Listening to Siemens Power Generation Group President Adolf Hüttl reporting on a remarkable year of business for the German giant at its annual report press conference, it sounded like the fulfilment of an ambitious dream, until the figures were examined.
In terms of historical development, the synergy in the massive acquisitions of Parsons in the UK, Westinghouse Electric's fossil energy business in the USA, and possibly nuclear fuel service links with BNFL, has a poetic charm about it.
1997 was the year in which Siemens celebrated its 150th anniversary by setting out to acquire very large tranches of steam turbine manufacturing capacity at a time when the industry is plagued with extensive overcapacity already and the major growth markets in Southeast Asia find themselves financially embarrassed. The combined commitments of the three companies result in a world-wide operation which is the second largest in the world snapping at the heels of American monster General Electric.
In a year when new orders have mushroomed yet again, up by some 19 per cent over the previous year, but margins have reached an all time low, the company has opted to commit major resources to a sector of the industry which nobody now regards as growth business.
How did it all start? In 1889 Sir Charles A. Parsons, the British engineer who built the first steam turbine for practical power generation, founded the company which still bears his name. George Westinghouse started his company in the USA, which was one of the first to establish the importance of three phase alternating current electricity transmission, in 1886. In 1896 Westinghouse acquired a license for Parsons steam turbines which was later extended to a patent exploitation agreement. Some years later Siemens' engineers familiarized themselves with Parsons generator technology and built the first Siemens turbine-generator set.
At the turn of the century, according to Hüttl's statement, the three companies were already maintaining more or less intensive relations.
Siemens' association with Westinghouse, which apparently dates back to 1924, culminated in 1957 with a licence to build the ubiquitous pressurized light water reactor technology which it has exploited with great success and impeccable safety. They are now aiming to "merge their nuclear business with the nuclear fuel business of British Nuclear Fuels plc ..... negotiations are due to be completed this spring".
There is, of course, a strategic master plan behind this accelerating growth pattern which we might ignore at our peril. Apart from the obvious axiom that increasingly characterises the electric power business around the world – size wins – there are other key factors which are emerging as preconditions for success – globalization and bankable O&M services. We have noted in these pages before that plant maintenance is now the high margin business in power plant contracts, and one by one each of the large global power plant suppliers are recognising this trend in their business planning and investment.
Siemens are not acquiring Parsons and Westinghouse's facilities to build turbines in, but to gain access to large fleets of turbine-generator sets which represent enormous commitments of maintenance services business. The same philosophy seems to apply to Siemens joint ventures such as the Egyptian Turbine Company SAE and Power Plant Performance Improvement Ltd. – a new company formed with Indian turbine licencee BHEL which boasts a fleet of 12 000 MW of machinery which urgently needs upgrading. Parson's installed capacity fleet is put at 57 000 MW while Westinghouse records a total installed capacity around the world of 300 000 MW. Together with Siemens' own commitment, this brings the aggregate for the three partners up to some 500 000 MW world-wide which all represent ongoing servicing business – or money in the bank.
Nearly as valuable as the business itself, is the volume of operating experience and technology feedback which is being analysed for use in further performance improvements on a much more purposeful basis than it has ever been handled before.
With these issues in mind we have scheduled our first international conference on Operation and Maintenance in Power Plants in more-or-less neutral London, UK, from 9 to 10 February 1998. We hope to see you there.
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