Company Celebrates Bittersweet Birthday
The Salt Lake Tribune - by Judy Fahys
The nuke-waste outfit's executives are optimistic despite fall in stock's value
Nuclear-waste outfit's stock price is down as it heads carefully into sophomore year as a publicly traded firm.
EnergySolutions Inc. celebrated its first year Friday as a publicly traded company.
But the party couldn't have been very festive. The nuclear-waste company's stock price traded close to its 52-week low at $3.96, a drop of less than 1 percent.
In large part, EnergySolutions executives said last week, turmoil in the financial markets has dragged down the company's future prospects for the time being, just as it has for the other companies in its sector.
At the same time, the company stumbled over a few obstacles that have tempered its freshman-year exuberance. One complicated its efforts to tap into decommissioning funds at nuclear reactors to dispose of large parts. Another, the timing of a secondary offering this summer that allowed majority investors to pull out just as the world-market meltdown was beginning, dampened investors' enthusiasm.
Company executives say they've scaled back expectations, but only for the short run.
"We have a very great company," Chairman and Chief Executive Officer R. Steve Creamer told investors Wednesday, "a company that is well-positioned to be stable through a recession or a flat economy and is ready to blossom with the next economic rebound."
EnergySolutions remains on track to report revenues of up to $1.9 billion and earnings between 50 cents and 60 cents per share this year, executives said.
"The good thing about our company is we are still profitable," said Philip Strawbridge, executive vice president and chief financial officer.
The upstart that used to have such a voracious appetite for other companies - it has purchased nine businesses in four years - now looks like a hostile takeover target.
Creamer, however, has his eye on the long term. He noted that he bought additional shares a couple of months ago, when the price remained about $15, just above half the 52-week high of $38.45. With his family holding nearly $10 million worth of the stock, about 2.3 million shares, he told investors he's looking forward to buying more at what he sees as a bargain price.
A key reason for Creamer's cheerful outlook is the new administration and Congress headed for Washington in January.
"Democrats have always spent more on the Department of Energy and environmental-management programs than the Republicans," noted Strawbridge.
Under the GOP, budgets for environmental management - the kinds of projects EnergySolutions bids on - have been about $5 billion to $6 billion, he said. Under Democrats, the budget runs about $7 billion to $8 billion.
Still, the financial crisis is prompting the company to delay two growth strategies.
One is "license stewardship" for cleaning up closed nuclear reactor sites. Through a new subsidiary called "ZionSolutions," the company landed a $900 million contract last year to take over the license of the Zion Nuclear Power Station in Illinois, clean up the old plant site, then return ownership to is current owner, Chicago-based Exelon Corp.
EnergySolutions already has geared down work at the site because the current financial crisis has pared $100 million from the decommissioning funds set aside for the project and made the fund balance too low to make the job profitable. EnergySolutions announced last month that it has another year, until December 2009, to allow the markets to stabilize without having to tamper with the contract with Exelon.
"Even though it's been delayed, people are excited about it," said Strawbridge, adding that two similar contracts are under discussion.
Decommissioning is big business, with 13 U.S. reactors already shut down. The company's stock price took a big hit in October after federal regulators announced they would not allow nuclear companies to tap into decommissioning funds for their still-operating reactors. That means, with large parts like steam generators that need to be replaced periodically, reactor companies need to find other sources of funding to get rid of the old, large parts safely.
The EnergySolutions low-level waste site in Utah is, practically speaking, the only facility available for disposal of these parts for plants being relicensed. The Tooele County site, which is permitted to receive only low-level radioactive waste, already is the burial ground for about 70 of those large parts, said company spokesman Mark Walker.
Between the declining markets and the likelihood last year's federal funding levels will continue through most of next year, company officials stay focused on jobs they've already landed, including a $7.1 billion contract at the Hanford nuclear reservation in Washington state and the Atlas tailings cleanup near Moab.
But they're keeping an eye on future contracts, including multibillion-dollar federal cleanups in Kentucky, Ohio and Tennessee and Great Britain's rebidding of cleanups EnergySolutions inherited with one of its acquisitions.
Travis Williams, an equities analyst with Wasatch Advisors in Salt Lake City, is among those who wonder why the stock is trading at such a low price.
"It shouldn't get much cheaper," he said, "based on the business they're doing today."
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