2012

Revenues $805.4 $765.9

GAAP Operating Income $60.2 $86.4

Adjusted Operating Income* $68.6 $86.4

GAAP Earnings Per Share $0.41 $0.50

Adjusted Earnings Per Share* $0.46 $0.50

Capital Expenditures $18.8 $21.4

Research & Development $28.3 $29.0

* See reconciliation of adjusted, non-GAAP items in Appendix

Capital Structure

Strong liquidity position at March 31, 2013

$415 million cash and investments, net of debt

$548 million available capacity under revolving credit facility

$700 million revolving credit facility

Matures 2017

“Accordion feature” with up to $300 million additional capacity

Facility rating of Baa2 / BBB

Corporate credit rating of Ba1 / BB+; Outlook Stable


Research & Development Expense

R&D by Year


$38.5

$53.2

$69.2

$106.4

$120.6

$-

$25

$50

$75

$100

$125

2008 2009 2010 2011* 2012*

2012 R&D by Category ($120.6MM)*

16%

81%

3%

Traditional Power

Nuclear

Clean Energy, Renewables and other * Includes non-cash in-kind R&D costs received by GmP totaling

$17.9 million and $16.6 million in 2012 and 2011, respectively.

($MM)

Appendix


Reconciliation of Adjusted, Non-GAAP Items


Note: Amounts may not foot due to rounding.

Q1 2012

GAAP

GCI

Restructuring

Charges

Q1 2012

Adjusted

Operating Income $ 86.4 $ - $ 86.4

Other Income / (Expense) (1.5) - (1.5)

Provision for Income Taxes (27.9) - (27.9)

Net Income 57.1 - 57.1

Net Loss (Income) Attributable to Non-Controlling Interest 2.9 - 2.9

Net Income Attributable to The Babcock & Wilcox

Company

$ 60.0 $ - $ 60.0

Diluted Earnings per Common Share $ 0.50 $ - $ 0.50

Effective Tax Rate 32.8% 32.8%

Q1 2013

GAAP

GCI

Restructuring

Charges

Q1 2013

Adjusted

Operating Income $ 60.2 $ 8.4 $ 68.6

Other Income / (Expense) 0.9 - 0.9

Provision for Income Taxes (16.3) (2.9) (19.2)

Net Income 44.9 5.5 50.4

Net Loss (Income) Attributable to Non-Controlling Interest 2.3 - 2.3

Net Income Attributable to The Babcock & Wilcox

Company

$ 47.2 $ 5.5 $ 52.7

Diluted Earnings per Common Share $ 0.41 $ 0.05 $ 0.46

Effective Tax Rate 26.6% 27.6%

Documents

Company Overview - The McIlvaine Company · The Babcock & Wilcox Company cautions that statements in this presentation that are ... Draft published June 2010, with final rule