The Babcock & Wilcox Company

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The Babcock & Wilcox Company

20 South Van Buren Avenue
Barberton, Ohio 44203-0351
U.S.A.
Telephone: (330) 753-4511
Toll Free: (800) 222-2625
Fax: (330) 860-1886
Web site: http://www.babcock.com

Wholly Owned Subsidiary of McDermott International
Founded: 1867 as Babcock, Wilcox and Company
Employees: 10,800
Sales: $1.37 billion (2004)
NAIC: 332213 Plate Work Manufacturing; 331210 Iron and Steel Pipes and Tubes Manufacturing from Purchased Steel; 333412 Industrial and Commercial Fan and Blower Manufacturing; 333994 Industrial Process Furnace and Blower Manufacturing

A subsidiary of McDermott International, The Babcock & Wilcox Company (B&W) provides boilers, steam generators, and related equipment and services to the conventional and nuclear power generation market; process recovery boilers and services to paper mills; and equipment used for environmental purposes, to reduce emissions created by the burning of fossil fuels as well as equipment to convert waste products into energy. Furthermore, B&W manufactures "package boilers" used by a wide variety of customers, including manufacturing plants, hospitals, and universities, to produce steam to generate energy or for use in industrial processes. The company also offers a complete range of field construction, construction management, installation, and maintenance services for the boilers it sells. In addition to its headquarters in Barberton, Ohio, B&W maintains operations in Lancaster, Ohio; West Point, Mississippi; Cambridge, Ontario, Canada; and Beijing, China. All told, the company employs more than 10,000 people.

MID-19TH CENTURY ORIGINS

The men behind the Babcock & Wilcox names were childhood friends, George Herman Babcock and Stephen Wilcox. Born in Rhode Island in 1830, Wilcox was two years older than Babcock. He was a talented inventor who, after a common school education and an apprenticeship, began improving existing machines and developing new ones. He received the first of 47 patents at the age of 23 when he created a hot-air engine that he tried to sell to the United States Lighthouse Board as a way to produce fog signals. Wilcox soon turned his attention to a field that had far greater commercial potential: steam boilers. In 1856 he and partner O.M. Stillman, a Babcock relative, received a patent on an improved water tube boiler, one that applied water circulation theory to produce a safe boiler, not prone to explosion like earlier versions. The device was not without flaws, however, and 11 years later Wilcox teamed up with Babcock to perfect the water tube boiler.

Babcock was the son of a successful inventor, and his mother's family also boasted a large contingent of mechanics. Born in New York State, he moved to Rhode Island when he was 12 and became friends with Wilcox. At the age of 19 he launched his own newspaper and printing company and, working with his father, invented a pioneering Polychromatic printing press. Babcock then turned his attention to engineering and during the Civil War worked as the chief draftsman of the Hope Iron Works in Providence, Rhode Island. It was in Providence that he was reunited with Wilcox. The two men worked together to improve Wilcox's water tube boiler, which they knew would find a receptive market because of the post-war demand for steam-powered locomotives and engines for manufacturing. In 1867 they received patents for the "Babcock & Wilcox Non-Explosive Boiler" and the "Babcock & Wilcox Stationary Steam Engine." In that same year they formed Babcock, Wilcox and Company, along with Joseph P. Manton, the founder of Hope Iron Works, to manufacture the new boiler.

The boiler was well received and found a new major source of customers in the 1880s with the growth of the industry that arose to generate electricity. In 1878 famed inventor Thomas Edison bought a B&W boiler for his work on electricity and a year later made a successful public demonstration of incandescent lighting, ushering in a new era of electric power. In 1881 four B&W boilers were installed in the first central electrical station in the United States, which was owned by the Brush Electric Light Company of Philadelphia, Pennsylvania. That same year, the B&W partnership was incorporated as The Babcock & Wilcox Company, funded by $225,000 and headed by Babcock as president. It was not long before the company opened its first international office, located in Glasgow, Scotland. A future B&W president, Nathaniel W. Pratt, headed the operation and began selling boilers to process industries throughout Europe. A year later, in 1882, Edison brought electric street lighting to New York City, powered by four B&W boilers in the Pearl Street Central Station in lower Manhattan.

B&W also developed other new markets for its boilers, in particular marine power. In 1889 Babcock fitted his yacht with a specially design boiler that became an immediate sensation. Five years later the company created a Marine department and soon a number of U.S. and British naval vessels would be equipped with B&W marine boilers. In fact, until the advent of the nuclear age, virtually all U.S. Navy ships and a large portion of America's merchant fleet were powered by B&W boilers. Even with the introduction of reactor power, Navy ships continued to rely on B&W pressurizers and heat exchangers. Moreover, B&W designed and built the power plant for the United States' first nuclear-powered merchant ship, commissioned in 1959.

