Focused for the future10 February 1999
Electrowatt Engineering has found its focus, with Jaakko Poyry, as a purely engineering company. Janet Wood took a look into the future with members of the Energy Division
Together, Rolf Sigg says, electrowatt Engineering (EWE) and Jaakko Poyry form one of the world’s largest engineering alliances, with over 6000 staff. Sigg is head of one of EWE’s ‘centres of excellence’ — the Hydropower and Water Management Department. He has seen out the reorganisation of recent years and is now looking forward to the future as a company focusing purely on engineering.
Until around three years ago EWE was part of a Swiss group with interests from design and industrial processes to generation and dispatch of power. The group’s hydro power interests were rooted back in the great days of Swiss hydro power construction in the 1950s, and had achieved a global position in the 1970s and 1980s. By the mid-1990s, however, it was obvious that the market was changing and that the disparate parts of the group had to follow separate paths.
The business was split: the operation and utility sectors remained in Watt AG, while the industrial businesses found a home with Siemens. It was well understood that for EWE this was not a suitable solution. ‘As an engineer, EWE must be independent of manufacturers,’ Sigg explains, ‘so a buyer had to be found.’ The result was the alliance with Jaakko Poyry, a Finnish group based in the forestry industries in Scandinavia. The two engineering alliance partners complement each other in the energy sector, Sigg says. Both are active in the various disciplines of the thermal field, and EWE covers hydropower. With the alliance a year old, Jaakko Poyry has increased its stake and now owns some 70% of EWE. The remainder of the stock is split between Swiss utility Nordostschweizerische Kraftwerke, Ernst Gröhner Stiftung and Lombard Odier. The company will operate with Jaakko Poyry’s subsidiary Ekono Energy under the brand name Electrowatt-Ekono.
In the hydro power sector the last years have seen little new building work in Europe, and along with this the geographical profile of EWE’s work has changed. Attention to overseas markets has paid off and in 1996-7 the company showed strong growth in Asia, Latin America and the Middle East, which saw close to 30% of the company’s sales. Another result has been that more of EWE’s staff are based outside Europe.
The company takes on a wide variety of hydropower contracts, for example:
•In Turkey it has acted for nearly 25 years as owners engineer, for example at the Karakaya and Ataturk dams. At Ermenek it is preparing the final design.
•In southeast Asia it acts as lender’s engineer at Theun Himboun and design/supervision engineer for Houay Ho, both in Laos.
•In South Asia it is retainer consultant for Nathpa Jakkri, and owner’s engineer for Dhauliganga and Kukule.
•In South America it is working in Peru, Argentina and Equador, as consultant engineer for BOT projects.
In these contracts EWE is fulfiling its traditional role as engineer, but Rolf Sigg is very aware that the commercial realities of the market are changing, and the company must react.
‘Commercial aspects of the contract are becoming as important as the engineering,’ he says, ‘and other aspects of the company’s service add value to its engineering capability.’ An example is the timing of work. Sigg explains that projects, particularly projects that have a variety of sources of finance, may take months or even years to reach closure. Construction schedules, in contrast, are minimised to allow a quick commercial return to be made. Sigg points out that while there may be no fixed time when the financing phase completes, the client often requires engineering and construction to begin immediately the contract is signed. Turnaround time is likely to be days, Sigg says, and he noted the logistical problems of keeping a team in place during the waiting period, and having staff ready at the point of agreement. Sigg is proud of EWE’s record in this regard, and the roster of engineers it can call on to meet new commitments as they are needed.
Peter Jedelhauser heads EWE’s key hydro accounts in South Asia, Africa and Eastern Europe, and he talked about likely future changes in the hydro power industry. The market structure has already changed, he notes, and recent years have seen a huge shift into private financing. In their turn, contractors have become investors, taking a share of the project and bearing part of the risk.
There will be a shift back towards more traditional market structure, Jedelhauser suggests, so that in five years time it will be split between two distinct types of project structure. But the traditional sector must be the bedrock of a company like EWE, Jedelhauser says; without a strong engineering base a company would not be able to offer the new contract structures that will be required.
As an engineer EWE is involved in BOTs and similar projects, but as a con-tractor, not a consortium member. ‘In such projects we would have to accept joint and several liability and we are not yet ready to do that,’ Sigg says. ‘We would sub-contract to the consortium as with any type of project.’ For EWE, the private power market looks most attractive in the refurbishment sector: it is here the company aims to become more active and to participate financially.
EWE’s experience of refurbishment offers a focus for EWE’s future strategy, and one that is already bearing fruit. Jedelhauser offered EWE’s experience in Bulgaria as an example. The company’s recent successful rehabilitation of Peshtera (see IWP&DC, December 1998, pp13-17) meant it was very well placed to bid for refurbishment at other Bulgarian plants. EWE has indeed recently signed a contract to rehabilitate Batak, but Jedelhauser believes it would have been the greatest possible mistake simply to copy the approach taken at Peshtera. ‘One plant is upstream, one is downstream; one is connected to the 230kV grid, one feeds the 110kV system,’ he says, ‘so the financing needs are different.’ The company could use its successes in thermal projects to offer broad ideas but hydro power plants were essentially different, fulfiling different roles in the energy industry and serving different types of customer.