Dive Brief:

• The accelerated decline of the coal industry has led Babcock & Wilcox to restructure its traditional power business, seeking to reduce overhead and boost efficiency to help offset a loss of coal-related revenue.
• The company said it expects a 15% to 20% reduction in U.S. coal customer demand for parts and services by 2017 or 2018.
• B&W eliminated about 200 positions, and consolidated aftermarket and global new build activities for coal-fired generation into one segment that will be led by Mark Low, senior vice president of the new power segment.

Dive Insight:

The decline of the United States coal sector is impacting companies beyond just generation, and services and technology leader B&W is restructuring its organization in attempt to offset lower revenues.

“We have reduced the size of our organization that supports the coal market by roughly 20% and restructured how we support this market,” CEO and Chairman E. James Ferland said in a statement. “These changes will allow us to continue to provide outstanding service to our customers and maintain solid profit margins in our power business despite an expected 15-20% reduction in U.S coal customers’ demand for our parts and services by 2017 or 2018.” 

B&W said the new organizational structure includes a redesign of workflow for its North American-based coal power generation resources, "to provide an effective, flexible organization that can adapt to the changing market conditions."

The company will eliminate more than 200 positions in North America and "other cost-savings measures across the enterprise." There are likely to be facility consolidations in the coming year as well.

Cheap natural gas and stricter environmental rules on generators have accelerated the decline of coal generation. Coal made up 80% of the 18 GW of generation retired last year, according to the U.S. Energy Information Administration.

Severance expenses and other costs over the next 12 months will be approximately $55 million to $60 million, of which approximately $30 million are non-cash. Those expenses will include the write-down of a coal power plant and and other factors.

After the power-segment reorganization, renewable energy projects, including the B&W Vølund subsidiary, will be consolidated into another segment, led by Senior Vice President Paul Scavuzzo. The new structure is intended to allow the power segment focus on efficiency and support for B&W's traditional customer base while the renewable segment focuses on project execution and growth.