COMPANY FOUNDERS DIE: 1893

In November 1893 Wilcox died. Just 19 days later Babcock passed away as well, and Pratt took over, beginning a period of turnover in the top ranks of B&W management. Pratt died in 1896 and was replaced by Edwin H. Bennett, who died two years later. His replacement, Edward H. Wells, would have a long tenure, however, and would lead B&W well into the 20th century.

The early years of the new century brought a number of developments. In January 1901, B&W opened its first manufacturing plant, located in Bayonne, New Jersey. A year later, the area's first subway system opened in nearby New York City, powered by B&W boilers. Then, in 1903, Chicago's Fisk Street Station power generation plant installed 24 B&W boilers to become the first utility to rely solely on steam turbines to produce electricity. To meet the demand for its products in the power generating, marine, and industrial markets, B&W expanded its operations through acquisitions. In 1904 it bought the Pittsburgh Seamless Tube Company operation in Beaver Falls, Pennsylvania, and two years after that B&W acquired the Stirling Consolidated Boiler Company plant in Barberton, Ohio. Not only did this latter deal expand its line of marine and stationary boilers, it provided B&W with its future corporate home.

COMPANY PERSPECTIVES

For more than 135 years, The Babcock & Wilcox Company (B&W) has been supplying innovative solutions to meet the world's growing energy needs. With power generation systems and equipment found in more than 800 utilities and industries in over 90 countries, we are truly generating powerful solutions.

As the century progressed, B&W remained in the forefront of boiler technology. Whereas generating plants had once increased capacity by simply adding more boilers, they turned to massive single boilers, some weighing as much as a Navy destroyer, to meet the escalating demand for power. In this way the duplication of expensive hardware was eliminated, resulting in more economically produced electricity. Larger boilers also led to B&W to become involved in the use of pulverized coal for fuel, which increased the amount of heat generated per unit of coal. In 1926 B&W acquired a maker of pulverized coal equipment, Fuller Lehigh Company. The new fuel, however, led to the accelerated deterioration of a boiler's firebrick refractory. To address this problem, B&W led the way in the development of a water-cooled furnace, and in 1933 resulted in the introduction of B&W's Integral Furnace boiler, combin-ing a boiler and water-cooled furnace, capable of burning pulverized coal, as well as any combination of oil and gas. In that same year, B&W introduced Junior Firebrick for marine boilers, offering a service life as much as four times longer than the material the in use. Another important development during this period was the 1935 installation of the first "black liquor" recovery boiler in the United States, using a byproduct of the pulping process as a fuel. A year later the company introduced the Radiant boiler and Open-Pass boiler.

Although the U.S. economy was mired in the decade-long Great depression of the 1930s, B&W continued to find sufficient need for its equipment to keep its plants running. One of the notable contracts of the period was the manufacture of the penstocks, water-carrying steel pipes, used in the Hoover Dam project in 1932. With war clouds developing over Europe and the Far East, the United States built up its Navy in preparation for another World War, and once the country entered the war in December 1941 the pace of construction of vessels of all types increased dramatically. Hence, B&W sold the government a large number of water-tube boilers, water-cooled furnaces, superheaters, air heaters, pulverized-coal equipment, chain-grate stokers, oil burners, seamless tubes and pipe, and refractories. It was not just the marine market that relied on B&W equipment; there was also healthy demand from power plants needing to increase capacity to meet electricity demand from war industries, which in turn needed B&W equipment as they ramped up production.

The war effort having jumpstarted the U.S. economy, B&W prospered during the post-war economic boom. Demand was strong for both industrial and heating boilers, but because of escalating field construction costs, B&W in the late 1940s introduced the package boiler, built in B&W shops and shipped to the customer for installation. It was also during the post-war years that B&W became involved in the nuclear power field. In 1953 it supplied many of the key components used in the U.S. Navy's Nautilus submarine, the first nuclear-power ship in history. Revenues rose steadily during this period, from $64.2 million in 1949 to $170.7 million in 1949 and more than $305 million in 1953. The company included three divisions. Boilers still accounted for the bulk of its business. The Tubular Products Division, which made carbon and alloy steel tubing used in making boilers and sold to other industries, contributed about 30 percent. A third division, generating about 5 percent of sales, produced refractories, insulating firebrick, and other furnace materials. Another 10 percent of revenues came from a pair of subsidiaries acquired in the 1920s: Bailey Meter Co., a Cleveland-based boiler control and metering equipment maker, and Diamond Power Specialty Co., a Detroit-based mechanical boiler cleaning equipment manufacturer.

B&W continued to expand its product lines and capabilities during the rest of the 1950s. It acquired Milwaukee-based Globe Steel Tubes Company in 1955 to bolster its Tubular Products Division. A year later the B&W formed a fourth unit, the Atomic Energy Division, to produce cores, nuclear fuel elements, and other reactor parts. In 1957 B&W introduced the coal-fired Universal Pressure boiler, the first commercial, supercritical pressure steam cycle unit. Also of note, in 1958 the Boiler Division moved its headquarters from New York to Barberton, which would eventually become B&W corporate headquarters as well.

