THE ENERGY INDUSTRY TIMES - DECEMBER 2017 Companies News 9 Structural issues hit Siemens and GE n Siemens power group bears brunt of losses n Energy remains core to new-look GE Siân Crampsie “Unprecedented challenges” in the world’s changing energy markets are causing industry technology stalwarts Siemens and GE to implement aggressive restructuring plans. The two companies last month revealed job cuts and plans to boost business operations to improve financial performance amid falling demand for gas turbines. “The power generation industry is experiencing disruption of unprecedented scope and speed,” Siemens management board member Lisa Davis said. “With their innovative strength and rapidly expanding generation capacity, renewables are putting other forms of power generation under increasing pressure.” Siemens said it planned to cut around 6900 jobs – equivalent to two per cent of its global workforce – predominantly from its power and gas business. Around half of the job cuts would be made in Germany, Siemens added. The move would “increase capacity utilisation at production facilities, drive efficiency, and enhance expertise by bundling resources”, the company said. GE’s new agenda includes a reduced dividend and a renewed focus on energy, aviation and healthcare. In an analysis of its energy business, GE highlighted its market-leading position and strong technology portfolio, but noted that the market would remain challenging into 2019. It said that gas would remain a key contributor to the energy mix in the long term. Siemens last month reported a big rise in net income in spite of losses at the company’s renewables division and a “significant decline” at the power and gas unit. Net income rose 9.9 per cent to €1.29 billion in the three months to the end of September. Fourth-quarter profit at the power and gas unit plunged 40 per cent to €303 million, as revenues were cut by a fifth to €3.65 billion. Global demand for large gas turbines has fallen drastically and is expected to level out at around 110 turbines a year, Siemens said. By contrast, the technical manufacturing capacity of all producers worldwide is estimated at around 400 turbines. Earlier in November Siemens Gamesa announced plans to cut 6000 jobs from its 27 000 global workforce in an effort to enhance competitiveness and improve financial performance. The wind turbine manufacturer announced disappointing results for fiscal 2017 and a below-forecast outlook for 2018. “Our financial performance is still not at the level we're all aiming for,” said Markus Tacke, CEO of Siemens Gamesa. “But it’s clear that we are making positive progress as we carry out our plan to make this company an industry leader. “Our integration efforts are proceeding ahead of schedule, and I’m confident that the decisions we’re making will allow us to better respond to changing market conditions, and to better serve our customers and other stakeholders.” Centrica sees aggregation as core part of strategy Centrica is aiming to make demand aggregation a core part of its offering after buying Dutch firm REstore NV. The UK energy giant has paid €70 million for REstore, which currently manages 1.7 GW of peak load from a portfolio of industrial and commercial (I&C) customers across Belgium, the UK, France and Germany. Its services help these customers to optimise the use of their energy resources while offering ancillary services to the electricity grid, including frequency response and capacity markets. The REstore business will be integrated into Centrica’s Distributed Energy & Power unit, which provides energy analysis, asset optimisation and energy solutions to large energy users. The acquisition is a key part of Centrica’s strategy to move away from large, centralised power generation assets and into distributed generation and ‘smart’ energy services. It recently released a new research report that concluded that the use of distributed energy devices such as batteries, together with energy efficiency devices, could help the UK’s I&C sector to make significant savings on annual energy spend. Centrica said that the acquisition of REstore would complement its earlier purchases of Panoramic Power, Neas Energy and ENER-G Cogen. “The acquisition will also further expand Centrica’s geographic footprint into new European markets,” Centrica added. Jorge Pikunic, Managing Director of Centrica Distributed Energy & Power, said: “This acquisition is an important step forward in the delivery of our strategy, expanding on our offer to business customers to help them take control of their energy and gain competitive advantage. “REstore’s proprietary technology and track record with large I&C customers will add to our optimisation capabilities and enable growth opportunities as global markets for flexibility continue to evolve.” REstore’s co-founders Pieter-Jan Mermans and Jan-Willem Rombouts, said: “There is clearly a momentum in the market right now so we are thrilled to be working with Centrica to further scale the go-to-market of REstore’s software solutions and demand response services in the UK, North America and other international markets.” Blockchain startup puts plans into action Siân Crampsie Waste-to-energy startup company 4New says it will use a recently won $25 million equity injection to get three proposed new power plants in the UK up and running. The cash injection from USA-based Mirach Capital is conditional on 4New successfully raising further funds for its novel plans to create a circular economy-style waste-to-energy business underpinned by blockchain. 4New CEO Sandeep Golechha told The Energy Industry Times that the startup is aiming to raise a further $25 million through an initial bitcoin offering as well as tapping the private equity market. The funds will finance the construction of three new waste-to energy plants in the UK, two of which are in an “advanced” stage of development with planning permission and grid connections, Golechha said. The firm’s proposed power plants would be capable of processing around 40 000 t/year of waste, which it hopes can be sourced from local waste aggregators. Its entire business model is underpinned by blockchain, a digital ledger that could transparently document and track all of the regulatory and compliance requirements associated with the waste industry, as well as process payments. 4New says that its proposals address a number of issues, including clean energy generation and waste disposal. Its offering would allow waste industry firms to trade for waste and energy transactions using 4New’s digital coins. It is aiming to complete construction of its three power plants by the end of 2018. An increase in mergers and acquisitions (M&A) activity in Europe and the Americas has driven deal value across the global power and utilities sector to a two-year high in Q3 2017, according to EY. Five megadeals in the Americas resulted in M&A deal value reaching $53 billion, nine times the value recorded in Q2 2017 and the highest since Q3 2015. Meanwhile, betterthan expected economic activity in Europe saw Q3 deal value increase to $16.9 billion, up 60 per cent from $10.6 billion in Q2. According to EY, the newly found momentum in the market is expected to continue, helped in part by an expected uptick in global economic performance and improved credit access. “With unanticipated levels of M&A activity across the power and utilities sector, particularly in the Americas and Europe, all major engines of global dealmaking are now moving firmly upward,” said EY Global Power & Utilities Transactions Leader, Matt Rennie. “Deals in Q3 indicate that private equity is likely to be the biggest story across the sector over the next 12 months.” EY’s most recent Power and Utilities Capital Confidence Barometer (CCB), a survey of executives in the power and utility industry, also indicates that technological change in the energy sector is creating pressure for energy companies to address the impacts of digitalisation. “The pace of disruption and innovation is compelling power and utilities companies to review their portfolios more regularly,” said Rennie. “And megadeals in the third quarter of 2017 highlight how industry consolidation is increasing and creating larger, and more diversified portfolios around the world. “Those companies that can better identify emerging trends will be able to readjust their portfolios and recycle capital to take advantage of new growth areas.” Startup firm 4New plans to build the world’s first blockchainintegrated waste to energy plant. Market momentum drives M&A deals 4New is planning three waste-to-energy plants
Energy Industry Times December 2017
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