The changing power industry

Phil Burns, Managing Director for Aggreko Middle East, reveals why rental equipment is an attractive option in times of limited liquidity.

INFRA. How long has Aggreko been providing services to the MENA region?
Phil Burns. Aggreko opened its first regional office in Sharjah in 1991 and opened its international headquarters in Jebel Ali Free Zone in 1998. Aggreko today offers round-the-clock service support and availability for the MENA region through a network of 10 locations in six countries: Saudi Arabia, Oman, Bahrain, Kuwait, Qatar and the UAE. Using these locations as operational hubs, Aggreko works all over the region; for example, currently we have over 200 MW on-hire in Yemen.

In our 18-year history in the region, we have worked on a huge variety of projects including supplying power during construction of the Palm Island development in Dubai, Festival City, Dubai Metro and the Qatar Pearl.

INFRA. How has the global downturn impacted your business in the region?
PB. Although the MENA region has not been affected to the same degree as North America and Europe, the impact of the financial downturn is nonetheless making itself felt around the Gulf, particularly with regard to those projects that are in the early phases of development. However, as a provider of high-end services and equipment, we are finding that our services are still demand. We believe that this is due in large part to our clients looking for ‘turn-key’ rental solutions that enable them to concentrate on their core business rather than focusing on generating power.

Renting equipment as opposed to purchasing is an attractive option in these times of limited liquidity. For companies which require large-scale equipment to operate, particularly in the oil and gas sector, the enormous cash outlays required for equipment are a heavy burden to bear, making rental a good option.

We are also finding that the rental option in this economic climate has a cushioning effect for companies who are uncertain about the long-term future of their projects. By renting equipment, companies can ensure that they will not be left with equipment that will sit unutilised; if a company which has purchased large amounts of equipment decides that an exploration project must be put on hold, the financial damage incurred can be a major blow. Ultimately, renting equipment means that potential risks are lower because ownership lies with Aggreko.

INFRA. What are some of the latest trends and developments in the power industry?
PB. One of the trends we are currently seeing is customers looking to diversify their energy portfolios. Rather than relying on one type of fuel, they are looking to expand their generation capacity to include two or more fuel types. For example, one of our customers, a cement company in Ras Al Khaimah, has its own gas-powered turbine, but contracted a diesel-powered package from us to provide additional capacity to their facility.

In response to this trend, we have introduced the ADDGas system, which allows customers to substitute a significant portion of diesel fuel with natural gas and gives the customer a considerable saving on overall costs.

INFRA. What are your plans for the immediate future?
PB. The slowdown has in some ways provided breathing space for companies such as Aggreko to take stock and evaluate how to improve their all-around business models. We see this as an important opportunity to improve some of our business processes.

For example, we are busy implementing a back office system to improve and streamline our customer service processes. By taking the time to ensure that our systems are more effective, we will be in a better position to take advantage of the market once the economy improves and projects that are currently on hold start up again.

We are also currently conducting an in-depth market research study, including interviews with executives in industries to discuss their needs and identify where best we can bring our specialist skills knowledge and equipment to support the growth and development of industry in the GCC.