Executive Interview: Viewpoints from the Board Room: John Brewster, NAES Corporation

With its work in many different segments of the energy generation industry, including hydroelectricity, NAES Corporation is situated to assist with all aspects of the energy and related infrastructure markets. President and CEO John P. Brewster discusses the company’s services and its interest in hydroelectricity.

By Elizabeth Ingram

John P. Brewster
John P. Brewster

NAES Corporation, headquartered in Issaquah, Wash., is an independent provider of plant operations and related technical support and maintenance services for the energy generation market. The company was founded in 1980 by four utility companies in the Pacific Northwest to provide project management services and is owned by ITOCHU International Inc. and I-Power Investment Inc., subsidiaries of ITOCHU Corporation. ITOCHU is an international trading conglomerate and Fortune Global 250 company with worldwide sales of more than $36 billion and total trading transactions exceeding $110 billion.

NAES customers include public and private utilities, independent power developers and the broader financial community.

NAES has four main divisions. The Power Plant Operations Division provides plant operations services under long-term contracts.

The Technical Support Services Division provides customized operations procedures, computerized maintenance management systems due diligence and operations assessments, North American Electric Reliability Corporation (NERC) oversight services, and document updates, all of which are focused on improving plant and personnel effectiveness.

The Maintenance & Construction Division provides construction, retrofit, turbine inspection and overhaul, and maintenance services under long-term maintenance or individual project contracts.

Finally, the Staffing Services Division provides custom-tailored staffing solutions.

John P. Brewster is president and chief executive officer of NAES. He has more than 35 years of experience in the power generation industry, including plant operations, early stage development, marketing and executive management. Brewster has been with the company since June 2010.

Hydro Review recently sat down with Brewster to find out more about NAES and learn the company’s outlook on the hydroelectric industry. The following is a transcript of that discussion:

Q: Since it was founded in 1980, NAES has expanded to a company with 2,300 employees in multiple locations in the U.S., Canada and Mexico. How do you explain this significant growth?

Brewster: So that we can most effectively serve our customers, NAES is focused on delivering service excellence in its core business segments. The company has been in operations for 25 years, technical services for 30 years, maintenance and construction for 30 years and staffing for 28 years.

Our business is people. We are a people company driven by proven processes. NAES focuses on hiring highly skilled and motivated people to develop and implement a set of processes that define how we conduct our business, and we’ve invested in ourselves by building a broad and experienced support organization. We hire a lot of ex-military personnel because they bring discipline and understanding of proper processes, which is important for our market segment.

We know where our focus rests, and we work hard to deliver excellent service. That has led to long-term agreements and long-term relationships. We also see a lot of repeat business, and that is important to us. As the company has grown, we recognize the importance of our size and the ability to leverage that in a lot of different ways.

Personnel hired by NAES Corporation perform a variety of functions at hydroelectric plants, including gate and penstock repairs, turbine repairs and installations, electrical work and general maintenance.
Personnel hired by NAES Corporation perform a variety of functions at hydroelectric plants, including gate and penstock repairs, turbine repairs and installations, electrical work and general maintenance.

Q: NAES has four operating divisions. Let’s discuss these, starting with the Power Plant Operations Division. What work is conducted by this division?

Brewster: That division, which focuses on the third-party operations and maintenance market, is the foundation of NAES. The company has grown from 30 plants under its care, custody and control in 2003 to about 120 projects with total capacity of about 34,000 MW in the Americas today. And soon we will be starting work on new projects in Asia and Europe.

In this division, we staff plants with NAES employees. This division is set up in a manner that allows us to share experiences and transfer knowledge across a large fleet of generating plants. We operate a broad range of technologies and fuels, including steam plants (oil, coal, gas waste and biomass), combustion and aero-derivative turbines (simple and combined cycle), reciprocating engine, landfill gas, geothermal, hydro, wind and solar. We are moving into biofuels because we see it as a good fit and a growth opportunity. In the next year, we expect this division will begin to manage several biofuels plants as they are being built.

NAES has been operating renewables for many years, including wind, hydro, biomass, landfill gas, waste to energy, bio solids processing and solar facilities. Although this segment of the market has slowed down recently due to low natural gas prices and an uncertain regulatory policy, it will continue to grow as it has the momentum from portfolio standards and positive public support.

Firms hire NAES ultimately for performance and risk mitigating purposes. Our processes are designed to emphasize the fundamentals: safety, compliance, cost effectiveness and production. This is a powerful combination that ultimately drives a customer’s economics.

Although all of this is managed centrally so that we can attain best use of economies of scale, we also recognize that a generating plant needs to be operated locally. So we maximize local hiring and train personnel to fully implement NAES processes.

Q: What work is handled by the Technical Support Services Division?

