Fluor to Build Coal Power Plants : Irvine Firm Forms Joint Venture With N. Carolina Utility

In a venture expected to generate $1 billion in sales in three to five years, Fluor Corp. announced Wednesday that it is joining with a North Carolina utility to build coal-fired power plants.

Fluor Daniel Corp., the chief operating affiliate of the Irvine-based heavy engineering and construction firm, said it has formed an equal joint venture with Duke Power Co. of Charlotte, N.C., to design and build coal plants for public utilities and other customers.

The new firm, with headquarters in Charlotte, will combine the existing coal generation resources of the two firms and will initially employ about 200 people, Fluor President Leslie G. McCraw said.

Dubbed Duke/Fluor Daniel, the company aims to combine Duke’s expertise in design and plant operations with the heavy engineering and marketing resources of Fluor Daniel. McCraw said the firms have each agreed to contribute about $100 million of existing contracts to the venture.

Parks Cobb, executive vice president of Duke/Fluor, said the company will bid on contracts for construction of new coal-fired power plants and cogeneration facilities, and for the upgrading of existing coal plants. He said the new company will initially have nine major projects contributed by the parent organizations, but he declined to identify all of them.

The power industry will need significant additional capacity over the next several years, Cobb added. At least one-third of that new capacity is expected to be in the form of coal-fired plants.

The joint venture encompasses most of the resources of Duke Engineering & Services, the 7-year-old contracting subsidiary of the Duke Power, a regulated electric utility. About 20% of Duke Engineering’s operations--involving nuclear and hydroelectric power projects--will remain outside the joint venture.

Unlike most utilities, Duke Power designs and builds its own power plants. Duke Engineering was originally set up to market the company’s expertise in that area, Parks said. The firm’s strength lies in its knowledge of plant design, engineering and operations.

Fluor, which had revenues of $5.1 billion last year and is the largest public company in the county, will bring its heavy construction, engineering and marketing expertise to the venture.

McCraw said that even though Fluor Daniel offers many of the capabilities that the joint venture will offer, the link with Duke will give it far more credibility in selling turnkey, coal-fired plants to utilities and industrial customers.

“As a contractor, we want to be able to offer cradle-to-grave service, including plant location, financing, construction, maintenance and operations,” McCraw said. “We can now offer that with much more confidence than before.”

Outside the Joint Venture

Fluor Daniel’s operations not involving coal power will remain outside the joint venture.

Fluor and Duke have worked together on several projects, according to the two officials, and Fluor built the one Duke power plant that the North Carolina company did not build itself.

Fluor also has extensive coal-mining interests, which produced revenues of $784 million last year. But McCraw said the new venture simply represented a better way to serve the coal-burning power plant market, rather than an intensified commitment to coal as an energy source.

The demand for power-generating capacity has been soft for much of the decade, but it is expected to pick up steam soon. Fluor’s power division had an order backlog of $756 million in 1988.

Sales of coal-fired plants are also expected to benefit from recent advances in so-called “clean coal” technology, which produces far less pollution than traditional plants. “The projects we are involved in are, and will be, designed to be environmentally sensitive without sacrificing reliability or efficiency,” Cobb said.

Retrofitting Existing Plants

Besides building new plants, the company will be involved in retrofitting existing coal-burning plants to comply with new clean-air regulations and building so-called cogeneration plants, which produce both steam and electricity for industrial facilities.

Duke/Fluor Daniel hopes to best its competition by offering innovative financing packages and complete operations and maintenance services. In the past, both companies offered such services by joining forces with other companies project by project.

DUKE/FLUOR DANIELS

HEADQUARTERS: Charlotte, N.C.

EMPLOYEES: Initially about 200.

BUSINESS: Design, engineering, construction and operation of coal-burning power plants.

REVENUES: Current orders worth about $200 million. Annual revenues expected to reach $1 billion in three to five years.

KEY EXECUTIVES:

*Ronald Green, president

*Parks Cobb, executive vice president, operations

*Mike Epprecht, senior vice president, marketing and sales.