B&W mPower cover story about lack of interest is bogus

Update: (June 20, 2014)

Here is the chart of B&W’s stock price during the past year. It is interesting to note the 10% drop between May 9, 2014 and May 18, 2014 and the fact that the stock continues to trade in a range centered around the new, lower price established after that drop.

BWC - June 2013 through June 2014

BWC – June 2013 through June 2014

End Update.

In late February 2014, the Babcock & Wilcox company made an announcement that sent shock waves through the nuclear energy industry and initiated even more intense shock in a couple of office buildings in my current hometown of Lynchburg, VA and in Charlotte, NC.

During a call with investors, Jim Ferland, the company CEO announced that spending on the mPower reactor development project would be slashed by approximately 75%. By the end of the week, the company had issued 60 day warning notices of pending layoffs to more than 200 engineers, project managers, administrators, and sales people.

The official explanation was that the company had failed in its effort to find major investors. Supposedly, investors were not interested because there were not yet any customer commitments to purchase B&W mPowerTM reactors, even though anyone who knows anything about the power business knows that no customer will make a firm commitment for a product that does not yet have a final design or a license to be built.

The underlying impression given, perhaps purposely, was that SMRs were not attracting customer interest and were thus just an expensive distraction to keep nuclear-focused development teams busy.

That cover story leaves out a lot of details. It glosses over the fact that a group of Wall Street investment funds have purchased enough B&W shares to impose a restructuring plan that directs spending away from the mPower development project. It also obliterates the fact that there was an investor that was ready to commit until Ferland made his surprise announcement.

However, even people who know a little about that underlying story may not have heard my interpretation of why the mPower project was an attractive target.

There is a May 6, 2014 story on The Street titled Babcock & Wilcox Change Looms as Blue Harbour Takes 6% Stake that starts off with the following false statement.

Energy solutions specialist and mission critical defense contractor Babcock & Wilcox is quietly becoming a target of value-seeking hedge funds after years of cost overruns and weak stock performance.

Here is a graph of B&W’s stock price during the four years since it was spun out from McDermott, the oil and gas focused engineering, procurement, construction and installation (EPCI) conglomerate that had owned B&W since a highly publicized takeover battle in 1977.

The Babcock & Wilcox Company stock price 2010-2014

The Babcock & Wilcox Company stock price 2010-2014

There was sharp drop in the stock price in March of 2011, but that Fukushima-inspired weakness was common among companies known to have a focus in nuclear energy. Since bottoming out at approximately the same level as the initial public offering price, B&W has been a reasonably strong performer and its current stock price is 40% higher than it was during its initial public debut in 2010. Compared to its former parent company, B&W’s stock price performance in the past four years has been spectacular.

McDermott Int. stock price 2010-2014

McDermott Int. stock price 2010-2014

It wasn’t stock price weakness that painted a bullseye on B&W for Wall Street.

The Street article goes on to provide more clues on the real target for the four big funds that have so far accumulated nearly 25% of the company and greatly influenced its long term decision-making process. Here is the list of funds involved:

  • Janus Capital Management – 6.2% of B&W on Dec 31, 2013
  • Mason Capital Management – 10% of B&W on Feb 27, 2014
  • Blue Harbor Group – 6.0% of B&W on Apr 21, 2014
  • Starboard Value – 1.8% of B&W (date unknown, no SEC filing required)

However, as activist investors take an increasingly vocal role on Wall Street, Blue Harbour may be able to accomplish its objectives without making much of a fuss.

Babcock & Wilcox is in the process of dramatically reducing its investment in a struggling mPower nuclear reactor project, which has weighed on shares amid spiraling costs, obscuring the company’s stronger performing nuclear energy, operations, and services businesses. The mPower unit cut $81 million from Babcock & Wilcox’s 2013 total segment income and $27.7 million in the fourth quarter, a significant hit to both full-year and fourth-quarter profits.

While Babcock & Wilcox had been shoveling about $100 million a year into mPower and initially provided guidance of between $60 million and $70 million of investment in 2014, those forecasts were revised by management in mid-April to just $15 million a year. That reduced spending plan for mPower caused analysts at William Blair and UBS to increase their full-year estimates for Babcock & Wilcox’s earnings.

For Blue Harbour, which began buying Babcock & Wilcox shares in early March, the company’s reduced mPower spending is just one move the company can take to improve its earnings and stock performance.

Besides mPower spending reductions, Babcock & Wilcox may be able to better manage its coal-related businesses to stem declining margins. Given its low debt load, Babcock & Wilcox may also be able to take up its leverage as a means to buy back stock, potentially increasing the value of its shares when that turnaround plan is complete.

