(Reprinted from BarterNews issue #36, 1996.)
A Texas Utility Company Trade Of 9 Million Pounds Of Bricks Demolition And Disposal Costs Result In $5 Million Investment Recovery Gain
By: Joe Robertson, Texas Utilities
Editor's Note: A special thanks to Wayne Beaty, managing editor of Electric Light & Power magazine, for providing us with this story which appeared in the November 1995 issue.
In searching for new economies in this competitive age, Dallas-based Texas Utilities Co. (TU) has rediscovered the ancient art of bartering...in a big way. When 9 million pounds of historic concrete-and-brick stacks recently came down at the company's Trinidad plant in East Texas, some hefty savings were involved.
The stacks served the plant when it burned lignite coal over two decades, beginning in the late 1920s. By the early 1940s, Trinidad was converted to natural gas.
By 1995, the 400-foot East Texas landmarks were approaching 70 and suffering from old age. Cracks in their shells had returned after repairs made earlier. Restoration and maintenance costs were prohibitive, so the stacks joined other structures at the site to await demolition.
Among the equipment and buildings scheduled for removal were four complete generating units, including the turbine building, the boilers of an additional water unit, a coal tower, and a water-treatment plant and laboratory.
Detroit-based Best Group Inc. submitted the most favorable bid for the project. Best Group, which had completed another recent Texas project (the removal of Arlington Stadium), was agreeable to the barter idea.
Jim Chennault, TU's investment-recovery specialist involved in the negotiations, said it took a short time to work out the details. Under the agreement, TU exchanged scrap and other salvageable materials and avoided more than $5 million in demolition and disposal costs. In return, Best Group received copper and steel from the plant plus equipment, such as valves, motors, and pumps.
"We encourage our clients to participate in the bartering of win-win situations," said Best Group's Steve Mardigian, "because it helps cement business alliances in an age of hard-driving, bottom-line decision-making."
The savings from trading obviously benefits TU's customers and shareholders too. Even with these benefits, barter arrangements are relatively new for electric utilities clearing plant sites of obsolete or worn equipment.
"There is a lot of selling going on but not a lot of bartering," said Chennault. "It's also a normal thing just to let old units sit there unused." He added that the barter agreement would have been impossible without a team effort within the utility. Personnel from the production, environmental, and procurement groups all participated.
TU's investment-recovery group, which contributed significantly to the company's bottom line in 1994 through its recovery of TU's investments in surplus and idle assets, sees bartering...the oldest form of exchange...as an important "new" tool for the future.
The company also expects utilities to turn increasingly to investment recovery as a vehicle for minimizing costs and enhancing competitiveness.
TU's investment-recovery group maximizes results through its membership in the Investment Recovery Association (IRA). IRA provides ongoing education, professional training and networking opportunities.
The association is experiencing renewed growth in its membership ranks, especially in the utility industry. More than 70 of IRA's some 250 member companies are utilities.
The investment-recovery departments of IRA-member companies in the United States report average individual returns of $8 million annually, with some experiencing annual proceeds as high as $150 million.
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