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The Big Build

Utility infrastructure projects face high costs, labor shortages and global competition for resources.

Fortnightly Magazine - February 2008

employment. In our industry, craftspeople and other skilled employees move from project to project, so having a sizeable backlog provides a degree of job security that a similar job at a company with a smaller backlog might not offer.

The decision to locate the Power Group headquarters in Charlotte, N.C., is another recruiting tool we’ve been able to leverage. Charlotte is a growing, vibrant city with a moderate cost of living, and many job candidates are excited by the thought of relocating to Charlotte.

Fortnightly: How deep is Shaw’s backlog of utility infrastructure projects or construction contracts in general?

Gill: Corporate-wide, Shaw booked nearly $11 billion in new awards during fiscal year 2007 and its backlog of unfilled orders as of Aug. 31, 2007, rose to a record $14.3 billion—up 57 percent from approximately $9.1 billion the same time a year earlier.

Of that $14.3 billion backlog, Shaw’s power group accounted for $8.5 billion of the future projects, the majority contracted with regulated utilities. We expect this trend to continue during the next few years, as utilities continue moving forward with AQC projects and some new construction on coal-fired and intermediate gas plants.

In addition to these conventional projects, we’re currently involved in a geothermal project in Indonesia, and from time to time we have evaluated other projects such as wind and biomass that might leverage our EPC expertise. Finally, we’re also looking for cross-marketing opportunities that might be available because of work being done by Shaw’s fabrication and manufacturing, environmental and infrastructure, and energy and chemicals businesses.

Beyond the near term, we’re optimistic that our backlog will grow substantially as customers in the United States, China and elsewhere begin ordering nuclear power plants in large numbers. Again, as a part-owner of the AP1000 nuclear program, Shaw Power expects to be a major player in the nuclear renaissance.

Fortnightly: Do you see more interest in new utility infrastructure construction or in refurbishment of older facilities?

Gill: We are seeing interest in both. In some cases, utilities are opting to upgrade existing power plants to make them cleaner burning and more efficient, and our fossil organization has won a number of AQC and re-powering contracts. At the same time, we are executing three new greenfield coal power projects here domestically, and are engaged in discussions for several other new plant opportunities.

Our nuclear and maintenance divisions have been active in power uprates at nearly half of the 100-plus nuclear plants in the United States. The fact is, Shaw dominates the U.S. nuclear power uprate market, with 46 projects to increase a plant’s generating capacity by 2 to 20 percent through the installation of more efficient equipment and more accurate instrumentation. To date, the uprates performed by Shaw have added 2,050 MW of electricity to the U.S. grid, the equivalent of two baseload power plants.

Fortnightly: What types of utility infrastructure projects has The Shaw Group recently been awarded?

Gill: In 2007, Shaw Power’s fossil division was involved in six, new-build coal-fired plant projects for U.S. utilities—half of them using supercritical technology and the