Posts Tagged ‘gas turbines’

The GT26 lives on with Ansaldo (for now)

June 21, 2016

I have previously expressed my doubts as to how long sequential combustion technology will continue for gas turbines after the technology has been transferred to Ansaldo Energia (as part of the acquisition of Alstom by GE).

Ansaldo has announced (in March this year) the sale of 2×2 GT26 machines as part of power islands for the Ibri and Sohar#3 combined cycle plants Oman.

Ansaldo Energia Switzerland has been awarded two contracts worth approximately 600 million Euros in total for the supply of major power plant equipment to two large IPP projects. The Ibri 1510 MW CCPP and Sohar III 1710 MW CCPP in the Sultanate of Oman are expected to be commissioned in early 2019. The Ibri and Sohar III CCPP IPP projects are developed by the sponsor consortium of Mitsui & Co. Ltd., ACWA – International Company for Water and Power Projects and DIDIC – Dhofar International Development and Investment Holding Company, following a simultaneous award of the two projects to the development consortium by Oman Power and Water Procurement Company SAOC of Oman earlier this month. The two power stations will operate and supply power under a PPA to the grid in the Sultanate of Oman. Ansaldo Energia will supply the main power train equipment components, including for each power plant, four of Ansaldo Energia’s newly acquired high-efficiency advanced GT26 class gas turbines, four heat recovery steam generators (HRSGs), two steam turbines and six turbo generators to SEPCOIII Electric Power Construction Cooperation of China (SEPCOIII), who will be responsible for engineering, procurement and construction (EPC) on a turnkey basis. Ansaldo Energia will also provide field services to SEPCOIII – under separate contracts – during the construction phase and long term maintenance services to the operator after commissioning. These projects mark Ansaldo Energia’s first success with its recently acquired and formerly Alstom owned GT26 gas turbine technology and will be one of the largest CCPP project awards in the Gulf region. Ansaldo Energia will certainly have a firm place the CCPP and IPP market where highly efficient, operationally flexible and reliable technology is required. With these two projects in execution in the region and Ansaldo Energia’s presence as a service provider in the Middle East area through Ansaldo Thomassen Gulf in Abu Dhabi, Ansaldo Energia’s position in the Gulf will be further strengthened. Juerg Schmidli, Ansaldo Energia Switzerland President, commented: “With its operating flexibility and high efficiency, the GT26 gas turbine will play a critical role in generating maximum project returns for our customer. This is the perfect start for our newly formed Company Ansaldo Energia Switzerland”.

I hope these machines from Baden/Birr will truly mean that Ansaldo has grabbed the sequential combustion ball and is running with it (and not that these are just machines already largely manufactured while under Alstom ownership and completed by Ansaldo).

What I still doubt is whether Ansaldo has the tradition, expertise and financial clout left to manage and implement any innovations. If they cannot, the Alstom version of the GT26 Ansaldo has acquired is already outdated. Especially since Siemens, GE and Mitsubishi have H-class machines in operation and are already moving on to H+ engines. GE’s HA-class machine (9HA) is operational in France for EdeF (62.22% claimed efficiency). The GT26 is still probably only at the G+ level and Ansaldo will need to get beyond the H-class efficiency level to be a realistic fourth player. If not the GT26 will be consigned – at best – to some niche markets. The 60Hz (including US) market and the GT24 are not available to Ansaldo and that does not help in the experience stakes.

How long it may take to get a commercial version of the next generation GT36 to market, or whether it will ever see the light of day, is an open question. I have a soft spot for sequential combustion and would like to see it continue. But I will stay pessimistic and remain doubtful that Ansaldo Energia has the wherewithal to remain a serious player with this technology.

And hope to be proved wrong.

Alstom GT26

Alstom GT26


 

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GE gets approval from the EC and Ansaldo gets Alstom GT technology

September 8, 2015

UPDATE:

More details are now emerging of what exactly will go to Ansaldo. It seems that Ansaldo will get PSM, technology for the GT26 and the GT36 (which does not exist yet) including the test facilities at Birr and the LTSA’s for 34 GT26s sold by Alstom. It is good that it is settled but the European Commission has not – in my opinion – got it quite right.