As a former B&W employee who was inspired to move to my current home in Lynchburg, VA to work on the B&W mPowerTM reactor development team, I have a different perspective. The mPower reactor and the associated Generation mPower-led mPower America initiative was the main pillar of the company’s growth strategy.

(Note: I left B&W mPower, Inc. in October 2013 to pursue a career as a writer, blogger, podcaster, consultant and pro-nuclear advocate.)

The leaders who decided to invest in the development of the B&W mPower reactor made a carefully-considered decision to build on the core competencies that the company had developed during its more than 150 year-long history as one of the world’s leading steam companies. B&W leaders saw value in taking advantage of its position as the only US company that has continuously manufactured the major components of light water nuclear power plants in North America for the past 60 years.

Aside. B&W is such a force in steam-related manufacturing that it literally writes the book on steam and recently released the 41st edition of Steam. I recommend borrowing or buying a copy of that new edition. Once you have your copy, pay careful attention to the extremely well-written sections on the mPower reactor project. End Aside.

In my opinion, the fund managers were specifically looking to kill the mPower reactor and deal a damaging blow to the nascent small modular reactor (SMR) industry. By focusing on the company that “everyone” thought was the market leader and concocting a cover story about lack of customer and investor interest, they did a pretty good job of initiating some confused reactions by people who have been looking at SMRs as the one bright spot in the US new nuclear industry.

See, for example:

Nuclear Intelligence Weekly (Feb 28, 2014) Newbuild: B&W May Pull Back From SMR Development

Charlotte Business Journal (Feb 28, 2014) No sale: Babcock & Wilcox can’t find buyer for Generation mPower

Charlotte Business Journal (April 14, 2014) Babcock & Wilcox slashing investment in small reactor venture

Forbes (Apr 28, 2014) mPower Pullback Stalls Small Nuclear

Taxpayers for Common Sense (May 5, 2014) DOE Continues Funding for Small Modular Reactors Despite Industry Concerns

People who have read the ‘smoking gun’ posts here over the past few years may be as suspicious as I am about the motives of investors who sabotage new nuclear technology development. There is a large universe of people who prosper from the fact our modern society is addicted to hydrocarbons with few, if any, reliable alternatives.

By discouraging investments in the only alternative that works — actinide (uranium, thorium, plutonium) fission — they sustain the enormous revenue streams that come from selling coal, oil and gas into undersupplied markets where consumers cannot get enough to meet all of their needs and desires.

In this case, there is also evidence of involvement in the sabotage effort from within the nuclear industry. The vultures from Wall Street have nominated Bob Nardelli to represent their interests on B&W’s Board of Directors. Before earning a reputation as one of the Worst American CEO’s of all time, Nardelli was one of the top three contenders to replace Jack Welch at GE. B&W’s current CEO, Jim Ferland, came to B&W directly from Westinghouse. Both of those companies have products that directly compete with the 180 MWe B&W’s mPower reactor. Westinghouse is developing a 225 MWe Westinghouse SMR and GE’s is marketing a 300 MWe PRISM reactor.

Now that the relatively recently hired CEO has taken it upon himself to mangle B&W’s long-term strategy, stockholders should vociferously question the company about its growth plans.

Where will the company’s future revenues come from as the US government scales back on defense spending? How likely is it that the Department of Energy will look favorably on facility services bids that include a company that competed strongly for a cost share support program and then bailed out of the project less than a year after getting the first multimillion dollar check from the government? How much trust — which is a big deal in government contract decision making — did Ferland’s abrupt decision to kill mPower lose for the company?

There is no doubt that developing a new nuclear power system in the US is fraught with difficulty. Many hurdles have been purposely erected in the development path and it takes a company with a strong cash position and a great deal of management skill to negotiate its way through the maze. It also requires courage and a long-term vision, but the end result could be a world-leading technology that would provide solid profits for many decades into the future.

I suppose that is too much to expect from executives in today’s “pay me now” culture. Apparently, Ferland has been guaranteed a rather generous golden parachute — roughly $18 million — if the Wall Street funds have their way and break up one of the few heavy industrial firms left in the United States with the cash, vision, and experience required to begin an innovative nuclear power system development project that showed signs of being able to succeed in the near future.

B&W’s next shareholder earnings call is scheduled for May 13, 2014.


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About Rod Adams

48 Responses to “B&W mPower cover story about lack of interest is bogus”

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  1. mjd says:

    I certainly won’t challenge your statements about short sighted Wall Street “Get Rich Quick” firms stirring the pot to their advantage here. After all that’s the entire actual product they have ever added to the US economy; they couldn’t build a paper clip. But what’s up with this?

