Mitsubishi

COMPANY PROFILE

2014

MHPS Europe

+44 (0)20 7647 0820 | www.emea.mhps.com

Mergers, investments and developments for the next big player in European thermal power generation

Editorial: Christian Jordan

MHPS Europe offers a unique and highly specialised portfolio of products and services to clients in Europe, Middle East and Africa. Commercial Director, Shin Gomi tells Total World Energy more about the development of this power player and its targets for the future…

After its official launch in February this year, Mitsubishi Hitachi Power Systems (MHPS) Europe has set itself the target of becoming the number one in the thermal power generation systems market, where significant growth in demand is expected globally.

Back in August, we looked at the progress MHPS Africa had made with two huge coal-fired power stations, Medupi and Kusile, in South Africa.

Mitsubishi Hitachi Power Systems

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Africa Head of Sales and Business Development, David Milner told us: “We and all the partners on site are working towards getting the first unit at Medupi online by the end of the year and that is the number one goal at the moment.

“Now that we have such a wonderful product portfolio, it’s completely changed the outlook of the organisation. Instead of just having one product which was largely boilers, we now have a complete set of technologies from gas turbines,

steam turbines and boilers to Integrated Gasification Combined Cycle (IGCC) products etc, and therefore the company decided it needed to be able to take all of these products to the market in South Africa as well as the rest of sub-Saharan Africa so we have established, and we are busy expanding, our business development activities.”

This month we look at the European arm of the operation and talk to Commercial Director, Shin Gomi to find

MHPS Europe out how the company plans to achieve its aim in the coming years.

“The reason we put the two businesses together was to be more competitive. Our main competitors include General Electric, Siemens and Alstom and from a volume point of view, with one company as Mitsubishi Heavy Industries and one company as Hitachi, the volumes were not big enough to compete therefore the decision was taken to merge these two Japanese companies to compete on a global scale,” explains Gomi.

“Mitsubishi Heavy Industries holds 65% of the MHPS and Hitachi holds the remaining 35%. What we did in February this year was to take out the fossil power generation businesses from each company and moved them into one organisation. Basically, our company is focussed on fossil power or what we call thermal power generation systems.

Our company is now dedicated to supply and support of anything to do with thermal power generation systems.

We manufacture components and equipment, we undertake EPC contracts, we provide maintenance and services for equipment that we have supplied and we also service equipment not manufactured by us, in existing power stations.

“We are now global; we have operations in the western hemisphere, MHPS America, which takes care of all the requirements in North and South America; in Asia we have multiple companies in China, Singapore, Thailand, Indonesia; we have operations in Australia and India; we have operations in the Middle East in Abu Dhabi and Saudi Arabia, and we now have MHPS Europe. Apart from the Japanese operations, MHPS Europe is probably the second largest operation behind MHPS America,” he says.

And in South Africa, the company’s work at Medupi and Kusile is demonstrative of the scale of the projects that this organisation is involved with.

“We are involved in some of the largest construction projects in the southern Hemisphere currently at these two sites,” says Milner.

“The energy produced by a single unit at Medupi and Kusile would power 80 high-speed German trains simultaneously and there’s six units going in at each so at full capacity the power produced is significant,” he adds.

A UNITED ORGANISATION Often when big companies merge, success is not as easy to come by as

the organisations planned. Historical trends show that roughly two thirds of big mergers will disappoint on their own terms, which means they will lose value on the stock market. The motivations that drive mergers can be flawed and efficiencies from economies of scale may prove elusive. In many cases, the problems associated with trying to make merged companies work are all too concrete. But for MHPS Europe, the fit between the two organisations has been pleasing from the very beginning.

“The effect of the merger has been very good,” states Gomi. “We already have a strong market presence; people were aware of both Mitsubishi and Hitachi and they are now seeing a more comprehensive product line and more comprehensive capabilities and services offered. Since the merger, we have received a lot of good feedback from the customers. Internally, there wasn’t too much difficulty merging and integrating; we were very united from day one.

