Like a physician with her stethoscope at the outset of a check-up, astute shareholders and directors should use the level and trend of a utility’s market-to-book ratio (MtB) as one of the first...
The Big Build
Utility infrastructure projects face high costs, labor shortages and global competition for resources.
procurement and project management work on four new nuclear units in China using the AP1000 design. Just as significant, as U.S. electric utilities pursue environmentally friendly generating options, nuclear power is again becoming very attractive since it emits zero greenhouse gases. According to the U.S. Nuclear Regulatory Commission, during the next few years, it expects to receive construction and operating license applications for 33 new nuclear power plants—and of those, at least 14 are expected to use the AP1000 plant design.
Fortnightly: The costs of building utility infrastructure projects are increasing. What role does The Shaw Group have in keeping those costs under control?
Gill: Shaw works closely with our customers on the details of design and scope development, and we communicate the costs associated with a given project prior to initiating the full release for the contract. We then collaborate on the best risk profile for the contract and negotiate a fair return on the services we provide, all of which enables Shaw Power to help our customers control project costs.
We also work closely with our subcontractors and suppliers to manage costs and project schedules. Like many contractors, Shaw flows prime-contract requirements regarding penalties and damages to our subcontractors and suppliers when they fail to meet schedules or adversely impact the cost of a project.
The vertically integrated nature of The Shaw Group also helps us to manage costs. For example, Shaw’s Fabrication and Manufacturing Group is the world’s largest supplier of industrial piping, which gives us the advantage of providing our customers with the most competitive pricing and schedules utilizing Shaw controlled engineering, procurement, fabrication, project management, construction, start-up and commissioning services for their project.
Finally, Shaw Power has now executed more than 27 million consecutive work hours without a lost-time accident. We are extremely proud of the safety culture we have developed for Shaw Power employees and other people who wish to participate with us on our projects. Having such a strong safety program and record not only ensures the safety of our workforce, it also translates into significant cost savings for the projects.
Fortnightly: Increases in costs for skilled and craft labor are a problem, and some expect a lack of skilled workers going forward. How is The Shaw Group dealing with these issues?
Gill: Without a doubt, demand for engineers, designers, craftspeople and project managers throughout our industry currently exceeds the supply of skilled employees.
In some ways, that’s a good problem for our company to have, because it means we have a lot of business. Like other companies in our industry, we have responded to the shortage of skilled workers by becoming more aggressive in our recruiting on college campuses, in high schools, vocational and technical schools, and at job fairs. In addition, Shaw Power plays an active role in local education and workforce development to help ensure future job-seekers have the kinds of skills we need to be successful.
The fact we have so much work also is a recruiting tool, because we are in a better position than many companies to offer long-term