  1. The technology seems to be restricted to 50Hz technology (after all, all of Europe is 50Hz). So a current GT26 and its potential upgrades should – theoretically – be available from Ansaldo but not the GT24 (60 Hz). It is the US market (60 Hz) which has access to cheap gas and the 50Hz market will take a while and will be dependant on fracking taking off in Europe. Ansaldo will probably need to take all liabilities to get their first 2 or 3 GT26 engines placed. And even then finding a suitable utility customer to host the machines will pose a challenge.
  2. GE will face no competition in the US from an Ansaldo GT24 and probably Ansaldo is not permitted to enter 60 Hz markets except with engines they develop themselves.
  3. The development of the GT36 is a long way from being commercialised and the assumption by the EC that this development will be completed by Ansaldo is almost “pie in the sky”. Of course it is theoretically possible! A 60Hz GT34 is even less likely.
  4. The EC’s assumption that PSM will be able to service engines like the GE 9FA under Ansaldo ownership is flawed. It is one thing to have an Alstom owned PSM servicing such engines considering that Alstom was the main source of GE 9FA until 2000 (when they acquired the ABB gas turbine business), and quite another to have an Ansaldo owned PSM doing such service.

I suspect that GE and Alstom have talked down the difficulties that Ansaldo will face and the EC have bought the sales pitch. Or it could be that the EC does know that this commercialisation of the GT36 (and maybe even the production of the GT26) by Ansaldo will likely not happen, but it gives them a face saving way of approving the GE bid.

Money talks. And we need to bear in mind that GE pays only €300 million less which must now presumably come to Alstom from Ansaldo. Just €300 million as the price for the ongoing service business and the assets at the R &D facilities at Birr does not leave much over actually for the technology that has been purchased.

But

  1. does Ansaldo have the additional €500+ million that they will need to get a GT26 into production?
  2. And do they have another €2 billion (at least), along with the will and the capability, to bring a commercial GT36 into being??

PowerMag:

The commission’s in-depth review, which focused on markets for the sale and servicing of heavy-duty gas turbines operating at 50 Hz, revealed that a GE-Alstom merged entity would have accounted for more than 50% of the European Economic Area market.

It was also specifically concerned that the merger would have risked eliminating an important innovator. “The transaction as notified would have reduced customer choice, R&D [research and development] and innovation, with serious risks that certain Alstom heavy duty gas turbine models would be discontinued and that the newly developed and most advanced model (GT 36) would not be commercialised. This was of concern for many market participants, including major European power utilities,” the commission said.

The merger was approved on the condition that the parties offered to divest Alstom’s GT 26 and GT 36 turbine technology, existing upgrades and pipeline technology for future upgrades, a large number of Alstom R&D engineers, and two test facilities for the GT 26 and GT 36 turbine models in Birr, Switzerland.

The parties will also need to divest long-term servicing agreements for 34 GT 26 turbines recently sold by Alstom, and Alstom’s Power System Manufacturing (PSM) subsidiary. The commission was concerned that if GE absorbed PSM, it would have eliminated competition for the servicing of GE’s mature heavy-duty gas turbines (like its 9FA model) that are installed in existing plants. “As GE is the dominant player in this market and PSM its most significant potential competitor, this would have created a risk of higher prices and less innovation,” it said.

34 gas turbines is a small part of Alstom’s fleet but it may be enough to give Ansaldo a fighting chance of building up experience over – say – 5 years or so.

I remain of the opinion that this is a good deal for Alstom and GE. However, I also remain of the opinion that some 8,000 jobs of those being transferred from Alstom to GE or to Ansaldo will be at risk. Ansaldo surely has a chance for becoming one of the “big 4”. But they may have difficulty chewing or swallowing what they have just bitten off.

Another thought that occurs to me is that the EC process is itself flawed. The solution (divestment to Ansaldo), which has delayed the deal by a year, smacks more of ego and politics rather than protection of competition. The actual protection of competition achieved is minimal.

WSJ: ……. GE already manufactures gas turbines of corresponding size to the two Alstom models, and the company says it will retain licenses that will enable it to compete for business servicing turbines made by other manufacturers—an opportunity for future earnings growth.

