Turbine maker Voith Hydro's new CEO eyes expansion
Kevin Frank grew up in Canada and worked his way through the ranks of the paper business, starting in a maintenance position and eventually obtaining a top spot in Voith Paper management in North Carolina.
He comes to York County as the new president and CEO of West Manchester Township-based Voith Hydro Inc. The firm with about 550 local employees makes hydroelectric turbine equipment and sends it across the world. It is a part of Germany's Voith GmbH. Voith Hydro saw previous CEO E. Mark Garner leave amid an accounting investigation.
Switching industries has been a bit of challenge, Frank said, but he is amazed by the untapped potential for hydro and what it could mean for business in the midstate for years to come.
Q: Obviously, you came from a very different business than hydro. What have you learned about this business since getting here?
A: It's quite an honor, actually, to work for a company such as Voith — a large, successful company — and run a business for them, and then have them ask me to go over and run a business that is completely different.
And when I got here, I didn't know what to expect walking in the door. It is an established business, so in some sense it has age, maturity to it. But it has highly untapped potential. There are more than 80,000 dams in the United States, and only 3 percent of them are used to produce power, hydroelectric power.
What could all that potential growth mean for the York County business community?
Voith Hydro York is sitting in a pretty enviable position. We have a pretty large backlog. In the past three and a half years, we've hired for 126 new positions, so we have jobs that we are creating right here in York. We are looking for new people now: engineers, people behind the scenes.
You came on board amid an accounting irregularities probe. Please describe what exactly had happened and give any up-to-date-information.
One thing first I want to say: The accounting irregularities that happened, there were no revenues or profits that were created out of nowhere. We have an accrual-based accounting process, which means we have projects that span a number of years. We account for our sales revenues and profits based on when our costs come in.
So if you have a number of years, where you define the end of the year can be a little hard to pin down. And what happened is that the revenue was being put in the wrong years. It was a small portion (of the revenue), but it was enough that it got everyone's attention. We've taken appropriate actions and we've put in safeguards to make sure this type of thing can't happen in the future.
Have new people been brought into other positions as a result of that?
We kept any change at the board of management level, so the very senior piece (of the staff).
What do you see as the role of hydropower moving forward in the U.S. energy strategy?
President (Barack) Obama is looking and challenging the nation to become independent with power. We are looking for clean, renewable energy, environmentally friendly. And hydro fits all that. The water is in our backyards; it is flowing by us as we speak. So I think it fits very well into the administration of today and likely the administration that will come next.
What are the barriers today? Why can't we go from zero-to-60, and why aren't we there now, if all that potential is there?
There are big, upfront costs, so the investments are large and the time horizon for the payback is also long. So there is a financial model that is not a quick payback.
But really, one of the big things that gets in our way is the long licensing process. So there is a … somewhat uncoordinated process that is out there for the developers. So when they go to develop a new site, it can take them five-plus years to get the license permit.
Do you think the difficult financing environment is a barrier for the industry?
When talking to the developers, actually the access to cash is not the biggest issue. The cheap (natural) gas right now is making power a little lower cost, which makes it tougher on the financial model.
But that really isn't the issue. The issue is the time. It's the time from when you start a project to when you get it completed and start producing energy.
So if you can shorten that time horizon, your model starts to make a lot more sense. They are saying that if we can get a more secure timeframe, then the cash shouldn't be a problem. It's always a challenge, but I think it is less of a problem than the uncertainty and the length of time.
Had you dealt with any midstate companies previously, and what did you know about this area before coming here?
I've gotten to pretty much every state to get to a paper mill. So I've either climbed around a paper machine in every state or I've visited a paper mill in every state. I've found Pennsylvania a very warm and hospitable place to go.
And as I've come to York, I've been greeted with open arms. It's a great community. It has a rural feel to it and yet there is a city environment. The downtown has been revitalized; there are some good restaurants here, good facilities. There are excellent work ethics here.
What has been the most difficult thing in taking over the CEO position? And what, if anything, has been a pleasant surprise?
It's always difficult to leave something you are very comfortable with; and the paper industry was something that I was comfortable with. But when I got to York, I saw very quickly there are parallels to the industry. I saw very quickly that, (when) running a business, there are elements that are common to most industries. And you very quickly pick that up. I've been here five months now and it feels like five years. You get embedded in it so quickly.
The greatest surprise was how much growth potential there is in this industry. I had no idea how much potential there really was. The paper industry was shrinking, so to get into an industry with (such) growth potential, it feels so nice.
How many more jobs could you put here if all the right procedures were put in place?
We have continuous improvement projects in the shop to get more efficiencies to stay globally competitive. And I tell you, I would not be opposed to expanding this facility. There is potential to grow this facility quite a bit larger than it is. We're in a pretty high state of production, but there is room for more. This is our main facility here, it is world class, and we would love to grow it.