    “While Babcock & Wilcox had been shoveling about $100 million a year into mPower and initially provided guidance of between $60 million and $70 million of investment in 2014, those forecasts were revised by management in mid-April to just $15 million a year. That reduced spending plan for mPower caused analysts at William Blair and UBS to increase their full-year estimates for Babcock & Wilcox’s earnings.”

    One hundred million bucks a year on what? As you’ve previously pointed out the actual mPower design is currently a computer data base, which I can probably carry in my back pocket on a thumb drive. Has anybody ever seen the mPower annual budget? Where does this money go? Exec salaries, lobby efforts at DOE, lobby efforts at TVA, etc.? Two hundred engineers at $100K/year each, actually working on a product, is only $20M.

    When NuScale went belly up on the loss of their South American shadow investor, Fluor bailed them out with a promise of $25M. What’s in the current forecast $15M/year budget, Exec salaries to supervise each other? They’ll have no workers.

    I don’t get it.

    • Rod Adams says:

      @mjd

      There is a LOT more to mPower than software files. There are numerous testing facilities, fuel fabrication prototype manufacturing, and about 500 people spread in various organizations.

      Speaking from personal experience, your OOM number for the total cost of an engineer is a bit on the low side. There is more to personnel costs than just salaries and the types of people you need for mPower are not your average entry level engineer.

      Design reviews, customer input gathering, etc. all cost a lot more than one might expect.

      Don’t forget all of the advance coordination meetings with the NRC at the bargain price of $274 per bureaucrat hour plus the travel costs for the mPower team.

      And yes, there is a good deal of the other kinds of costs that you identified. I never said the project was perfect or even all that well managed. It didn’t deserve to die because of failure to address readily solvable challenges.

      • mjd says:

        I totally agree with you. My point was, where the rubber really hits the road on needed new nuke designs like SMRs, getting the actually engineering details done seems to be a small fraction of the eventual total project cost. It is the whole system that is flawed and nobody seems to have an answer or the will to change it. The design developers are in the same box as a potential buyer. A ton of $ goes out the door with no guarantee of success.

        I’ve lived long enough to see the exact thing that made this country great, its huge industrial manufacturing base, disappear. I know this sounds like whining and hand wringing, but it is what I see. When you no longer can even tell “who” a company is anymore (leveraged/hostile buyouts) you have a system begging for hidden agendas.

        No, I don’t know how to fix it, but I’ll call a spade a spade; an ethics problem right in the chair where the buck stops.

  2. Ruth Sponsler says:

    As long as short-term (quarterly) profits are the only thing that matters to Wall Street, long-term (a few years) design-engineering-licensing projects are destined to this fate.

    Even the Chicago Pile took more than a couple of quarters to design, develop, build, and test. Back in those days, there was a greater societal imperative (WWII) that called for long-term thinking.

    Unfortunately, that imperative led to nuclear energy being interpreted firstly as a weapon of war and secondarily as an energy source. To control that problem, a lot of myths were spread about fearful dangers of low-dose radiation.

    Now, according to climatologists, we are at a crucial junction for action to reduce fossil fuel emissions. This was predicted 40 years ago by prescient scientific luminaries like Alvin Weinberg. Now, we’re here with accelerating CO2 emissions posing a possibly existential threat. Spiritual leaders, including Nuestro Sagrado Padre Francisco are asking for the equivalent of a ‘pilgrimage’ to solve the problem.

    I know people who have gone on Lenten pilgrimages. These are walks of many kilometers to cathedrals and other spiritual sites. Sometimes people walk an entire day plus a night for a distance that is greater than a marathon. Aside from the exercise-related adaptive responses that happen during such a pilgrimage, the participants realize that some things in life are long-term and do not provide immediate gratification but nevertheless must be pursued.

    The ‘activist investor’ decision reveals a complete lack of BOTH scientific AND spiritual guidance about doing what is right for the future of humans and Earth given accelerating fossil fuel-related emissions.

    Fossil fuel emissions need to be costed so they have economic disincentives.

    (If that wasn’t qualitative, I don’t know what is?! Not a single number in the entire comment!)

  3. SteveK9 says:

    They are just interested in maximizing short-term money I think … no great strategic plan. Don’t worry about Defense spending … we’re trying to restart the Cold War, much to the joy of many interested parties.

  4. SteveK9 says:

    I know I sound like a commie sometimes, but with the kind of ‘leadership’ that is prevalent in the private sector (those hedge funds lead the way these days), I’m afraid something like nuclear development is only going to happen as a government program. And, for that to happen we will need some kind of ‘threat’, probably rapid development of China’s capabilities, or these days better yet Russia’s.

  5. Christian says:

    I do agree 100% with the notion that the short-sighted greed of investors caused this. What do you think is going to happen 3 years from now, when investors, after lining their pockets with nice dividends will start asking the question “Where is the growth?”. MR. Ferland will get a nice separation package and mPower project will never be revived again.

