Global Power Equipment Group Inc. History

Company Perspectives:

The company has honed its expertise in the design, manufacturing and delivery of gas turbine equipment with over 30 years of experience in the power generation industry.

Key Dates:

1923:

Braden Steel Company is formed.

1958:

Company is acquired by C.W. Flint, Jr., and H.G. Lewis.

1966:

Diversification effort leads to Braden's entry into power generation field.

1985:

Braden is acquired by AMCA International.

1989:

Jason Incorporated acquires business.

1998:

Management team acquires Braden division in leveraged buyout; business is renamed Global Power Equipment Group.

2000:

Harvest Partners acquires company.

2001:

Global Power is taken public.

Company History:

With its corporate headquarters located in Tulsa, Oklahoma, Global Power Equipment Group Inc. is a leading designer and manufacturer of equipment for gas turbine power plants. The fastest growing segment of the power generation industry, gas turbine power plants use a gas turbine and generator to produce electricity. Until recently most of these plants relied on simple-cycle gas turbine systems, which converted just a third of the fuel energy content into electricity. Combined-cycle plants add a heat recovery steam generator (HRSG), using heat exhaust to produce steam in order to generate additional electricity. Combined-cycle plants convert as much as 57 percent of the fuel's energy content into electricity. Global Power manufactures HRSGs as well as other products needed by both single-cycle and combined-cycle gas turbine power plants, including exhaust systems, filter houses, diverter dampers, inlet systems, specialty boilers and related products, and gas and steam turbine enclosures. The company divides its business into two operating segments: heat recovery equipment and auxiliary power equipment. Marketed under the Braden, Deltak, and Consolidated Fabricators brands, Global Power equipment is used around the world, found in power plants in over 30 countries on six continents.

Corporate Lineage Dating Back to 19th Century

The oldest component of Global Power, as well as the company's Tulsa roots, can be traced to the Braden brand and its founder, Glenn T. Braden. He was born in 1856 in Waterford, Pennsylvania, a state where some of the nation's earliest oil discoveries were made. Fascinated at an early age by the emerging oil industry, Braden by 12 was recovering spilt oil by sopping crude off the surface of puddles with rags. He then proceeded to wring out a large number of oil-soaked rags to produce a barrel of oil, and in this painstaking way was able to earn pocket money. Braden was only 13 when he was hired by the Indian Rock Company to help drill oil wells. After helping his father operate a small refinery for three years, he went to work as a pipe liner for the Union Pipe Line Company, a Standard Oil subsidiary. His association with Standard Oil would last for more than 30 years. An early proponent of natural gas, he invented the Bradenhead, which diverted natural gas from oil wells without disrupting oil production. He was instrumental in Standard forming the Hope Natural Gas Company to transport natural gas from fields in West Virginia to western cities. It was under his supervision that the first natural gasline was laid, stretching from West Virginia to Cleveland, Ohio.

Connection to Tulsa Dates to 1905

Braden's connection to Tulsa, Oklahoma, dates to 1905 when he and T.N. Barnsdall formed the Osage & Oklahoma Company after buying 155,000 acres of land owned by the Osage nation of Native Americans. As part of the land transaction they also picked up a small natural gas plant in Tulsa. A year later Braden created the Oklahoma Natural Gas Company to build a pipeline connecting the Tulsa gas field to a number of Oklahoma communities. Over the next dozen years he built up a collection of gas companies and a pipeline network that was consolidated under the Oklahoma Natural Gas charter in 1917, at which point he resigned from Standard Oil. In 1923 he formed the Braden Steel Company in order to diversify into the steel building business, producing fabricated steel buildings and winches for use in the oil industry. Three years later the steel building operation was incorporated separately as the Braden Steel Corporation. Braden would be well into his 80s when he finally relinquished control, selling the business in 1941 to William Moorer, who headed Braden Steel until 1958 when it was sold to H.G. Lewis and C.W. Flint, Jr., of Clint and Steel. In the mid-1960s the company conducted a study to determine new fields that Braden Steel could enter as a way to diversify its operations. Management settled on the power generation field and began to manufacture air inlet and exhaust silencing systems and enclosures for turbines used in power plants. Over the next few years the company grew this product line so that by 1972 it was the principal supplier to General Electric and Westinghouse.

