The 2002 SB&D Investment 100

Pretty Good Year, But One With an Asterisk

By Lee Burlett

In contrast to the 2002 SB&D Job 100, the 2002 Investment 100 looks like a winner. But looks can be deceiving. Last year a record threshold of $80 million tied the previous record of $80 million set in 2000. Those two years proved there were some very large companies making some very large financial commitments in the region. Yes, it's been a good two years on the investment front, two years that virtually matched one another.

The 2002 SB&D Investment 100 didn't match the record $80 million threshold set in 2001 and 2000, but it came close. This year, any investment announced in the South that totaled $78 million or more made up the largest 100 investments announced in the South by various industries and companies. This year's ratio ranged from $78 million for the 100th largest announcement to $1.7 billion (that's with a "B") for the largest investment made in the region.

This year's SB&D Investment 100 totaled an impressive $24.97 billion in investment. That's an excellent total considering last year's I-100 summed up at $25.75 billion, the largest total ever. The $25.75 billion topped the previous record mark set in 1999 of $24.6 billion, so this year's total is the second best ever.

There were two megadeals over $1 billion on this year's list. That's the same as last year and one better than the year before. The 1996 SB&D Investment 100 remains the megadeal king with five deals announced with over $1 billion in investment. So, in comparison to other years, years that were not recessionary, the 2002 Investment 100 looks very strong, with a high threshold, a good representation of megadeals and a total investment that ranks second in "100" history.

But, as mentioned in the headline, an asterisk should be placed on this year's Investment 100. If you read our methodology on the first page of the section, you know that we use all announcements in the "100" that were made public by the corporation. If they said it, and it was written, then we counted it. Hey, it's not egg on our face if they don't build it. It's egg and much more thrown at them if the deal becomes a dog. And dogs are what we smell in this batch of Investment 100 deals.

Now, don't get us wrong. There's only one industry sector in which the odor wafts. Its the electric power generation industry. In calendar year 2001, there were 37 power plants publicly announced by utilities in the South. I can assure you all 37 will not be built, or at least won't be built any time soon. There was a record 21 power plants announced in 1999 and 20 more announced in 2000. At that rate, every person in the South will have his or her own power plant by 2125. Alright, we admit that's a gross exaggeration. But 37 power plants to be built in the South after 41 were announced over the last two years means there are exactly 78 more power plants announced in the South the last three years than were constructed in California during all of the 1990s. Many of those generation facilities will not be built.

While power plants made up 37 percent of this year's Investment 100, there were other deals that were more noteworthy because of the jobs they created (power plants create very few jobs). A few that you will find in our ranking include the $1.2 billion (that's with a "B") invested by NewCo in Lake Charles, La. With that investment came 500 new jobs compared to the 30 or 40 created by the average power plant. Sony-Toshiba-IBM ganged up to turn an impressive $400 million advanced chips deal that meant 300 high-paying jobs in Austin. Ford spent $375 million in Norfolk and added 200 jobs. Toyota chose Alabama for its V-8 engine plant and invested $220 million and hired 350. And WorldCom (another dog, maybe?) spent $180 million and announced 3,600 jobs in northern Virginia's Loudoun County. We crowned the WorldCom announcement "Deal of the Year," even though it may or may not actually happen considering the company's current situation. And we can't forget another deal that was no dog. Nestle announced an investment of $165 million and 1,000 jobs for its new frozen food plant in Jonesboro, Ark.

New vs. Expanded

New versus expanded investment announcements were a wash in this year's Investment 100. There were 51 new deals that made the list compared to 49 expansions. The 51 new deal total, the highest in four years, was obviously affected by the 37 power plant announcements. While the Southern Business & Development 100 did not exist in the last real recession (1991), we suspect that new deals will surpass expansions during downturns. Why? Some of the new deals are dogs, while expansions don't occur as readily when times are tough. Last year, for example, there were 41 new deals making the list (once again driven by 20 new power plants), compared to 59 expansions.

Industry Trends

Because of their capital intensive nature, manufacturing and utilities have dominated the SB&D Investment 100 over the last several years. We've already discussed electric utilities and their effect on the list. But other industries had major effects as well. Federal government industry classifications do not clearly show which industries are spending money more readily than others. But our own classifications clearly show that the oil and gas industry is alive and well in the South. The same can be said for the chemical industry. Those two sectors accounted for 19 of the largest 100 investment announcements made in the South. The 19 deals is a major increase from one year ago when only five big investments were made in oil and gas and chemicals. But the 19 deals is off the record mark of 30 oil, gas and chemical deals making the I-100 in both 1998 and 1999.

