MOUNTAIN VIEW, Calif., 5 July 1999 — By Andrew G. Wright, Debra K. Rubin, Mary B.Powers, Sherie Winston, William J. Angelo, Stephen H. Daniels and Paul Rosta
The environmental market could be called the other E-business. ENR’s 1999 Top 200 Environmental Firms bear little resemblance to Amazon.com, ebay and other high-flying, Internet-driven, high-tech ventures. The ENR 200 are not rewriting conventional economic theory, spinning out lucrative IPOs almost weekly or creating an expanding class of 20-something millionaires.
No, this realm is a bit more staid: plain as dirt, elemental as air and water and about as sexy as hauling out the trash. Its business still is judged in conventional terms. Clients expect tangible results. Big government clients like the Dept. of Defense and the Dept. of Energy are pushing harder than ever before to see quantifiable progress in cleaning up their contaminated sites. Industrial clients who want to concentrate on their own core businesses are trying to outsource to outside specialists, as much as possible, the management of waste-stream byproducts. For the service provider, keeping the client in compliance with state and federal regulations is more than a goal—it is a prerequisite to getting the deal.
Likewise, municipalities face the twin challenges of expanding populations and ever-stricter state and federal standards for water and wastewater treatment. These owners expect their design engineers and contractors to provide infrastructure that will surpass established benchmarks for quality, durability and costs.
The older E-business has grown steadily since 1970, the year marking the first Earth Day observance, the establishment of the U.S. Environmental Protection Agency and the enactment of the Clean Air Act. Public support for a cleaner environment, aided by a regulatory jump start, created a robust new service sector that enjoyed a period in the late 1970s and 1980s as a Wall Street darling. Those golden days of green may be gone forever, but what remains is a legitimate, steadily expanding global economic sector. In 1998, the Top 200 market totaled $26.7 billion in revenue, adding $2.6 billion to the previous year’s total, an increase of nearly 11%. Once again, hazardous waste, water and wastewater treatment dominated this year’s list, accounting for 70% of the total market.
Consolidation and acquisition, trends that marked previous years, again were catch phrases in 1998. At the top of the heap for the second year is U.S. Filter, reporting nearly $5 billion in revenue, up from $2.9 billion in 1997. The master consolidators devoured enough small fry to position itself for a $6.2-billion buyout by Vivendi, the French utility and media conglomerate (ENR 4/5 p. 16).
Palm Desert, Calif.-based U.S. Filter is “now in the process of integrating GDE (Generale des Eaux),” Vivendi’s global water and wastewater treatment arm, says U.S. Filter President Richard J. Heckman. “We’ll have one big company at the end of the summer…a $13-billion company,” he says, approaching the size of Coca Cola, with 80,000 employees in 120 countries. Heckman says the world market for water is $300 billion a year and “that’s low. If Walmart sells $100 billion worth of goods, I have a hard time believing all the water in the world is only three times that.”
It can be perilous being near the top of the Top 200, however. Consider Philip Environmental Services Group, a Canadian consolidator whose two-year buying spree pushed it into third place last year. Dropping off the ENR Top 200 is the least of the firm’s woes. Accounting and inventory irregularities triggered a spate of lawsuits and a stock swoon that landed Philip in Chapter 11 bankruptcy proceedings. The company received permission to extend its reorganization plan filing to June 30. Another part of the workout involved a $70-million May sale of Philip’s utility management arm to Azurix, Houston-based Enron’s entry into the water business. Having just completed its own initial public stock offering, Azurix is concentrating on building the same credibility in water that Enron claims in oil and gas.