Product category:
Engineering Industry Reports and Surveys
News Release from: Frost and Sullivan
Edited by the Engineeringtalk Editorial
Team on 09 October 2006
Power plant upgrades offer profitable
growth
End-user study is based on primary research among nearly 100 power plant managers, as well as operations and maintenance managers involved in facilities management.
Industrial power plant services markets in Western Europe represent a huge growth opportunity for turbine manufacturers, as profit margins continue to outstrip those of the new equipment business The increasing proliferation of long-term service agreements in the market, particularly in the gas turbines sector, is expected to provide secure and stable revenues for maintenance, repair and overhaul (MRO) service providers over a long period of time
This article was originally published on Engineeringtalk on 9 Aug 2000 at 8.00am (UK)
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This finding was revealed in a recent Frost and Sullivan end-user study based on primary research among nearly 100 power plant managers, as well as operations and maintenance managers involved in facilities management.
The analysis focused on the MRO requirements/strategies of industrial power plants in western Europe.
High service margins in the gas turbine arena are expected to attract new entrants, such as joint venture and specialist companies.
"The role of independent service providers in the market appears to be much smaller than in the utility MRO market although their presence is growing", remarks Frost and Sullivan Industry Manager Colin O'Hanlon.
"Original equipment manufacturers (OEMs) are striving to keep independent providers at bay, increasing their emphasis on long-term service agreements".
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However, the preference for outsourcing of services is not universal due to marked differences between the major technologies.
For instance, the level of outsourcing in the gas turbine segment, which provides significant opportunities for gas turbine OEMs, is almost double to that of the steam turbine segment.
"Hence, major participants in the market are focusing on increasing the proportion of end-users they can tie-up in a long-term service agreement in order to maximise revenues", remarks O'Hanlon.
"Such agreements will also prove beneficial to end-users, enabling them to concentrate on their core competencies".
Quality of work, value for money and lead time/speed of response were found to be crucial factors that influenced supplier rating.
Technical knowhow, though not overtly stated, was also suggested to contribute to the overall satisfaction of customers and hence, should not be ignored.
However, in the selection of service providers, industry experience received higher importance ratings, demonstrating that it is the key competitive factor.
In the context of buying practices, four of ten respondents indicated that decisions related to periodic maintenance, as well as upgrades and maintenance were determined jointly by the headquarters and the power plant.
The study also indicated that in the majority of cases, routine maintenance was done in-house at the power plant, with just one-fifth of the respondents relying on third-party maintenance.
Moreover, smaller industrial plants demonstrated a greater willingness to outsource routine maintenance.
Across the different equipment considered, OEMs were found to be the suppliers of spare parts, particularly in gas turbines, where only few independents possess the necessary reverse-engineering capabilities required due to the sophisticated nature of the technology.
Lead times for critical spare parts were discovered to have remained the same over the past two years.
However, almost one third of the respondents remarked that lead times had increased, suggesting deterioration in service levels.
The survey revealed that major overhauls were provided by OEMs, particularly in gas turbines sector, due to technological complexities involved.
In this context, nearly half of the respondents suggested that industrial MRO providers need to respond quickly in order to reduce the notice time required for major overhaul jobs.
Whereas most respondents in the gas turbine sector were found to possess a full maintenance contract, the proportion was significantly lower for steam turbines and boilers, suggesting greater reliance on in-house expertise.
Moreover, three of ten respondents expressed interest in a performance-based maintenance contract, thereby highlighting growth opportunities for MRO providers.
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