2002 SB&D Investment 100

Bureau of Labor Statistics Industry Categories

Also doing well in 2001 was the transportation industry. It wasn't a particularly good year for automotive, however seven big deals in one of the most active Southern industry sectors made the list. Last year's I-100 featured 13 large transportation investments and 13 the year before that. So transportation, while represented, didn't measure up to previous years.

An industry not normally seen in the SB&D 100 emerged. It's an industry we believe you are going to hear much more from in the future. Biotech and pharmaceuticals had their best investment year ever in the South. Four big deals made the list, led by the Human Genome Science project in Montgomery County, Md. and Biopure in Sumter, S.C.

For the fourth consecutive year, the semiconductor industry did very little. Only one deal made the list, though it was a memorable one. Sony, Toshiba and IBM got together to build an advanced chips facility in Austin. So the news is not all bad in that sector.

2002 SB&D Investment 100

SB&D Investment 100: The States

For the second consecutive year, Texas is not sitting atop the annual SB&D Investment 100. Last year, Virginia, Louisiana and South Carolina all surpassed Texas' total of deals making the Investment 100. This year, however, only Louisiana's 17 big Investment 100 deals could top Texas' total of 13. Following Louisiana and Texas with excellent investment years were Florida, Mississippi and South Carolina.

Louisiana earned the top state spot this year with several oil, gas and chemical deals, a bunch of power plants, a wood products deal and a steel announcement. Louisiana came in second in the state category last year with 13 I-100 deals. This year is the first time Louisiana has topped all other states in the Investment 100.

While nine of the South's 17 states saw their big investment deals drop in 2001 from 2000, there were some real highlights this year. For example, Florida set a state record with 9 Investment 100 deals. Its previous high was three. Mississippi's total rose from two big dollar deals last year to 12 this year, even though nine of those 12 were power plant announcements. Louisiana set a record with 17 I-100 deals and South Carolina almost tied its best ever mark of 12. Missouri's big investments were up, too.

Yet, as mentioned most Southern states saw their large capital investment deals drop. Georgia's dropped from six to two, Kentucky's from seven to one, Oklahoma's from eight to four and Virginia's big dollar deals fell from 15 in the 2001 SB&D Investment 100 to 7 this year.

The Southern States

SB&D Investment 100 Deals 2002 vs. 2001

SB&D Investment 100: Just Missed Deals

As for just missed deals, Florida turned an astounding number with 21 making the junior list. With its 9 Investment-100 deals, Florida was home to 30 announcements of $30 million or more. That surpasses its largest number of big investment deals by 14, when 16 big dollar deals were announced in the Sunshine State in 1998.

Florida's capital investments of $30 million or more (both I-100 and JMDs) were made in a variety of industry sectors from wireless circuits to internet services to a desalinization plant. It should be noted that of Florida's I-100 and just missed deals, only two were power plants. Also garnering some excellent just missed investment deals were Louisiana, Missouri, South Carolina, Texas and Virginia.

SB&D Investment 100: Per Capita Performance

To correctly measure a state's performance at garnering large corporate capital investment projects, you must factor in the state's size and population. Economic development activity is directly related to population. For example, it's impossible to compare Texas' Investment 100 numbers with Kansas' numbers. With 21 million people, Texas is more than eight times the size of Kansas.

Each year Southern Business & Development factors in the number of SB&D Investment 100 and Investment JMD deals turned by each state per million residents. Looking at the "100" this way changes the makeup of the ranking. By studying the per capita chart, you'll notice states at the top that are not necessarily considered economic development giants. But giants they are when the playing field is level.

The Southern States

SB&D I-100 and JMDs

The Southern States

SB&D Investment 100/JMD Performance Per Capita

As you can see by studying the adjoining chart, Mississippi is at the top of the Investment 100 on a per capita basis. Also doing well are Louisiana and South Carolina. Georgia, with 0.8 big investment deals turned per million residents ranked near the bottom for the first time in the 10 years of the "100." Texas, which is also ranked near the bottom, is in familiar territory. Texas has ranked at or near the bottom in investment deals turned per million residents for the last three years.

On paper, the 2002 SB&D Investment 100 is better than average at worst. Furthermore, it tops the numbers posted by the Job 100 by a long shot when both rankings are compared to other years. The $25 billion invested by the top 100 projects in the South is a mere $750,000 off the record set by the top 100 investment projects last year. But we question whether the 37 power plant announcements, the largest industry sector showing by far in this year's I-100, are all going to be built. We think not, therefore the 2002 Investment 100 can be labeled as one that is skewed to an unknown degree.

View 2002 Investment 100 Chart

You can email Mike Randle, editor and publisher of Southern Business & Development, on this article at mike@sb-d.com