    • Rick Armknecht says:

      The situation reminds me of the demise of McDonnell Douglas. Building new planes was the big money game that that company wanted to play. MD spun off all of the parts and maintenance business for the planes it made. When it came time to design a new plane, there was no income stream to fund the design, development and tooling. Game over.

  6. FermiAged says:

    “As long as short-term (quarterly) profits are the only thing that matters to Wall Street…”

    Weren’t SEC mandated quarterly financial reports a solution to a previous problem?

    I thought that Westinghouse has pulled the plug on it’s SMR activities a few months ago. Westinghouse is no longer a competitor in the SMR market. I think part of your thesis needs some re-evaluation.

    What I would look into are the ties that the management of Janus, Blue Harbor etc. have with anti-nuclear organizations. What organizations do they sponsor? What are their pet “causes”? Where do their political donations go?

    • Rod Adams says:

      @FermiAged

      I thought that Westinghouse has pulled the plug on it’s SMR activities a few months ago. Westinghouse is no longer a competitor in the SMR market. I think part of your thesis needs some re-evaluation.

      Westinghouse did not “pull the plug” on their SMR development project. They merely redirected many of the assigned engineers to higher priority work on the AP1000, which has paying customers. They reached a point in their design where they had enough definition to answer questions from potential customers and the regulators. According to the man in charge of the remaining team — who is a former Chief Petty Officer and worthy of great respect — Westinghouse is within one year of submitting a design certification application and can hold their design at that point indefinitely.

      One year from the funded ‘Go’ they will be submitting and off to the competitive races.

      • T Barry says:

        Longtime reader, first time poster. I’m not quite sure how DOE grants usually work, but it B&W goes through with its downsizing of the mPower project, could it loose out on its SMR grant? If Westinghouse is a far as you say in its design for a SMR, I’m sure they’d love to resubmit their application for the grant money.

  7. Brian says:

    “It also obliterates the fact that there was an investor that was ready to commit until Ferland made his surprise announcement.”
    TVA has been consistently very noncommittal to the building of mPower at Clinch River. They also have their own financial challenges from which they’re laying off 10% of their workforce. It doesn’t seem that they were “ready to commit” to building an mPower reactor. Nor has the Clinch River plan changed since the mPower announcement. Could you please elaborate more on your claim above?

    • Rod Adams says:

      @Brian:

      I did not say a customer was ready to commit. I said an investor was ready to commit. For now, all I can offer is an assertion that the information is from a very good source.

      • Brian says:

        @Rod

        Please accept my apologies. I read ‘investor’ as ‘customer/TVA’ since they would be indirectly making an ‘investment’ in the technology.

        I suppose my confusion was because of B&W’s public excuse for the defunding (that they were unable to find a new owner for mPower nor additional funding from TVA). Doesn’t seem like good business to defund (with all the negative press) while courting an investor.

  8. David Snedeker says:

    But look at all the lovely new NR work you just rec’d.that and the fuel fab at NFS should keep the investors happy. Plus it is real hardware.
    Keep up the good fight

  9. EL says:

    Compared to its former parent company, B&W’s stock price performance in the past four years has been spectacular.

    This really isn’t how Wall Street investors see things. Measured against the S&P 500, B&W has not been a strong performer. Returning 10% in a bull market returning 40% is an indication of lagging (and time to figure out what you are doing wrong). Measured against one of largest energy sector ETF (Vanguard VDE), things really aren’t that much better (although recent volatility indicates there may be opportunities for short sellers).

    In my opinion, the fund managers were specifically looking to kill the mPower reactor and deal a damaging blow to the nascent small modular reactor (SMR) industry. By focusing on the company that “everyone” thought was the market leader and concocting a cover story about lack of customer and investor interest, they did a pretty good job of initiating some confused reactions by people who have been looking at SMRs as the one bright spot in the US new nuclear industry.

    Cover story? mPower was bleeding cash (some $27 million/quarter). Just because investors expect a section of the company to turn a profit in the foreseeable future (or yield above market returns on equity shares) doesn’t mean there is a conspiracy afoot. They failed to find an investor for a struggling project (eating up some 1/3 of company’s net income). With other companies (smart grid, oil and gas, renewables, etc.) making above market returns … why pick a laggard? This appears to be little more than a typical value stock proposition. BWC has very low debt, strong performance in other sections (nuclear energy, operations, services), and thinking the stock had hit a bottom (and was undervalued), it was set up for a rebound once it shed it’s excess weight, and put the bulk of it’s attention on it’s profitable businesses. In order to remain competitive with other industries, how much longer would it be wise for BWC to sustain it’s profit eroding ventures?

