Utilities, Consolidators Selling Back Mechanical Firms
Utilities and consolidators that snatched up mechanical contracting firms in the '90s are now unloading them to "concentrate on their core businesses." Akron, Ohio-based FirstEnergy Corp. recently sold two of its mechanical firms -- Colonial Mechanical Corp. of Richmond, Va., and Webb Technologies of Norfolk, Va . -- to the original owners. The deal closed on Jan. 16, but terms were not disclosed.
"We asked to buy back the companies after we understood that FirstEnergy had decided, because of the slowing of deregulation, that in all probability its strategy needed to change and its focus should be in the Northeast than here in the Southeast," Howard Webb Jr., chairman of the combined businesses, told PM.
The offer to buy Webb Technologies was made to FirstEnergy in April 2002, reported The Virginian-Pilot. FirstEnergy officials insisted that Colonial be part of the deal.
"FirstEnergy was counting on deregulation and a chance to bundle electric commodities with mechanical-contracting services," Webb said in the Richmond Times-Dispatch. "The Enron debacle created an environment in which utilities want to get back to their core businesses."
Colonial Mechanical and Webb Technologies were part of FirstEnergy's Facilities Services Group subsidiary, which ranked No. 11 in PM's 2002 Pipe Trades Giants list. Colonial was purchased in 1998, and Webb in 1999.
The two companies will form Virginia's largest mechanical contractor with $150 million in annual revenues and 1,250 employees. Howard Webb Sr. will remain as chief executive officer of Webb Technologies, and Mitchell F. Haddon, formerly the president of Colonial's Service Group, will take on the role of Colonial's CEO. Robert Norton was named president of Colonial's Construction Group.
Another large utility, New Jersey-based PSEG, decided to get out of the mechanical contracting business altogether. In financial releases dated July and October of 2002, the company reported charges related to "decisions to discontinue operations of PSEG Energy Technologies," the company's mechanical contracting arm. These decisions were "based on a review of its strategic fit with PSEG," said E. James Ferland, chairman and chief executive officer of PSEG.
The utility's plan was to sell the 12 companies comprising PSEG Energy Technologies, which ranked No. 8 on PM's Pipe Trades Giants 2002 list, by the end of last year. No mention was made of the progress of the sale, and calls made to PSEG were not returned by press time.
Consolidators, TooEncompass Services Corp., which filed for bankruptcy protection in November 2002, also has had offers to buy back companies it had acquired. Al Hitchcock and David Gregg, executives of the former Charleston, S.C.-based CR Hipp Construction, have made an offer to buy back the company's name and assets from Encompass, which bought the company in 1999 and renamed it EMS Charleston.
The proposal is awaiting the approval by a Texas bankruptcy court judge, according to The Post and Courier.
There is also an effort by Hungerford Mechanical of Richmond, Va., to return to local ownership, said the Richmond Times-Dispatch.