Babcock & Wilcox ($BW): Selling the AI Boom a High-Cost, High-Emission Power Plant from the 1980s
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For nearly 160 years, Babcock & Wilcox (B&W) has made boilers — a technology that powered the first age of electric utilities, kept the US Navy afloat through two world wars, and then faded as combined-cycle gas turbines and renewables rendered conventional coal and gas-fired thermal plants obsolete for new, utility scale electricity generation in the United States. Now, with data centers driving a surge in electricity demand and order books for the largest combustion turbines stretching years into the future, B&W is proposing to sell an allegedly faster route to power: a new natural gas-fired boiler and steam turbine plant, sometimes called a gas-fired Rankine Cycle plant (we will refer to it as a “gas steam plant”), to be built by a start-up Independent Power Producer (IPP) called Base Electron.
The problem is that B&W's boilers are an entirely obsolete technology and its speed-to-power argument does not survive scrutiny.
A gas steam plant is a 30-to-40-year, front-of-meter utility asset that would generate electricity at 35–42% thermal efficiency as opposed to 58–60% efficiency for modern combined-cycle gas turbine ( CCGT) plants, requires more than 24 hours to cold-start, and will be grid-connected in one of the most oversupplied power markets in the United States. Perhaps recognizing the inadequacy of its boiler-only offering, the company has suddenly started to pitch an entirely novel design for a new power plant – where sometime in the near future new gas turbines will be fitted to B&W’s steam boilers to create a hybrid gas-turbine-and-steam-turbine-boiler plant. Applied Digital’s CEO has claimed this two-stage buildout will create a “combined-cycle plant”, even though modern CCGT plants don’t use boilers at all. Those facts alone call into question the viability of Base Electron and B&W’s power plant plans.
Key Points:
Related Parties B. Riley, Applied Digital, and Babcock & Wilcox Spun Up Base Electron Gas Steam Power Plant In Sharp Pivot to “AI Power” Late 2025, Fueled by Circular Investments, Warrant Incentives, and Hype.
160-Year-Old Boiler Maker On Brink Of Delisting Suddenly +400% AI Power Darling; B. Riley Now Dumping Stock.
Laws of Thermodynamics Mean B&W’s 1980s Gas Steam Tech (Rankine Cycle Boiler Plant) Burns 40% More Gas and Emits 40-50% more CO2 to Deliver Same Power as Modern Combined-Cycle Gas Plants.
No US Utility Has Built B&W-Style Gas Steam Plant In 41 Years; No Other Data Centers Or Boiler Makers Are Proposing to Build One Now.
Proposed Plant Would Be ‘Grid Connected’ In North Dakota, Competing In One Of Most Over-Supplied Markets In US. Even Applied Digital Is Distancing Itself From Project.
Project Does Not Appear to Have Site or Any Permits; With No Permits, No Grid Interconnection, and No PPA, We Believe It Is Very Unlikely B&W Project Ever Gets Funded or Built.
“Speed to Power” Claims Based on Fast-Tracked Steam Turbine Supply Undermined By Realities of Power Plant Permitting; Claims of Operations By 2028 Absurdly Optimistic As Twice As Fast As Permitting And Construction For Recent (Modern) Gas Plants In North Dakota.
Until AI Pivot, B&W’s Core Business Was Servicing Remaining 1950s-60s Era Power Plants For Parts and Maintenance; Core Business Valued By Our Analysis at ~$1.20-3.60 Versus $19 Today.
Even If Completed, Project is Worth Approximately $1-2 Per Share to B&W In Our Opinion, Assuming Generous 10% EBITDA Margin/3 Years.
Current $19 Price Based on Optimistic Analyst Estimates That Assume B&W Sustains New Run Rate, Building 9-10 Similar Low-Efficiency Plants Into Mid 2040s.
New Plan to Add Gas Turbines to Boiler Plant At A Later Date to Create “Combined-Cycle Plant” Seems Illogical –Combined-Cycle Plants Don’t Use Boilers.
Data Centers Are Routinely Opting for Modern Combined-Cycle Gas, Renewable + Battery Storage, And Quicker Behind-The-Meter Solutions Like Reciprocating Engines and Aeroderivative Turbines.
B. Riley Needs to Monetize 8-Year-Old B&W Investment While AI Is Hot.
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