Babcock & Wilcox Enterprises, Inc. · NYSE:BW
Babcock & Wilcox Enterprises — Investor Day (June 2015)
66 slides from Babcock & Wilcox Enterprises's investor day presentation, Jun 17, 2015
Slide 1: Investor and Analyst Day
Investor and Analyst Day June 17, 2015 .1
Slide 2: Safety Share
Safety Share .2
Slide 3: Safe Harbor Statement
Safe Harbor Statement Forward-looking statements. The Babcock & Wilcox Company (“B&W”) cautions that this presentation contains forward-looking statements, including, without limitation, statements relating to the timing of and expected benefits associated with the planned spin-off of Babcock & Wilc
Slide 4: Agenda
Agenda Topic Presenter Introduction Leslie Kass VP, Investor Relations & Communications B&W Company Overview Global Services Business Jim Ferland Global Power Business Chairman & CEO Industrial Environmental Business Financial Overview Jenny Apker SVP and CFO Closing Remarks Jim Ferland Chairman & C
Slide 5: Company Overview
Company Overview .5
Slide 6: 148 Years of Success in Power Generation
148 Years of Success in Power Generation “…the best boiler God has permitted man yet to make.” Leading technology base Thomas A. Edison • Combustion systems (1888) • Fluid flow systems • Heat transfer systems • Emissions control systems Steam/its generation and use • Longest continuously published e
Slide 7: B&W Company Profile
B&W Company Profile • Global leader in energy and environmental technologies and services for the power and industrial markets Headquarters: Charlotte, NC • Installed electricity generation capacity of more than 300,000 MW Incorporation: Delaware in more than 90 countries Chairman & CEO: E. James Fe
Slide 8: Spin-Off Overview
Spin-Off Overview Overview Ticker BW Exchange NYSE Distribution Ratio 1:2 (BW to BWC) Expected Sharecount ~53.5M fully diluted shares outstanding Record Date June 18, 2015 Distribution Date June 30, 2015 Trading Begins July 1, 2015 .8
Slide 9: Three-Pronged Strategy Drives EPS Growth and Shareholder Value
Three-Pronged Strategy Drives EPS Growth and Shareholder Value Optimize Pursue Growth Traditional Opportunities in Business to Align International with Changing Market Market (Increase Revenue) (Increase Margin) Continue Disciplined Acquisition Program (Increase Revenue and Margin) .9
Slide 10: Post-Spin Benefits and Opportunities
Post-Spin Benefits and Opportunities Increases Management Focus on Operations Better Positions B&W for Changing Industry Dynamics Increases International Tax Optionality Facilitates Board Emphasis on Long-Term Strategy .10
Slide 11: Investment Highlights
Investment Highlights Strong Foundation Significant Earnings Upside Great Brand Associated with Quality, Three-Pronged Growth Strategy Reliable Delivery and Innovation Aligned with Businesses Customer and Strategic Technology Leader in Partner Relationships Global Power Generation Established Platfo
Slide 12: Business Model Delivers Maximum Customer Value
Business Model Delivers Maximum Customer Value B&W engineers custom solutions that are difficult to replicate and are fundamental to reliable operations and regulatory compliance Manufacturing Complex Strategic Project Customer Custom Engineering Management Sourcing Technology Relationship and Desig
Slide 13: Skilled Management Team
Skilled Management Team Chairman and Chief Executive Officer Finance Jim Ferland Jenny Apker Senior Vice President & Chief Financial Officer Global Services Global Power Industrial Division Division Environmental Division Mark Low Paul Scavuzzo Ken Zak Senior Vice President Senior Vice President Sen
Slide 14: Experienced Board of Directors
Experienced Board of Directors Thomas A. Christopher Former Vice Chairman of AREVA, Mr. Christopher also served as its President and CEO from 2000 to 2009. Before that, he held a number of positions at Westinghouse, including Vice President and General Manager, Westinghouse Power Services. Cynthia S
