GE Power Services unveils growth plan amid global headwinds

“In his new starring role at GE Power Services, football fan Martin O’Neill sees the hugely competitive English Premier League providing a few management lessons.

We can’t afford to buy a Neymar yet, nor would we want to pursue a strategy of splurging on players and projects like Manchester City,” said the general manager of the company’s newly established Cross-fleet Service Solutions unit.

It’s less than a month before the World Cup tournament kicks off in Russia. The interview over dinner at a lovely restaurant in the bustling industrial city of Baden in Switzerland quickly takes on football references.

Brazilian superstar Neymar became the world’s most expensive football player when he joined France’s Paris Saint-Germain for US$250 million last year. English champions Manchester City, backed by the Abu Dhabi government, has invested heavily in players and infrastructure over the past decade to become a global force in the sport.

“Our strategy would be to grow the business organically. We favour a more modest approach like Burnley or Leicester,” Mr O’Neill said. Both are smaller English clubs that have been punching above their weight in recent years. Leicester won the championship in 2016 while Burnley finished in a creditable seventh position last season.

Mr O’Neill, who shares the same name with the manager of the Republic of Ireland national squad, said he is focused on building a team that will win matches and progress up the table with each season.

“The immediate goal is to win credibility, gain the confidence of customers, and strike fear in the hearts of rival teams,” he said.

The reference to mid-table performers seems incongruously modest for a global conglomerate that reported a total revenue of US$122 billion in 2017. But these are difficult times, not just for the company but the world economy. GE is undergoing life-changing surgery under John Flannery who took over as chairman and CEO in August 2017. To revitalise the underperforming 126-year-old symbol of industrial America, he is selling off a number of businesses so that the future slimmer GE will focus only on its Power, Aviation and Renewable Energy divisions.

As part of that message roll-out, GE Power Services, a unit within the power division, hosted a group of international journalists at its Baden headquarters from May 14 to 15. The company’s senior executives, led by CEO and President Scott Strazik, presented its global strategy with details and codenames like cross-fleet service solutions, advanced gas path (AGP), and additive manufacturing.

Cross-fleet Service Solutions
The power-generation business experienced a period of rapid global capacity expansion In the 1980s and 1990s. This golden period of expansion coincided with strong economic growth in many developing countries such as China, India and Southeast Asia that were emerging from a low income base. Electricity consumption grew rapidly, leading to orders for the construction of large power generation plants, including many that operate on gas-fired turbines.

Many of these plants, built by GE as well as its rivals, Germany’s Siemens and Japan’s Mitsubishi Heavy Industries, are nearing the end of their normal shelf lives. Their owners are faced with big decisions to upgrade the plants and extend their operating years as they face new pressures from rising energy costs and environmental standards.

GE Power Services, which supports more than 2,800 customers worldwide, sees opportunities from boosting the performance and reliability of existing gas turbine fleets, especially those manufactured by its rivals. This will form part of its business to provide services for more than 28,000 power generation equipment assets owned by its customers.

At the Baden event, the company announced the launch of its Cross-Fleet Service Solutions unit that supports a range of technologies including those used by Siemens’ SGT-800 and Mitsubishi’s 501F units. The goal is to take market share from its competitors.

GE said the injection of its advanced capabilities and technology into these fleets will help gas plant operators gain more flexibility, reliability and efficiency while extending maintenance intervals. Ultimately, it is aimed at helping customers boost their profits.

The company said its technology inputs have boosted the performance of gas turbines manufactured by its competitors by six percent, and extended their operating time by an average of 40,000 hours.

It has already snared more than US$200 million worth of orders in Latin America, Europe and Russia. The cross-fleet solutions will also be offered to the owners of the 7,500 GE gas turbines located around the world.

“We’re executing projects on multiple continents, with a healthy pipeline to follow,” said Mr Strazik, who was chief financial officer until his promotion last October.

“Cross-fleet is not about servicing somebody else’s machines. That’s boring. It’s about taking those machines and making them our own,” he said.

