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Global Gas Turbine Markets and Trends – What

Does the Future Hold?

The Future of Gas Turbine Technology – 3rd International Conference


Châtelain All Suite Hotel, Brussels, 11-12 October 2006

Harald Thaler
Frost & Sullivan
© 2006 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan.
No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan.
Agenda

• The gas turbine equipment market – drivers, demand analysis, forecasts


and trends

• The gas turbine services market – service providers and focus, market
forecasts, key trends and challenges

• Focus of gas turbine improvements – areas of operator interest


The Market for Gas Turbines in the EMEA Region
Gas Turbine Market : Market Dynamics in EMEA

Growing Demand Natural Gas


for Electricity Electricity Market Reserves
Deregulation
Efficiency and Flexibility
Drivers

Drivers
Restraints

Restraints
Renewables Clean coal
Volatility of Security of technology
Gas Prices Supply

Short Term impact


Long Term impact
Gas Turbine Market : Forecasts
GT Market Size & Growth: Breakdown by Output Range,
(EMEA), 2000-2010

20000 • Following decline in the very early


18000
part of the decade post-US boom,
healthy growth has returned
16000
• Installed 18.7 GW in 2005 -
14000
forecast to remain broadly stable
12000 through 2010
MW

10000
• Stronger growth momentum in the
8000 next few years in the mid-range
6000 turbines (very popular in
expanding Middle Eastern
4000 markets)
2000
• More limited demand for large
0 turbines from EMEA is
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010
compensated by buoyant Asian
demand
5-60 MW 60-180 MW >180 MW
Gas Turbine Market : Forecasts

Cumulative GT Additions by Output Range (EMEA), Cumulative GT Additions by Region (EMEA), 2006-
2006-2010 2010
North Africa
5-60MW 9%
14%
Above 180MW 8 GW
Europe
13 GW 41%
41% 39 GW 39 GW
48 GW
43 GW

60-180MW Middle East


45% 50%

• The medium-range output class is the largest • Booming Middle East market will see greater
with nearly 43 GW expected cumulative overall additions than all of Europe over the next
installations between 2006 and 2010. few years.
• Largest output range to grow more in the next • Italy and Spain still strong and renewed interest
decade as new H class machines gain ground in UK
Development of Very Large Gas Turbines

Operator Interest in Very Large Gas Turbines


• Operator interest in new
100%
‘mega-turbines’ with outputs
90%
over 300MW has been
80%
muted so far.
70%
• Asia-Pacific will be key
60%
market for these turbines
50%
despite some interest from
40%
operators in Europe.
30%
• Huge capacity additions will
20%
be undertaken in Asia in the
10%
decades ahead.
0%
Western Eastern North Latin America Middle East & Asia Pacific • Greater interest in new
Europe Europe America Africa
technology in general
High Interest Moderate Interest No interest
Gas Turbine Market : Competitive Position

Cumulative Gas Turbine Additions • GE and Siemens are the major two
EMEA, 5MW and Above players - typically account for
6% around three quarters of the total
4%
EMEA market for gas turbines
• Their dominance is less pronounced
15%
if taking only the larger installations
41%
into account.
• Alstom’s share now reduced as no
longer competes in 5MW-50MW
10%
range
• Mitsubishi more focused on Asia
and North America – selective
24% targeting in Europe
*2000-2004
The Gas Turbine Services Market
Services Market : Industry Structure

Turbomachinery Service Providers

OEM Third Party

Multinational Multinational

Regional Regional/Domestic

Joint Ventures Utility/IPP Affiliates


Main Service Providers in Europe
Original Equipment Manufacturers Third Party Service Providers

