Acquisition doubles size of US firm and the market available
In November 2015, US-based GE completed the 12.35bn ($13.85bn) acquisition of the power and grid businesses of Frances Alstom.
Paul McElhinney, GE
The transaction meant major changes for GEs power services arm.
It is a very different business after the Alstom deal, says Paul McElhinney, senior vice-president at GE and CEO of power services. We had 13,000 employees before the deal, we now have 26,000 employees operating in 150 countries around the world. We were a very big successful gas services business and our scope dramatically changed with Alstom. Steam generators, boilers, Siemens equipment, [Mitsubishi Heavy Industries] equipment and the industrial internet are all product offerings that now are in our portfolio. In many senses it is almost a new business.
Double the size
In the Middle East and Africa, the market size for the power services business has effectively doubled. We have about 150GW of installed capacity [in the Middle East and Africa], says Azeez Mohammed, GEs president and CEO for power services in the Middle East and Africa. "The total capacity out there is 300GW, so we are almost half of the regions total electricity supply. With the acquisition of Alstom, we have the capability to service the remaining 150GW, so the region is a huge growth market for us.
The market size has doubled because GE can now service Alstom equipment as well as kit manufactured and installed by other competitors. We did not service other firms' equipment in GE, but Alstom did, says McElhinney. "They have a very interesting business that they grew with very innovative creative technology around Siemens gas turbines, [Mitsubishi Heavy Industries] gas turbines, other OEM [original equipment manufacturer] gas turbines, and we intend to take that capability and grow that business out.
"Customers dont think gas turbines, they think total plant, and it gives us the ability to have those kinds of conversations to bring solutions to them to drive the potential in significant improvements in the way they run their business.
The Middle East and Africa market is also expected to grow as governments add new capacity. We are active in 28 countries in the region and when you look at many of these countries, they are coming out of the recent regional unrest or a tough period economically and they are rebuilding infrastructure in a significant way, says Mohammed. "Countries such as Tunisia Egypt, Algeria, Iraq, Nigeria, and South Africa. We are really making a difference in these countries. If you compare them with the Gulf countries, where there are capacity reserves of 10 per cent, these countries have under-capacity and black-outs for half of the day."
Azeez Mohammed, GE
In the near term, the region does face challenges as low oil prices continue to put pressure on capital expenditure. Projects in terms of new investments, particularly in the oil and gas sphere, tend to get moved to the right, and in a slow or no-growth [world] everybody is focused on efficiency and productivity, says McElhinney.
The efficiency of existing plants can be improved significantly. We have had conversations with customers where we can offer 2-4 per cent improvements to the performance of their existing assets. Those are really beyond incremental to customers, says McElhinney.
As budgets are reduced, another option available is assisting clients with finding solutions. Financing using the GE balance sheet and guaranteeing an outcome is a big deal for customers right now, says Mohammed. The deal we signed in Iraq recently is testament to that and we see more of that. When we are able to bring the financing, customers are not stopping their progress, they are moving forward, so I think that is another shift I see in the region.
Traditionally, one of the key players for funding US manufacturers such as GE has been the Export-Import Bank of the US (US Exim) export credit agency, but other sources of funding are also available. Exim has been a great partner, but GE has operations in 150 countries around the world and we have the ability to partner with governments of countries where we have operations, where we make products, employ people, so we have significant sources of new finance, says McElhinney. We have found some new pretty exciting financing opportunities with some of the other governments where we have operations, such as Hungary and Canada, and in this region a few good examples.
GE wins Iraq power contracts
The US GE has won contracts worth a total of $1bn to boost electricity capacity in Iraq.
Under the agreement with the Electricity Ministry, GE will provide equipment and maintenance for 10 power plants across the country. According to sources in Iraqs electricity sector, the capacity will be installed on a fast-track basis.
Financing is already in place for the first stage of projects, which are worth $328.8m. The schemes will add an additional 700MW capacity to the grid. Read more
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