Fluor Corp.’s work at Energy Department nuclear cleanup sites in Kentucky and Ohio has enhanced the company’s reputation at the agency, the construction giant’s chief executive told investors Friday.
Remediation of former gaseous diffusion plants at DOE’s Paducah and Portsmouth facilities is “proving us to be one of the DOE’s go-to contractors,” CEO David Seaton said on Fluor’s 2016 earnings conference call.
The company’s Fluor Federal Services subsidiary holds the $420 million Paducah GDP deactivation contract that expires on July 31; the Fluor-BWXT Portsmouth joint venture handles decontamination and decommissioning at the Portsmouth Site in Piketon, Ohio, under a 10-year deal potentially worth more than $2.5 billion through March 28, 2021, including options.
Despite Seaton’s rosy outlook, the Portsmouth work, at least, has suffered some setbacks recently. Earlier this month, the company disclosed it might miss a critical milestone to de-energize the old X-326 uranium enrichment building by up to six months. Around the same time, a crucial manager from leading subcontractor CH2M abruptly left his post. About a year ago, DOE said Fluor had room for improvement at Portsmouth, and split what had been a five-year contract option into a pair of two-and-a-half year options.
Nevertheless, Fluor is poised to remain a major player in DOE’s Cold War nuclear cleanup world. The company is less than a year into a five-year cleanup pact at DOE’s Idaho National Laboratory, and is bidding on at least one of two decade-long cleanup contracts the agency put on the street last year.
Revenue rose and profit rebounded in 2016 in the government segment, where Fluor books business from its DOE nuclear cleanup contracts. Segment profit for 2016 was about $85 million, up nearly 2.5 percent year over year after a dip in 2015. Segment revenue increased by more than 6 percent to over $2.7 million, according to the company’s latest 10-K filing with the U.S. Securities and Exchange Commission.
“I love the government business because it’s a good, steady, long-term contract base that pays the light bills so that we can go and build stuff other places around the globe,” Seaton said on Friday’s call.
Besides winning the Idaho Core Cleanup contract last year, Fluor is also part of the Atkins-led Mid-America Conversion Services team that earlier this month began processing depleted uranium hexafluoride at the Paducah and Portsmouth sites.
Fluor is also busy with bids, having at least sniffed at the 10-year Los Alamos National Laboratory legacy cleanup contract DOE put out for bid last year; Fluor representatives attended an October pre-solicitation site meeting in New Mexico.
Fluor is also said to be bidding against AECOM and BWX Technologies for the next 10-year liquid waste management contract at the Savannah River Site. A new regulatory filing shows the company may be teaming with the Toshiba-owned Westinghouse on that effort. About a month after DOE solicited offers on the contract potentially worth up to $6 billion over 10 years, with options, Fluor and Westinghouse created the jointly owned Fluor–Westinghouse Liquid Waste Services, according to a list of subsidiaries appended to Fluor’s latest 10-K.
Fluor is the majority partner on a joint venture, which was stood up July 28, 2016, according to a filing with the Delaware Department of State’s Division of Corporations. The company did not reply to a request for comment Friday. Fluor disclosed the partnership’s existence the same week Westinghouse’s disastrous performance in the U.S. nuclear market sent its parent company, Japan’s Toshiba, into a financial tailspin. The Japanese mainstay, which acquired Westinghouse a decade ago, said Tuesday it would book a $6 billion loss on the U.S. nuclear segment’s abysmal performance, and cease building new nuclear power plants.
Meanwhile, work on DOE’s soon-to-be-awarded Savannah River liquid waste contract would begin July 1.
Los Angeles-based AECOM, which leads incumbent Savannah River liquid waste prime Savannah River Remediation, is bidding on the follow-on contract, as is BWX Technologies of Lynchburg, Va. Bechtel National is said to be a junior partner on one of the bids.
The bidding war at Savannah River represents a sort of breaking up of the band. While Fluor is not part of Savannah River Remediation, BWX Technologies is.
“It’s a dog-fight in this industry,” Seaton said on Friday’s call.
Overall, Fluor’s 2016 net earnings fell more than 30 percent year over year to just over $280 million. That includes a $45-million non-cash charge in the company’s fourth quarter that had nothing to do with its U.S. nuclear or nuclear-cleanup businesses. Even excluding the charge, annual profit fell about 20 percent from 2015 during what Seaton called one of the hardest years in recent member for the engineering and construction industries.
Fluor’s 2016 revenue, meanwhile, rose about 5 percent to just over $19 billion.
