Thanks to energy-related orders, Minnesota manufacturers are hiring, expanding – and profiting.
After years of job cuts, the 205 factory workers at Electric Machinery in northeast Minneapolis were thrilled to pounce on a new order for a 100-ton generator. The $2 million job promises to keep them busy for a year and has prompted the company to ramp up hiring.
“Things are picking up,” said Dan Lanske, Midwest sales manager for Electric Machinery. He has orders for 45 generators next year and 50 in 2015.
After the gut punch of the Great Recession, several local manufacturers with ties to the energy sector are gaining millions in new business. Factors such as aging infrastructure, natural disasters across the nation and state and federal regulations demanding cleaner, more reliable power are drumming up orders for Electric Machinery, Cummins Power Generation, Bell Lumber & Pole, Xcel Energy, Great River Energy and a host of other Minnesota companies.
In a recent study, University of Minnesota Duluth economist Jim Skurla found that hundreds of millions of dollars in new energy-related spending surged through Minnesota’s factories and economy in 2013. “Power generation is a very important part of the economy,” he said. It is a “very capital-intensive and expensive operation.”
Lanske welcomes the reprieve. Sales of Electric Machinery’s 50- and 100-ton generators had sunk to just 30 a year from the robust days of 2007.
In August, Great River ordered the new 56-megawatt generator from Electric Machinery for its St. Bonifacius power plant. It proved the first in a series of orders, including ones from Boise Paper Mills, the Flint Hills refinery, the Prairie Island nuclear plant and a Guatemalan sugar processing plant. “We’ve called back nearly all the guys from furlough,” Lanske said. “The layoffs we had before were not insignificant. It was probably 15 to 20 percent of our entire workforce.”
Electric Machinery is certainly not alone in its comeback. Since the recession, utility pole maker Bell Lumber & Pole in New Brighton has been able to grow, in part, due to several storms that opened up new business in the Midwest.
The company was adding about nine workers a year. In 2010, it added just one. But since 2011, it has hired 24 workers and plans to add 40 more by early 2015. “We are going gangbusters and trying to get the wood out as fast as we can,” said Steve Kracht, Midwest utility pole sales manager. Bell Lumber grows and strips trees, pressure-treats the logs and turns them into utility poles that last 40 years.
Recently, giant rigs snatched 125-foot logs off rail cars in its 23-acre yard, tossed them onto hefty cradles and hauled them into the treatment plant. Towering trucks with claws zipped along narrow lanes, carrying long bundles of Douglas fir, Western red cedar and Southern pine.
In between, workers measured, drilled holes, shaved wood and further prepped the poles. On a recent Tuesday, Kracht made the rounds and pointed out a pile of poles with “GRE” chalked on the stumps. “These are all headed to Great River Energy,” Kracht told visitors. The pile represented just a few of the 30,000 utility poles Bell Lumber made for Great River this year.
Great River, which provides electricity to 1.7 million people in Minnesota and North Dakota, will use the poles to carry up to 250 kilovolts of electricity into growing or aging neighborhoods. Business “is definitely coming back from when we dropped like a brick for a number of years,” said Great River Energy spokesman Randy Fordice.
For two years, Great River ramped up maintenance projects delayed during the downturn. It has also helped expand the state’s power distribution grid, and used Bell Lumber’s poles to replace rotting poles in neighborhoods. The grid expansion was a result of state and federal regulations requiring more reliable and green power in rural areas. The Northeast blackout of 2003, which brought into question the strength of the electric grid, was behind several federal regulations.
The new guidelines are helping Bell Lumber, as are orders from Great River’s 28 co-op members and a spate of orders from Xcel Energy, the state’s largest electrical utility. “We provide 50,000 to 60,000 poles just across the Midwest and that includes probably 30,000 just in Minnesota,” Kracht said. “Demand from the Great River, its electrical co-ops and the Xcels of the world is increasing,” which is prompting Bell to build more poles and add more workers.
Bell Lumber has come a long way since the recession. This year, it built a second floor on its New Brighton headquarters. Two years ago, it added a new wing. With business rising, Bell will open a new factory in Nebraska next year, which will take the pressure off New Brighton and help the company expand more in Iowa, Kansas and Nebraska.
Great River Energy isn’t growing nationwide, but is doing its part in the Upper Midwest after surviving a brutal recession, big dips in power demand, and the wrath of some customers who were upset about rate increases. In January 2012, it decided to mothball its new $426 million Spiritwood coal plant in North Dakota after a key steam-buying customer withdrew. It suffered another blow this year when the Minnesota Public Utilities Commission took the rare step of rejecting its long-term business plan because it didn’t include a coal reduction plan.
Still, Great River is stabilizing. After cutting costs and initiating early retirements in 2008, employment is rising. “It’s at 880, which is up slightly,” Fordice said.
Maintenance projects, the decision to buy a generator for St. Bonifacius and its work on the massive 10-company, power-grid expansion project called CapX2020 are putting Great River back on its feet. Great River also has 12 transmission expansions and substation projects underway statewide.