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Nuclear Niche

Nuclear plant construction has run aground, but at Riverside Central Services in Natchez, Miss., the business of storing reactor equipment keeps rolling on the river.
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Nuclear power, the "peaceful atom," could prove a bomb. The public increasingly doubts its safety and many in the financial community proclaim it economically doomed. Nevertheless, Riverside Central Services Inc. (RCS) in Natchez, Miss., a specialized handler of component parts for nuclear-power plants, is buffered from market forces and continues to thrive. For Larry L. "Butch" Brown, RCS's president, life on the mighty, muddy Mississippi River has never been better.

"Our future is assured," asserts Brown, sipping a Miller Lite in a cocktail lounge as he watches dusk settle on the humid bayous and antebellum mansions of Natchez seven floors below. The lounge he sits in is part of an historic hotel he helped restore; the brand he drinks is sold by a local beer distributorship he partly owns. Brown, 40, dabbles in so many ventures that business associates have nicknamed him "Deal a Day." He describes RCS, his biggest deal, and the niche he has molded in storing strictly nonradioactive and nontoxic material. As he speaks, his animated mannerisms are those of an entrepreneur relishing a cornered market.

"We're the only privately held warehouse in the country that we know of that will store nuclear components, test them, and maintain them," says Brown. "Our customers have nowhere else to go. If regulations and restraints are lifted, there will be more plants built and more need for our services. If the nuclear industry stays flat, or even takes a nose dive, we still have guaranteed business Construction time keeps getting longer and longer, and exist ing plants need to store spares for as long as they're on line."

Since 1978 there have been no new orders in the United States for nuclear generating plants. In the past 11 years, 101 units have been canceled. But Brown has no qualms about deriving his livelihood from a clearly troubled industry. "There is no disastrous scenario for Riverside that I can think of," he insists.

Brown's sanguine outlook appears justified. Most utilities store construction materials at on-site facilities that are costly to maintain. Very few private warehouses in his region, or even the country, will store nuclear-plant materials. The ones that do are ill-equipped to compete with RCS. The company pioneered long-term storage contracts, averaging five years, whereas most warehouses operate with monthly contracts, or on a speculative daily basis with materials constantly in flux Brown believes that his company's 500,000-square-foot temperature-controlled facility on a bustling Mississippi River port is the country's largest privately owned warehouse under one roof -- larger than even, say, New Orleans's Superdome. All specialized services, handled by 33 full-time employees, are consolidated in one building accessible by rail, river barge, and truck.

Utilities and contractors, burdened with long lead times and crammed inventories of cumbersome machinery, have turned to RCS as the logical solution to nuclear storage problems. Being the leader in an esoteric field has helped propel the company from $181,461 in sales in 1977 to more than $2.4 million in fiscal 1983, its 550% growth during the first five years made it #253 on INC.'s list of the 500 fastest-growing private companies in the United States (see INC., December 1982). RCS's aftertax profits consistently exceed 15% of sales.

Brown conceived the lucrative RCS concept during an embarassing incident that would have chastened most other men. When Mississippi Power & Light Co. (MP&L) began construction of Grand Gulf Nuclear Station Units 1 and 2 at Port Gibson Brown's wholesale lumber outfit in Natchez supplied the hardwood needed to shore up excavation work. One day in 1976, driving from Natchez to the site, Brown accidently tore a huge hole in the seat of his pants at a stop five minutes away. "I said the hell with it and went anyway," recounts Brown in a drawl that is somehow southern and fast-clipped at the same time. "The sophisticated engineers saw my split pants and laughed. I just looked at them and said, 'Boys, I bust my ass for an order."

The remark amused Albert Thompson, the Grand Gulf project manager for Bechtel Power Corp., worldwide construction giant and project contractor. The two began an amiable chat that led Thompson to confide that Bechtel sorely needed storage space for rapidly accumulating nuclear-power-plant components. Brown pounced on the challenge and persuaded a local wholesale grocery company that was going out of business to rent him 10,000 square feet of its building at 4 cents a square foot. "The grocer thought he was screwing me," says Brown. "He didn't know I had persuaded Bechtel to pay 8 cents a square foot."

RCS's unique services evolved from coping with exigencies, rather than beginning with a preconceived strategy. Bechtel increasingly called Brown to give basic instructions, such as, to rotate this valve or lubricate that part Brown responded quickly to each demand. He also sensed that business with Bechtel had prospects beyond transitory deal-making.

"I asked Bechtel how things were going over at Port C'ibson," he says. "They told me construction would take another five years, and I had their business for those five years. I asked them how much my volume would increase. They said it might double. At the time, I had 10,000 square feet that were packed so tightly I knew we had to expand. I estimated future space requirements from what Bechtel told me, and got a bank loan to build a new warehouse away from the downtown area and down by the river port. Then, I got Bechtel to agree to a five-year contract, which was unheard of, but they went for it."