“It’s about adopting those machines, inserting our technology, our coatings, our alloys, our engineering depth. That then allows us to do things with the machines, with our technology that the customers need, that we don’t necessarily think our competitors can do.”

Just as important, GE Power Services is well-positioned to provide long-term services support for a wide range of gas turbines following the expansion of its cross-fleet capabilities, said Mr O’Neill.

The company said customers are supported by its global network of 40 service centres that inspect and analyse cross-fleet hardware, as well as develop repair solutions to keep power and steam producers operating and improving.

Advanced Gas Path (AGP)
“When I arrived as the engineering leader in 2003, there was no advanced gas path (AGP). So now there is, and we talk about all the cool stuff that has allowed our customers to be better at their business,” said Steven Hartman, GE Power Services’ chief technology officer.

AGP combines hardware upgrades, software packages, or a customised mix of both, to enable customers to extract more value from all major gas turbine components. The solutions include applying design innovations, materials advancements and control software to boost the output and efficiency of gas turbines as well as extend their maintenance intervals and maintain low emissions.

As a result of AGP upgrades to existing gas turbines, the company said it has added a total of seven gigawatts of power capacity around the world. AGP-enabled plants are generating an additional total of nearly 19.4 million additional megawatt-hours (MWh) of power a year, sufficient to meet the electricity needs of two million homes.

“Advanced Gas Path is a huge deal for us,” said Mr Hartman, an American who lives in Baden and speaks German.

At the Baden event, GE Power Services announced that it had secured three new AGP orders from different companies in Saudi Arabia, Dubai and Japan.

The first, state-owned Saudi Cement, will apply the solution at its three GE 6B gas turbines at Hofuf. Saudi Cement, which became the first in the cement industry to adopt the AGP solution,  expects to boost power output by a total of up to 16.9%.

Next, Dubai Electricity and Water Authority (DEWA) signed a US$52 million agreement to install the AGP technology in three GE 9E gas turbines at the Jebel Ali Power & Desalination Station. The upgrade, to be completed next year, will increase energy production, improve efficiency and reduce carbon emissions, as well as extend the life cycle of the gas turbines for an additional 12 years.

GE also secured a first AGP project in Japan, from Ohgishma Power Co Ltd, a joint-venture company between Tokyo Gas Co. Ltd and Showa Shell Sekiyu. As part of the agreement, Ohgishima’s three GE 9F gas turbines in Kanagawa will be upgraded to improve efficiency by 2.5 percent. Its emissions level will be reduced to 15 ppm nitrous oxide to help Tokyo Gas remain competitive in Japan’s struggling power industry.

Since 2010, our revolutionary AGP technology has been installed in 435 units across four GE gas turbine fleets in 39 countries on five continents,” said Mr Strazik.

“We are expanding our AGP solution to GE 6B gas turbines to increase output and availability on our fifth gas turbine type. In certain industrial applications, the need for more megawatts, efficiency and flexibility is paramount, and our AGP technology can help cement companies like Saudi Cement’s increase their power capacity.”

Additive Manufacturing (AM)
Steven Hartman’s enthusiasm for additive manufacturing (AM) gushes over when he starts expounding on the subject.

According to AdditiveManufacturing.com, AM describes the technologies that build 3D objects by adding layer-upon-layer of material including plastic, metal, concrete or possibly even human tissue in the future.

The range of AM technologies today include 3D printing, rapid prototyping, direct digital manufacturing (DDM), layered manufacturing and additive fabrication in the making of a three-dimensional object.

AM is increasingly crucial to the power industry which is under pressure to supply electricity as well as remain profitable, or to at least stay afloat in the case of many developing countries. Power companies must keep cost down while raising plant performance.

“We’ve been doing additive manufacturing for 20 years,” said Mr Hartman. Instead of replacing entire sections in an ageing gas turbine, a plant operator is able to focus on the defective or underperforming parts using AM technologies.

