‘Quiet giant’ diversifies
TIC stays strong by pursuing new ventures
July 2, 2005
TIC Holdings Inc., Steamboat’s quiet giant, has been deliberately acquiring other companies in the first part of the decade as it seeks to diversify its industrial construction business.
TIC ranks seventh in the nation among contractors building power-generation facilities and third in fossil fuel power plants, according to Engineering News Record. TIC is fourth in wastewater treatment plants. Among the top 500 privately held construction firms in America, TIC ranks 207th. With annual revenues topping $1 billion, it is easily the biggest company in Steamboat.
The majority of TIC’s business growth continues to be internal, marketing executive Paul Compton said. But the company has used some key acquisitions to enter markets executives thought it could not have penetrated without acquiring an established contractor.
Based on Steam–boat’s west side in a campus of inconspicuous office and utility buildings, TIC doesn’t get much of the limelight in a resort-based economy. But its 200 Steamboat-based employees represent an important piece of the local payroll. And the hundreds of skilled workers who are flown here annually for continuing education support motels, restaurants and retailers.
At the turn of the century, TIC was digging deep to keep pace with the burgeoning demand for natural-gas-fired power plants. The power market, and the gas turbine market in particular, accounted for 70 percent of TIC’s business at one time, Compton said.
Compton said TIC’s board of directors realized it was growing at a faster rate than was ideal and also had the foresight to see that the demand for new power plants could not continue at the hectic pace of the late 1990s.
“In about 2001, we asked ourselves, ‘After the boom, what would TIC do?'” Compton said. “We realized we weren’t as well-prepared as we needed to be.”
As the industry evolved, it turned out that increasing prices for natural gas made the gas-fired electrical plants less desirable. Some utilities had rushed to build new plants without firm power sales agreements in place. And the collapse of the Enron empire seriously shook the confidence of institutional lenders, making it difficult to finance power plant projects.
When the power plant building boom died out, Compton said, large contracting firms were affected to varying degrees. Some contractors found themselves deep into projects that came to a halt. TIC avoided that disaster, but projects it was working on were delayed.
“There was kind of a cliff that caught some people by surprise with its steepness,” as the demand for gas-fired power plants fell off precipitously, Compton said.
TIC always has been a company that has prided itself on being a “direct hire” contractor —- it would prefer using its employees to complete a complicated industrial project instead of farming out work to subcontractors. Early this decade, Compton said, the company peaked with teams of as many as 500 of its employees on single jobs. As demand for
gas-fired plants declined, TIC had to redistribute teams of highly skilled workers to other projects across North America.
But it would be grossly misleading to say that TIC has abandoned its longtime base in fossil fuels and mining construction. Energy News Record ranks the company third in the country in construction activity at fossil-fueled power plants.
TIC continues to look for opportunities to build power plants and retrofit older, coal-burning plants with pollution controls, Compton said. Cleaner burning coal gasification plants represent a growing sector.
TIC is bidding for the contract to build a 600-megawatt coal-fired power plant in San Antonio, Texas, and has several air quality improvement projects on hold in the Midwest. The company also is involved in building a gold ore processing facility in Ghana at the urging of Newmont Mining and Engineering.
However, TIC continues to monitor closely the evolution of the new federal energy bill as it moves through Congress and its implications for its business, Compton said. TIC is eyeing opportunities in areas such as building ethanol plants. Recently, it installed 100 electricity-generating wind turbines for Mitsubishi on the San Juan Mesa in New Mexico.
TIC is the general contractor on a $20 million-plus project retrofitting existing facilities for Suncor Energy, so it can produce ultra-low-sulfur diesel fuel at an existing refinery in Commerce City.
Coming out the other side of the seismic shift in the power contracting industry, Compton said, TIC was helped by its track record with big lenders.
“TIC has a good relationship with banks and bonding institutions,” Compton said. “It’s one of the few (large contractors) able to bond sizable projects in the U.S. That has helped.”
Engineering News Record reported TIC’s 2004 revenues at $1.1 billion, essentially flat since 1999.
As TIC’s board looked at the future four years ago, it resolved to put itself in position to grow in areas outside of power generation. It has done that within the past few years by acquiring successful, smaller companies it already enjoyed a working relationship with.
Western Summit Con–struct–ors in Denver is a prime example. Western Summit is now a wholly owned subsidiary of TIC Holdings, and its growing business building water treatment and wastewater treatment facilities accounts for about 24 percent of TIC Holding’s stateside revenues.
“They’ve really picked up the ball for us as far as water and wastewater treatment projects are concerned,” Compton said. “There is a lot of demand –from the Front Range to California to Atlanta and Florida. Western Summit has the craft employees and management in place, and they’re uniquely positioned where they can take on those projects.”
In other cases, TIC has taken on partial acquisitions of existing contracting firms.
Among those is UMA Constructors, which is building a plant in Alberta, Canada, to extract petroleum from large oil sand deposits.
A significant part of TIC’s business today involves contracts to maintain existing industrial facilities, something that has produced a predictable revenue stream.
“That’s really helped stabilize our revenues,” Compton said.
TIC’s values include keeping bureaucracy at a minimum and empowering construction managers in the field to make important decisions.
That philosophy will help the company remain agile as it continues to adapt to the constant changes in the heavy contracting industry, Compton predicted.
“We didn’t rest on our laurels in the power industry like we could have,” Compton said. “A lot of companies didn’t do that, and they were affected dramatically.”