Top executives at AECOM and BWX Technologies this week made clear their companies still aim to come out on top in the extended contest for a multibillion-dollar contract at the Department of Energy’s Savannah River Site in South Carolina.
David Black, senior vice president and chief financial officer at Virginia-based BWXT, addressed the situation in a Monday earnings call with Wall Street analysts. Michael Burke, chairman and CEO of Los Angeles-based AECOM, covered the same ground in his company’s call Tuesday.
“Based on our history of strong performance for our client and the strength of our bid, we are optimistic on our revised proposal” on the long-term contract, Burke said, without elaborating. AECOM leads the current liquid waste contractor at Savannah River.
BWXT and its partners, Bechtel and Honeywell, in October took home a 10-year, $4.7 billion contract for liquid-waste management at Savannah River. The two losing groups — an AECOM-CH2M venture and a Fluor-Westinghouse team – quickly protested the award to the Government Accountability Office (GAO). In February, the GAO upheld the AECOM-CH2M protest, saying DOE had not sufficiently vetted BWXT-led Savannah River EcoManagement’s waste processing technology.
The BWXT group had submitted the lowest bid at $4.7 billion, followed by Fluor-Westinghouse at $5.4 billion and AECOM-CH2M at almost $6 billion. In April, DOE had all three teams submit updated proposals, sources have said. A DOE spokesperson said this week the agency does not comment on active procurements.
The work involves processing 36 million gallons of radioactive waste into a more stable form for disposal, along with closing underground storage tanks that now hold the waste.
AECOM partners with CH2M, Bechtel, and BWXT on liquid waste manager Savannah River Remediation. In March, DOE proposed extending the team’s contract until March 2019. The extension is not yet finalized, the department said Wednesday. A decision will have to be made soon as the current five-month contract extension expires at the end of this month.
The dispute is not likely to be resolved before late September, Black said during the BWXT call. The situation has lasted longer than expected, he said.
Provided the BWXT-led group retains the award, it would not begin transitioning on to the job before the fourth quarter, Black said: “This results in transition beginning no earlier than fourth quarter, putting some pressure on our anticipated $20 million of operating income for the current year,” he added.
AECOM Highlights Reactor Decommissioning, Hanford
In discussing the company’s latest earnings numbers, Burke said the growing market for decommissioning of commercial nuclear reactors could help offset revenue losses in other business lines at AECOM, such as construction of gas-fired power plants.
The engineering and infrastructure specialist reported $4.8 billion in quarterly revenue, up 8.2 percent from the $4.4 billion during the first three months of 2017. After the cost of revenue was subtracted, AECOM listed gross profit of $141 million for the first three months of 2018, its second quarter of fiscal 2018. That is down from $168 million year over year.
Burke also noted that another AECOM-topped DOE contractor, Hanford Site waste tank manager Washington River Protection Solutions, in March received a one-year contract extension that will keep it on the job through September 2019. That “adds to our visibility across key DOE sites,” Burke said.
Washington River Protection Solutions is comprised of AECOM and SNC-Lavalin subsidiary Atkins, with Orano (previously AREVA) as its chief subcontractor. AECOM has large roles elsewhere across the DOE complex, including as a partner in the outgoing management and operations contractor for the Los Alamos National Laboratory and leading management of the Waste Isolation Pilot Plant, both in New Mexico.
AECOM reported a net loss and diluted loss per share of $120 million and $0.75 for the latest quarter, compared to a net loss of $102 million and $0.66 one year ago. The latest figures were affected by the non-cash charge on non-core oil and gas assets held for sale.
Management reported increased quarterly revenue for the business branch that counts the Department of Energy among its government customers. The company realized about $898 million in revenue from its Management Services segment, up from $827 million from the same period in 2017. The sector’s operating income dropped to $43 million from $52 million.
AECOM’s Construction Services division, which includes energy projects and nuclear reactor decommissioning in North America, reported quarterly revenue of $1.9 billion, up from $1.7 billion a year ago. The unit’s operating loss increased from $26 million to $180 million on a year-over-year basis, AECOM said, citing a $168 million non-cash charge over certain oil and gas assets being held for sale.
AECOM reported a record company-wide backlog of about $50 billion, up 18 percent from $42 billion a year ago. Its adjusted earnings per share guidance for its fiscal year remains unchanged at $2.50-$2.90.
Like Fluor, AECOM is moving out of the market to build fixed-price natural gas power plants. When asked during the earnings call how the company might compensate for this revenue, Burke pointed to nuclear power plant decommissioning as one option.
“For instance, the nuclear decommissioning space, we won the first big project here in the U.S. for the San Onofre decommissioning,” Burke said. “We’re focused on Diablo Canyon, which will be the next big decommissioning in the U.S.” AECOM also sees perhaps $200 billion worth of nuclear procurement opportunities in Canada, he added.
The San Onofre Nuclear Generating Station (SONGS) in San Diego County, Calif., California never restarted after it stopped power production in 2012. A partnership of AECOM and EnergySolutions has a 10-year, $1 billion decommissioning contract for the facility.
The two-reactor Diablo Canyon nuclear complex is the last nuclear power station operating in California. Its owners announced two years ago Diablo Canyon would retire in the mid-2020s rather than seeking a license extension from the Nuclear Regulatory Commission.
“We’re focused on Diablo Canyon, which will be the next big decommissioning in the U.S. Bruce Power has a number of decommissioning activities in Canada. So, we see that as a $200 billion opportunity,” Burke said.
BWXT Has a Busy Quarter
CEO Rex Geveden noted BWXT is part of the Battelle Energy Alliance team, which recently received a five-year, $5 billion extension to the Idaho National Laboratory management and operations contract.
While it didn’t garner much comment during the earnings call, BWXT is a partner in the legacy cleanup team at the DOE Los Alamos National Laboratory in New Mexico. Newport News Nuclear BWXT-Los Alamos (N3B) became the new contractor last week. N3B prevailed over two other rival bidding teams in December to win the contract worth about $1.39 billion over a decade. The N3B venture took over from Los Alamos National Security (LANS), which remains the LANL manager through September.
First-quarter 2018 revenue rose 6.8 percent, to $457 million, from $428 million in the first three months of 2017. BWXT also reiterated its prior company-wide earnings-per-share guidance of between $2.45 and $2.55 for 2018.
BWXT recorded $66.4 million in net income, or $0.66 a share, for the quarter, compared with $55.7 million, or $0.55 per diluted share, in the same period a year ago. The company attributed the better numbers to a combination of good operations and tax reform.
The Nuclear Services Group (NSG) segment, which included BWXT’s Energy Department cleanup business, recorded operating income of $1.2 million, which is up $800,000 from a year ago. The business line’s revenue also improved, at $30 million for the quarter, compared with less than $28 million for the first three months of 2017.
