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Tough-talker Carolan makes the connection


Peter Carolan thrives on defying the odds. So far he has given up smoking and run the London Marathon.

Now he says he can treble his firm's turnover by connecting developers to all four utilities at the same time.

Alasdair Reisner believes him IT IS SAID that giving up smoking is the easiest thing in the world - staying off the smokes is the real challenge as all too often the best intentions and promises go crashing down as soon as the nicotine comes knocking.

Not so for managing director of Alfred McAlpine Utility Services, Peter Carolan. While on holiday a few years ago he told friends he was going to kick the habit. Most thought he'd be stocking up on the duty frees by the time he boarded the plane home. Mr Carolan proved them wrong and hasn't touched a cigarette since. Similarly, a late night promise that he could do the London Marathon became reality and a large cheque for charity was presented less than 12 months later. So when Mr Carolan says he thinks he can nearly treble his firm's turnover in the next three years, it should not be taken lightly.

Utility Services was formed last year following the £52 million acquisition by Alfred McAlpine of Kennedy Construction, where Mr Carolan was managing director. Rival Ryan Utility Services was then added to the business in November for a further £12.9 million.

'The acquisition of Ryan brings our turnover up to around £220 million. We believe with outsourcing we can bring that figure up to £600 million within three years, ' says Mr Carolan.

The outsourcing he refers to follows attempts by the regulators to purge inefficiencies from the electricity, water, gas and telecommunication sectors.

'Utilities have already gone through a fair period of downsizing and are looking at outsourcing. The regulators are saying: 'Your costs are too high. Anything you do in-house is not cost-efficient because it is not market tested.'' The main new area of work that is likely to open up as a result of this is connections. This market for linking up new developments to each of the utilities was recently valued at more than £1 billion annually by the gas and electricity regulator Ofgem.

'This is going to be the area where there is most competition, but nobody yet knows how it will work. It can just be let as a contract and transfer everyone across by Tupe [Transfer of Undertakings (Protection of Employment) Regulations].

'But that means you just transfer across all of the old inefficiencies of the in-house team, ' says Mr Carolan.

A second option is to hive off the utilities connections business, make it efficient and sell it on as a going concern. But again the same problem arises - the utilities don't have the knowledge to make themselves efficient and attractive to buyers. In both cases anyone taking over would expect guarantees of long-term contracts to safeguard their investment.

Utility Services has an alternative solution that it is road testing with Scottish Power.

A joint venture, known as Core Utility Solutions, will provide multi-utility connections across southern Scotland and the North of England.

'We bring in our commercial awareness, our financial awareness and our use of systems. We are good at isolating what really needs to be done.

'We can come in and say: 'If you were starting this from scratch, how would you do it? How would you set up a connections business?' By doing that you can get rid of massive amounts of waste. It's all just a case of coming to the problem with a fresh pair of eyes.'

The joint venture allows Scottish Power to cut its exposure to the connections market yet still meet its licence obligations and remain in control of the work. For Alfred McAlpine, the deal ensures a strong bond between the firm and one of the largest players in the utilities sector.

This 'one-stop shop' for connection to all the utilities is increasing demand from developers hoping to avoid dealing with four different firms for four different connections. As such, the business is expected to quickly go nationwide with turnover rising from £50 million to £100 million.

But if the whole business is to reach Mr Carolan's ambitious targets then it will need to grow not only by picking up new work but also by further acquisition.

'The plans are to take advantage of any opportunities that arise in the North and acquire companies in the South. We have several targets acquired that fill in the glitches with the South as priority one and the Midlands as priority two.

'Specifically we are looking for overhead line firms and those with telecom and foul water capability, ' he says.

Despite the purchase of facilities management firm Stiell for £85 million in March, more than £100 million is understood to be left in Alfred McAlpine's coffers to achieve these ends.

That said, Mr Carolan is wary of throwing money around:

'If we can get small bolt-on organisations, especially in the South, then that's what we're going to do. We could go out there and make a huge splash and spend a lot of money, but finding one company that would fulfil all our requirements is not that easy.

'If we can find small companies that are not huge in turnover then that is the way forward. We'll use them as a platform to build on.'

So can Mr Carolan achieve his lofty ambitions for Utility Services? Only time will tell - but judging by his previous form you'd be unwise to bet against him.