The 1977 facility, encompassing 60,000 square feet on 17 acres, cost $1.2 million, expansions through 1981 brought it to its current size. More than 65% of RCS's entire inventory is related to the nuclear-reactor industry, generated by MP&L construction at the twin Port Gibson units and by Gulf States Utilities Co. construction at River Bend Nuclear Station Units 1 and 2 in St. Francisville, La. Bechtel, contractor for the twin Grand Gulf units, is still RCS's major client, filling 40% of the warehouse and generating 30% of the company's total sales. Other customers renting space include Stone & Webster Engineering, contractors for the River Bend project, General Electric, and Westinghouse Electric.

Some vendors, wary of the storm clouds over the future of nuclear power, are canceling product lines and advising utilities to order parts now while they are still available. As a result, RCS serves as a shelf for parts that won't be used for another decade, if ever.

Like the rest of their beleaguered counterparts, the utilities storing at RCS are plagued by chronic cost overruns. Both Grand Gulf units, the initia clients, were expected to cost $13 billion and take 10 years to build; instead, it has taken 10 years and about $3 billion just to build Unit 1, which is nearly complete. Unit 2 is about 20% complete. But for RCS, prolonged construction means prolonged patronage. In addition, Brown expects to supply all four units with storage and maintenance for spare parts for the duration of their commercial lives, an average of 30 years.

Most of RCS's non-nuclear business comes from foundering, or sunset, industries. The second largest commodity stored -- occupying about 100,000 square feet -- is paper products, largely from International Paper Co., located down the road from RCS. About 20,000 square feet are taken up by specialty steel, with the remainder housing heavy machinery. "Sometimes, a recession can feed a warehouse business," says Brown, "because slack demand creates large inventories and backlogs." Most of the commercial warehousing industry, though, has been dampened by the recent recession, with current activity down 13% from 1980.

Roughly 90% of RCS's business is done by long-term contract. Brown refuses to divulge rates, but he concedes that his prices are higher than average. The key distinctions, he maintains, are specialized service, efficiency, and convenience. "We can do it cheaper than the utilities can do it for themselves," he says. "They have to build and care for their own storage sheds. We're consolidated and quicker. The rates are higher, but often the overall bill ends up being lower." He adds that utilities, caught in a surreal world of billion-dollar overruns, usually place RCS's charges under "miscellaneous."

Despite the complex nature of some reactor components stored at RCS, the work required of Brown's employees is surprisingly conventional. There are no white-coated technocrats with clipboards, experience in material handling is the primary qualification. As Brown puts it, "It doesn't take a whole lot of expertise to turn a valve. It may be nuclear, but a nut's a nut and a bolt's a bolt." Preventive maintenance is not an unusual service for warehouses, but few undertake the meticulous testing and care that have grown into an expertise at RCS. For instance, the RCS crew is regularly suited with rain gear and sent crawling into giant reactor bearings to spray the interiors with a mist of special rust inhibitors. Pressure readings of reactor heat exchangers are monitored to comply with vendor specifications, and nitrogen is injected into equipment parts to retain pressure equilibrium.

According to Brown, his most indispensible employee is his first cousin Allen Brown, RCS vice-president and general manager. "I rely on Allen to stay on top of the day-to-day details at the warehouse," says Brown. "That frees me to focus on sales and the financial aspects of the company, the things I do best."

Allen was the first person Larry enlisted when given the opportunity to store for Bechtel. A former public relations man, Allen played on the first two Green Bay Packer Super Bowl teams under coach Vince Lombardi Lombardi's competitive philosophy still has a hold on Allen. "I work my men pretty hard," says Allen, "but I work myself pretty hard, too."

Hard-working employees providing specialized services will mean another prosperous year for RCS. But, although his business is ostensibly secure, Brown is like a shark -- cessation of movement is, for him, tantamount to death.Thus, he envisions a boldly expanded role for RCS as the foundation of a program for pooling spare parts for reactors. So far, he has sponsored two conferences for the top managers of about 10 utilities across the country to discuss the pooling plan. One was held last December in Natchez, the other last March in New Orleans. "The response was good, and now the ball is in their court," Brown says. "It was helpful to get together to discuss common problems and the need for a co-op spare-parts program. Utilities are too fragmented and don't communicate enough. They're preoccupied with overruns, rates, and government regulations."

Spare-parts pooling is not a new idea, and some vendors already stock limited inhouse inventories of parts for utilities to dip into. But, although vendors and utility consortiums have considered pooling, a comprehensive co-op system remains unrealized The only existing program that approaches the one Brown envisions is Pooled Inventory Management (PIM), being managed by GE for participating utilities. However, PIM is geared only for big-ticket items, and so far it has received much interest but scant business Utility executives who attended Brown's meetings are studying the feasibility of categorizing interchangeable parts, a first step toward the creation of his dream.

"I think Brown's idea could work," says Gary Weigand, vice-president of nuclear operations for Gulf States's River Bend project. Weigand attended both utility conferences, and he supports parts pooling. "Conceivably, pooling could save each utility $1 million a year per plant."

Larry Brown's warehouse on the banks of the Mississippi is booming, but his spare-parts pooling scheme, if successful, could boost business exponentially. He is confident that RCS, by virtue of its reputation and experience, would naturally inherit the lion's share of the market. Echoing George Mallory's reason for wanting to climb Mt. Everest, Brown explains: "I make deals like this because they are there."

Last updated: Sep 1, 1983




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