2005 SB&D Investment 100

Moving Up Better Than Falling Back

Investment 100 Beats Last Year's Mark by Mere $100 Million

By Mike Randle

The last few years of the SB&D Investment 100 have been skewed. By studying Chart No. 1, you'll notice that in the recession years of 2001 and 2002, $25 billion or more was invested by the 100 companies that made up the SB&D Investment 100. Those two years remain the top two SB&D Investment 100s. Problem was, some of those companies never made the investments in their announced deals. In fact, in calendar year 2001 (the 2002 SB&D 100), 36 power plants were part of the 100-largest investment deals announced in the South. Just a handful of those deals ever broke ground.

In calendar year 2000 25 power plants were announced and in 2002 that figure dropped to 10. Last year's SB&D Investment 100 featured just five power plants. That means that in four years 76 electric power plants were announced in the South. The successful ground breaking of 76 electric power plants over the last four years was about as accurate as the success of deregulation of the utility industry in the South as a whole. In other words, for the most part, it didn't happen, therefore Investment 100 totals from 2001-2003 weren't correct. But, we can't make a company build what it says it will build. Our rules are if the company publicly announces the project, we list it. The power plant ruse of the early 2000s is the only time in the history of the SB&D 100 that we have ever felt "taken."

Fortunately for this year's SB&D Investment 100, a rational number of power plants has made the list. Only six electric power generating facilities made the 2005 Investment 100, giving us a feeling the total invested by this group is pretty close to accurate. And that total, $22.2 billion, is a slight increase over last year's $22.1 billion.

The difference between last year and this year centers on the threshold. The 2005 SB&D Investment 100's threshold, or the 100th-largest deal, is $70 million, easily topping last year's threshold of $55 million. What that means is while there weren't many super projects of $1 billion or more as in year's past, at least there were more sensible investment deals in the $100 million to $250 million range. To us that also means a more accurate and accountable Investment 100.

Chart No. 1

SB&D Investment 100 1994-2005

The 2005 SB&D Investment 100: Top Industry Sectors

Last year's top two industries, automotive and oil and gas, are also the first and second place industry sectors respectively in the 2005 Investment 100. The automotive sector placed 16 deals on the Investment 100 and another 17 on the just missed list, for a total of 33. Oil and gas rung up 26 big deals, 16 of which were part of the 100-largest investment deals announced in the South in 2004.

The distribution sector performed well again this year, but not good enough for another third place finish. Distribution fell to fifth place and food processing jumped to third place this year. Building products also passed distribution into fourth place this year.

The big surprise in the 2005 Investment 100 was the biotech sector, which we have lumped pharmaceuticals and medical devices into. Bio posted 14 big investment deals, 10 of which made the Investment 100. Other industry sectors performing well this year in large capital intensive projects were metal products, electronics and plastics.

But the real story of this year's Investment 100 as well as the last five Investment 100s is the automotive industry. For the second consecutive year no new automotive assembly plants were announced in the South. In fact, the last one was Toyota's pickup truck plant that's being built in San Antonio. Toyota made public that project in February of 2003.

Even with the void of assembly plant announcements in the Southern Auto Corridor (www.SouthernAutoCorridor.com) over the last two years, the automotive industry still rules the roost of all industry sectors in the region. Of the $22 billion total invested by this year's Investment 100 by all industries, automotive was responsible for 17 percent, or $3.7 billion. However, if you look at all deals of $30 million or more announced in the South in calendar year 2004, the automotive expenditures in calendar year 2004 grow to $4.5 billion.

For all practical purposes, the South's automotive industry has had a couple of off years in the 2004 and 2005 SB&D 100s compared to 1999-2003. But even when automotive is having an off year, it remains the No. 1 industry in the region. With the prospects of at least two and possibly three new assembly plants announcing in the Southern Automotive Corridor over the next year or two, look for the auto industry to dominate the SB&D Investment 100 even more than it has in 2004 and 2005.

Chart No. 2

 Top 10 Industries 2005 SB&D Investment 100

(Total Announced Deals of $30 Million or More)

2005 SB&D Investment 100: Manufacturing vs. Non-Manufacturing

There has never been a year in the Investment 100's history that the service sector won out over manufacturing in the number of deals making our capital investment lists. But most years at least the services sector makes an effort. This wasn't one of those years.