The U.S. company will also divest the long-term servicing contracts for 34 turbines that have already been installed by Alstom. GE has said that Alstom’s servicing contracts were a key attraction of the deal, but a person close to the deal said the divested contracts amounted to only 4% of Alstom’s total installed base.

“I am glad that we can approve this transaction, which shows that Europe is open for business and that Europe-based technology can thrive and attract foreign investment,” Ms. Vestager said.


 

Well, the European Commission has given GE approval for the acquisition of Alstom’s power and grid businesses. But Ansaldo will now get Alstom’s large GT technology (it’s not clear to what extent), the testing facilities in Birr and some substantial service business. Whether Ansaldo actually gets the GT24 and GT 26 engines or just technology is not clear yet.

Previous posts: https://ktwop.com/tag/alstom/

Bloomberg:

As part of GE’s offer, Ansaldo will acquire Alstom’s technology for large and very large gas turbines. Alstom will also cede two test facilities for these turbine models in Birr, Switzerland, the EU said.

“Ansaldo will have a true fighting chance” of competing in the European market, Margrethe Vestager, the EU’s competition commissioner, told reporters in Strasbourg, France.

The Italian firm should gain a foothold in the maintenance business by taking over long-term contracts Alstom holds to service 34 previously-sold gas turbines, the commission said. Ansaldo will also acquire Alstom’s Power Systems Manufacturing unit which can service gas turbines of different makes, the regulator said.

With PSM going to Ansaldo, Shanghai (via PSM) gets a foothold in the US for 3rd party engine service – for whatever that may be worth. But I am not very hopeful. As an owner, I would not be very keen on asking an Ansaldo owned PSM to service a Siemens or a GE engine or even an old Westinghouse engine.

Good luck to Ansaldo anyway.

It will be interesting to see if Shanghai Electric can provide sufficient influence to make this work. Ansaldo on its own would have very little chance to make it, I think. It will still take them the best part of a decade and by then GE, Siemens and Mitsubishi would have moved on. I think the EC’s competition commissioner is fooling herself more than a little when she states that “Ansaldo will have a true fighting chance”. She is being far too optimistic, but maybe Shanghai can make the difference.

The Ec’s conditions does not have a great impact on the jobs that will be lost. This will stay at around 8,000 I think for GE. Of the jobs shifted to Ansaldo, I am not very optimistic.

A pity, because I think this marks the end of sequential combustion with a viable player.

I wouldn’t mind being proved wrong – but the probability is rather low.

But it’s good news for both Alstom and GE. For Ansaldo, it may be too much of a mouthful.

GE makes its pitch for Alstom acquisition to the EC this week

July 1, 2015

The European Commission must make its decision by early August regarding GE’s proposed acquisition of Alstom’s energy and grid business. The EC’s concerns have held this deal up for the best part of a year. I estimate that financial closure for this deal is now no longer possible at least till the end of 2015. The EC sent GE its “statement of objections” in the middle of June. This week (tomorrow) GE will be attending “hearings” at the EC at its own request. The hearings are to be “oral” and the meetings are “closed-door”.

It seems to me that this is more of a negotiation rather than a “formal” hearing. Clearly GE will be exploring how far it needs to go in its final, written submissions which will be needed before the EC can make any formal adjudication in August. I suspect that GE might be considering “creative” alternatives for making IP from Alstom, which it judges it does not – and will not – need, available to other “serious” players. One difficulty is that a lot of IP has value in creating a barrier for others, rather than being usable in its own right. I also suspect that GE is looking to ensure that the revenue stream from the service of Alstom’s fleet of operating gas turbines is not impaired by being forced to give up part of that business. And to do that GE may be considering ways and means of assuring the EC that the pricing of such service business will be “reasonable” and not predatory.

Personally I think that many of the EC’s fears are imaginary or theoretical. They are quite insignificant compared to some of the predatory pricing and price-fixing that is evident in other industries. But then my own opinion is that it is better not to have a competitor in the market place rather than for a “sick” or reluctant competitor to be forced to continue. That only encourages distortion of the market place to the ultimate detriment of OEM’s and customers and eventually consumers. Moreover, R & D for advanced gas turbine technology will, I think, be served best by the deal going through.

