Who will benefit from this opportunity

Implications: Will the urgency to insure power to meet the increasing need provide benefits to select contractors and manufacturers? Who stands to benefit the most?




Analysis: It is very evident that power consumption continues to grow. Data centers that were being designed at 75 watts per square foot in the late 90's, grew to 95 watts per square foot in early 2001, and today we see designs for 140 watts per square foot. As servers shrink in size, they seem to require more cooling and a more reliable power supply. The demand for power shows no signs of slacking off, while the neglect of the electrical T&D infrastructure for the past twenty years catches up. With the uncertainty of the deregulation process, utilities were rightly wary of making improvement they did not know how they were going capitalize. Now with Congressional mandated requirements to improve the electrical grid and generation capacities, who stands to profit the most.

Certainly the large E&C contractors like KBR, HB Zachary, Bechtel, Parsons and others will benefit. TXU has announced that they will spend $20 billion in Texas over the next 10 years to add generation which should have the attention of all the above named contractors. Consultants who specialize in the design of electrical generation operations like Black and Veech and Sargent and Lundy will also surely benefit.

However, the generation is only part of the equation. T&D (transmission and distribution) will also have to be addressed. Contractors such as Pike Electric, Masco, and Quanta should benefit. Manufacturers like General Cable, Southwire and Alcan will have the opportunity to furnish the conductor for new transmission lines. Many of the existing transmission lines are already being reconductored to increase their capacity and it should be expected that many more will have to be upgraded. Manufacturers such as Hubbell Power Systems, Hughes Brothers, S&C, ABB, Siemens, GE, and others will see billions spent as the construction of new transmission and distribution begins.

An example of the commitment to construction of new transmission and distribution infrastructure may be seen in the following announcement by AEP. American Electric Power will form a joint venture company to fund and own new electric transmission assets in Texas. Creating a joint venture company to pursue Texas transmission opportunities allows the participants to share the often significant capital investment necessary to complete these important infrastructure projects. As conceived by AEP, the joint venture company could invest up to $1 billion in new transmission projects in Texas and would own the assets. The company would be created as a utility and would be subject to the rules and regulations governing utilities within the Electric Reliability Council of Texas (ERCOT). AEP would be responsible for developing, building and operating the assets for the joint venture company. This information comes from an article published October 10th, 2006 in Transmission and Distribution Magazine.