Brewster: This division has earned greater focus over the past year or two to bring greater value to customers in the plants we operate and, equally so, to owners of generating plants around the world.

We have separated the division into several discrete groups so that each group is closer to its customers. We have engineering, NERC compliance, environmental and support. Each group then is focused on some core skill sets.

Engineering: We have experts in heat rate improvement and efficiency improvement, performance modeling to optimize plants and root cause analysis of failures. This group provides reports and recommendations, offers outage planning and support, and supports negotiating large contracts such as long-term service agreements. In addition, this group provides maintenance management implementation and support.

NERC: This group employs a number of NERC compliance experts, including several ex-NERC auditors. These staff members provide NERC compliance programs (including GO and GOP and TO and TOP registration) and expertise to ensure our clients can meet the requirements of a NERC audit by performing gap analysis and mock audits.

Environmental: We all know that environmental legislation is constantly evolving and, frankly, becoming more difficult in the process. We have a large contingency of environmental engineers who provide services to operated plants and third parties via performance assessments, compliance program development, regulatory monitoring and permit modification/renewal support.

Support: Support provides owners with well-defined operational programs, such as safety, maintenance policy, chemistry and operations. The latter includes system descriptions, simplified drawings and P&IDs, system operations procedures and plant start-up/shut down. This group, with support from plant operations, also leads our due diligence/operations assessment work for clients who are interested in understanding the operations performance of a plant they may acquire or a client who wants to know “How am I doing?” So, we engage in personnel/organizational analysis, physical performance analysis (which may include benchmarking), and analyze whether we discern gaps in other areas such as safety and compliance.

All in all, this diverse division with myriad skill sets can be put to use at any plant to ultimately support improvement efforts.

Q: What is the objective of the Maintenance & Construction division?

Brewster: This is really where NAES started. This division is comprised of a non-union maintenance group with offices in Houston and North Carolina and a union construction and maintenance group with offices in Pittsburgh, Portland and Kansas City

The Maintenance and Construction Division provides a variety of services, including episodic and annual maintenance of thermal and hydro plants or any component of the same, erection of air quality control upgrade projects such as precipitator erection, substation installation, stack/chimney repairs, and the inspection and repair of combustion and steam turbines.

Power plants typically are staffed for day-to-day O&M. At hydro plants, for example, the owner will shut down after several years to do major maintenance and overhaul work. To conduct this type of work, they have to bring in additional expertise and additional construction/maintenance people, a NAES core expertise.

For example, we recently completed an interesting project, the mechanical overhaul of two units at a hydroelectric plant built in 1930. Work included complete disassembly, inspection and reassembly of turbine-generator components. During the inspection, we discovered that six of the wicket gates were making contact with the face plates and a runner was significantly out of alignment. Starting from the ground up, NAES and a team of experts reverse-engineered several components, including the crown plates and curb plates, as component drawings were not available. New components also were fabricated and machined to meet manufacturer design clearance. Once the unit was aligned and mechanical commissioning and electrical tests performed, the unit was released to commercial operations.

At a large coal plant, NAES may be on site on a year-round basis conducting repair/modification work beyond the capability of the plant staff. We use some of that time to support owner major maintenance planning so we can effectively ramp up to as many as several hundred employees to complete a major maintenance outage in the prescribed time period.

Our turbine services group performs combustion and steam turbine inspections in the field and may affect repairs in our shop in Houston.

The company is moving into petro-chemical and refinery work. We are taking advantage of our skill sets in work that is centered on piping, rotating equipment and heat exchangers.

Q: Tell me about the Staffing Services Division. What is its focus, and why did you decide this was an important service to offer?

Brewster: Staffing Services is a division that is fundamentally focused in two areas – placement of permanent employees up on request (what we call defined search) and placement of temporary employees to supplement a need. The division is set up to provide these services within NAES, for the power generation industry, and for other industries such as oil and gas and petrochemicals.

For example, a company may have an emergency at a plant and need 20 qualified welders tomorrow. That’s what our staffing services division does. We have a large database to capture those people and get them to the work. We have payroll services because they are NAES employees.

This division fulfills a need that increases during personnel shortages. The economy is very depressed, and a lot of industries are not doing a lot of work. In 2005 and 2006, when there was a lot of industrial work taking place, there was a shortage of craftsmen. It was difficult for companies to find people. I think we are going to see that situation again as the economy starts to come back because we have an aging workforce and the poor economy of the past few years has driven skilled personnel elsewhere. We believe having a staffing company and working hard to retain a core group of people out in the workforce will benefit NAES in the future.

For major equipment overhaul or repair work, NAES Corporation provides trained personnel who can get the job done quickly and effectively.
For major equipment overhaul or repair work, NAES Corporation provides trained personnel who can get the job done quickly and effectively.

Q: How much of NAES’ work is directly related to hydroelectric facilities?