Wood Group
Transcanada Turbines
Sulzer Elbar
Thomassen Turbine Systems
GE Energy Chromalloy
Alstom Power Babcock Borsig Service
Siemens Power Generation Fortum Service
Mitsubishi Heavy Industries Turbo Services Network
Ansaldo Energia european maintenance company
Rolls Royce MTU Maintenance
Pratt & Whitney Mitsui Babcock
Kawasaki Fluor Daniel
Hitachi
MAN Turbo RWE Power International
Solar Turbines EON (Anlagenservice / Power Technology)
Turbomeca/Safran Group Soluziona O&M (Union Fenosa)
Service Focus in Gas Turbine Area

Organization Type Gas Turbine Service Focus


ALSTOM Power OEM Focuses predominantly on own make turbines. Small
industrial turbine business sold to Siemens and hence
do not focus on servicing those
General Electric OEM While GE tries to maximize the aftermarket share of
its own make of gas turbines, it is also trying to
capture a share of repair and parts supply market for
Alstom, Siemens and Mitsubishi gas turbine makes

Siemens OEM Supply of spare parts for own models and servicing all
makes of gas turbines
Pratt & Whitney OEM Maintenance, overhaul, repair and spare parts both
for its own make and other brands (GE and Siemens)
Rolls Royce OEM Supply of spare parts and service for own models only
Service Focus in Gas Turbine Area
Organization Type Gas Turbine Service Focus
Wood Group Non- Maintenance, repair and reengineered parts for
OEM GE, Alstom and Siemens gas turbines
Sulzer Elbar Non- Replacement parts and repair of heavy duty and
OEM small gas turbines of Alstom, GE, Westinghouse
and Siemens models
Thomassen Turbine Non- Supply of spare parts and services for GE Frame
Systems (Ansaldo) OEM 6B and 9E
Fortum Non- Only servicing of turbines. Procures components
OEM from OEMs/non-OEMs as per end user preference

MTU Maintenance Non- Servicing of aero derivatives LM2500, LM5000 and


OEM LM6000
European Maintenance Non- Component supply and servicing for GE Frame 5
Company (EMC) OEM and 6
Turbine Services Ltd Non- Component supply and services for GE Frame
(JV Siemens/Chromalloy) OEM 3,5,6 and 7(B to EA)
Services Market Revenues and Forecast
European Gas Turbine Services Market – European Gas Turbine
Revenue Forecasts 2000-2010 Services Market –
Breakdown of Revenues
Scandinavia Other
6% UK
9%

$1.7 bn
Belelux 28%
$1.3 bn 13%
CAGR (2005-10)
= 5.8%

Italy Germany
16% Spain France 17%
7% 4%

• Fastest growth in Spain and Italy,


followed by UK
• Solid growth in Germany and
Benelux
Source: Frost & Sullivan • Slower growth in France and
Scandinavia
Services Market Trends in Key Countries
UK
• Largest gas turbines services market in Europe
• Driven by deregulation and presence of IPPs
• Renewed expansion of generation capacity
• Big presence of independent service providers forced OEM price reductions
Germany
• Some investment in gas turbine turbines due to retiring of lignite capacity and
growth in wind power
• Recent entry of services arms of big utilities
• Limited work for independents due to strong allegiance to OEMs
France
• Limited potential due to large nuclear base and promotion of renewables
• Delays in full privatisation of EDF and full deregulation
Trends in the Different Markets
Spain
• Explosive growth in combined cycle power plants
• Continued expansion of natural gas grid
• Limited presence of independent service providers but strong interest from
operators
Italy
• Extensive repowering programme converting from oil-fired to CCGT plants
• High electricity prices drive IPP investments
• Utility interest in outsourcing
Benelux
• Relatively mature with limited expansion opportunities
• Established presence of independent service providers
Scandinavia
• Mature market with limited gas grid – focus on renewables and nuclear
Outsourcing Trends
Share of Power Plants with Full Maintenance Contracts for
Gas Turbines