KEY DATES

1856:: Stephen Wilcox invents an improved water tube boiler.
1867:: Wilcox and George Herman Babcock form Babcock, Wilcox and Company.
1881:: The partnership is incorporated as The Babcock & Wilcox Company.
1893:: Wilcox and Babcock die within 19 days of each other.
1906:: The Stirling Consolidated Boiler Company plant is acquired in Barberton, Ohio.
1933:: B&W introduce the Integral Furnace boiler.
1956:: The Atomic Energy Division is formed.
1978:: The company is sold to J. Ray McDermott & Co., Inc.
1982:: B&W begins settling asbestos liability claims.
2000:: Due to asbestos claims, B&W seeks Chapter 11 Bankruptcy protection.
2006:: B&W emerges from bankruptcy.

B&W IMPACTED BY 1979 THREE MILE ISLAND DISASTER

B&W continued to make advances in boiler technology and grew its nuclear power business in the 1960s and 1970s. Among the most important milestones of this period was the 1969 development of a construction technique that allowed a nuclear power plant to erect a complete outer shell before the major components were installed. Another was the 1973 installation of the world's largest electrical generating unit, a 1,300-megawatt, pulverized coal-fired plant for the Tennessee Valley Authority. Unfortunately, B&W was also connected to the first case of melted fuel in a full-scale commercial nuclear power plant when, in March 1979, one of the units at the Three Mile Island nuclear power facility in Pennsylvania came perilously close to causing a catastrophic nuclear accident. As it was, Three Mile Island was the United States' worst commercial nuclear accident, and because B&W designed the nuclear steam supply system and built the reactor, it found itself at odds with the plant's operator, General Public Utilities Corporation, each side blaming the other for the incident.

Shortly before the Three Mile Island incident took place, ownership of B&W changed hands, as J. Ray McDermott & Co., Inc., a Louisiana maker of production platforms for the offshore oil industry, acquired the business. McDermott paid $750 million for B&W and less than a year later found itself facing $4 billion in lawsuits related to the Three Mile Island accident. McDermott had internal problems of its own to contend with, including a political bribery scandal that resulted in several of its executives going to prison. The combined company had to endure a rough patch as a new management team took over, but the addition of B&W soon began to pay dividends for McDermott, whose fortunes were bolstered by B&W at a time when the production platform business was in a down cycle. In addition, the two companies proved to be more compatible than might appear at first glance: B&W's tubular products were not only suitable for boilers but could also be sold to oil companies by McDermott for drilling activities as well as pipelines and other transport needs for oil and gas.

After B&W emerged from the Three Mile Island difficulties, it found itself dealing with another problem, asbestos claims. Although it never manufactured asbestos, B&W had for many years used the material—at the behest of government agencies—as insulation in power-generation projects in order to protect both people and equipment. This came to an end in the early 1970s when asbestos was phased out, but B&W found itself the recipient of asbestos liability claims, which it would be saddled with for the next 20 years. Starting in 1982 B&W began quietly settling claims out of court, dispatching with about 340,000 of them by the end of 1999 at a cost in excess of $1.6 billion, an amount borne by both B&W and its insurer.

Even with the asbestos suits hanging over its head, B&W carried on business. It looked to countries where so many of the world's manufacturing operations were moving, resulting in a rising demand for electricity. B&W expanded its international operations through joint ventures established in Mexico in 1985, Indonesia and the Peoples' Republic of China in 1986, India in 1989, Turkey in 1990, and Egypt in 1994. The company also opened a new division in 1988, the Energy Services Division, to perform repair and upgrade services on fossil-fueled power plants as well as industrial units. In 1995 B&W opened the Clean Coal Environmental Development Facility, an Alliance, Ohio-based combustion and emissions testing facility that kept the company on the cutting edge of modern power generating technology.

The asbestos problem only grew worse with time, however, as plaintiffs' demands escalated, despite the total number of claims having been whittled down to about 45,000. In March 2000 B&W elected to file for Chapter 11 Bankruptcy protection in order to work out a comprehensive solution to the asbestos liability claims. The company remained in Chapter 11 until early 2006. During that time the number of asbestos personal injury claims swelled to more than 222,000. Part of the company's reorganization plan, approved by a federal court in late 2005, called for the creation of a $1.9 billion fund to settle these claims. The company's business was thriving, as demonstrated later in 2006 when B&W signed a deal in excess of $1 billion to supply Texas power plants with eight coal-fired boilers and related equipment, the largest North American boiler order in several decades. With the burden of asbestos claims about to be lifted, the company hoped to resume a history of continued and steady growth.