“Powergen Europe in June was the first event that MHPS Europe jointly participated in and this was a great team effort, presenting as one company and promoting the multiple products that we now offer. I would say of the merger; so far so good.”

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Before the merging of these two giants in the energy market, the companies were direct competitors but each with a smaller product range compared to that of the global industry leaders. “We were competitors in the past, we were in the same industries but there were not many opportunities to work together,” says Gomi.

Today, in Europe and around the world, MHPS is one company operating with one workforce, one product portfolio and one single vision.

The European operation is headquartered from two areas and looks after three large regional markets. “We have two headquarters; one in Germany and one in London. The German

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in partnership with

In partnership with in partnership with

office was the headquarters of Hitachi and London was the headquarters of Mitsubishi Heavy Industries before the merger. We are in the middle of the integration right now but these two offices are in charge of the Europe, Middle East and Africa markets,” says Gomi.

LOCALISATION When it comes to customer service, MHPS Europe is second to none in its desire to be hands on and locally available to customers, quickly solving any problems that may arise at minimal cost to the customer and to the customer’s customers. This comes right from the top of the organisation and President and CEO, Takato Nishizawa.

“One of the key messages from Mr Nishizawa surrounds maintenance and services business. He believes that for us to be the number one global player, we need to achieve customer satisfaction and to do that we need to maximise service and maintenance after equipment has been delivered,” says Gomi.

This is why, in Europe, MHPS invested in two companies that offer top-ofthe-range service capabilities allowing for manufacture, refurbishment and modification without the need to transport parts back to Japan.

“In Europe, we acquired a company called Maintenance Partners in Belgium and ATLA Turbine Services in Italy. These two investments were done before the merger with Hitachi. At the same time, Hitachi had already developed strong local presence in Germany.

“The aim here is to localise service capabilities and expand power generation service support for the client who owns MHPS components and also those who need support on other products from a non-OEM,” says Gomi.

“With Maintenance Partners, we have one huge rotor shop in Antwerp supporting both the power generation industry and also oil & gas industries and with ATLA, we also have a state-of-theart component repair and manufacturing shop in Italy so we do not have to ship components back to Japan. This integration has now been completed and we are able to support European customers locally together with Germany operations. Most of the people employed here are European meaning that the whole service, organisationally and infrastructurally, is localised.

“With ATLA in Torino, we have invested in new factories to digest more component repair and manufacture for high-tech gas turbine hot gas path parts.

With Maintenance Partners in Antwerp, we have expanded the 9000m² facilities with an additional 4000m² rotor repair facility to be able to handle the large frame gas turbines and steam turbines

MHPS Europe that we supply here locally. With those two facilities and our service operation in Europe, our infrastructure to support rotating equipment has been fully developed.

“Customers have appreciated this investment. Previously, if there was repair required or failure with a product, we would have to ship components to Japan for refurbishment or replacement and with power generation customers, losing power for one day is a huge, huge loss and impacts on the wider community.

Lost generation time has to be minimised as much as possible and that is why people appreciate our investments into local service capabilities,” he adds.

POWERFUL PRODUCT PORTFOLIO As a result of the merger of Mitsubishi Heavy Industries and Hitachi, the MHPS Europe business now has a vast range of innovative and proven products.

With worldwide experience that has

allowed for on-going research and development, the company’s product range is respected globally, especially for the J-Series gas turbines that have been designed to achieve higher efficiency and increased power output. MHPS completed the development of the worlds most advanced J-Series gas turbine with an inlet temperature of 1,600 ºC with our own technologies. The significant 1,600ºC turbine inlet temperature was achieved in February 2011; it is 100ºC higher than the current temperature of 1,500ºC featured in G-Series gas turbines. Since the launch of the J-Series, 16 units of the M501J have been sold in Japan and South Korea. Two units of the M701J have been sold, both in Japan.

