A company that makes steel towers for wind farms plans to lay off workers in Illinois even as construction accelerates in the U.S. wind market ahead of the expiration of a key federal tax credit.
Arcosa Wind Towers Inc., a subsidiary of Arcosa Inc., will lay off as many as 148 employees beginning in mid-November, according to the Illinois Department of Commerce and Economic Opportunity. Under Illinois law, companies must notify the state when they plan to lay off workers.
Bryan Stevenson, Arcosa's chief legal officer, said the company is planning a "partial workforce reduction" while it retools a plant to manufacture larger towers.
"Our goal is to secure additional orders based on the plant's geographic proximity to new wind farm developments and our long-term customer relationships, which will help us minimize the number of employees affected by the layoff," Stevenson said in an emailed statement.
The unemployment rate in the U.S. renewable power industry stands at around 13%, which is significantly higher than the national figure and down just 1 percentage point since the end of June.
Unemployment remains stubbornly high even though the sector performed well through the coronavirus pandemic. "I think, by and large, what we thought would play out looks like it will here in 2020," Larry Culp, chairman and CEO of General Electric Co., which among other things manufactures wind turbines and is one of Arcosa's top tower customers, said at a recent investor conference.
Wind farm developers have been busy in the U.S. since lawmakers decided late last year to bump up the value of the production tax credit and extend the incentive to the end of 2020, according to S&P Global Ratings. The firm expects U.S. wind installations to nearly double this year to almost 19,000 MW, thanks to the added financial support as well as falling technology costs and growth in environmental, social and governance investing.
Through June, the country's wind industry had installed 4,371 MW in 2020, an increase of 71% from the first half of 2019. Historically, installations accelerate strongly in the final months of the year.
"In wind towers, the current backlog supports our 2020 production plans, and we're working with customers on 2021 orders," Arcosa President and CEO Antonio Carrillo said on an earnings call in July. "[We] expect a transition in the medium term as PTC phases out. However, we remain optimistic about the fundamental strength of renewable energy and wind specifically."
Late last year, the Trump administration imposed preliminary duties on imported wind towers from Canada, Indonesia and Vietnam after Arcosa complained that it had to cut its prices to compete with foreign rivals.
Revenues in Arcosa's wind towers and utility infrastructure division rose 17% year over year in the second quarter. However, CFO Scott Beasley told analysts in July that lower tower prices weighed on margins.
Analysts expect Arcosa to report adjusted third-quarter earnings of 65 cents per share — down from 68 cents per share a year earlier — when the company announces financial results on Oct. 28, according to the S&P Global Market Intelligence consensus mean estimate.