The generator game
What are the effects of the global economic conditions on Middle East
What are the effects of the global economic conditions on the Middle East’s vital generators and compressors market?
Contrary to popular belief, there are still certain service sectors for the utilities sector that seem to be outperforming the market. In the field of generators and compressors, the demand has never been higher.
For generator companies, the rental option is still becoming more and more prevalent. “Leasing has a cushioning effect for companies who are uncertain about the long-term future of their projects,” explains Phil Burns, managing director of Aggreko Middle East.
“By renting equipment, firms can ensure that they will not be left with equipment that will sit unutilised; if a company that has purchased large amounts of equipment decides that a project must be put on hold, the cost damage incurred can be major.”
In general terms, clients’ unwillingness to invest large sums of capital means that the rental option is perfect for companies that may not be able to afford such large lump-sum outlays.
Furthermore, lead times are by definition shorter with rental solutions, which can be utilised within days (or even hours – see case study) of an agreement being signed. Lastly, the flexibility that the leasing option provides – allowing clients to increase or decrease capacity at the drop of a hat – means that, all in all, for some companies, the rental packages are certainly making more sense.
In the market for compressors, however, there is a belief on the part of some that while the rental sector is strong in the construction sector, this has not yet passed over to the utilities industry.
Burns believes that as Aggreko has just come out of a busy summer period, the company is still benefiting from the seasonal increase in business due to summer shortages.
This positive outlook is reflected by Kaeser Kompressoren, a major provider of compressed air technology, which bases its regional head office in Dubai’s Jebel Ali Free Zone.
“Currently, business is running extremely well, in fact our order book has never been higher,” says Carl Briden, director at Kaeser Kompressoren.
“Obviously the first few months of 2009 were difficult for everyone due to the uncertainty in the market. However, we have noticed that with a need for greater efficiency across all market sectors, decision making has tended to be more focused on quality and energy efficiency rather than just the bottom line.”
In terms of trends, the themes of sustainability and diversification are most prevalent. Rather than relying on one particular type of fuel, customers are looking to expand their capacity to include two or more fuel types.
“One of our customers, a cement company in Ras Al Khaimah, has its own gas-powered turbine, but contracted a diesel-powered package from us to provide additional capacity to their facility,” says Burns.
Aggreko has reacted to this demand by introducing its ADDGas system, which allows customers to substitute a significant portion of diesel fuel with natural gas, giving the customer a considerable saving on overall costs.
On the sustainable side, Kaeser Kompressoren ensures that consumption is kept to a minimum by producing highly energy efficient compressed air stations.
“With compressed air generation requiring over 30% of all electricity consumed in industry today, it is our responsibility as manufacturers to look at ways of reducing this consumption,” says Briden. “The ultimate benefit is a greener environment.”
Whereas supply chains are often a factor in the regional transformer market, lead times are also improving. Generally speaking, the wider the global reach of the company, the more efficiently it can transport its offerings to utilities.
In the case of Aggreko, a worldwide fleet of around 13,500 generators – with a total of 5,600MW of operating capacity – combined with a strong network of depots, mean that its products can be readily available to potential clients.
Extra investment over the last 12-18 months has improved lead-times for Kaeser Kompressoren, an approach that has also been assisted with technological advancements that allow customers to monitor their installations on a 24-hour basis.
There are even computer-controlled management systems available that can send text messages to a mobile phone providing operational status.
And that need for constant updates as to operational status is absolutely vital. “A 3mm hole in a compressed air network for example, can cost a customer US$6,900 per year in electricity costs,” explains Briden.
“This is a substantial amount and in most cases the customer is unaware such losses are taking place. It is our duty to continually educate clients as to the proper use and up-keep of their compressed air systems.”
Five to watch
Utilities Middle East reviews five local operators in the generator sector.
Aggreko can supply generators from 15 kVA to 2 000 kVA in single units, as well as multi-megawatt packages using 1 250 kVA units linked together. Smaller sets are used to power Portacabins, piling machines and hand tools, while construction cranes are usually powered by 250 kVA or 320 kVA generators.
Altas Copco provides portable and stationary generators. The company has reported increased activity in the larger 500 kVA to 1 000 kVA category due to power shortfalls in some urban areas, but it mainly supplies contractors who require units in the 20 kVA to 275 kVA range.
Caterpillar provides gas-powered gensets ranging from 9 kW to 600 kW and diesel-powered generator sets from 7 kW to 16 200 kW.
It supplies these products to a total of five GCC countries for which Al Bahar, a machinery and trading group in the Middle East, has the Caterpillar dealership. Caterpillar has a number of different models to cater the needs of the industry and for varied project requirements.
Cummins offers gensets between 15 kVA and 500 kVA. The 250 kVA to 500 kVA range is used during construction for powering offices, cranes and other miscellaneous construction requirements. Gensets ranging from 500 kVA to 3 000 kVA are used for permanent installations as back-up power to local utilities companies in most buildings.
Cummins believes that contractors prefer to rent generators for specific projects instead of owning the equipment and continuously moving it to new project locations where they incur hefty logistical costs.
FG Wilson designs and manufactures diesel and gas gensets. Its most popular products for construction sites range from 60 kVA to 500 kVA.
It also gensets from 10 kVA to 2 200 kVA so as to be able to cater for customer demand. All these can be supplied as sound-attenuated and weatherproof canopied gensets. FG Wilson offers technical support from pre-sales and aftersales support from installation to commissioning. Its Middle East business includes countries such as Iraq and Afghanistan.
Aggreko’s Phil Burns outlines a recent company success story.
“In June, the British Trade Office was commissioned by British airline BMI to host an anniversary reception to celebrate the first anniversary of the company’s operations in the Eastern Province of Al Khobar, Saudi Arabia.
With over 100 guests expected, a sophisticated lighting and sound system was put in place to ensure that the event made an impression. However, only three hours before the evening was due to begin, the British Trade Office discovered that the power distribution panel was unable to handle the amount of power needed to operate the system.
In need of a fast solution, Aggreko was called in to help provide sufficient power to ensure the lighting and sound would function at optimum capacity; the alternative would have been to cancel the whole evening.
Having a base in the region and a reputation for being able to supply efficient and reliable power at short notice, Aggreko was able to deliver and install a generator within a few hours – just in time for the reception starting.
The evening was a resounding success and Aggreko’s on the ground support and quick response time ensured that guests were completely unaware of the question mark that had hung over their evening a few hours before.”