Brewster: Hydro work for NAES is increasing in scale as we are engaged in servicing our customers with hydro operations and annual and episodic maintenance, as well as in a variety of technical support services. The range of work is emblematic of NAES itself. Let me give some examples of recent work:

– Conducting NERC compliance work for Canadian and U.S. customers. We expect this segment to remain active because we believe NERC compliance is best provided by specialists who can keep current with regulatory changes.

– Working with hydro plants with aging workforces where owners are interested in upgrading all kinds of plant documentation so that personnel can be provided clear and effective processes and procedures and better training than the school of hard knocks.

– Providing due diligence and operations consulting for a firm contemplating a large hydro acquisition.

– Operating two hydro facilities, and we expect that work to grow in the future.

– Providing electrical maintenance on an annual contract at several hydro facilities in the Northwest.

– Providing episodic work at various hydro facilities, such as gate and penstock repairs, turbine inspections and overhauls, and fish containment system construction.

Q: NAES offers a Preferred Vendor Program to plant owners. What are the benefits of this type of program?

Brewster: With the scale of our plant operations fleet, we possess tremendous buying power. We leverage that buying power to negotiate reduced pricing and better services (such as response time) for our customers from our vendors. NAES passes that savings on to the owners. We don’t keep any of it. We look at it as an additional value we can bring to the owners of the plants we operate. They are getting the benefit of a very large fleet even though they may only own one or two plants.

With this program, we are driving millions of dollars of savings, improving response times and increasing overall responsiveness to the needs of our customers.

Q: NAES recently conducted a survey, The Aging Power-Sector Workforce. Why did you complete this study, and what were the results?

Brewster: This was one of those issues that, in the 2005-2007 timeframe, was a significant concern, especially in the construction side of business, and it became a larger issue on the operations side. But it was not just power generation, it was petrochemical, pulp and paper, any industrial entity. These facilities were pulling from the same pool of workforce, the same type of craftsmen. We received many inquiries from customers facing this aging workforce issue. There was and is a tremendous amount of retirement and turnover taking place.

We decided to see what’s going on and what people are doing to address these things. Ninety percent of the people we surveyed recognized it was an issue. One of the outstanding results was that only 50% were really doing anything with it. It is one of those things we need to deal with as an industry. Some people are starting to look at it and search for solutions. With the economy the way it is, it is difficult to start bringing in trainees and add head count. We are working with high schools, trade schools and universities to prepare people and let them know what opportunities there are for them to come into the power generation industry because the jobs they will fill are high-paying, important and long-lasting.

We’re going to be challenged again if you think about the craftsmen alone. We don’t have enough work to keep them busy to feed their families, which takes them away from the crafts. When the market comes back, companies are going to have to look at the availability of crafts and how that affects when they start projects, rather than basing it on the best time of year. Most outage and construction work is done in the spring and fall. If we all are doing the same thing, there is not going to be enough of a workforce.

We believe this survey put it in the forefront of a lot of our customers’ minds that they need to start looking at this issue. We think about it every day and strive to constantly bring in new people.

Q: You recently added a corporate development team to your staff, with a director and a manager of corporate development. Why was this team needed?

Brewster: We are growing organically and well-positioned to grow via acquisition. The market is the type where there are opportunities for acquisitions, and we’re looking at a lot of different areas – maintenance, technical support services, technology type sectors – that could be bolted on to NAES to support the foundation of the business. We also are looking at other areas NAES could go into to continue to alleviate the risk and increase our foot print into the industry as a whole. I’m not one to sit and say NAES is working solely in the power generation industry. We’re working in infrastructure. We’re people managers, maintenance managers and process managers. Those skill sets are transferable, and we are looking for organic and non-organic efforts to move us forward in quest of our corporate vision.

NAES also is looking at technology. Being a first mover is the right approach. We are looking at companies out there that are developing new approaches and processes or patenting new technologies we can apply and put under the NAES name to provide additional value to owners and move into other sectors. We need to bring those types of experts into the company. This is not something you can do part time. Mergers and acquisitions, business development and business strategy is a full-time job and we need experts to help with that.

Q: What does NAES see as trends for the future with regard to its work at hydroelectric plants?

Brewster: Hydropower is one of the key components of the energy industry – an industry that contributes about one-sixth of all global electricity and will likely play an even more important role in the future of global energy supply as the inevitable shift to renewable energy occurs. Hydropower has generated clean, affordable electricity for more than 100 years, but it has yet to realize its full potential. A study from Navigant Consulting shows that nearly 9,000 MW of new capacity could be added through modernizing existing hydropower facilities. Modernization projects upgrade turbines and other equipment, expanding the capacity and life span of existing hydro facilities. NAES is well-positioned to provide the expertise required for these modernization projects.

Elizabeth Ingram is senior editor of Hydro Review.

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