Power plant managers say OEM prices are too high

A new study by industry analysts Frost and Sullivan has found European power plant managers are unhappy with the level of service being provided by original equipment manufacturers

A new study by industry analysts Frost and Sullivan has found European power plant managers are unhappy with the level of service being provided by original equipment manufactures (OEMs).

Based on 150 in-depth interviews with power plant managers, the study - European Power Plant End-User Survey - found significant changes in the maintenance, repair and overhaul strategies of utilities, industrial power plants and IPPs are underway.

An increasingly competitive business environment has forced OEMs to reduce their own manpower and increasingly rely on contract staff.

This has happened at the same time as power utilities themselves, seeking to slash costs to survive under newly competitive market conditions, have reduced their overall staffing levels, including maintenance.

This has led to longer waiting times and a deterioration both in terms of quality of work and technical knowledge.

The study found price was of particular concern to dissatisfied power plant managers.

The report's author, Harald Thaler, explains: "Many respondents have indeed mentioned that they regard the service prices charged by OEMs as too high." "There is a feeling that the OEMs exploit their virtual monopoly in certain parts of the service market and keep prices artificially high.

Although some companies can sometimes go to other firms for part of the work, the major overhauls and major replacement parts can only be had from the big suppliers and therefore many power plant managers feel trapped in this highly priced scenario.

"Over the past year or so in particular, power plant managers have seen extreme price rises in the aftermarket.

Many feel these have not been adequately explained to them." Another critical factor is quality of work.

This has allegedly deteriorated among some of the largest OEMs, with power plant managers in key markets complaining that increased use of subcontractors by OEMs has led to failing standards and a dearth of technical knowledge centres within some OEMs.

"The results contained in this study serve as a healthy reminder for OEMs that, despite their virtual monopoly in some sectors of the power generation industry, customers still have the power to switch equipment suppliers and seek out alternative ways to obtain crucial spare parts and MRO services," Mr Thaler continues.

"OEMs need to establish strategic priority areas that they wish to improve in order to gain competitive advantage in the European power generation aftermarket." Detailed ratings for OEMs' performance in the aftermarket across a number of categories can be found in the report.

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