Engineering, procurement and construction (EPC) contracts are evolving as utilities seek to spread risks, contain costs, and execute their business strategies. As a result, turnkey contractors are...
Engineering and construction firms adapt to a changing market.
consulting business is a distinct unit, but we coordinate closely. The key is to be really intertwined, when capturing new business and managing projects.
Eppinger, Fluor: Fluor is the largest publicly traded EPC firm and maybe the only one with an A credit rating. That strong balance sheet provides a significant amount of security behind our EPC contracts, which helps clients obtain financing. That’s important, given the stringent requirements lenders are seeking in today’s market.
We’ve always been involved in the major power project segments. Years ago the main projects were focused on fossil generation. As regulations change, the market changes. We’re now active in things like new nuclear plants and SMRs [small modular reactors], and those markets weren’t active 10 years ago. Also we’re pursuing carbon capture projects. Nobody even spoke of that 10 years ago.
Renewables have gone through resurgence and major OEMs [original equipment manufacturers] have developed the technology and back-stopped it, driving it to become a major generating source. We consciously decided to focus on solar, both PV and CSP [concentrating solar thermal power].
We’ve strengthened our global procurement capabilities to the point where we can source equipment and material anywhere in the world.
Champagne, CH2M Hill: We’ve become better known in the power industry than we used to be. Previously we were strongest in water and other infrastructure, but now we have a strong reputation in power.
We perform everything—engineering, construction, startup, and testing—internally at our company. That seems to be a preferred approach compared to what we’d see in the past, with an engineering team and a construction company. Owners are interested in having one company that’s responsible for everything and can do it all in house.
Many utilities have reduced their staffs, cutting their engineering teams and getting down to just operating plants. As a result they’ve looked to EPC firms to provide a full solution that doesn’t necessarily require a lot of oversight. They rely on us to provide a performance-based turnkey approach.
Theis, Burns & McDonnell: We began our construction group in the mid-’90s. At that time there was a huge boom in the gas-fired power market, with a lot of combined-cycle and simple-cycle projects. Many projects were competitively bid with large EPC contractors. We entered the market toward the peak of that phase, when many contractors were getting extremely busy and we were competing for slots in the EPC capacity. As that market fell off, we got involved with large environmental retrofits.
To spread the risk, we partner with other construction firms.
In the late 1990s we also formed a business and technical services group, to help owners with market analysis, project development, siting and permitting. In addition we’d develop our own projects. We’d select a site, acquire land, obtain permits, and then market the project, to find an owner who would take it on. The sole reason was to develop a project that we’d be able to build on an EPC basis. We’ve done a couple of projects with that model and we continue to look for project sites that we