“In AM repairs, you take out the old part, you cut out a section, you put in a new printed version. It’s a novel application that allows customers not to change their whole unit, but just change that one part and they get 15% cooling flow improvement which improves their performance and save fuel,” he said.

A key ingredient in 3D printing is the choice of the material used in the making of the replacement part.

GE Power Services has a distinct advantage because it is able to draw on “the accumulated massive amounts of data on material characteristics” to design and produce the part needed in the gas turbine, said Mr Hartman.

The material’s characteristics are critical to the plant’s performance.

“What’s in the metal? Will it last for 10 years or longer? We have all that information and can use that to print those parts.”

Would a contractor using generic AM technology be able to print those parts and install it in a power plant for a much lower cost than GE Power Services?

Mr Hartman acknowledges that possibility with the growing popularity of 3D printing but he challenges any contractor to have the material knowledge required to design and produce quality parts to enhance the plant’s performance. It is unlikely that they will have the depth and extent of the material database and knowledge found in Advanced Manufacturing Works (AMW), the research arm of additive for GE’s power business.

AMW, located in South Carolina’s Greenville in the US, undertakes research and analysis to improve on the materials and their design and application for use in power plants. 

GE Power Services: Geopolitics, trade tensions and rising energy prices
While global electricity consumption continues to grow, the demand for new investments in large power plants is unlikely to match its pace.

Amid rising global trade tensions, surging debt levels and increasing geopolitical tensions, most countries are bracing for slower economic growth in the coming years.

Amid the sober outlook for the world economy and GE’s own recent setbacks, Mr Strazik is taking the long view with a firm eye on growth.

“You can’t talk about this business in the context of quarters or in the context of years. You have to look at a business like this over five-year trends because projects are very lumpy, complicated and hard to finance,” he said.

“The longer term trends still show a real need for gas. And that’s why we’re continuing to invest hundreds of millions of dollars in a year in services to meet those solutions.”

Mr Strazik sees long-term sustainable growth in GE Power Services’ AGP business along with its digital, core parts, repairs and services solutions.

“So in the first quarter, we reported core parts repairs and service revenue growth of about 30%, which is the first time in almost a year that we reported growth in that segment of the business,” he said.

“There are much better days ahead for this business financially.”

China has emerged as a major challenge for GE and other American firms, especially since the 2016 election of Donald Trump as US President. GE’s focus on building a strong long-term presence in China comes at a time of rising tensions between Beijing and Washington, DC. American firms have complained about the difficult operating environment in China. At the same time, President Trump wants to stop the transfer of American technology to Chinese firms.

Mr Strazik is resolute that GE has a long-term role in China, especially given the country’s demand for natural gas to fuel its power plants. To clean up its heavily-polluted cities, China wants to reduce its dependence on coal in favour of natural gas and renewable energy.

“Whether China gets along with Trump, GE wants to be in this market. At the end of the day, China is a massive market,” he said. Continuing from when he was GE Power Services’ CFO and commercial leader, Mr Strazik revealed he still visits China every quarter, underlining his commitment to strengthen the company’s position in the country.

GE’s outlook could be bolstered by the continuing recovery in oil and gas prices on account of strong global demand and rising geopolitical tensions. Some analysts are forecasting that crude prices, now hovering around US$70 a barrel, could return to US$100 a barrel or more over the coming year.

Asked about the impact of high oil and gas prices, Cross-fleet Service Solutions’ Mr O’Neill said without hesitation that it would be a boon for GE Power Services’ prospects.

Pinched by rising fuel prices as a major component of operating cost, power companies will look for ways to keep cost down while maintaining or boosting electricity output at the same time.

“You’re sharpening the economic argument for a Cross-fleet offering with every dollar of the oil price increase. Our solutions are putting true value on the table that will only be amplified by higher oil prices,” he said.

Relegated for the first time from the Dow Jones Industrial Index in June, GE will be like a prized football club with a new squad of ambitious players plotting to return to play in the Champions’ League.

 

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