According to Reuters, General Electric, the EC, other EU agencies, and parties opposing the deal will take part in a closed door hearing this Thursday, July 2.

Reuters:

Senior officials from the EU competition authority, their counterparts from EU agencies and rivals are expected to attend the closed-door hearing.

“We have requested an oral hearing,” GE spokesman Jim Healy said. He said the hearing would be on July 2.

French Economy Minister Emmanuel Macron has said the deal should be viewed in a global perspective and take into account Chinese rivals following the EU regulator’s decision to exclude the Chinese market from its scrutiny of GE’s market power.

The Commission is concerned the takeover would leave just two gas turbine companies in Europe, with GE competing only with Germany’s Siemens.

The EC has not announced who the objectors are but I expect that Ansaldo Energia (40% owned by Shanghai Electric) and Siemens are among those opposing. I can well see that Ansaldo/Shanghai would be looking to be able to access some of Alstom’s IP to help them to bridge the not inconsiderable technology gap they must overcome to even have a chance of becoming a major player in the Heavy Duty Gas Turbine market. Siemens, I am sure, would object as a matter of principle even if they will actually benefit from the deal. I am not sure if Mitsubishi-Hitachi has a presence large enough to have any locus standi as an objector in Europe. The Siemens/Wood Group JV (Turbo Care) which focuses on the service of non-Siemens gas turbines is likely to be a principle objector but in this case it is essentially a “pirate” and, hopefully, will not be given too much credence.

Patrick Kron, CEO of Alstom is very bullish – but then, of course, he can hardly be anything else.

Bidnessetc: Alstom SA chief executive Patrick Kron remains bullish that General Electric Company will successfully acquire its energy unit and will also have the European Union (EU) regulatory authorities’ approval. Mr. Kron’s statement came as General Electric has requested the EU antitrust authorities to conduct a hearing with the aim to get their approval.

The EU has been holding back General Electric’s request to acquire Alstom’s energy unit for the last few months, as it is investigating the effects of the acquisition on the European market. However, Mr. Kron said in an interview to a newspaper yesterday: “I hope that we are now in the final leg and I am confident … My position is very clear. I do not see why Plan A would not work out.”

European Commission’s objections to GE/Alstom deal may come today

June 12, 2015

My previous posts about the GE/Alstom deal are here:


UPDATE2! The EC has apparently sent its statement of objections to GE:

WSJ: The European Commission, the EU’s top antitrust regulator, said it had sent a so-called statement of objections to the U.S. industrial company on Friday.

UPDATE! Reuters reports that Alstom has reacted to the press articles today and said that they will continue to provide evidence to the EC about the positive aspects of the deal for Europe. About the “statement of objections” they said “There have been press comments that a ‘statement of objections’ would be issued by the European Commission associated with the investigation of the sale of Alstom’s Energy businesses to General Electric. This is a usual step in a phase II merger case and it does not prejudge the outcome of the investigation. It will allow both General Electric and Alstom to address specific matters pointed out by the investigating team.”


The EC are playing hardball and seem to be looking for substantial concessions from GE before approving GE’s acquisition of Alstom’s power and grid businesses. According to Reuters a statement of their objections could come today (12th June).

ReutersGeneral Electric Co may need to offer bigger concessions to win European Union approval for its purchase of Alstom SA’s power unit as regulators plan to warn the U.S. company that the deal would harm competition, two people familiar with the matter said on Thursday.

….. “A statement of objections could come on Friday,” one source said.

Such a document shows why the EU regulator views the deal as anti-competitive and is a prelude to a veto unless companies come up with strong arguments or significant concessions.

Alstom shares fell 3.2 percent following the Reuters story, while GE was down 0.3 percent. An EC spokesman declined to comment. Alstom had no immediate comment. GE said it was working constructively with the regulator.  “We are focused on a positive outcome that preserves the deal economics,” GE said, adding it was confident of closing the transaction in the second half of 2015.

