By Jack Keough
It seems likes everyone in the world was on vacation the past few weeks, so we’d like to bring you up to speed on the news you may have missed. And there was a lot of news.
To begin with you’re probably tired of hearing (like I am) about the fiscal cliff. But part of the American Tax Relief Act, which was approved by Congress and signed into law by President Obama, limits tax increases to personal income above $400,000 for individuals and $450,000 for couples. It also raises rates to 39.6%, up from 35%.
That means that some companies who list themselves as S-corporations and report their company’s profits as personal income—as many small distributors do—could end up paying more in taxes.
On the other hand, as part of this new legislation, the controversial production credit for wind power was extended for one year.
The credit gives a tax break of 2.2 cents for every kilowatt hour of energy produced by wind. The American Wind Energy Association says the credit will save more than 37,000 jobs and revive business at manufacturing plants across the U.S. It is good news for electrical distributors.
Because of the uncertainty that surrounded the controversy over the extension, thousands of workers in the industry had been laid off in the past few months. Orders had virtually dried up and the future seemed dim for the extension.
The extension covers all wind projects that start construction in 2013. It can take up to two years to develop a wind farm.
Solar power also got some good news. Warren Buffett’s MidAmerican Energy Holdings Company has agreed to spend as much as $2.5 billion to build two solar projects in California that are set to be the world’s largest photovoltaic development.
The Spanish energy conglomerate Iberdrola has reached an agreement with a consortium of GE Energy Financial Services (40%), a unit of GE; EDF Energies Nouvelles (20%); and MEAG, an asset manager of Munich Re and ERGO (40%); for the sale of 32 operating onshore wind farms in France totaling 321.4 megawatts, according to various reports.
As expected, there were several acquisitions during the last week of December.
Granite City Electric, headquartered in Quincy, Mass. bought Major Electric, an electrical distributor based in Pawtucket, R.I. The deal means Granite City will now have 28 locations spread across New England.
Dominion Electric Supply, Arlington, Va., bought the assets of YES Electric Supply, also headquartered in Virginia. YES Electric Supply had been in business for 24 years.
Applied Industrial Technologies, one of the largest industrial distributors in the country, acquired Parts Associates, Inc. (PAI).
PAI is a distributor of maintenance supplies and solutions, including electrical, fasteners, fluid flow, paints, chemicals, shop supplies, and related assortments. Terms of the sale were not disclosed.
Matrix Capital Markets Group, Inc. announced the sale of Richmond Electric Supply Company, Inc. (RESCO) to RESCO Acquisition, LLC, an investment group comprised of RESCO’s recently appointed CEO, Mike Bourn and other private investors.
Founded in 1983, RESCO operates as a full-line, stocking electrical wholesale distributor that serves commercial contractors, the government & military, residential contractors, and industrial and OEM markets both on a regional and national scale. RESCO is headquartered in Richmond, Va., with additional locations in Norfolk and Farmville, which opened in the fall of this year.
Meanwhile, economic activity in the manufacturing sector expanded in December following a month of contraction and the overall economy grew for the 43rd consecutive month, according to ISM’s Manufacturing Report on Business. The PMI registered 50.7%, an increase of 1.2 percentage points from November’s reading of 49.5% indicating expansion in manufacturing for only the third time in the last seven months.
New orders were flat at 50.3 but remain in growth territory and are above 50 for the fourth straight month—in terms of overall growth—following three months of contraction. Production was down 1.1% to 52.6, while employment rose 4.3% to 52.7.
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Jack Keough was the editor of Industrial Distribution magazine for more than 26 years. He often speaks at many industry events and seminars. He can be reached at john.keough@comcast.net or keoughbiz@gmail.com
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