    Add to this … BWC has a coal related business (and it’s hedge fund managers who are getting all the attention)?

    • Rod Adams says:

      @EL

      Cover story? mPower was bleeding cash

      The B&W mPower reactor project was a long-term research and development effort with no expectation of producing any revenue for at least another four years until its design was finished and licensed.

      What the heck does “bleeding cash” mean in that context?

      How long do you think Apple spent money on the iPhone before the first dime of revenue came in?

    • Rod Adams says:

      @EL

      They failed to find an investor for a struggling project (eating up some 1/3 of company’s net income).

      Did you read my post? There was at least one investor ready. The way these things work is that the first one is always the most difficult; everyone wants to be number 2.

      Also, look at the dates of the announced purchases for the funds. Other than the one that did not have to file an SEC form, all of the activity happened AFTER B&W piqued Wall Street’s interest by shopping around for investors and all happened well after the stock price bottom.

      You seem to have an odd defensive mechanism that kicks in every time there is any indication that your cherished anti-nuclear view of the world is wrong. You’ll even defend manipulative Wall Street bankers. Pretty strange coming from someone who touts his involvement with many liberal causes.

      Did I mention how many people are losing their family wage jobs because of this action?

      • EL says:

        How long do you think Apple spent money on the iPhone before the first dime of revenue came in?

        @Rod Adams

        If Apple wasn’t directly benefitting in revenues, it was surely benefiting in patents, attracting new investors, and rising stock valuation. If you don’t have a product to sell, you have expectations (and Apple was very good at managing expectations).

        mPower appears to be doing very little for BWC (based on all that can be gleaned from company sources and stock performance). Contrary to what you have written, it’s stock isn’t performing well (agains it’s index, or against the market as a whole), and liabilities are rising for underperforming segments (mPower in particular). Earning reports speak to a lack of confidence and slowdown in nuclear sector in US (driven primarily by low natural gas prices, low electricity demand growth, regulatory uncertainty, and more).

        Yes … mPower was not attracting investor interest, and BNC didn’t like what it saw in the marketplace. They tried to sell off their ownership share, and when that didn’t work cut back on their spending. If the prospects for mPower were so great, why couldn’t they find a buyer for the company (there’s nobody out there who recognizes a good deal when they see one). I understand how investors can have control over a company they own (reflective of their ownership), but the industry as a whole? Doesn’t make a lot of sense (and doesn’t capture the mindset of these folks … who aren’t strategic or long term thinkers).

        You seem to have an odd defensive mechanism that kicks in every time there is any indication that your cherished anti-nuclear view of the world is wrong.

        Huh? I’m not sure how you glean this from the news for mPower, etc. Developing an advanced reactor and bringing it to commercial production is expensive and time consuming, especially so in current and evolving global and domestic energy markets. It faces significant headwinds (engineering, environmental, financial, regulatory, and more). I’m not sure why you consider my comment a defense of Wall Street bankers. I just thought it was an explanation, and a reasonable one given company and market outlooks (as reported in press, financial statements, etc.).

        all of the activity happened AFTER B&W piqued Wall Street’s interest by shopping around for investors and all happened well after the stock price bottom.

        The stock has been underperforming for years. The bottom is relative (not absolute).

        • Rod Adams says:

          @EL

          You are wrong. There was — and continues to be — a great deal of interest in the B&W mPowerTM reactor. Take a look at B&W’s stock price performance from its initial public offering in 2010 until March 11, 2011. Do you think that performance was based on excitement about a business focused on defense and government contracting, with a coal focused business line?

          The immediate prospects for nuclear energy may seem a little dim to people who cannot count and cannot look at graphs of natural gas prices to see that they are about as predictable as the weather, but that should not have bothered a company that was developing a new reactor that would not be ready for the market for at least another four to five years. Paraphrasing The Great One, who cares where the puck is now, you need to go where the puck will be.

          The activist investors who purchased B&W stock starting in late 2013 did not do so because it was especially undervalued. They saw a company that was investing cash into a new technology with great promise. However, like the greedy, selfish people they are, they decided that company’s cash could be better directed into their pocket by short term manipulations that would result in a temporary bump in stock prices that would provide them with a good selling opportunity.

          I also believe they recognized that taking action to kill off a promising nuclear technology would be profitable for many of their other investments.

          By the way, my information sources are not publicly released documents approved by the very people who are involved in the schemes to temporarily drive up stock prices. Get my drift?

          • EL says:

            The activist investors who purchased B&W stock starting in late 2013 did not do so because it was especially undervalued.

            @Rod Adams.

            BWC is a value stock. It has a modest P/E at 11.24 (S&P currently stands around 18.75).

