$1 Billion B&W Deal Cut Back After Sale of Big Texas Utility

By Betty Lin-Fisher, The Akron Beacon Journal, Ohio

Feb. 27–The proposed sale of Texas electric utility TXU Corp. has left workers for Barberton-based Babcock & Wilcox Co. looking for answers.

Last year, the company said it had landed its largest and most significant contract in decades, to design and build eight large coal-fired boilers and pollution-reducing systems for TXU.

The contract would generate more than $1 billion in revenue for B&W, the company said.

Each of the so-called supercritical boilers will be able to generate 858 megawatts of power, while the pollution controls will reduce nitrogen oxide emissions below federal and state standards, B&W said.

Design work was under way in Barberton, with the first unit expected to be online in the fall of 2009 and the rest through 2010.

Before Monday’s announcement that TXU would be taken private, TXU notified Babcock & Wilcox’s parent company, McDermott International Inc. to suspend performance on five of the eight projects.

However, no notice has been given on the three unsuspended units.

In a news release Monday, McDermott officials said they had received no notices from TXU about the sale.

“We read TXU’s press release this morning and their comments regarding reducing the number of plants. However, B&W has not received any official word today from TXU related to either the suspended units or the other three,” said Bruce W. Wilkinson, chairman and chief executive officer of McDermott.

“Regardless of the potential change in TXU’s ownership or the status of these projects, we expect TXU will remain a valued customer,” he said.

The company said it was continuing work on the three unsuspended units.

The contracts for any suspended units require that TXU compensate B&W for all work performed to date and for all costs associated with the suspension, storage and resumption. In the event of a termination, the contracts provide for recovery of costs and a reasonable profit.

Shares of McDermott fell $1.89, or 3.7 percent, to $49.32 on Monday. Over the last 12 months, McDermott shares have risen about 40 percent.

Betty Lin-Fisher can be reached at 330-996-3724 or blinfisher@thebeaconjournal.com.

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Copyright (c) 2007, The Akron Beacon Journal, Ohio

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