March 17, 2014

NEW CEO SAYS ENERGYSOLUTIONS WILL FOCUS ON ‘MAXIMIZING SHAREHOLDER VALUE’

By ExchangeMonitor

Following the abrupt removal of EnergySolutions Chief Executive Officer and Chief Financial Officer over the weekend, new CEO David Lockwood said in a call with investors yesterday that the EnergySolutions Board is “focused on maximizing shareholder value” going forward. WC Monitor and RW Monitor reported last week that EnergySolutions was considering selling a portion of the company as the value of the company’s stock continued to drop, and Lockwood said yesterday that EnergySolutions had hired Goldman Sachs to examine such a possibility over the last year. However, after consulting with Goldman Sachs on “strategic alternatives,” Lockwood said the company received no “actionable proposals.” Going forward, “The Board has decided the best way to maximize shareholder value is to continue to operate the business in the years and ahead. … We’re here to position the company for success over the long term. We know we have years of hard work ahead of us, but our focus is on driving growth and profitability, that’s what we’re going to work on.”

Lockwood was named EnergySolutions’ new CEO to replace Val Christensen, who departed effective June 10. Lockwood previously was a partner at investment firm ValueAct Capital, which owns nearly 17 percent of EnergySolutions’ stock. In addition, Greg Wood was named to replace William Benz as Chief Financial Officer, also effective June 10. Describing the management changes, Lockwood said, “The board is determined that the time is ripe for new leadership to position the company, to take advantage of the opportunities that lie for us ahead. The goal is to combine new leadership in operating the financial management in public companies in the CEO and CFO roles with strong industry management currently in place to drive greater growth and profitability.”

After the announcement of the executive overhaul, EnergySolutions’ stock lost approximately 55 percent of total value, closing at $1.62 at the end of trading Monday, compared to a value of $3.59 at closing on Friday, June 8. EnergySolutions also announced yesterday that it was revising its 2012 Adjusted EBITDA guidance to $130 to $140 million, down from the guidance of $150 to $160 million provided with its first quarter 2012 financial results on May 9. The less optimistic financial outlook is largely the result of changed assumptions in EnergySolutions’ Zion license stewardship decommissioning project. Much focus of yesterday’s investor call was the fact that the Zion project, which EnergySolutions has long touted as a key to the future of the company, was underperforming. Far afield of recent earnings calls, Lockwood characterized the project as having “risk [that] outweighs the returns,” and said the company was officially reducing profit margin outlook from 10 to 15 percent to five to 10 percent. EnergySolutions now believes annual investment returns from the project will be less than the six percent previously estimated, and the company has reigned in its savings assumptions for discovering an alternative to a $200 million letter of credit with site owner Exelon. “Look, we are going to pursue decommissioning, but we paid our dues,” Lockwood said yesterday. “[This] is a strategic, not a financial [project]. … We’re not going to do any more decommissioning projects that don’t compensate us for our cost of capital.”

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