            Blue Harbour Group doesn’t appear to have any axe to grind. They have investments in URS (with 60 years experience in nuclear service work). They aren’t particularly aggressive (known on the Street as a “friendly” activist investor). Here too. They appear to have a balanced portfolio of retail, technology, media, and service companies.

            They likely bought BWC because they wish to make money, and like the company’s cash position (and recent efforts to buy back it’s stock). They also like it’s power generation business. LeMasters has this to add:

            As a midcap multi-line manufacturer with strong competitive positions in end markets that have varied prospects, Babcock & Wilcox has all of the ingredients to be deeply undervalued by investors, and we believe it is.  But the company also has a relatively new management team with no legacy views and many levers – operational, capital allocation and strategic – available for building and unlocking shareholder value …

            Management recently demonstrated their willingness to make big, tough decisions when they announced that they’ll significantly reduce investment in a promising project that’s simply too large and too far from commercialization for a company its size.  We believe that, with a few more similarly wise management decisions alongside strong execution of operating initiatives in the Power Generation segment, Babcock & Wilcox can solidly grow earnings and its stock can deliver very attractive gains for shareholders over the next couple of years.  We look forward to continuing our support of Babcock & Wilcox and its management team’s efforts.

            If one group of investors are buying up shares, others are dumping them.. A typical response when a big shift is underway (and this one appears to have been in the works for some time). If management is being led by the nose, they certainly aren’t putting up much of a fight.

          • Rod Adams says:

            @EL

            If management is being led by the nose, they certainly aren’t putting up much of a fight.

            Yup. New management is certainly not putting up any fight. That was part of the point of my article. Dod you overlook the following portion?

            The vultures from Wall Street have nominated Bob Nardelli to represent their interests on B&W’s Board of Directors. Before earning a reputation as one of the Worst American CEO’s of all time, Nardelli was one of the top three contenders to replace Jack Welch at GE. B&W’s current CEO, Jim Ferland, came to B&W directly from Westinghouse. Both of those companies have products that directly compete with the 180 MWe B&W’s mPower reactor. Westinghouse is developing a 225 MWe Westinghouse SMR and GE’s is marketing a 300 MWe PRISM reactor.

            Now that the relatively recently hired CEO has taken it upon himself to mangle B&W’s long-term strategy, stockholders should vociferously question the company about its growth plans.

            In a different article on the same topic, I used the phrase “Trojan horse.”

            Besides – your quote about “unlocking shareholder value” and “returns over the next couple of years” is exactly my problem with the moves. That cash flow should not be seen as the private property of a few activist investor funds (and current management) to be distributed over a couple of years of rising stock prices.

            That is a formula for short term profits, not long term, world-beating success.

        • Rod Adams says:

          @EL

          If Apple wasn’t directly benefitting in revenues, it was surely benefiting in patents, attracting new investors, and rising stock valuation.

          Once again, you expose your ignorance of business and history. Apple was definitely building a strong patent base while developing the iPhone, but since that company is very good at keeping secrets about new technology before it is released, that development effort had little or no effect on attracting new investors or improving the company’s stock price. Of course, that changed once the product was complete and released to the market, with full regulatory approval.

          B&W has also been developing a strong base of intellectual property. I had the privilege of attending a couple of “patent parties” before I left the company and I know a little about the applications in the pipeline.

          In contrast to Apple and the iPhone, B&W could not keep its mPower reactor development a secret. It would not have made any sense to do so. Spending money on nuclear technology development spooked the market in 2011, but that perception — which had NOTHING to do with B&W mPower — was wearing off.

          Any residual stock price weakness in the past couple of years just MIGHT have had more to do with the loss of two major DOE contracts and the associated cash flow due to the decision by DOE to make B&W the scape goat for the decision by a couple of nuns to trespass at Y-12.

          • EL says:

            Once again, you expose your ignorance of business and history …

            @Rod Adams

            Really … Apple only had a run up in it’s stock value from $15 to $120 prior to the release of first iPhone in June 2007. With rumors (photos even) dating back to 2002, if you didn’t know it was coming, you were probably living in a cave somewhere. I bought Apple at $30 (BTW) … must have been my ignorance of business and history that helped me pick a winner (no doubt).

          • Rod Adams says:

            @El – And I bought a nice stake in Apple at $15. The iPhone was only one of many game changing products; did you forget the enormous success of the iMac and the iPod and the cash flow those products were bringing in while there were hints of a possible iPhone?

    • Rod Adams says:

      @EL

      Add to this … BWC has a coal related business (and it’s hedge fund managers who are getting all the attention)?

