INVESTOR DAY 2015 ROGER BLAIR, PRESIDENT, INDUSTRIAL/ENERGY, U.S.

Transcription

1 INVESTOR DAY 2015 ROGER BLAIR, PRESIDENT, INDUSTRIAL/ENERGY, U.S. JUNE 10, 2015

2 2 INVESTOR DAY 2015 JUNE 10, 2015 ROGER BLAIR, PRESIDENT, INDUSTRIAL/ENERGY, U.S. Male: So sometimes I d like to say (enough) or something completely different because part of my business is specialty niche business. So we're going to have a couple sectors that I ll talk about. One is kind of a general industrial utility business which for the most part, we have -- we have approached through the power sector whether it s transmission, whether it s generation. And the second part is specialty underground storage business that sits in amidst in the midstream oil and gas business. So they re kind of different markets but we ll -- kind of I ll go back and forth and hopefully I wouldn't confuse you too much. So we're talking about the first one which is heavily in the power sector. The market remains flat in the U.S. So combinations of reasons, timing-wise, it s related to frankly the overall economy. So when economy is down, demand is down, at the same time, as everyone knows, efficiencies in electricity usage have drastically improved in the last five and 10 years. And so that combination is to get the market pretty flat. We expect it to remain flat based on talking to the folks that are in the generations business, that

3 3 own -- they own the facilities. But there will be -- there will be some opportunities because of the change in the mix of the -- of the fuel source. So coal plants are retiring, the natural gas stepping up, and of course, continued growth in the renewables but we have to remember that renewables are relatively small piece of the total picture, so even though their growth is large, dollarwise, the money -- a lot of the money is going to be spent on natural gas generation as far as the new generation. It s going to be frankly the biggest mix. You know, a few years ago, coal was the biggest mix, natural gas would be the biggest mix for generation in the U.S. in the next, you know, five years or so. The other thing is we're seeing a trend away from -- there will be some large natural gas generation projects to replace coal where it makes sense to feed into the system, but there is also a big trend towards more distributed energy. So smaller natural gas plant and renewables and sometimes the natural gas plants are (inaudible) simple cycle to basically take the swing as solar and wind very based on the time of the day and time of the year. So there will be some opportunities even though the general trend for generation is going to be down. And on the grid side, we think the T&D market is

4 4 going to have a big spin to basically be able to deal with this change in dynamic of generation. The other piece of the business is our underground storage business which is kind of a niche subset of the midstream oil and gas business. Fortunately right now, there is a large demand for underground storage related to the liquids market, so natural gas liquids. The shale plays from the fracking as well as the oil plays result in extracting NGLs so propanes, butanes, other natural gas liquids which are -- which have a higher value than natural gas. They re exportable unlike crude oil, so with a few exceptions, we can export crude oil out of the U.S., we can and have been doing natural gas liquids. So a lot of the projects that we're seeing are related to increased extraction facilities, fractionators, and increased export capabilities of the natural gas liquids which require a storage piece for operational basically consistency. So they fractionate the liquids at a certain rate. They want to load up tankers at a very high rate to avoid the (diverge costs), so you need something in between to provide that buffer. And so a lot of the projects we're doing now are related to that dynamic. The fact that the oil prices are down and gas prices are down, actually it does not directly hurt the midstream piece because in the petrochemical side,

5 5 that s their fuel cost, so that actually makes their business more economical. And because there is a high value in the extracted liquids, the fact that there s already an inexpensive source of the raw products helps many parts of the midstream business. So I kind of talked about on our, what I call our power section or the utilities industrial piece, our major competitors are firms that you probably heard of. And so the big power -- the big power companies or companies that had big power components, power engineers, we see them a lot in our T&D side, but now that they have (Bernstein Rowe) as part of that group, we also see them on the generation side. So we're 12th -- (E&R) ranks us as 12th in the power sector and so we're not -- we're not one of the biggest. We will not likely be one of the biggest because almost everyone ahead of us on this list plays heavily in the (EPC) or the construction market. So their dollars are bigger because the construction dollars are larger chunks in the special services. So we think we definitely have room for growth but we don t have -- we don t have the expectation that we're going to be number one in power because that would require a large construction component. So operationally, we're also a relatively small group compared to the whole U.S. business and people, a

6 6 little over 260 folks. And what you can see here is there are some red circles and kind of blue green circles. The red is our underground storage group which our biggest office is in Houston because that s the core of where the energy -- that energy business sits, that makes sense. We have -- we do have -- we have an office in Baton Rouge and we actually have a small office in South Dakota basically to support some of the work we do in Northern U.S. and historically, we have done in Canada. And then we have (Botcos) for our power business. So we're in Boston, San Francisco, New York and we have some hydro folks in Portland. We also do have an office across the river in Newark that is really the kind of the headquarters of our T&D business and we have one -- right now, it s one major project but we're looking at several other opportunities. So as I said, we're a relatively small part of the overall business. In 14, 4 percent of the -- of the total business. This year I think 14 was a bit of aberration, we expect to be 5 percent or 6 percent this year, but still a relatively small part of the business. So again, kind of separating the two pieces of the market, this is the power side and where we re addressing the utility and industrial market. We

7 7 have about, you know, equally in the design and program management piece, so those are two things that the firm has been known for across markets. We also have those capabilities. Our owners, lenders, engineers at our upfront work, we see both of those as growth opportunities. So the upfront work, as Jim mentioned, we think there s opportunities to work with the environmental group to get in early. We, in the past, did not -- have not really gone after that market. We now have capabilities to try to do that. The other is in the (auto) engineer sector, we're making a strong push towards that. I ll talk about in a little bit mainly because we see in the