As I have written before, I expect that the EC objections are centred around what will happen with Alstom’s Heavy Duty Gas Turbine (HDGT) technology and service business. GE has no immediate need for Alstom’s sequential combustion technology, though, in the long run, GE may be the best placed to utilise that technology to take gas turbines to new heights. Regarding the service business for gas turbines it is very rarely, and only for older machines, that a party other than the OEM can provide the most critical spares. So such spares for the Alstom machines would come in the future from GE instead of Alstom but it would be no real change to the competitive position. (For the critical, “noble” parts of any not-too-old gas turbine, the OEM has a virtual monopoly).

However what the EC may be struggling with is that

  1. insisting on Alstom selling the HDGT business to someone other than GE will not find any competent buyers and certainly not any price close to what GE would pay, or
  2. asking GE (or Alstom) to sell sequential combustion technology to a 3rd party could only find buyers a long way down the learning curve who would need deep pockets and maybe 5 years to bring themselves up to any kind  of competitive position, or
  3. asking GE to either commit to use the sequential combustion technology themselves but where GE would probably want to discontinue the Alstom machines quickly, or
  4. to make the technology  “generally available” (as some kind of open source technology) for other potential competitors which would also require that GE give up the service business for some of Alstom’s biggest engines (say the machines operating in Europe) so that they could be available as a “training ground” for any technology user trying to make a go of it (for example; Ansaldo/Shanghai, MHPS, Harbin, Bhel, Kawasaki Heavy ……)

None of these options would be easy to implement. Option 1, I think, will not fly. Option 4 is probably beyond GE’s walk-away point since the heart of their business plan – the service revenues – would be impaired. Some variation of Options 2 and or 3 and parts of 4 maybe will not chase GE away.

The EC is due to announce its decision by early August, and since the EC is in regular discussions with GE, it does look like there is a negotiation ongoing (even if it cannot ever be acknowledged to be a negotiation by either party). I suspect Alstom has no great part to play in this negotiation. The French government probably can not be seen to be involved, but they are certainly not happy with the EC and its objections. (Of course, it is inconceivable for the French government that the EC could possibly go against “French interests”).

The statement of the EC’s objections – if it comes out today – should give a good indication whether this deal is going to go through or will eventually die. But killing the deal is not really in Europe’s interests, so the EC will have to tread very carefully.

Turbines in the orangery

May 26, 2015

Today, in the orangery in the grounds of Finspång Manor, a little gem of a museum was opened. A website is in its infancy. It records the quite remarkable, more than 100 year old, history of the manufacture of steam and gas turbines in this little town. Finspång town has a population of a little over 15,000 today but has an industrial tradition dating back to 1641 and was for 200 years at the forefront of cannon manufacturing (before the advent of the rifled barrel). They had a reputation for usually supplying cannons to both sides of many European wars of the 18th and 19th centuries.

Stal Laval logo

Turbines have been manufactured in Finspång since 1913 but the technology also has a thread going back to Gustaf de Laval who invented his steam  turbine in 1883 and put it into production in 1893 in Stockholm. (In the UK, CA Parsons invented his steam turbine in 1899). The Finspång manufacture of turbines by the STAL company built on the ingenious inventions of the brothers Ljungström, Birger and Fredrik. The two strands of the de Laval and Ljungström technologies came together later in 1959 and STAL became STAL-Laval. Ownership of the factory in due course shifted to ASEA and then to ABB and for a short while was with Alstom and then eventually moved to Siemens who are the current owners. Gas turbines came into the picture in 1945 with the development of a jet engine (the Dovern) for the Swedish Air Force. That engine flew only once (under another aircraft for a test) and never “in anger”. The Swedish Air Force chose Rolls Royce for their engines and STAL converted the development for industrial use. The engine morphed into an industrial gas turbine, the GT35, which first went into operation in 1957 and this engine – with a further development or two – is still around in the Siemens stable. In 1959, STAL delivered a 40MW gas turbine, the GT120, which at the time, was the world’s largest.