Services were riding high in the late 1990s when boatloads of money were being poured into dotcoms, the financial services industry and the distribution sector. The closest the services industry got to dethroning manufacturing in the number of large capital investments was in 1998 when 43 percent of all deals $30 million or more were services-related.

This year manufacturing dominated the list of 217 deals announced in calendar year 2004 with $30 million or more in investment. In fact, there were 179 manufacturing deals with $30 million or more in announced capital investment and only 38 came from the services sector.

2005 SB&D Investment 100: The States

In this year's SB&D Investment 100, 13 of the 17 Southern states increased their total deals with $30 million or more in announced investment. Last year it was 12 of 17. That being the case, we have upward movement in most Southern states when it comes to luring larger capital expenditures. In an economy as choppy as this one is more than two years after the recession officially ended, upward movement, no matter how slow it may be, is an accomplishment in itself.

We've given you a chart (No. 3) that shows each Southern state's performance at garnering deals of $30 million in investment or more from 2003-2005. As you can see, most Southern states are methodically building their portfolio of more and bigger investment deals. Arkansas, for example, increased their lot by more than triple this year. Alabama, Florida, Georgia, Kentucky, Maryland, North Carolina, Tennessee and Texas have all seen their big dollar deals rise with regularity each of the last three years. And that's what you want; a consistent rise of major corporate and industrial investments in your state.

Chart No. 3

 2005 SB&D Investment 100 State Performance

(Deals $30 Million or More 2005, 2004, 2003)

SB&D Investment 100: Per Capita Performance

As we wrote in this year's SB&D Job 100 section, it is impossible to compare most states in the South to each other when it comes to turning deals because of the vast differences in population. In the South you have two huge states, Texas and Florida that account for 39 million people, or more than a third of the population of the entire South, the most populated region of the U.S. Then there's Georgia, North Carolina, Tennessee and Virginia. Together, those four states represent 30 percent of the region's population.

The rest of the South is made up of smaller states, from 1.8 million in population (West Virginia) all the way up to 5.7 million (Missouri). There are 11 Southern States that feature populations of 1.8 to 5.7 million. We rank all Southern states in the Investment 100 in capital expenditures per million people. That tends to give smaller states a more level playing field with the larger states.

Chart No. 4 shows all deals turned in each state of $30 million or more and the total sum of those deals. We then divide the state's population into that amount to come up with a total investment made per million residents.

Chart No. 4

SB&D Investment 100 per Capita

(Total of Deals Announced of $30 Million or More and Capital Investment per Million Residents)

As you can see by studying Chart No. 4, the South's smallest state, West Virginia, with just eight deals turned of $30 million or more, is the No. 1 state in the South for corporate and industrial investment per million residents. South Carolina had a banner year as well. Texas, which usually finds itself near the bottom of this ranking because of its population size, had one of its best investment years in the history of the 12-year-old SB&D Investment 100. Texas and West Virginia were the two states that benefited the most from power plant announcements. We'll keep our fingers crossed and hope those actually get built.

2005 SB&D Investment 100: Notable Deals

As written earlier, this year there were but a few mega-deals, or those deals that approach or exceed $1 billion in investment. The largest deal was Infineon Technologies' expansion of its semiconductor facility in Richmond, Va. As opposed to power plants in years' past, the dominating single industry, or in this case, sub-sector industry, was liquid natural gas. Eight of the 18-largest investment deals announced in the South in 2004 were LNG facilities. While there wasn't a new assembly plant announced in the South in 2004, the expansion of existing automotive assembly plants (not including parts suppliers or engine plants) in the South totaled $1.2 billion. Look for that figure to rise dramatically in the next two years as new assembly plants are announced and more existing plants are retooled.

Some of the more interesting investment deals that made the SB& D 100 and JMD list include Vought and Global Aeronautica's large aviation-related projects in Texas and South Carolina, Maersk's huge new terminal in Portsmouth, Va., Merck's new $300 million vaccine plant in Durham, N.C., the Corporate Executive Board's $227 million research investment in the D.C. region, Electronic Arts $50 million expansion in Orlando, and Dreyer's $180 million ice cream plant in Laurel, Md.

2005 SB&D Investment 100: Conclusion

The sum of all 217 deals announced in the South in calendar year 2004 of $30 million or more in investment was $27.315 billion. There were 130 expanded projects with $30 million or more in announced investment and there were 87 new deals of $30 million or more. Of the 217 projects with $30 million or more in capital expenditures, the average deal was a $126 million investment.