Braden Steel remained involved in both the metal building and power generation businesses throughout the 1970s, then in 1981 management decided that the metal buildings segment required more manufacturing space. This business was then merged with Metallic Building Company and its operation transferred to a larger Houston, Texas, facility. Braden Steel carried on with its power generation business until March 1984 when it acquired Econotherm Energy Corporation, prompting a reorganization that resulted in Braden operating as a division of Econotherm. Less than two years later the Braden division was sold to AMCA International, and it was at this time that Global Power's current CEO, Larry Edwards, became involved in the business by being named general manager. Although Braden was also involved in non-energy activity, its power generation business began to display exceptional growth during the late 1980s, as sales of gas turbines picked up worldwide. Two former AMCA executives, Vince Martin and Mark Train, then formed Jason Incorporated and in 1989 purchased Braden. Under Jason, Braden expanded its gas turbine business in 1992 by acquiring Metrio Technologies, a Dutch firm. As a result, Braden added diverter dampers, allowing the company to now offer exhaust systems. Two years later Jason acquired DELTAK Corporation and merged it with Braden to form a subsidiary named Jason Power Holdings.

DELTAK was founded by Denis Csathy, a native of Hungary who immigrated to Canada in 1956 in order to escape the turmoil of the Hungarian Revolution. A trained engineer, he went to work for the Minneapolis firm of William Brothers Boiler in 1960 as its chief designer, then in 1963 became the head of its heat transfer division, which was an early pioneer in the design of boilers for use in gas turbine heat recovery. In 1968 the parent company was acquired by American Hoist and Derrick, and the heat transfer business subsequently sold to Riley-Stoker Corporation, based in Worcester, Massachusetts. Rather than accept a transfer, Csathy preferred to stay in Minneapolis and took a position with RayGo, Inc. which had been established several years earlier by Gordon Garis, who had originally hired Csathy at William Brothers. RayGo manufactured road construction equipment but Garis wanted to diversify into waste heat recovery.

As a result, Csathy started a new heat transfer division at RayGo, naming it DELTAK. "Delta" alluded to the name of his patented watertube boiler design, so called because of its shape, while the letter "k" was the engineering symbol for thermal conductivity. DELTAK sold its first heat exchanger units in 1969, but by 1972 RayGo management realized that it was unable to invest the necessary funds in growing the business. Key employees of the division then formed a company to take over the operation. The new DELTAK was headed by Csathy until he was debilitated by a stroke in 1985, leading to his death several years later. The company carried on independently for several years before being acquired by Jason.

In May 1998 the management team of Jason's power generation products division formed GEEG Holdings, L.L.C. in order to acquire the division with backing from affiliates of Saw Mill Capital, a private investment firm that specialized in energy, as well as other financial investments. The acquisition of the Jason assets, resulting in the operational company of Global Energy Equipment Group, L.L.C., was completed in June 1998. Little more than two years later the company was again seeking purchasers, and in August 2000, as part of a $310 million recapitalization transaction, control passed to Harvest Partners, Inc., a New York buyout firm founded in 1981, which acquired an 80 percent stake in the business from Saw Mill Capital. Harvest learned about Global Energy through a member of its advisory board who was involved in the power industry and recognized the potential of the business in light of future growth in gas turbine generating systems. Because Harvest had been studying the energy sector since 1999 it was able to strike quickly when the opportunity arose to acquire Global Energy.

Only a few months after Harvest gained control, Global Energy acquired Consolidated Fabricators Incorporated (CFI) in a $28 million deal. CFI designed and fabricated gas and steam turbine power plant enclosures, a product that was a complement to Global Energy since the two sold different products to the same power plant installation. Based in Auburn, Massachusetts, CFI owned additional manufacturing facilities in South Carolina and Mexico. The company was started in 1971, and in addition to power generation products, it was also involved in the pulp and paper, defense, nuclear, and machine tool industries. Although Harvest maintained that it intended to grow Global Energy both organically and through acquisitions, it was also planning a way to reap a return on its investment. According to Stephen Eisenstein, a general partner of the firm, "We were able to do an acquisition very quickly within three months of closing and the organic growth of the company continued along at a dramatic pace, which led us to the conclusion of an IPO with the sector."

