Keith Cos., Others Find Silver Lining in State’s Energy Crisis
The energy crisis threatening to spread from California to other states is proving to be a boon for engineering firms, from behemoths such as Fluor Corp. to little guys such as Keith Cos. that can design and build power plants.
Carving out a business in quickly building smaller local plants, the Costa Mesa company Thursday reported record annual and fourth-quarter revenue and profit befitting a stock that has more than doubled in value in the last two months.
“It’s a booming industry right now,” company Chairman Aram Keith said. “Everyone’s looking to increase electricity.”
With Keith Cos. shares leading the way, engineering company stocks have jumped as investors dump “new-economy” enterprises for businesses with solid profits.
In the last two months, shares of Fluor in Aliso Viejo and Jacobs Engineering Group Inc. in Pasadena have surged by a third.
The engineering and technical services arena is awash in work, with government spending on roads and other infrastructure helping companies like Jacobs add to their traditional work.
What sets Keith apart is its expertise in several growing businesses, such as golf retirement communities and fiber-optic communications. But the big attention-getter is its work on local natural-gas power plants that generate electricity when it’s most needed--during peak periods when blackouts loom.
Keith’s Engineering Services Inc. unit has designed five so-called peaker plants for PG&E; National Energy Co., three in Ohio and one each in Chula Vista and Escondido. Moving from the planning board to operation can take less than a year, compared with three years or more that a major plant would take.
As governments, businesses and households look for the quickest fix, the plants Keith designs have an easier time winning operating permits, because they are smaller, quieter and aren’t fueled by coal or oil but by cleaner-burning gas.
They produce up to 50 megawatts, enough for 50,000 households, compared with the 500-megawatt plants produced by a venture of Fluor and Duke Energy Corp.
Built in regions that need them, the small plants help compensate for power shortfalls from large plants located far away and the long, inadequate transmission lines that carrytheir power, advocates said.
Observers believe state and federal regulators are likely to put construction of new peaker plants on a fast track, which helps explain the company’s stock performance in the last few months.
Keith Cos. went public at $9 a share in July 1999, but tumbled into the $4 range later that year. After languishing for much of 2000, the stock began to recover in the fall. Then between Dec. 21 and Tuesday it jumped from $7.25 to $22.44 in Nasdaq trading. Shares were down $2.63 to close at $17.75 on Thursday.
“It’s a unique way for investors to play the power supply crisis,” said Gary Holdsworth, an analyst at Wedbush Morgan Securities, which took Keith public.
Keith Cos.’ net income more than doubled last year to $4.7 million, or 89 cents a share, from $2.2 million, or 50 cents a share, a year ago. Net revenue rose 35% to $53.4 million, the company said. Its fourth-quarter profit jumped to $1.4 million, or 25 cents a share, from the prior year’s final quarter earnings of $557,000, or 10 cents a share. Quarterly revenue grew 28% to $14.6 million.
