NEWS RELEASE DECEMBER 2016
Who Should Purchase GE Water?
Hundreds of companies in the water business as well as private investors will be considering the purchase of GE Water. The first conclusion in a cursory review will be that this is a group of individual companies which operate independently and are not necessarily in the same markets. There are companies selling systems and major components, small components, instruments and consumables such as treatment chemicals.
The management of these businesses is challenging because of their diversity. The way you manage an effort to supply $50 cartridges is totally different than the way you manage an effort to sell knowledge which is bundled into the price of formulated chemicals. The management of a company which sells complete zero liquid discharge (ZLD) systems requires skills not required in some of the other businesses.
Danaher has been mentioned in the media as a potential purchaser. Their recent Pall acquisition has made Danaher a major player in pharmaceutical and chemical industry filtration. GE Water is focused more on power, oil and gas, refining and to a lesser degree on various water-related purification. So, the industry alignment is complimentary.
Xylem has grown the test segment of its transport, treat and test efforts. Its instrumentation or test business is mostly in municipal water and wastewater and compliments the GE instrumentation applications.
Other water chemical formulators such as Ecolab and Solenis and basic water chemical suppliers such BASF and Kemira are also potential purchasers.
Any of the large companies in the air, water, liquid, gas flow and treat businesses with an industry total revenue of $323 billion are potential purchasers.
Air/Water/Gas, Liquid Flow and Treat Revenues
|Product||Power||Fluid||Municipal||Industrial and Other||Residential/
|Cross Flow Membranes||2||0||4||3||1||10|
|Oxidation and Destruction (Water)|
|Indoor Air Treatment|
|Stack Gas Treatment and Flow|
|Fans and Compressors||4||2||2||12||5||25|
* includes vacuum bags and face masks as well as HVAC
|GE Water Coverage|
The GE water treatment chemicals business is of greater value as the percentage reduction of end user knowledge to total knowledge continues to shrink. The formulated chemicals business is more problem solving with the right combination rather than sale of a product. Knowledge of the applications is critical. With the development of the smart sensors, the formulators can become remote operators or continuous advisors rather than just offering periodic advice as part of the chemical sale. Will potential investors fully recognize this opportunity? If they do, the potential buyer will be one who can best leverage this very large potential. The expertise in the use of chemicals along with filtration, valves, pumps, etc. will all create a very large remote advice, operations and preventive maintenance revenue opportunity.
The various relevant market reports for an evaluation of this opportunity are shown at: Markets
NEWS RELEASE DECEMBER 2016
Water Treatment Chemicals Market is Growing Faster than GDP
The expansion of municipal drinking and wastewater treatment in Asia is one of the driving forces which will ensure that growth in the water treatment chemicals market will exceed the rise in GDP. The 2017 market is forecast at $27 billion. This is the latest forecast in N026 Water and Wastewater Treatment Chemicals: World Market. Corrosion inhibitors will be the leading product segment.
|Oxidizers & Biocides||2,993|
Water treatment chemicals are part of a larger category labeled specialty chemicals or performance chemicals. The market for this broader category is $1 trillion per year. Large players include Dow Chemical, BASF, Bayer, INEOS Group and DuPont.
The major markets for specialty chemicals are:
- Polymers & Plastic Additives
- Construction Chemicals
- Electronic Chemicals
- Cleaning Chemicals
- Lubricants & Oilfield Chemicals
- Specialty Coatings
- Paper & Textile Chemicals
- Food Additives
- Adhesives & Sealants
The major revenue producers in the water treatment chemicals market are formulators such as Ecolab (Nalco) and GE Water (Betz). They in turn are buying the specialty chemicals which they then mix and sell along with service expertise.
A number of acquisitions have taken place in the industry in recent years. In the most recent announcement, Lanxess AG agreed to buy U.S. competitor Chemtura Corp. for about $2.1 billion in cash, more than doubling the size of its additives business and accelerating a shift towards specialty chemicals. Chemtura sales are €1.5 billion with a pretax EBITA of €245 million. Chemtura sells bromine directly to some large customers but is also a supplier to formulators such as Ecolab. GE is planning to divest its water business. This includes the Betz water treatment chemicals. The sale of this group will have an impact on the market going forward. The divestiture target date is mid-2017.