STAL Dovern.jpg

“STAL Dovern”. Licensed under CC BY-SA 3.0 via Wikimedia Commons

The Finspång Orangery (built in 1832) in the grounds of Finspång Manor is, at first sight, a most unlikely place for a Museum of Turbine History. But even with its wall frescoes and painted ceilings which evoke a long-gone age of gracious living, the turbines do not seem at all out of place. An older Orangery burnt down in 1830 and the current building was designed by Lars Jakob von Röök.  On two of the back, north-facing walls are frescoes said to be by the Italian painter Guido Reni. (But since Reni was born in 1575 and died in 1642, that is either wrong or the walls are much older and survived the fire of 1830. Since the manor was only built between 1668 and 1685, it is more likely that the artist was someone other than Guido Reni).

Finspångs Orangery juli_2005 (wikipedia)

Finspångs Orangery juli 2005 (wikipedia)

Orangery frescoes (image khaladsphotoblog)

Siemens has provided the Orangery as a home for the Museum, which has been put together by volunteers. They are still working to organise the wealth of material and drawings and pictures and films and models that are gathering dust in the catacombs under Finspong Manor.

Through the summer it is hoped to be able to have the museum open on Wednesdays and Thursdays. In any event the Finspong Manor grounds are well worth a visit and for anyone interested in rotating machinery, the museum should prove fascinating. (The manor itself is used as offices and is closed to the public. However the chapel – now run by the Swedish Church – is a little jewel of a chapel).

Finspång Manor from the SE. (image http://www.skyscrapercity.com)

Chapel in Finspång Manor (photo credit Per Svensson http://www.sfoto.se)

Currently the Finspång facility is the main centre for Siemens’ range of industrial gas turbines and ceased manufacturing steam turbines earlier this year. But the turbine tradition is now into a 6th generation.

EC looking for GE concessions to approve Alstom acquisition

May 12, 2015

UPDATE!

The New York Times also reports on the potential anti-trust issues and GE’s readiness to make some accommodations for EC concerns. However my take away from the NYT article is that GE is warning the EC that Alstom and the European Union have more to lose than GE has if the deal does not go through:

In now dealing with the European Commission’s antitrust office, Mr. Immelt has not forgotten the harsh experience of his predecessor, Jack Welch. In 2001, Mr. Welch failed to win approval for a proposed $42 billion takeover of Honeywell International after objections were raised by Mario Monti, the European antitrust commissioner at the time.

Mr. Immelt was worried enough last week that he met with Ms. Vestager in Brussels, where he also gave an address at the American Chamber of Commerce highlighting Europe’s economic potential. In that address, Mr. Immelt said young Europeans were “awesome” and “amazing,” but he emphasized that Europe needed investment to gain competitiveness and beat unemployment.

Speaking to reporters later, Mr. Immelt said his meeting with Ms. Vestager was “very constructive” and he described her as “a good leader.” G.E., he said, was engaged in “a process” with Brussels, and would “take the process where it goes.”

If G.E. is unable to convince Ms. Vestager of the merits of its case, the next step could be a so-called statement of objections, as soon as next month — formal charges that would outline the commission’s specific antitrust concerns. G.E. and Alstom could avoid that step by offering remedies sooner, perhaps proposing to sell parts of the gas turbine business in Europe.


My expectation was that the European Commision would look for some concessions from GE and would only grant a conditional approval for the acquisition of Alstom’s power and grid businesses.

The EC concerns seemed to be focused on Heavy Duty Gas Turbines (HDGT), and I wrote:

Will the EC approve GE’s acquisition of Alstom’s power business?

…. In any event,  I expect that the deal will go through, but I will not be surprised to see an approval conditional on some assurances from GE regarding R & D centres, R & D jobs and/or R & D budgets in Europe. I think it highly unlikely – and a little meaningless – if the EC were to ask for divestment of Alstom’s HDGT business to a third party (if any such exists). The bottom line is, I think, that Alstom’s HDGT technology has come to a dead-end and can not be developed any further in their own hands. While the business can continue in a diminishing way for some years, Alstom technology has no long-term value except to another party which has access to high temperature cooling technology. To have Alstom continue with the HDGT business as an unwilling and reluctant player does no one any service at all.

This Reuters report today suggests that my expectation may be close to the mark. However it also seems that if the EC demands too much in the way of concessions, GE might walk away. Clearly GE are already getting a little irritated at the protracted nature of the EC approval process. The failure of the deal is not something that Alstom or the EU would look forward to.