This product range includes all components required for thermal power generation systems. Three of the most popular products, present in energy sectors around the world, are boilers, steam and gas turbines. In addition to this, MHPS has a strong global presence

in providing the EPC contract with many supply records in EMEA regions as well.

“Gas turbines and steam turbines are amongst the most popular products. The difference between the two is the way they rotate the turbine. Once you have the rotation, you connect the turbine to the generator so the generator can produce electricity,” says Gomi.

“There are two major products in the market, conventional power plant and combined cycle power plant.

Conventional power plant is like what we are using in South Africa; you burn coal or oil or any type of fuel in a boiler to produce steam and the steam is used to rotate the turbine.

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the Middle East or Africa, then we can relocate the combine cycle power plants to places where they can run. This is a unique offering that we are developing.”

In South Africa, the power stations that MHPS is working on are coal fired but Milner tells us that there is a growing focus on gas.

“Right now at Medupi and Kusile, we are installing boilers but going forward the product range will be more diverse. There is a push within Southern Africa towards gas and we have a lot of good products for that market. It’s a market that we are addressing; we are active in Mozambique, Tanzania and in Namibia on the Kudu Project,” he says.

reaction. The energy from the reaction is used to power the turbine.

This requires high pressure, high temperature and the material we use for coating and cooling is very sensitive and very high-tech. After you run the gas turbine, there is exhaust gas which is still hot and we used the exhaust gas in a boiler to create more steam and turn a steam turbine and that is why it’s called a combined cycle. Gas and steam turbines together in one power plant optimise efficiency,” he explains.

But selling combined cycle power plant is no easy feat, especially with the continual rise of renewable energy sources that do not require large-scale, industrial turbines (Renewable energy sources accounted for an 11.0 % share of the EU-28’s gross inland energy consumption in 2012 according to the EU Commission). After all, how many power plants does one region need at a certain time?

“In Europe right now, there is a lot of renewable energy so demand for power from power stations has fallen slightly.

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Also, the coal price has been fluctuating and is lower now so there are more coal power plants running. This has resulted in lower demand for combined cycle power plant equipment but they are still running. As they run, there is always a maintenance requirement so we have to be there.

Gas turbines are very sensitive and we have to undertake periodical inspections and because of the high temperatures that the equipment is exposed to, repair or replacement is often required,” says Gomi.

“From a service perspective, when demand for equipment is lower we focus on our maintenance capabilities and also our abilities to service other equipment that is not manufactured by us.”

Interestingly, when the business does experience lulls in demand for products in European markets, it has developed a strategy enabling the movement of power plant equipment to other parts of the world where demand is high, as Gomi explains: “We have been aggressively creating opportunities to relocate power stations. If power plants are not running in Europe but there is high demand in

CURRENT FOCUS Since the formation of MHPS Europe, the organisation has had a baptism of fire, not stopping to admire itself but quickly building a pipeline to add to the work that was already in place before the merger.

In just under a year, the company has managed to secure business with major customers that operate as leaders in their chosen industry.

“We are working on multiple projects right now. Day to day we support our customers,” says Gomi and he adds that the list of services provided by MHPS in Europe are categorised into four main sections; existing customers, non-MHPS customers, relocation services and operation services.

“With existing customers that are up and running, we provide longterm maintenance and service and sometimes they require modifications or upgrades. Maybe they need efficiency improvements or output improvements and we can present solutions for this.

Maybe they need flexibility for their solutions; they need to react more quickly to power demand – we have developed a flexible menu to provide customers with all they could require.

“With non-MHPS customers, we receive requests regularly for services

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even though the customer does not own MHPS equipment. We can provide services as a non-OEM and we develop quality ideas on how to meet the needs of these customer across Europe, Middle East and Africa.

“With relocation, we look for a customer who is in need of power and we look for customers who are struggling to make full use of their product because of low demand for power.

“Lastly, we don’t only provide maintenance, we also offer operation of power stations and we are proactively promoting these services right now.

“We have a team servicing all of these sectors daily,” he says.

