ENR Texas &amp; Louisiana Ranks The Largest Contractors In The Last Year

General contractors in Texas and Louisiana are seeing steady work across much of the region. Once again, plentiful and cheap natural gas is lending a hand to the business; three of the largest projects that broke ground this past year among the top-five-ranked contractors were energy-related.

The industrial sector is quite active, says Keith Manning, executive vice president, enterprise strategic development group, Zachry Group. "Our projects are primarily being driven by cheap and plentiful natural gas, which is a primary feedstock for our petrochemical-based customers as well as the go-to fuel for powerplants. So we see quite a bit of activity continuing in the petrochemical sector, including new polyethylene and derivative type projects along the Gulf Coast," he says.

Zachry Group, which focuses on industrial markets and works primarily in the power and process sector, is "engaged with Freeport LNG on a very large LNG [liquid natural gas] export facility," Manning says. "We see LNG export activity continuing quite strong. Then, we're just beginning two large combined-cycle, natural gas-fired powerplants for Exelon in Texas. We're seeing more opportunities in the combined-cycle power generation market as well."

Regional revenue for Zachry Group reached $1.29 billion in 2014, up nearly $300 million from the previous year. "Total revenues for Zachry Group this year will exceed $3 billion, just to give you a relative size of the total business," Manning adds. "Our growth that we're seeing, particularly in Texas and Louisiana over the past year or so, is clearly related to the natural gas phenomenon."

Meanwhile, health care and transportation projects are plentiful among the largest starts for general contractors in the region. The top eight firms on this year's ranking each brought in regional revenue of $1 billion or more, and all contractors on the list reported a combined $35.15 billion in regional revenue for calendar year 2014, marking a roughly $3 billion gain over the total of $31.95 billion for 2013.

In Louisiana, key projects include two major hospitals in New Orleans: the $1-billion University Medical Center, now coming online, and the $1-billion New Orleans VA Hospital, Project Legacy, which will open next year, says Christian Generes, executive vice president at Landis Construction Co. "Those are a big driver for other construction projects, mainly for multifamily living, condos, hotels—there's a lot of development going on downtown to bring more residences to the area."

The inventory of vacant buildings in New Orleans is being bought up quickly, "so as soon as you see one building being renovated, the surrounding buildings are being picked up," Generes says. That includes renovation of the former Rault Center on which Landis is now working.

"We're just a couple months into it, as we're still underway with demolition," Generes explains. "Unfortunately, it's got a sad history involved with it, where six people actually died from a fire in that building, and it has been out of commerce for about 30 years. It is eligible for historic tax credits because it changed the national fire code."

The Rault Center is next door to another Landis project that was supposed to start almost a year ago, "and we expect it to start within the next few months. So in one city block, we've got two $20-million projects that are going to be underway by the end of the year," plus a third building on the same block that another company is working on. These are old buildings that have been abandoned and just sitting there for years. This is a prime example of what is happening all over New Orleans," Generes says.

The Texas market looks to be stable and well-positioned for the future, says Doug Jones, region CEO, Central for Balfour Beatty Construction. "All indicators show a robust marketplace with slow, steady growth," he says.

"Population growth will continue to drive the need for more social infrastructure across the state. In North Texas, the market is driven largely by the corporate sectors, i.e., expansions and relocations," Jones says. "In Houston, the market has changed dramatically—corporate expansion and relocation has declined as a result of the contraction of the oil market. However, the social infrastructure—education, housing, health care—continues to grow to meet the demands of the recent population growth in the area. The Austin market continues to be strong across most sectors."

Balfour Beatty, ranked No. 7 this year, with regional revenue of $1.1 billion, has seen its revenue remain steady over the last three years. "We are experiencing a slight decline as notable significant projects come to an end in 2015," Jones adds. "However, strong sales over the past 12 months will fuel revenue growth as we go into 2016 and beyond."

Daniel J. Filer, vice president, business development, for Ferrovial Agroman US Corp., last year's ENR Texas & Louisiana Contractor of the Year, points out that "the construction business remains extremely competitive, with hard-bid margins still hovering near zero. The [departments of transportation], in my opinion, are benefiting from this in getting more work done for the same budgets. There is a risk here, however. We have seen some of the aggressive companies defaulting on hundreds of millions of dollars in contracts in the past year. This is bad for the DOTs, the taxpayers and the industry as a whole."

Ferrovial, which saw regional revenue remain steady at $1.4 billion in 2014, is finishing up two large projects within 10 months of each other, "which were largely responsible for our activity in 2014," Filer says. "It will be a challenge to immediately replace the activity associated with those projects, so we are leveling our resources across North America and other projects while we build more backlog in the region."