The EC decision may also be delayed somewhat beyond August 6th.

Reuters:

General Electric Co said on Monday for the first time it would be willing to consider concessions in order to win European approval to acquire the power equipment unit of France’s Alstom. “We are willing to explore remedies to get this deal done even though again we believe in the merits of the deal,” Steve Bolze, president and CEO of GE Power & Water, the conglomerate’s biggest industrial unit, told Reuters in an interview. Any concessions would have to “preserve the deal economics and our strategic value,” he said. …

… EU regulators typically prefer merging companies to sell overlapping assets or make it easy for rivals to enter the market. GE’s gas turbine competitors include Siemens AG and Mitsubishi Heavy Industries Ltd.

…GE already altered the deal to win the French government’s backing during last year’s two-month battle, in which it fended off Siemens and Mitsubishi. In the interview, Bolze acknowledged the “protracted process” for Alstom, and said GE was focused on “how to move … forward as it makes sense.”

In GE’s first-quarter conference call last month, Chief Executive Jeff Immelt backed the deal’s fit for GE, but said if it “ever would become unattractive, we wouldn’t do it.”

…. GE, which is undergoing an overhaul involving the exit of most of its finance assets, has said it expected synergies from the Alstom deal to add between 6 to 9 cents in earnings per share in 2016. But some analysts have told Reuters they doubt GE’s stock would take a big hit should the deal collapse, with the idea that GE could make up those earnings with stock buybacks or other deals. ……. 

…… EC spokesman Ricardo Cardoso said regulators are waiting for data from the companies before a setting a new deadline to act. The previous deadline was Aug. 6.

The EC will need to be very precise in demanding concessions from GE while ensuring that the deal does go through. Divesting parts of the HDGT business to unknown (and probably non-existent) buyers is probably a lose-lose solution. I expect that GE’s walk-away point will be reached if earnings from the service of Alstom’s fleet of gas turbines is removed from the mix. In fact any conditions set by the EC which dilute future revenues could prove fatal for the deal going through. Assurances about keeping R & D located in Europe and assurances about jobs and even about R & D budgets could be absorbed by a robust business plan. But no business plan can survive if something as fundamental as the revenue stream is adversely affected. And it is the volume of that revenue stream – and not just the margin from those revenues – which is crucial.

The end of the road for the large Alstom gas turbines?

July 7, 2014

(corrected February 2015)

The large (>50MW) Alstom gas turbines (GT11N2, GT13E2, GT24 and GT26) represent a line of technology which derives mainly from the BBC range of products (developed further as ABB) and acquired by Alstom in 1999. At that time Alstom’s licence with GE came to an end. But as GEC-Alsthom, Alstom had also inherited the gas turbine technology which came out of GEC in the UK. In the current Alstom range not much remains of the GEC tradition. At the smaller end Alstom also once had the gas turbine technology of the Ruston engines from Lincoln and acquired the ABB range of small machines (which themselves carried forward the developments as ASEA and some of the Sulzer range). But the entire range of industrial (<50MW) gas turbines was divested to Siemens in 2003 (and they are doing very well there).

Now as GE takes over Alstom’s power business (which has still to get final regulatory approval but looks to be a done deal), the days of the Alstom range of large gas turbines are strictly numbered. GE (and Siemens) have their own machines competing directly with the GT24 (60Hz) and GT26 (50Hz) and I do not expect that any more of these machines will ever be sold again. The sequential combustion design concept that these machines employ is so far from the GE approach that it seems impossible for any versions of these machines to continue. Alstom (as ABB) had adopted sequential combustion in the late 1990’s firstly to differentiate themselves from GE and Siemens and to get over their lack of access to advanced, high-temperature materials coming out of military jet engine programmes. Sequential combustion was first used/tested by BBC in the 1960’s 1948* though at much lower temperatures and ABB was trying to create a virtue out of a disadvantage – which the GT24 and GT26 did eventually do, but not without great problems and great cost.