Slide 15: Consolidated Revenue Overview
Consolidated Revenue Overview 2015E B&W Revenue Breakdown Other Asia 7% Other 9% 21% Coal Europe North Renewables 55% 19% America 18% 65% Gas 6% Aftermarket coal will be a solid base for the business while our strategy drives growth and diversification .15
Slide 16: Business Segments Align with Growth Strategy
Business Segments Align with Growth Strategy Global Services Optimize Traditional • Parts and technical services Business to Align • Service projects with Changing • Construction services • Operations and maintenance Markets Global Power Pursue Growth • Utility steam generation Opportunities in • Re
Slide 17: Global Services
Global Services .17
Slide 18: Global Services Overview
Global Services Overview 2014 Revenue by Segment • Aftermarket products and services for steam generating equipment and associated 69% environmental and auxiliary equipment Service Construction U.S. Projects Services • Servicing B&W installed electricity generation 31% 27% capacity of approximately
Slide 19: Market Overview
Market Overview 2014 Total Revenue Breakdown 2014 Non-Coal Revenue Breakdown Renewable 53% Natural • Biomass International Gas • Waste to Energy Non-Coal 15% U.S. General Industry 30% General Coal Renewable • Petrochemical, 55% Industry Refinery 27% Intl. Coal 58% • Pulp & Paper 47% • Manufacturing
Slide 20: Competitive Positioning
Competitive Positioning U.S. Market Share: Coal-Fired Power Plants Other, 3% • B&W is a strong international B&W brand with a reputation of serving Riley Stoker (now BPI) 35% customer needs on time and within 6% AMEC 317GW budget Foster Wheeler 14% Alstom • Strong position in the U.S. power 42% gene
Slide 21: Global Services Strategy
Global Services Strategy 1. Improve margins by enhancing operating model and reducing fixed overhead 2. Leverage position as an original equipment manufacturer to secure business on B&W units and offer increased creliability for non-B&W units 3. Create new sources of revenue through global expansion
Slide 22: Ongoing Rationalization of Operations
Ongoing Rationalization of Operations Cambridge, B&W Foundry Melville, Diamond Power Ongoing Pipeline Ontario (Barberton, OH) Saskatchewan Restructuring of Initiatives Ceased fossil Operations to be Plant to be mothballed Integration of parts B&W continues to work operations in 2014 and consolidated
Slide 23: Case Study: B&W Foundry
Case Study: B&W Foundry B&W entered into a strategic agreement with Magotteaux, a world leader in casting engineered wear parts, in January 2015 This unique relationship will bring together B&W’s extensive pulverizer experience and Magotteaux’s expertise in wear materials, creating truly world-class
Slide 24: Opportunities for New Revenue
Opportunities for New Revenue • New channels to market through strategic partner relationships • Align with turbine generator suppliers to improve power generation plant efficiencies per EPA 111(d) • Expand Global Services through local service providers • Develop solutions to meet new regulatory re
Slide 25: Case Study: Alliant Ottumwa
Case Study: Alliant Ottumwa Leveraging B&W technology to expand customer base (Alstom boilers) Global Power • Environmental systems for SO2 and particulate/dust control and ash handling Global Service • Major boiler upgrade provided in tandem with steam turbine upgrade • Construction advisory servic
Slide 26: Global Power
Global Power .26
Slide 27: Global Power Overview
Global Power Overview 2014 Revenue by Segment • Steam generating systems for fossil fuels and renewable energy conversion for power generation and industrial uses 57% U.S. • Environmental solutions include New Build Environmental emissions control products and 36% related equipment $471.9M • Complex
Slide 28: Market Opportunity
