Officials at Duke/Fluor Daniel like to brag they built one out of every three megawatts of new electricity capacity last year in the U.S. This year, the joint venture of Aliso Viejo-based Fluor Corp. and Charlotte, N.C.-based Duke Energy Corp. is even busier. So far, Duke/Fluor Daniel has won 10,000 megawatts worth of power plant construction contracts this year and in late 2000. All the plants are set to produce electricity for U.S. consumption, with some even expected to help California’s energy crunch in the next few years.
“California has taught us there is no substitute for operating capacity,” said Jeremy Dreier, spokesman for Duke/Fluor Daniel. “The capacity has to be built at some point or the economy grinds to a halt. So we expect the need for capacity is going to continue to be strong.”
Here are the power plant projects won by Duke/Fluor Daniel and another Fluor joint venture recently:
++In July, Duke/Fluor Daniel won what it calls its biggest-capacity plant contract from Juno Beach, Fla.-based FPL Energy, part of FPL Group Inc. When completed in summer 2003, the 1,789-megawatt, gas-fired plant in Forney, Texas, stands to be one of the state’s largest.
++In June, San Diego-based Sempra Energy tapped ICA Fluor Daniel, a joint venture of Fluor and Mexico’s Empresas ICA Sociedad Controladora SA de CV, to build a plant along the border in Mexicali that sends power to California. The 600-megawatt plant is set to be linked to the U.S. via a 230,000-volt transmission line. Completion is set for summer 2003.
++In April, Duke/Fluor Daniel was awarded two contracts by Raytheon Co.,the Mystic Project, a 1,600-megawatt combined cycle gas-burning facility; and the Fore River Project, an 800-megawatt combined cycle gas plant. Both plants are near Boston and are owned by New York-based Sithe Energies Inc.
++Also in April, Duke/Fluor Daniel won four contracts from Duke Energy North America. The four gas-fired plants, expected to come online by the middle of next year, are in Arizona, Georgia, Arkansas and Ohio. The company also landed work in April on an 865-megawatt plant in Ohio from Newark, N.J.-based Public Service Enterprise Group Inc. The plant is expected to open in May 2003.
++In coming months, Duke/Fluor Daniel is expected to start work on Duke Energy’s Morrow Bay project at Moss Landing in San Luis Obispo. The project stands to add 1,200 megawatts of electricity generation to the plant’s current capacity of 1,002 megawatts.
Fluor started pursuing power plant contracts long before any hint of deregulation in California and other states. But the Golden State’s electricity woes have raised the profile of the company’s power plant work, officials say.
“That energy is back on the front page of the papers can be very good for our business , in the past you had to work hard to get reporters interested in power generation,” Dreier said. “That’s an important difference, because now you have top level policy makers and all kinds of businesspeople who are looking at the cost and availability of energy.”
Duke/Fluor Daniel first got into the power plant business in 1989, focusing chiefly on coal-fired generation facilities for Raytheon.
By the early 1990s, Duke/Fluor Daniel expanded to global projects in Indonesia and elsewhere after the domestic coal-fired market didn’t pan out as expected.
In 1996, the company branched out into gas-fired plants, a market that has since taken off in part because gas plants emit lower levels of gases and other pollutants than coal-fired plants. Duke/Fluor Daniel also provides operating and maintenance services for plants throughout the world.
The company’s chief power plant rivals are Kansas City, Mo.-based Black & Veatch and San Francisco’s Bechtel Group Inc.
While power plants have spurred new business for Fluor, they’ve also brought some volatility to the company’s shares on Wall Street.
After a steady climb in the first quarter, Fluor shares plunged in late May after the Federal Energy Regulatory Commission put controls on electricity rates in California and 10 other states. The move sparked concern that rate caps would discourage new plant construction. Fluor’s share price last week was at about 37,down from more than 60 in May.
“If government intercedes and restricts the profitability of a power plant selling electricity, then clearly that could limit investment in those types of projects,” said Richard Rossi, an analyst with ABN AMRO in New York. “Everybody, including Fluor, would see fewer opportunities.”
Power plants offer “no better than average” profitability vs. Fluor’s other projects, according to Rossi. But, “Fluor hasn’t been pursuing plain vanilla power plant jobs that would offer lower-than-average profitability,” he said.
Duke/Fluor Daniel officials argue that their business won’t be overly affected by regional rate caps, which some observers contend are high enough to spur new investment.
“The entire Western U.S. still needs more power plants,” said Tom Williams, a California spokesman for Houston-based Duke Energy North America. “California thinks it’s the center of the universe. But since the state is a net importer of electricity, it is very much a part of the West.”
A lack of investment in new power projects and increased usage is spurring Duke/Fluor Daniel’s power work, analyst Rossi said.
“We were seeing somewhat higher-than-normal growth in electricity consumption because of the computer age,” he said. “And you had deregulation as an added factor in markets like California that helped spur demand for new power plant construction.” n