GE may well have some benefit from some of the component solutions that Alstom has been forced to develop – at great expense – to get over the challenges posed by sequential combustion. Similarly some of the low-NOx solutions developed by Alstom could possibly be of use for GE. There may be some tricks for GE to pick-up regarding compressors. Certainly GE will continue with the very lucrative service market in maintaining the Alstom fleet and this will continue for perhaps 10 or 12 years at most. So while GE will benefit from the service revenue and by the reach of Alstom’s global sales organisation, the GT24 and GT26 – as products – have very little benefit to offer. It will not be possible for GE to absorb all the manpower currently employed with Alstom’s gas turbines. Not all those currently involved with the design and manufacture of the GT24 and GT26 will be needed for – or be able to switch over to – the design and manufacture of the GE range. GE’s global procurement network and its qualification of sub-suppliers is probably much more advanced than Alstom’s. I don’t expect that GE’s global sourcing will be much enhanced by the acquisition of Alstom’s Power business. Some job losses at Alstom locations are inevitable and I suspect these will be mainly in Switzerland while jobs in France will be somewhat protected by GE’s promises to the French government. At Belfort, Alstom produced GE machines under licence till 1999 and no doubt this will become GE’s centre for large gas turbines in Europe.

The GT11N2 gas turbine will probably die a natural death. It has not been a really competitive machine for over a decade and even though it has gone through many upgrades and cost reduction exercises, It has some unique advantages with low-Btu fuels but I do not think it offers GE any great advantages and they already have competing machines. The GT11N2 may have survived a little longer within the more restricted Siemens stable but even here it would have eventually withered.

The GT13E2 is possibly the only machine that may survive for a while under GE. It has some unique advantages with low-Btu fuels and could have a geographical market niche in Russia and the former CIS countries. But if it does survive it will do so only as a niche product. Again it would probably have had a longer life under Siemens but my guess is that it will not be sold for more than another 2 or 3 years.

The next market boom for large gas turbines – by my analysis – will come in the second half of 2015. This will be due partly to the 7-8 year “normal” business cycle and partly due to, and reinforced by, the advent of shale gas. And when that boom comes, the Alstom machines will be absent and there will be one less gas turbine technology available in the world. GE, Siemens and MHI will be the only three technologies left and they will be the main beneficiaries. But just three technologies are not enough. A growing market together with a dearth of technology suppliers will probably ensure the entry of another player into the field of large gas turbines.

(Actually Siemens and MHI get the best return at the lowest cost. They gain increased market space as Alstom’s machines disappear at no cost to themselves. GE gains no new products, gets the same increased market space and gets increased service revenue for Alstom machines. But GE has a large cost of acquisition and a great deal of hassle – and cost – to come as they restructure and integrate the Alstom business).

I would guess that this fourth player could well be Shanghai Electric with their newly acquired 40% stake in Ansaldo Energia. This has been something of a coup for Shanghai Electric. Doosan were also eyeing Ansaldo as a way of entering the gas turbine playing field (the entry barriers are too high for a scratch player). Both Doosan and Siemens had made bids for Ansaldo Energia but Siemens’ bid was essentially a defensive and a spoiling bid and they eventually withdrew. Doosan were the sole remaining bidder but it seems that Shanghai have pipped them at the post for this strategic acquisition.

* Correction – Sequential combustion was first used by BBC at Beznau in 1948, operating on distillate and with a TIT of 575ºC.

The Age of Gas: China has enough shale gas for 200 years

March 2, 2012

The Age of Gas is not just dawning  but is well and truly underway with China revealing reserves sufficient for 200 years. At 25 trillion cubic meters (875 trillion cubic feet) of recoverable reserves these could be almost twice the recoverable reserves in the US.

As shale gas comes into play all over the globe there is going to be a run on large gas turbines for power generation. Gas turbine manufacturers (and the big 4 are GE, Siemens, Alstom and MHI) can expect a sellers market within 2 or 3 years as the economic recovery pressurises generation capacity.

File:GasDepositDiagram.jpg

from Wikipedia

The Telegraph: 

China is planning an investment blitz to unlock its vast reserves of shale gas, convinced it can match the energy revolution under way in the US and meet a significant part of its fast-growing fuel needs.

(more…)


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