Market Opportunity Select Fuels Generating Capacity (GWe) by Region 3,000 Coal Natural Gas Renewables 2,000 1,000 0 2014 2025 2014 2025 2014 2025 2014 2025 NorthNorth America EMEA CtlCentral & So America / South Asia Pacific EMEA Asia Pacific America America Source: IHS Energy Scenarios (Rivalry), J
Slide 29: Competitive Landscape
Competitive Landscape • Competitors vary by market and product • B&W capability and diverse product portfolio allows for the right technology solution to be brought forward for each opportunity • Business development processes and close alignment to our customers drive the pursuit of the most attrac
Slide 30: Go-To-Market Strategy
Go-To-Market Strategy Renewable Coal Environmental • Look for policy drivers • Driven by GDP, energy • Global emissions regulations (landfill abatements and demand and natural continue toward developed renewable mandates) resource availability world standards in growing • Selective bidding when mark
Slide 31: Global Power Strategy
Global Power Strategy 1. Focus on growth markets where demand and energy policy favor our technology (renewable energy and coal) 2. Invest in sales and business development infrastructure worldwide 3. Utilize Asian joint ventures for market access and competitive engineering and manufacturing .31
Slide 32: Recent Project Awards Demonstrate Global Expansion is Underway
Recent Project Awards Demonstrate Global Expansion is Underway Emissions Control Project in Colorado March 2015 – $40.3M Biomass Power Plant in England March 2015 – >$220M Biomass Power Plant in Wales January 2015 – >$200M Supercritical Coal-Fire Boiler and SCR System in Vietnam January 2015 Waste-t
Slide 33: Case Study: Partnership Led to Win in Vietnam Duyen Hai Extension Award
Case Study: Partnership Led to Win in Vietnam Duyen Hai 3 Extension Award Project Highlights 688 MW Supercritical • Project is in a growth market (Southeast Asia) Pulverized Coal • Important partners and customer Steam Generator • Leveraged enterprise to drive competitiveness B&W Technologies • High
Slide 34: Asian Joint Venture Strategy
Asian Joint Venture Strategy B&W is positioned for new coal generation planned in Asia Babcock & Wilcox Beijing Co. Thermax Babcock & Wilcox Energy Solutions (Beijing, China) (Pune, India) Manufacturing capacity of 5,000 MW per year, 108 acre manufacturing facility with capacity of boilers and envir
Slide 35: Case Study: Amager Bakke
Case Study: Amager Bakke Currently under construction, the Amager Bakke Waste-to-Energy plant is located in the city center of Copenhagen and is an environmental landmark with recreational ambitions Plant Performance • Total plant efficiency > 99% • Electricity for 62,000 households • Heat for 160,0
Slide 36: Case Study: Palm Beach County WTE Facility
Case Study: Palm Beach County WTE Facility B&W designed and built a 3,000 TPD mass burn facility in Palm Beach County, Florida, that opens June 2015 • One of the largest waste-to-energy facilities in the world • 1.7M tons of solid waste per year • Electric power capacity: 150 MW gross • Power for mo
Slide 37: Industrial Environmental
Industrial Environmental .37
Slide 38: Industrial Environmental Overview
Industrial Environmental Overview 2014 Revenue by Segment(1) • B&W acquired MEGTEC Systems, Inc. on June 20, 2014 • 40+ year history with ~600 employees across 13 offices globally 53% • Asset-light flexible manufacturing platform U.S. Aftermarket • Significantly expanded B&W’s industrial environment
Slide 39: Market Opportunity
Market Opportunity • Industrial environmental business provides engineered solutions to a wide range of problems and processes in diverse and naturally growing end markets 5% projected annual market growth • Broad customer base includes ~3,100 businesses stretching across six continents and over 60
Slide 40: Global Demand Drivers
Global Demand Drivers Growth Drivers Americas Europe Asia Environmental Solutions Macro-economic growth Aging installed base Increasing regulation Engineered Products Macro-economic growth Aging installed base Focus on sustainability Legend:
