FOSSIL POWER
The Fossil Power business line is
itself divided into four market segments:
Solid Fuel, Emissions Retrofit, Natural Gas,
and Integrated Gasification Combined
Cycle (IGCC). The Solid Fuel segment
works with coal, which has been the largest
portion of Bechtel’s power business for the
last six years. Futcher, however, sees the
coal plant work declining. “With pending
CO2 impacts and the difficulty of permitting
coal plants, we expect the market for
new plants to diminish over the next several
years,” he says. “But there are still opportunities
for our Emissions Retrofit segment,
such as adding pollution control back-ends
to existing power plants, which has been a
significant portion of our power business.”
Futcher says Bechtel’s mix of work
between coal and gas, and its experience
with both, provides great flexibility in
responding to changes in the market. “Like
many others, we see gas being the baseload
gap filler until new nuclear plants come
online,” he says. “We’re well-positioned in
this market and have won a project already
in California.”
Futcher is also enthusiastic about
IGCC. Bechtel is doing IGCC work for
Duke Energy at Edwardsport, Indiana.
Bechtel also finished a big IGCC project for Tampa Electric (TECO Energy) in the late
1990s and a gasification project at
Kingsport, Tennessee, for Tennessee
Eastman that converts coal to syngas for
chemicals. Says Futcher, “IGCC is a critical
portion of our business. We are the leader
in it, and we see it as a big part of our business
going forward.”
NUCLEAR
The Nuclear Power business line has three market segments: Nuclear Operating
Plant Services (NOPS), Major
Modifications and Services, and New
Generation. NOPS supports utilities running
nuclear plants, doing engineering,
helping during outages, writing Combined
License (COL) Applications, and the like.
At present, NOPS is involved in seven
Combined License Applications.
Under the Major Modifications and
Services segment, Bechtel replaces steam
generators and reactor pressure vessel
heads and also uprates plants. Says
Futcher: “When new nuclear plants stopped
being built, Bechtel became the nation’s
leader for steam generator replacement
work. SGR work is demanding, but we have
competence and credibility in the market.”
With respect to the uprates, Futcher
says Bechtel’s analysis of the market identified
the kind of big complex work at which
it excels and led to several contracts. It is
now working at FPL’s Turkey Point and St.
Lucie plants in Florida, as well as their plant
at Point Beach, Wisconsin.
The New Generation segment is
working on the Watts Bar 2 completion project
in Tennessee. Although technically not
new because it has already received its permits,
Bechtel is treating Watts Bar as such
because it is a restart. “It’s as close to new
nuclear as you can get,” Futcher says. New
Generation is also looking at the possibility
of a third reactor at Calvert Cliffs,
Maryland. The customer is UniStar, a joint
venture of the French company EDF and
Constellation Energy. For this project,
Bechtel has partnered with the French
company AREVA and is using AREVA’s
EPR (Evolutionary Power Reactor) technology.
Futcher says New Generation is also
looking at new nuclear work outside the US.
RENEWABLE AND NEW TECHNOLOGY
Futcher’s Renewables and New
Technology division is building on
Bechtel’s 30-plus years experience in carbon
capture, solar thermal, photovoltaic,
wind, and biomass projects. Ian Copeland
(World-Generation Class of 2008) started
the business about a year ago. Futcher says
that Renewables and New Technology has
won the contract for BrightSource Energy’s
Ivanpah facility in California, the largest
solar thermal project in the world at 440
MW. Bechtel is taking a small ownership
position in the project and is enthusiastic
about the technology. Futcher expects
Bechtel to be active across a wide range of
renewable energy projects, both in the US and abroad. “We have the experience and
the focus to succeed in a market poised for
tremendous growth.”
LOOKING FORWARD
Futcher says the company strategy
has always been to work for repeat business.
With this in mind, Bechtel is not looking
to grow too fast, but rather to attract
skilled persons, do work that exceeds
expectations, and grow slowly where it sees
opportunity. “We had been concentrating on
the United States, but noting the demand
curve in the US is flatter than in other
places has made us look increasingly overseas,”
he says. “We have targeted six countries
to begin with: Canada, the UK, Libya,
Egypt, the UAE, and India. We have very
good opportunities in each of these countries
in each of our business lines. We have
good offices there and know the countries
well. So we see a good future in these
nations.”
