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Charah IPO a good growth opportunity for Bernhard Capital

In early 2017, Baton Rouge private equity firm Bernhard Capital Partners acquired Kentucky-based Charah Solutions for $104 million, adding the company to its rapidly growing portfolio of holdings in the energy services sector.

Earlier this week, it took the company—which provides environmental and maintenance services to the coal and nuclear industries—public with a $88 million initial public offering that is expected to net some $54 million for the company.

BCP has declined to comment on Charah or the IPO.

But experts say adding the $430 million Charah to the BCP portfolio and taking it public some 18 months later make sense for the private equity firm and is likely the first of many such deals to come.

“This is what private equity firms do,” says LSU Economist Jim Richardson. “They grow companies and then take them public or sell them.”

In the case of Charah, BCP, which originally acquired a 76% share of the company, has retained a 51% ownership stake and is likely banking on projected growth opportunities in the coal sector—not necessarily because of President Donald Trump’s recent policies designed to simulate the coal industry, but because coal remains a significant source of power generation in the U.S., says David Dismukes, director of the LSU Center for Energy Studies.

“Even with the changes in power generation that we’re seeing with dramatic shifts toward natural gas and renewables, the forecasts project  30% or so of all power generation will come from coal,” Dismukes says “So it’s still a pretty stable market.”

Dismukes says he doesn’t think a Trump policy announced earlier this month, which would force utilities to take electricity from certain failing coal and nuclear plants, will ultimately have much effect on the energy market, and he believes the timing of the Charah IPO, coming so soon after the new Trump policy was announced, is purely coincidental.

Nonetheless, he says coal will remain strong for the foreseeable future and the need to clean up and dispose of the waste generated by coal plants— which is what Charah specializes in—will be around even longer.

“Regulations associated with handling have become more stringent,” he says. “So while there is likely not a lot of growth in coal generation there is still going to be material handling issues.”

Charah is one of seven portfolio companies owned wholly or in part by BCP, which was founded in 2013 by The Shaw Group’s founder and CEO Jim Bernhard and his No. 2, Jeff Jenkins.

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