Operation of power stations is an attractive option for potential customers, often resulting in less recruitment and

power plant in Turkey’s Kırklareli province with partner, Kırklareligaz Enerji Üretim Sanayi ve Ticaret Anonim Sirketi.

An example of MHPS Europe’s service capability is demonstrated by a deal signed in February with ScottishPower to provide long-term service to a natural gas-fired gas turbine combined cycle power generation plant at the company’s Damhead Creek Power Station. Based on the 12-year, long-term service agreement MHPS will provide maintenance, management, parts supply and remote monitoring services for the gas turbines.

Away from gas and steam turbines, MHPS Europe announced in September that it would supply environmental equipment to ENEA Wytwarzanie S.A., a power producer in Poland, for two sets

training requirements, cost savings and an overall more integrated approach to the supply chain.

Earlier this year, the company signed an agreement with Turkish organisation, Üründal Group, to build and operate a 520 MW natural gas combined cycle

of selective catalytic reduction (SCR) type deNOx system for installation at Units 1 and 2 of the company’s coal-fired power station in Kozienice. These highperformance systems reduce emissions of NOx (nitrogen oxides), a cause of air pollution, by more than 80 per cent. They

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are scheduled to go into operation at Unit 1 in late 2015 and at Unit 2 in May 2016.

A MITSUBISHI MAN Since the formation of MHPS Europe following the merger, the company has been understandably ambitious. When asked if he believes that the organisation has made progress towards its goal of becoming the number one in the thermal power generation systems market, Gomi says that much progress has been made.

“I believe we are getting close. Our competitors have a very strong presence in the market. But five or six years ago Mitsubishi had nothing here and we have invested to increase our presence. There are lots of opportunities that we never had a chance to obtain in the past but now we can put together a competitive product so we are on the right track to become the number one in the market.

“Before 2006, the service resources for Mitsubishi we had in Europe was less than 10 people. Now, we have over 600 servicing this region and we have made significant investments into resources.”

MHPS Europe The commercial director has been a Mitsubishi man for most of his career, starting in Japan and moving around the world helping to develop the business.

“I come from the Mitsubishi Heavy Industries side and I have been part of the service business all of my career.

Originally, I worked in the Mitsubishi Heavy Industries headquarters in Yokohama for four years and then I moved to the USA for five years to support establishment of the local service company, Mitsubishi Power Systems America. We built the service centre with manufacturing shop, repair shop and all of the field service organisation and remote monitoring centre with the strong leadership help of the key executive management that we hired locally. After that, I went back to Japan for four years helping to expand the localisation of services abroad. We worked to expand service capabilities in the USA through additional investment, in Europe we

invested in localized operations together with the acquisition of Maintenance Partners and ATLA. In 2011, I moved to London as Commercial Director for Power Generation Services in Europe, Middle East and Africa and also helped integrate Maintenance Partners and ATLA,” he says.

Importantly, Gomi is still very happy in his role and after all the investments, developments, acquisitions and mergers he says that the company has a clear strategy which is effectively communicated from the very top.

“One of the unique things about our company is that it is very open and very flexible. We have Mr Hanasawa, the CEO here in London and Mr Kiechl, the CEO in Germany and Mr Nishizawa, the President and CEO of MHPS and they meet frequently, sharing information openly and that is very helpful for us to understand the business strategy and direction. It makes sense right now as we

are a newly integrated company and we all need to change and move in the same direction. The communication that they do at executive level and the involvement of the executives at each local level is amazing and very unique. We are very encouraged that they look at us in this way and we will always support them coming here.”

With such a vast market place, such an innovative product range, such a fantastic workforce and a growing global reputation, it seems that it will not take too long for MHPS Europe to reach its goal and there certainly will not be any standing still; the focus is always on the future.

“The company is motivated to grow in Europe from a services point of view by touching customers, listening to customers and understanding customers and this information is very important for new product development in the future – it’s motivating and a lot of fun,” Gomi concludes

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