Babcock Power Inc.

Source: Energy Digital

Date :04/08/2007 16:48:44

When power companies need to improve the way they generate electricity and bring plants into compliance with environmental regulations, they call on Babcock Power

Written and produced by Megan Santosus & Sean Bakke

With varying chemical properties and sulfur content, coal is a fickle substance to work with.

Texas lignite, for example, burns differently from eastern bituminous.

This means that for coal-fired power plants, switching from one kind of coal to another — not an uncommon strategy for plants seeking to cut costs or meet compliance requirements — is not a decision to be taken lightly.

“Plant equipment is well-tailored to burn certain kinds of coal,” explains James Wood, president and CEO of Babcock Power Inc. “Changing coal may require some equipment to be modified.”

With sophisticated analytical software developed in house, Babcock Power can provide utilities with various scenarios depicting what they would need to do if they indeed changed the kind of coal they used.

“We can analyze what would happen to existing equipment and provide cost-effective alternatives by modeling them first with our software,” Wood says.

However, providing such an analysis for power plants is only one of the many services that Babcock Power provides to the power industry in the United States, Middle East, Asia and Europe.

Babcock Power was formed in 2002, following the bankruptcy of Babcock Borsig AG. Today, the company is based in Danvers, Mass., and owns a significant amount of the North American assets of the former Babcock Borsig AG.

Under its current configuration, Babcock Power provides design, manufacturing, construction, and repair and maintenance services for power plants around the world.

While Babcock Power includes eight separate companies, Wood says the company’s focus is on four primary business units.

The environmental control business helps power companies control pollutants that are regulated by legislated emission standards. In this arena, the company designs and deploys a variety of environmental solutions such as systems for controlling acid gases as well as mercury control and air pollution control systems.

“Most of our air pollution business is in the U.S.,” Wood adds.

Compliance to environmental standards is certainly one factor that leads utilities to turn to Babcock Power, but it’s not the only one.

“There’s a drive in all utilities to maintain plants, and improve efficiency and reliability,” Wood says.

To address this need, Babcock Power also has a segment that designs, manufactures and installs heat exchangers — equipment that increases efficiency in nuclear, gas and coal-powered plants.

Then there’s the Heat Recovery Steam Generator (HRSG) business, which is based in Louisville, Ky., and is known as Vogt Power International Inc.

“HRSGs are a form of heat exchanger, that includes a separate source of heat, coupled with gas turbines,” Wood explains. “With an HRSG, a power plant is able to recover its waste heat and make steam.”

Vogt also offers aftermarket services and support, which includes consulting, inspections, project management and equipment fabrication.

Then there’s the services business, which designs and manufactures fuel processing and combustion equipment such as boilers, and provides customers with replacement parts, regular maintenance and repair services. Such maintenance and repair services are particularly important for utilities with coal-powered plants.

“Coal is abrasive and corrosive, and a coal-fired power plant needs constant maintenance and repair,” Wood says.

Wood goes on to add that the company’s diversified portfolio of products and services are what set Babcock Power apart from its competition.

“We have a big footprint with all of our business units,” he says. “We have individual competitors in each business segment, but there are few companies that can offer the integrated approach that we can.”

In a power plant, Wood notes, maintenance and repair will often require expertise across several areas, and Babcock Power — with its multiple business units — is in a unique position to take advantage of many opportunities that its more narrowly-focused rivals can’t match.

For example, in the environmental control business, Babcock Power helps utilities control the emission of nitrogen oxide, which is a byproduct of burning fossil fuel. In general, a power plant can reduce emissions in two ways: At the front-end with new combustion equipment that reduces the production of nitrogen oxide; or, at the back-end with chemicals that reduce the amount of nitrogen oxide after it’s produced.

“It’s not unusual for power plants to have to reduce these emissions by 90 percent to get in compliance,” Wood says.

With Babcock Power, Wood says customers can rely on a single company to provide both the front-end and back-end approaches for reducing nitrogen oxide, a solution that is often times less expensive than trying to achieve significant reductions with a single strategy.

“We can offer a less expensive solution for a utility,” Wood adds.

Since its founding, says Wood, Babcock Power has enjoyed considerable success, which is attested to by its 25 percent growth rate year-over-year. All told, the business units within the privately-held Babcock Power generate annual revenues just shy of $1 billion.

Given the current state of the power industry, Babcock Power is in a good position to keep its growth streak going.

“Right now is the most active this business has been in 30 years,” Wood says.

The power industry experienced rapid growth in the 1990s, but that came to an abrupt halt on 9/11 with the terrorist attacks on New York and Washington, D.C. Since then, business has been building slowly, and now the worldwide demand for power — and the resulting power plant building boom — is keeping companies such as Babcock Power busy.

Wood estimates that Babcock Power’s order book is filled for 2008 and into 2009.

When projecting business out to 2009 and 2010, Wood says an important factor will be public policy.

“We have to determine the evolution of environmental policy and legislation and figure out how we can provide equipment in that context,” Wood says.

As for expansion into new markets, Wood foresees two scenarios: Replicating the environmental control business that currently is in the United States in other countries that have already or will be adopting similar regulations, or launching new products and services into entirely new markets.

One area that the company is planning to exploit in the future is manufacturing. While Wood declined to provide details, he says Babcock Power is developing some exclusive manufacturing processes that will give the company advantages in terms of cost.

Given the current boom in power plant construction and maintenance, manufacturing facilities are at capacity. Wood says a few years ago, excess manufacturing capacity could be found in such places as China or Eastern Europe, but that’s no longer the case.

To accommodate growth in current manufacturing facilities, Babcock Power is working to increase its manufacturing throughput.

“We are constantly making improvements in the throughputs of products in our manufacturing plants.” Wood says.

Of course, improvements in manufacturing efficiency will only go so far. In order to capitalize on future opportunities, Babcock Power has to hire additional engineering and manufacturing employees, not an easy task in an industry hungry for talent worldwide.

Human resources are another area where the company is working to increase its competitive advantage. In addition to hiring college graduates, Babcock Power recruits engineers from other industries that have skills similar to the company’s needs.

When hiring employees from other firms, Babcock Power strives to avoid the expense of moving new hires. As a result, Babcock Power has gotten into the habit of opening satellite offices – the most recent one is located in Charlotte, N.C., with approximately 30 engineers and project managers.

Having offices around the country hasn’t hindered Babcock Power because the company has invested in an infrastructure that fosters collaboration.

“With the software and telecommunications that we have in place, it’s as if we are located in the same place,” Wood says.

At the end of the day, Babcock Power is managing to integrate its eight companies working within its four primary business units to provide services to help grow electric generation and reduce its environmental impact.