80 Countries and Counting

From Olympic stadiums to nuclear cleanups, CH2M Hill is as ubiquitous as it is anonymous. An interview with CFO Michael Lucki.

CH2M Hill, a $6.3 billion consulting, engineering, and construction company, is much better known than its unassuming name would suggest. With nine business groups in 80 countries and counting, the Colorado-based firm is the force behind some of the world’s best-known public-works projects. Right now, for example, it is overseeing the construction of London’s 2012 Olympic venues, the expansion of the Panama Canal, and several of the Environmental Protection Agency’s Superfund cleanup sites. CH (as it is often called) is also looking at hundreds of potential projects around the globe, from nuclear remediation work in Japan to new oil-field developments in Iraq.

“I view our company as almost a mutual fund,” says CFO Michael Lucki, who joined the company from Ernst & Young last November. “Each business group focuses on a different end-market, with different economic cycles, creating a balanced portfolio.” Lucki’s E&Y experience has proven helpful, he says, because “at E&Y I had 8 to 12 clients at any given time, and here I have 8 to 12 projects at the same time. But at CH they’re all the same fact pattern, so it seems easier.”

Which of your business groups are hot right now, and which are lagging?

Our microelectronics and manufacturing businesses that deal with semiconductors and anything to do with photovoltaic flat screens are hot. [CH2M Hill designs and builds manufacturing facilities.] Demand for those have gone through the roof over the last six months. Power [including designing and building power-generation plants] has also taken off dramatically this year. Whereas if you look at the U.S. transportation market [which includes highway, bridge, rail, and airport projects], with the federal deficits and state deficits, and funding and appropriations [still in flux], that business has been very slow the last year.

What are your priorities as a relatively new CFO?

I was brought in to focus on four areas. One is capital structure and obtaining financing as we look at acquisitions. We have a $700 million credit facility with seven banks that we just renewed for five years, and we’re also looking at term loans. Clearly, the cost of debt right now is very high; it seems like the banks have forgotten everything they went through three years ago. So we’re evaluating all those as to the most effective type of debt we would like to take on if the need arises.

My second focus is acquisitions. Right now, CH is number one in about eight markets, including water, energy, and pipelines. Having a number-one ranking is very important to us, and as other companies consolidate, we could possibly lose some opportunities, so we have a couple of acquisitions in progress and others we’re considering. Then, internally, we’re continuing a cost-reduction program that we’ve had under way for a number of years. I’m also trying to split up federal and nonfederal projects for accounting purposes, rather than have a one-size-fits-all model.

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