Formation of Global Power As Part of 2001 IPO

With the economy lapsing into recession and the window essentially closed on the IPO market, Global Energy was one of the few companies able to succeed with an initial offering in such an unpromising environment. The company was helped immensely by the California energy crisis, with news reports of rolling blackouts and astronomically high electricity prices. It was an easy message to convey to investors: New power plants had to be constructed and that 90 percent would rely on gas turbine generators, most of which would be combined-cycle plants, an area in which Global Energy was particularly strong. Moreover, Global Energy commanded a 60 percent share of the U.S. market. By all accounts the company was clearly poised for strong growth. A road show for the IPO met with an enthusiastic response, oversubscribed by ten times. Several days before the offering, Global Power Equipment Group was formed to succeed GEEG Holdings. The initial price range of Global Power was $16 to $18, but when the offering, led by Credit Suisse First Boston and Salomon Smith Barney, took place in May 2001 the shares were actually sold at $20, resulting in net proceeds of $131.2 million. The following day, trading commenced on the New York Stock Exchange and shares increased in value some 57 percent, jumping to $31.45. The offering price and initial trading were bolstered somewhat by the announcement of the Bush administration comprehensive energy plan, the conservation part of which promoted fuel cell companies.

Some of the enthusiasm over Global Power began to dissipate later in 2001 in the wake of the terrorist attacks that occurred on September 11, the Enron scandal later in the fall, and a mild winter that hurt the energy sector. Global Power reported excellent results at year-end: revenues grew from $416.5 million in 2000 to $723.5 million in 2001. The company also turned a $7.2 million loss in 2000 into a $138.7 million net profit in 2001. Nonetheless, the company was not without doubters, who pointed to Global Power's dependence on a handful of customers. Roughly three-quarters of all sales came from five companies: General Electric, Mitsubishi Heavy Industries, Siemens-Westinghouse, Bechtel, and Duke Power. Moreover, some questioned if the rush to construct additional power plants was premature and that a stagnant demand for electricity in the United States might lead to customers canceling their orders with Global Power. As a result of these and other concerns, the price of the company's stock dropped significantly, hovering around the $5 mark.

According to Global Power management, however, the key to the company's future lay overseas, especially in China. Statistical evidence also seemed to support the company's prospects, both domestically and internationally. In the United States, over 355 gigawatts of new capacity would have to be found over the next 20 years in order to replace outdated facilities as well as to meet rising consumer demand, and over 80 percent of these new plants were expected to be powered by gas turbines. The situation in the rest of the world looked even more promising for Global Power. As much as a third of the world's population still lacked electricity, and demand for power was expected to rise dramatically in developing Asian nations, with lesser yet significant increases projected for Europe and South America by 2020. To meet this future challenge Global Power planned to pursue strategic acquisitions that would not only broaden the company's product lines but extend its geographic reach. In addition Global Power hoped to improve profitability by taking advantage of its engineering capabilities to launch new products. Although energy remained a cyclical industry, which might temporarily halt Global Power's momentum, there was every reason to believe that the company was likely to prosper into the foreseeable future.

Principal Subsidiaries: Deltak, L.L.C.; CFI Holdings, Inc.; Global Power Equipment Group International.

Principal Operating Units: Heat Recovery Equipment; Auxiliary Power Equipment.

Principal Competitors: Donaldson Company, Inc.; Foster Wheeler Corporation; Spirax Sarco.

Further Reading:

• Alpert, Bill, "Power to the People," Barron's, April 16, 2001, p. 37.
• Ray, Russell, "Tulsa-Okla.-Based Power Equipment Firm Focused on Chinese Electricity Growth," Tulsa World, June 7, 2002.
• ------, "Tulsa-Okla.-Based Power Plant Equipment Maker's IPO Raises $147 Million," Tulsa World, May 30, 2001.
• Robinson, Rick, "IPO for Tulsa, Okla.-Based Power Plant Construction Firm Called Success," Daily Oklahoman, May 19, 2001.
• Rudakewych, Lesia, "Global Power Makes Strong Wall St. Debut," Financial Times, May 19, 2001, p. 8.
• Tran, Hung, "Harvest Launches into Acquisition Frenzy," Buyouts, August 28, 200, p. 1.

Source: International Directory of Company Histories, Vol. 52. St. James Press, 2003.

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