Slide 41: Competitive Landscape
Competitive Landscape (Belco®) (AirTech) (Bischoff) Footnote: Trademarks are the property of their respective owners. .41
Slide 42: Industrial Environmental Strategy
Industrial Environmental Strategy Perform operationally and grow via acquisition • MEGTEC acquisition is highly Key Acquisition Criteria complementary to B&W’s core • Alignment with core competencies competencies • Synergistic value • Long-term growth platform • History of acquisitions and • Diversi
Slide 43: Case Study: Coffee Roasters
Case Study: Coffee Roasters B&W serves a diverse customer base of industrial manufacturers, including global beverage industry leaders B&W regenerative thermal oxidizer (RTO) technology effectively controls volatile organic compound (VOC) and odor emissions that result from coffee roasting operation
Slide 44: Case Study: Polybutadiene Rubber Plant
Case Study: Polybutadiene Rubber Plant B&W’s international customer base includes Reliance Industries, a ~$70B Mumbai-based company • B&W provided off gas treatment for a Polybutadiene Rubber Plant located in Hajira, Gujarat, India • B&W technology included • Epsilon® RTO • Venturi scrubber • Steam
Slide 45: Financial Overview
Financial Overview .45
Slide 46: Growth Strategies Drive Value Creation
Growth Strategies Drive Value Creation Optimize Traditional Targeting margin improvement of 200-300 bps Business to Align with by 2017, primarily through Global Services Changing Markets Pursue Growth Targeting annual organic revenue growth Opportunities in of 3-5%, primarily through Global Power In
Slide 47: Driving Margins Through Operational Improvement
Driving Margins Through Operational Improvement Continue to aggressively identify additional cost reductions • Targeting the full 200-300 bps in operating Global margin improvements to be recognized by 2017 Manufacturing Consolidation • Activities to generate more than $75M in annual savings have be
Slide 48: Strong and Growing Backlog
Strong and Growing Backlog Positions B&W well for future growth Geographic Diversification • B&W continues to build a more diverse backlog, both by geography and by market Intl. 22% • Significant amount of aftermarket business Intl. U.S. U.S. 47% is not reflected in backlog totals and 53% 78% provid
Slide 49: Pro Forma Capitalization
Pro Forma Capitalization Well-capitalized stand-alone business with capacity to fund growth Pro Forma Capital Structure Capital Allocation Priorities ($ in millions) At Spin Cost reduction initiatives Cash (U.S.) $105 Cash (Outside U.S.) 175 Total Cash $280 Global business development Revolver Avail
Slide 50: Segment Profitability Characteristics
Segment Profitability Characteristics Segment Revenue $3,000 $2,500 $2,000 • Flat revenue $105 $147 Global • Mix impacts average margin Millions $1,500 $603 $781 $712 Services $1,000 $603 $472 $486 • Top priority is driving margin $500 $939 $1,005 $1,055 $909 $939 $822 $0 2010 2011 2012 2013 2014 LT
Slide 51: Improving Cash Flow Profile
Improving Cash Flow Profile Net Work-in-Process Pro Forma Operating Cash Flow $300 $249 $60 $52 $228 $48 $250 $50 $200 $160 $40 $132 Millions $150 $30 Millions $100 $72 $40 $20 $50 $10 $0 $0 2010 2011 2012 2013 2014 LTM 3/31/15 ($10) ($8) ($6) ($20) • Net work-in-process (Net WIP) 2012 2013 2014 1Q
Slide 52: Capital Expenditures
Capital Expenditures Capital Expenditures(1) $45 $40 $35 $30 $25 Millions $20 $5 $40 $4 $5 $15 $10 $19 ~$23 $15 $16 $5 $0 2012 2013 2014 2015E 2016F & Beyond B&W Facility in Monterrey Business CapEx ProForma Corporate CapEx Footnote: (1) 2012, 2013 and 2014 business capital expenditures are pro form
Slide 53: Pension Update