      What is your point? BWC has had a coal-related business for its entire existence. As described in the post, it is a STEAM company and makes some of the best boilers in the world. Babcock and Wilcox started their business based on a new design for a safer boiler.

      What is wrong with having a coal-related business, especially when a major part of it is pollution control systems and more efficient boilers?

  10. Eino says:

    “What is wrong with having a coal-related business, especially when a major part of it is pollution control systems and more efficient boilers?”

    Well – Right now pollution control is a big market. However, it may be a limited market. Look at the news. There are many coal plants to be shut down. Due to EPA regulations, there are about none being built in the USA. Not much wrong money wise right now in supporting boiler work. There will be maintenance work in years to come. However, after the pollution control work, doesn’t it look to be a non-growth market?

    I have my 39th edition of “Steam / It’s Generation and Use” and would like to see future editions with chapters on small modular reactors. Maybe Wall Street will get a better vision of the future and change B&W’s direction.

    • Joel Riddle says:

      Eino, it sounded like the 41st does have chapters relating to the mPower and that those were possibly at least partially written by Rod, based on his urging to “pay careful attention to the extremely well-written sections on the mPower reactor project.”

      I have a copy of the 40th edition that was given to me by the a B&W employee in that pollution control business during my 2nd summer internship. That was the first time I had ever actually heard of B&W.

      • Rod Adams says:

        @Joel

        Congratulations. You have displayed your ability to read the fine text that occasionally appears between the lines here on Atomic Insights.

  11. Charles Barton says:

    I have viewed the mPower Reactor, as an interesting step on the road to Generation IV reactors. The problem with the mPower is that it is expensive. The savings produced by factory construction, will be lost to material costs, and on site labor. Once Small Molten Salt Cooled Reactors reach the market, the mPower will over priced, with no way to bring manufacturing cost down to match the cost of MSRs and MSCRs..

    The AP-1000 has a more promising future, because it can service the base load market, and would be cheaper per MW than the mPower.

    The MSR requires vision and willingness to take a big risk. Right now there are 3 MSR projects underway in North America, and at least 1 MSCR project being looked at. Wall Street is not involved in any of the businesses, and developing reactors is the only business of any of the organizations undertaking these ventures.

    • Joel Riddle says:

      Charles, I am guessing that the 3 you mention are Flibe, Terrestrial, and Transatomic, right, with the Per Peterson-led fluoride salt-cooled pebble bed reactor project as the Molten Salt Cooled Reactor (MSCR) project?

  12. Don Cox says:

    “There is more to personnel costs than just salaries ”

    The figure I have always heard is that an employee costs about twice the salary.

  13. poa says:

    So….check out Marco Rubio’s latest public statements about global warming. Ain’t happening, according to Rubio. And if it is, it ain’t got nuthin’ to do with man’s choice of energy production. Yep, its all a left wing conspiracy theory, by golly!

    40% of Tea Party Republicans believe climate change “is just not happening” according to a recent poll.

    So, I guess votes are more important to Rubio than science is. Welcome to the Twilight Zone, Marco.

  14. poa says:

    Then there’s Limbaugh. His favorite expression concerning global warming is “the global warming hoax”. (Perhaps the oxicontin addiction did actual brain damage?)

    Romney?? Who knows? His stated opinion concerning global warming changes with the political winds.

    Soooo………exactly what is the so called “right wing” position about global warming? When mouthpieces such as Limbaugh coach thier listeners to doubt the science, and both established and upcoming Republican “leaders” tell thier constituents that global warming is a left wing fabrication, what incentive is there for a right leaning public to look for alternatives to fossil fuel?

    And what fuels this disdain for science that seems to shape the RW narrative about global warming? Can it be an alliance with the global merchants that peddle the fuels that warm our environment? Does greed trump science in the halls of Congress?

  15. Eino says:

    POA:

    “And what fuels this disdain for science that seems to shape the RW narrative about global warming?”

    Which science? Mainstream or alternative?

    http://www.conservapedia.com/Main_Page

  16. poa says:

    Well…..that’s better, by gumbo! That site really spells it out for us. Global warming is a “liberal hoax”. Yesiree Bob!

    Egads and oh lordie. Surfing that site actually induces nausea. Are there really people that ignorant amongst us? Since when did swill become “information”?

    • Jeff Walther says:

      The anti-nuclear forces have been passing out swill as information for forty years and no one has managed to air a loud complaint publicly.

  17. poa says:

    I mean, ya gotta love it.

    Look the site over. Click on “dinosaur”. Did you know that man coexisted with dinosaurs, six thousand years ago? No? You didn’t know that? Well, you must not be schooled in “Creation Science”, right?

    Comforting, isn’t it, knowing that people holding such a high regard for science are seizing the reins of power back from the atheistic heathens on the left?

