A steep and continued decrease in the use of coal to make electricity is largely responsible for costing 126 people their jobs at Babcock & Wilcox Enterprises’ facilities in Summit County.
The Charlotte, N.C.-based power generation company on Tuesday said it is laying off more than 200 people — 126 in Barberton and Copley Township — as it restructures its traditional power business in the face of declining coal usage by electric utilities in the United States.
Most of the local people losing jobs are salaried and in engineering and support functions, a company spokesman said.
Shares of B&W Enterprises plunged after the company, the former power generation segment spun off in 2015 from Babcock & Wilcox, drastically reduced its adjusted earnings guidance for this year. Adjusted earnings now are expected to range from 63 cents to 83 cents per share; the company just last month reaffirmed guidance of $1.25 to $1.45 per share. (The other half of the now-split B&W is BWX Technologies in Lynchburg, Va.)
Shares fell $4.02, or 21.2 percent, to $14.92.
The drop in B&W Enterprise earnings is in large part because of the outlook for coal-generated electricity, coupled with one-time problems at a renewable waste-to-energy plant being built in Europe and a temporary halt to work at a Canadian oil sands site due to a large wildfire. The company said Tuesday that 2017 earnings should be better than its original 2016 earnings outlook.
Most of the eliminated positions — 113 — were in Barberton. With the layoffs, the company’s power segment payroll totals 737 employees in Barberton and 120 employees in Copley. Employees were told Tuesday of the cuts.
B&W Enterprises is the largest private employer in Barberton. “As with any workforce reduction, the impact to the local economy will be detrimental to the city budget and, most importantly, the employee and their household,” the city said in a news release on Tuesday.
Barberton Mayor William Judge said he and his administration met with B&W Enterprise’s leadership team and reached out last week to the company but had no discussions related to job cuts.
City offers assistance
“I understand the difficulty created by any workforce reduction and my administration will reach out to B&W in order to offer assistance to affected employees,” Judge said in a statement. “B&W continues to play an important role in our community and we look forward to continuing our relationship with them.”
B&W Enterprises’ power segment designs and engineers coal-generated power plants and components for coal-generated plants. It also services existing plants and provides after-market parts.
The restructuring of the company’s power segment is being done to be “more competitive in a declining coal generation market,” said Ryan Cornell, a company spokesman based in Barberton. “The size of the coal generation market has shrunk and will continue to shrink.”
B&W Enterprises based its original earnings outlook in part on coal usage forecasts that subsequently were revised downward, E. James Ferland, chairman and chief executive officer, said in a conference call with industry analysts.
“These are likely lasting changes to the market,” he said.
Overall coal consumption in the U.S. is expected to drop 15 to 20 percent in 2017 and 2018 from projections made only a few months ago, he said.
For example, a drop in coal’s share of electricity production from 34 percent in 2016 to 27 percent in 2017 and 2018 “is a 15 to 20 percent reduction in the market. So it is a big reduction for us,” Ferland said.
As a result, the company needs to reduce the size of its coal operations by 20 percent, he said.
“We will pursue additional facility consolidations,” Ferland said.
The reorganization includes separating its renewable energy business into its own segment, Ferland said.
B&W Enterprises’ coal business will continue to be a strong cash contributor, he said. It now accounts for about $800 million a year for the $1.8 billion company. The expected 15 to 20 percent drop in coal usage represents about a $100 million cut in revenue.
Cornell said some employees’ positions were eliminated Tuesday; other employees will leave their jobs in coming weeks as they finish up projects. Jobs also are being eliminated in Charlotte and Canada.
Laid-off employees will receive severance payments and job-placement assistance. B&W said cash and non-cash severance expenses and related costs over the next 12 months will be $55 million to $60 million.
Babcock & Wilcox Enterprises will employ about 5,700 people worldwide after the layoffs.
B&W traces its history to the 1860s as a boilermaker company. It opened its first facility in Barberton in 1906.
B&W Enterprises main goal is to diversify and will continue to look to buy other companies that fit its business model, Ferland said. “We do have cash to deploy. We just need to find smart ways to do it.”
According to the latest federal government forecast, coal consumption to make electricity is expected to decline 10 percent this year in large part because of low-priced natural gas from fracking and also from a warmer-than-normal winter that also reduced electricity generation.
Natural gas is displacing coal to make electricity. The Energy Information Administration said utilities continue to retire coal-fired power plants not just because of competition with natural gas generation but also to comply with EPA mercury and air toxic standards. Natural gas produces far fewer pollutants than coal.
Jim Mackinnon can be reached at 330-996-3544 or firstname.lastname@example.org. Follow him @JimMackinnonABJ on Twitter or www.facebook.com/JimMackinnonABJ. Katie Byard can be reached at 330-996-3781 or email@example.com.