Pension Update Mark-to-Market Gain/(Loss) Pension Funding Status $90 $1,500 $100 $1,236 $1,150 $1,079 $918 $980 $50 $882 ? $1,000 Thousands ($6) Millions $0 $500 ($50) $0 ($100) ($99) 2012 2013 2014 ($150) Plan Assets Plan Liabilities 2012 2013 2014 2015E Pension Contribution • Benefit of remaining
Slide 54: FY 2015 Guidance
FY 2015 Guidance Revenues of • Represents 15% year-over-year growth approximately • Combination of core growth and the full-year impact $1.7B of MEGTEC acquisition • Excludes any mark-to-market adjustment for pension and Adjusted post-retirement benefits, spin-related transaction costs and restructu
Slide 55: Closing Remarks
Closing Remarks .55
Slide 56: Three-Pronged Strategy Drives EPS Growth and Shareholder Value
Three-Pronged Strategy Drives EPS Growth and Shareholder Value Optimize Pursue Growth Traditional Opportunities in Business to Align International with Changing Market Market (Increase Revenue) (Increase Margin) Continue Disciplined Acquisition Program (Increase Revenue and Margin) .56
Slide 57: Management Alignment with Shareholder Interests
Management Alignment with Shareholder Interests Earnings Return Total Per Share on Invested Shareholder Cash Flow Capital Return Management team will be rewarded ONLY if we deliver shareholder value .57
Slide 58: Investment Highlights
Investment Highlights Strong Foundation Significant Earnings Upside Great Brand Associated with Quality, Three-Pronged Growth Strategy Reliable Delivery and Innovation Aligned with Businesses Customer and Strategic Technology Leader in Partner Relationships Global Power Generation Established Platfo
Slide 59: Appendix
Appendix .59
Slide 60: B&W Management Team
B&W Management Team A seasoned executive with more than 25 years of experience in the utility and commercial nuclear power industry, Mr. Ferland joined B&W in April 2012 as President and Chief Executive Officer. Immediately prior to joining B&W, Mr. Ferland served as President of the Americas divisi
Slide 61: B&W Management Team
B&W Management Team Mr. Low is responsible for all of the company’s domestic and international service business. From 2012-2013, he was Vice President and General Manager of B&W’s Environmental Products and Services Division, responsible for the company’s environmental products and services business
Slide 62: B&W Management Team
B&W Management Team Mr. Zak is responsible for B&W’s Industrial Environmental business, which includes its B&W MEGTEC operations. Prior to assuming his current position in May 2015, he was Senior Vice President of Business Operations for B&W MEGTEC. From September 2003 to December 2012, he served as
Slide 63: B&W Management Team
B&W Management Team Mr. Carano leads B&W’s corporate strategy and merger and acquisition activities. He provides oversight, leadership and direction as the company identifies, evaluates and pursues new business opportunities and strategic partnerships. As Treasurer, he is responsible for the strateg
Slide 64: B&W Management Team
B&W Management Team Ms. Kass leads the investor relations, marketing/communications functions, and government relations areas. Previously, she was Vice President of Regulatory and Agency Relations, leading B&W’s efforts to develop a strong relationship with the Nuclear Regulatory Commission and othe
Slide 65: B&W Management Team
B&W Management Team Ms. Radtke provides direction and leadership for B&W’s global Human Resources functions and strategy including Total Rewards, talent acquisition, performance management, succession planning, diversity and inclusion, learning and development, and employee and labor relations, ensu
Slide 66: Non-GAAP Reconciliation
Non-GAAP Reconciliation Three Months Ended March 31, Year Ended December 31, (In thousands except per share amounts) 2015 2014 2014 2013 2012 Pro Forma Net Income $ 12,326 $ 8,133 $ (8,315) $ 147,493 $ 106,933 Actuarial (Gains) Losses on Our Pension and Post-Retirement Plans - - 63,857 (60,248) 6,53
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