    I mean, like, gee golly, how can you not trust these realists to make science based decisions in our nation’s best interests about energy related issues? Good lord, folks, they know the truth about dinosaurs , don ‘t they?

    Lets let them plot America’s course towards our energy future. God will guide them. How can we go wrong?

    • Rod Adams says:

      @poa

      This is one of the reasons I think I have a better chance of convincing real liberals of the value of nuclear energy than in convincing true conservatives that there are risks associated with continuing on our current course and speed with fossil fuel consumption patterns.

      • jmdesp says:

        In a way, the ecologists are conservatives themselves, opposed to anything new, cherishing the idealized image of a time where things were simpler and not corrupted by modernity. And I’m not joking here, I’ve found some interesting smoking guns of links between the two ideologies.

        • poa says:

          Oh, I agree in many ways. I really think this whole thing about liberals vs conservatives has become a wedge that is purposely shoved between us, rendering us impotent to arrive at any consensus powerful enough to rock the political status quo. If you examine the site that Eino linked to, the purpose seems to be to alienate and anger rather than to actually inform. I find it hard to believe that some of the crap offered there was offered from a position of belief. Frankly, some of it is so absurd that the simple fact that the author was able to find his keyboard exempts the possibility that he possesses sufficient ignorance to believe his own blather.

  18. poa says:

    I understand, Rod. Unfortunately, the “realists” I’m insulting are the ones coming into power the next election cycle.

    Excuse my sarcasm about these jackasses. I tried to do search, seeking to find out about the positions politicians are actually taking about energy policy. The deeper I dug, the more alarmed I became. Both sides of the aisle have numerous people in high political position that are heavily invested in fossil fuel, contributing greatly to their wealth. A great many are multi-millionaires, in no small part because of investments in fossil fuel stocks or business holdings.

    It is no suprise that these scumbags push bogus science to protect their interests. What is suprising is the absurd nature of the bogus science, and the apparent ignorance of the great numbers of american citizens swallowing this bullshit. A short perusal of the site that Eino offered reveals a level of abject stupidity that defies the imagination. No wonder the huge influx of money being allowed into the electoral process can be sold as a “free speech” issue. We are a nation of idiots, if that website actually has believers. God help us

    • Jeff Walther says:

      We’re more a nation of folks who aren’t paying attention. It may be idiocy to ignore such critical issues, but there you go. I bet more folks can name two American Idol contestants than can name their two senators.

      • poa says:

        That’s wishful thinking.

        The site demonstrates that we’d be far better off if these jackass authors and their readers were ignoring the issues. Its my experience that these kinds of people are perfectly willing to obsess about issues they know nothing about. As a consequence, they become open receptacles for false information. And it spreads from one gaping jawed idiot to the next, aided along by these despicable mouthpieces like Limbaugh or Mathews.

  19. poa says:

    Which brings us to a question. On sites such as Rod’s, why is it that we often see accusatory insinuation implicating “the left”, or “the right” in criticized policies, yet when it comes to naming names, there’s a real dearth of specificity. Who are these liberal politicians that are so anti-nuke? Who are these conservative politicians that are such friends of the atom?? And vice versa?

    The conversation requires specificity. Vague insinuation about one side or the other only nets skepticism. I’d love to see a deep investigative posting from Rod outlining perceived foes and friends on the political front, exposing not only their stated positions, but their voting record concerning energy issues, as well as their financial portfolios. Thus we could judge motive, and the sincerity of their stated positions.

    • Rod Adams says:

      @poa – that would be one expensive and time consuming investigation. It would require more resources that I have to offer.

      I have, on occasion, tried to produce some posts with details and names. Search for Markey, Boxer, Alexander, Carper. There are also a couple of “politics” categories in the archives.

      • poa says:

        Well…… then. How are the right vs left conclusions drawn here? I have seen a number of comments critical of the left since I have been posting here. Your regular participant “Paul” comes to mind, as do a couple of other participants. They have done this expensive and time consuming research?

        Of course, I’m being facetious. But it is a concern, speaking as someone that came here uninformed, and looking for answers beyond the shallow crap we are force fed by the mainstream media.

        If you can’t credibly offer specific examples of friend or foe, and how they earned their designation, on what hook are your uninformed readers supposed to hang their hats on? Honestly, despite my weeks of reading and participating here, I have gleaned very little understanding of the political realities, except that some of the participating commentors here are rabidly partisan, and perfectly willing to cast aspersion without providing foundation. I don’t offer this observation as an insult, but rather as food for thought. Without credibly identifying friend from foe, I find it doubtful that one can offer a very convincing analysis of the political roadblocks and bridges that must be traversed if nuclear energy is to become a larger part of our energy structure.