Concerning power mix, Futcher sees
coal struggling because of the carbon problem,
and nuclear as the big opportunity. But
with nuclear, cost is the biggest challenge.
Increasing the Department of Energy loan
guarantee program beyond the present allocation
of $18 billion will help. “If the US can
get six nuclear plants online by 2020, I think
we’ll be doing well” he adds.
For renewables, Futcher worries over
the issues of high cost and intermittency.
“The market has to play out on these
things,” he says. “We see gas as the gap
solution. Building a gas turbine with solar or
wind projects may be a remedy for the intermittency
problem.” He’s bullish about gas,
at least for a while: “With the price of gas
and the relative ease of bringing gas on line,
we think gas will be heavily in play in the
next 10 years.”
Of carbon capture and sequestration
(CCS), Futcher is confident in the technology,
noting that the oil industry has been
pumping CO2 underground for years in oil
fields to maximize their yields. The big
problems are scalability—the amount of
CO2 to be injected is huge—and liability in
the event of significant CO2 leakage: “Some
entities might take the liability for 2 or 5
years, but who is going to take it for 100
years? I think the government may have to
step in as it has with nuclear and structure a
liability regime like the Price-Anderson Act.”
Futcher is hard pressed to see the
decades ahead without higher energy
prices. “We are moving away from our lowest
cost fuel—coal—and toward higherpriced
ones. How do we deal with carbon
without raising the cost of energy so high in
the United States that industry sends even
more jobs overseas, to countries that are
less inclined to reduce carbon emissions? I
think our carbon price will have to be balanced
with technical innovation that will
allow us to deal with energy prices more
effectively than what we see now with CCS,
wind, solar, and nuclear. But you have to
place a high-enough price on carbon to
drive innovation. And how do you say to
developing countries that they should have high energy costs? It’s hard to figure out
what the right thing to do is.”
THE BIDDING CLIMATE
Futcher notes that the marketplace for
bids has changed a bit since the beginning of
the recession. “Owners are demanding higher-
risk terms from contractors and more
fixed price contracts,” he says. “Reduction in
demand has led to fewer projects, which
means fewer jobs to bid on by more contractors,
which has meant more risk being taken
on by the contractors.” But Bechtel has
always worked well with lump-sum contracts,
he says. “If we have good history on a technology,
we don’t object to lump-sum contracts.
But familiarity with the type of job the
owner wants is a big factor in how much risk
we are willing to take. With combined cycle
plants, which we know very well from having
completed 50 of them, we know the scope
and risk and we can price them accurately.“
New technology and first-of-a-kind projects
present more of a challenge for the contractor
and the owner,” says Futcher. “The
pricing of a job becomes less a cards-to-thevest
negotiation and more of a collaboration.
The pencils are still sharpened of course, but
we’re working on the same page to reach a
fair price.”
Futcher is quick to point out Bechtel’s
competitive advantages. “For the biggest,
most complex projects in the world, we are
the best,” he says. “For the newest, too, such
as the BrightSource solar thermal project. In
addition, we are the largest employer of
union labor in the country. We are very
proud of our relationship with the unions;
they do great work for us, and they are a differentiator
for our company. We know union
labor and how to work with unions.
“
Moreover, we are able to engineer,
buy everything, and build a project using our
own people and our own construction equipment.
So we are one of the few big engineering,
procurement, and construction companies
that do all the work themselves, using
our own craft people. And we are private; we
don’t have the same pressures on us as publicly
owned stock companies. We try to grow
prudently, because our model is driven by
repeat business with satisfied customers. We
try to make sure that for every job we take
on, we apply the best people, persons who
know how to get the work done in the way
customers want. Thus, our customers have
certainty on the outcome of the project. We
have never walked away from a job; we finish
what we start. It’s the culture of a private
company that sets us apart.“
Additionally, Bechtel is not just a collection
of projects. We invest a huge amount
of money in what we call our functional organization.
We have hundreds of people working
above the project helping get the job
done correctly. These people own the work
processes, the tools, and the computer systems,
and they try to improve them all the
time. This is unique in our business. No one
matches us in that sort of investment,” he
says.
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