Germany

Italy

Netherlands

Spain

UK

0% 10% 20% 30% 40% 50% 60%


Share of Responses

Share of plants with full maintenance contracts / LTSAs in 35-50% range


Spain is highest due to newer fleet
Outsourcing Trends
Proliferation of LTSAs – benefits
• LTSAs reduce cashflow uncertainties
• Allows operators to benefit from latest technology innovations
• Provides assurance that a rapidly changing technology will continue to be
supported by the service providers and that spare parts will be available
• Raises the re-sale value of the plant

Future trends
• Fleet management structure due to internationalisation of utilities
• Focus on “value packages” where value to operator is clearly measured
• Greater partnership approach between service provider and operator
• Towards full O&M contracts (mainly industrial plants)
Key Challenges for Gas Turbine Service Providers
Growing competition among service providers
• Greater strategic focus of the OEMs
• Service arms of major utilities

Pressure on prices
• Has affected prices for gas turbine spare parts in particular

Volatile gas and electricity prices


• Reduces long-term planning for power plant fleet
• Lower electricity prices reduce investment in industrial plants
Key Challenges for Gas Turbine Service Providers
Deregulation of European electricity markets
• Has introduced greater uncertainty
• Delays investments in new power plants

More cycling and 2-shifting


• Greater wear and tear
• Affects maintenance intervals
• Greater uncertainly of how to price long-term service contracts

Adding value for the client


• Bundling of services
• Guarantees on availability, heat rate, output etc.
• Moves towards complete power plant asset management
Focus of Gas Turbine Improvements
Key Areas of Future Improvements

Importance for Gas Turbine Operators

Turbine Performance

Emissions Reductions

Fuel Flexibility

Response Speed

Importance
Key Areas: Turbine Performance
Key Improvements

• Efficiency: Most important area for improvement – Of particular interest in


Asia/Latin America/Middle East as running on baseload. Trade-off between
higher efficiency and possibly increased O&M expenditure and lower
reliability.
• Reliability: another key area – particularly important for European operators
who prefer it over efficiency gains, preference for tried and tested machines.
Also critical for industrial/oil and gas users.
• Availability: Through
 Shorter overhauls – Assumes greater importance in very competitive markets. Of
little importance to the oil & gas industry.
 Longer outage intervals – users want to see changes in yearly increments due
to preference for certain times of year
Key Areas: Emissions
Key Drivers
• Legislation: In compliance with government policies in various countries,
emission limits in most countries are expected to be less than 15 ppm by 2010
and possibly below 10ppm by 2020.
• Preference among internationally-based IPPs and large industrial operators
(eg oil majors) to purchase and install the most advanced machinery across
their fleet. Local utilities even in developing countries normally follow as well.

Greatest interest in lower emissions turbines from


North American operators. European limits
expected to be reduced to 9-12ppm in longer term
Key Areas: Fuel Flexibility
Key Drivers
• Price: High natural gas prices act as a driver for fuel flexibility. Currently on
the way down.
• Existence of interruptible contracts: Some operators pay a premium for
uninterruptible supply and are hence keen on greater fuel flexibility. Particular
interest from UK, Italy and Netherlands.
• Deregulation: Movement away from long-term gas supply arrangements will
open up greater potential for alternative fuels.

Greatest interest will be from developing


countries where gas quality is more varied
Key Areas: Greater Response Speeds
Greater
Growth of wind Deregulation Increase need
interconnection
power for flexible
of grids with
operation
CEE/FSU

Drivers
Impact

Restraints
High hydro
power capacity

Sufficient
response
speeds in highly
integrated power
markets

Overall of relatively limited importance – current


levels seen as sufficient in most cases
Summary

• Gas turbine market has recovered from its slump


• Strong growth in mid-range turbine demand in medium term and large
turbines in longer term
• Booming Middle Eastern market will outpace Europe over the next few
years
• Greatest demand for very large gas turbines to come from Asia
• Services market is very attractive to both OEMs and independents
• Long-term maintenance agreements continue to expand
• Desired improvements from operators’ perspective: Reliability is key for
European users – lower emissions and greater fuel flexibility also important
THANK YOU