Keith Cos. Sees Uptick From Crisis
Alan Keith, founder and chief executive of Keith Cos., said he sees “almost unlimited” opportunities because of electricity deregulation.
The Costa Mesa-based engineering services company is targeting design work for small natural gas-driven power plants that Keith said he expects to pop up “all over the place” in California and elsewhere in response to the state’s electricity crunch.
The company designs plants for Houston-based Enron Corp. and PG & E; National Energy Group, a unit of San Francisco-based PG & E; Corp. The smaller plants, at 49.5-megawatts, are a “magic number” in California,just small enough to get fast-track approval, according to Keith.
“It takes about a year to get plants like that up and running,” he said “That includes the approval process and construction.”
Last month, Keith Cos. said it hired eight people for a total of 45 in its Engineering Services division, which is designing and planning power plants throughout the West.
The company’s power plant work is part of a larger diversification strategy. Keith Cos. does its share of government work, including projects for Newport Beach, Anaheim and the Metropolitan Water District of Southern California. But much of the company’s growth has come from more sprightly sectors: housing, telecommunications, manufacturing, and, these days, power plants.
Keith Cos. provides civil surveying, mapping, construction management and other services. Residential clients include The Irvine Company and Shea Homes, while industrial customers include Sprint PCS and Pacific Bell Wireless, now Cingular Wireless.
OC projects include work at the Irvine Spectrum as well as the Pelican Hill Golf Club in Newport Beach. Keith Cos. also provides consulting to LPA Inc., an Irvine architectural firm, for the University Research Park next to the University of California, Irvine. The Irvine Co. typically accounts for about 10% of business, according to Keith Cos. officials.
For the third quarter, Keith Cos. reported a 27% increase in revenue to $14.5 million from the year-ago period, while net income surged 83% to $1.5 million. After going public in July 1999, Keith Cos. has seen its shares surge recently,last week they were traded at around 12, up from a low of 3 last summer.
“A lot of firms had negative earnings warnings and announcements for the third quarter,” Keith said. “We didn’t.”
The company’s $41.2 million in revenue for the first nine months of 2000 nearly equaled its total for all of 1999. For the fourth quarter, Los Angeles-based Wedbush Morgan Securities expects Keith Cos. to earn 18 cents a share, vs. 10 cents a year ago.
“Since making some freshman mistakes, they’ve done a remarkable about-face,” said Gary Holdsworth, a Wedbush Morgan analyst. “Their core real estate business is doing well, and they’ve benefited from growing demand in small power plant construction as well as growth in telecommunications.”
Keith Cos. is a relatively small player in an industry dominated by behemoths such as Aliso Viejo-based Fluor Corp. Keith cites Tetra Tech ASL and San Francisco-based URS Corp.,middle-tier companies that have OC offices in Irvine and Santa Ana respectively,as his main competition.
While the company’s power plant work is a hot topic right now, housing in California and Nevada has been a growth driver, Keith said.
“Our clients can’t build homes fast enough,” he said.
Keith Cos. also is benefiting from increased government spending on wastewater and transportation projects, both in Orange County and nationwide. Company officials expect continuing growth in business driven by population increases in California along with other states with fast-growing populations, including Texas, Nevada and Arizona.
In other activities, Keith Cos. maps fiber-optics communication lines, enhances manufacturing processes and designs software for robotics.
The company counts some 1,000 clients in all. The aim, according to Keith, is to portion the business equally across the four main sectors,public works, telecommunications, infrastructure and industrial.
Since starting operations in 1983, Keith Cos. has had offices or projects in eight states as well as projects and feasibility studies in Taiwan, Russia and Eastern Europe. The company has branch offices in Las Vegas and Salt Lake City, and is looking to set up additional offices in Arizona, Colorado and other states. n
