Canadians taking over Enron unit in Bothell
Seattle Times business reporter
Canadian construction giant SNC-Lavalin said yesterday it will take over $900 million worth of power-plant projects formerly held by Enron's unit Nepco in a buyout that will save all 5,100 jobs at the Bothell-based company.
As part of the agreement, Nepco, which had $2.1 billion in sales last year, will file for bankruptcy in the coming days, allowing SNC-Lavalin to buy its assets out of bankruptcy court, free of Enron entanglements.
As a result, Nepco — founded in 1938 — will cease to exist and its employees and operations will be absorbed into SNC-Lavalin Constructors, a small unit of the Montreal-based company.
Nepco's former managers, including President John Gillis, who stepped aside in February to work on the buyout, will return to run the newly configured company.
"We're really excited," Gillis said. "It's a relief to have gotten to this point."
SNC-Lavalin Constructors will become the entity finishing work on eight big power plants Nepco was building in Mississippi, Illinois, Arizona, Arkansas and Louisiana.
"We will finish these jobs with the same people who have been on these jobs before," said Klaus Triendl, SNC-Lavalin's executive vice president for power.
Nepco had 14 active projects in January, but owners of the others switched contractors when Enron fell apart last year. Nepco picked up one new contract, for an 820 megawatt plant in Jenks, Okla., owned by Cogentrix.
The buyout is good news for Nepco employees, including 500 working in Bothell, who had feared losing their jobs after Enron's bankruptcy filing in December. Enron's demise froze Nepco's cash, which had been managed by Enron, causing Nepco to bounce checks and forcing it to renegotiate contracts. Nepco employees said they were worried, however, that there might be cuts in pay or benefits.
But Gillis said terms wouldn't change. "One of the key pieces is that the employee base would receive comparable salary and benefits to what they had prior to the Enron bankruptcy," he said.
At the same time, taking over Nepco beefs up SNC-Lavalin's ability to bid for large natural-gas-fired plant contracts worldwide — work that will flow to Bothell. Most of SNC-Lavalin's expertise is in hydropower-plant design, not natural-gas-fired systems such as Nepco builds. SNC-Lavalin has offices in 30 countries and projects in 100, Triendl said.
"With 5,000 employees, we finally have (the critical) mass to take on all kinds of jobs and get to clients we never could get to before," Triendl said. "These people will make a contribution not only here, but around the world, I hope."
Nepco customers who stuck with the firm through Enron's collapse cheered the deal yesterday, even though it may cost them more to complete their plants.
"This is good news for the projects and for TECO Energy," said Rick Ludwig, president of TECO Power Services. The Tampa, Fla.-based company has contracted with Nepco to build four plants worth about $3.4 billion, in conjunction with other partners. "This eliminates the risk that the projects would be drawn into the Enron bankruptcy, which could have impacted our large project financing."
Costs will be $117 million more than originally budgeted under Nepco, but the extra is small compared with the total cost and is paid only if SNC-Lavalin completes the projects to specifications and on time.
"It costs us a little bit more, but we think, with the amount of risk we're reducing, it's worth it," said Laura Plumb, a TECO spokeswoman.
Alwyn Scott can be reached at 206-464-3329 or email@example.com