The forecasts do not include the pH adjusters used in scrubbers. There is a very large market for lime and sodium compounds sold to power plants and other industrial emitters. Lime and limestone react with SO2 to form gypsum. Much of the world’s gypsum wallboard is made with flue gas desulfurization (FGD) gypsum.
For more information on N026 Water and Wastewater Treatment Chemicals: World Market, click on: http://home.mcilvainecompany.com/index.php/markets/27-water/449-n026-water-and-wastewater-treatment-chemicals
NEWS RELEASE DECEMBER 2016
Filtration Market Rankings Change with Two Acquisitions
Two significant mergers in the filtration industry have taken place in the last month. Lydall has acquired Gutsche and Parker Hannifin has acquired Clarcor. Lydall’s acquisition is relatively small but their increase in market share is large. Parker Hannifin’s acquisition is large but their increase in market share is relatively small. One reason for this is that Lydall is nearer the beginning of the supply chain where total revenues are less. The second reason is that Lydall has focused on a niche market, whereas the Parker acquisition is much broader based.
Lydall, Inc. has entered an agreement to acquire MGF Gutsche GmbH & Co. KG (“Gutsche”) for approximately $58 million in cash. The business consists of operations in Germany and China. Gutsche’s fiscal year ends on December 31, 2016 and revenue and EBITDA for these operations are forecasted by Gutsche to be approximately $50 million and $6 million, respectively.
Lydall has recently acquired Texcel and they purchased Andrew several years ago. These previous acquisitions plus Gutsche are providing Lydall with a market share approaching 20 percent in high performance non-woven media for fabric filters.
|Fabric Filter Bag and Media Revenues 2016 $ Millions|
|High Performance Non-Woven Media||800|
|Lydall High Performance Non-Woven Media||90-120|
|Gutsche High Performance Non-Woven Media||45|
|Total High Performance Non-Woven Media||135-165|
|Lydall % of High Performance Non-Woven Media||17-20%|
Other competitors in the high performance non-woven area for fabric filters are BWF, Xiamen Savings and Testori. An increasing number of Asian suppliers have also entered the market.
Parker Hannifin will acquire Clarcor for $4.3 billion. Clarcor is a diversified manufacturer of mobile, industrial and environmental filtration products with annual sales of approximately $1.4 billion and 6000 employees worldwide. Clarcor brands include Clarcor, Baldwin, Fuel Manager, PECOFacet, Airguard, Altair, BHA, Clearcurrent, Clark Filter, Hastings, United Air Specialists, Keddeg and Purolator. The acquisition of Clarcor adds a broad range of industrial air and liquid filtration products and technologies to Parker Hannifin’s filtration portfolio. With approximately 80 percent of Clarcor’s revenue generated through aftermarket sales, the acquisition is expected to significantly increase recurring revenue in Parker Hannifin’s Filtration Group.
|Filtration Revenues 2016 $ millions|
|Clarcor Revenue 2015||1400||590||810|
|Parker Filtration and Engineered Materials||2500||2300||200|
|Gas Turbine Inlet Air||100||100|
|Gas Turbine Market Share||18%||18%|
|Process Liquid Filtration||100||100|
The combined company has full portfolios in some segments of filtration and partial in others and is not a player in many segments.
|Parker Clarcor Combination|
|Filter Type||Portfolio Coverage||Market Ranking|
|Fuel Filters - Mobile||100%||High|
|Oil Filters - Mobile||75%||High|
|Air Filters - Mobile||75%||High|
|Hydraulic Filters - Industrial||100%||High|
|Gas Turbine Inlet Air||100%||High|
|Natural Gas Coalescer||100%||Medium|
|Cartridge Filters for Process Liquids and Water||75%||Low|
|Dust Collector Bags||100%||High|
|Scrubbing and Acid Gas Removal||0||Low|
|Cross Flow Membranes||0||Low|
|Sedimentation and Centrifugation||0||Low|
The new Parker will be a leader in dust collector bags. They buy the roll goods from companies such as Lydall. Clarcor has moved vertically to manufacture media for HVAC but is a small player in roll goods manufacturing.
Parker has expanded and is a major player in filter elements. It is not competing in system work except in some narrow areas such as gas turbine inlet filtration. However, because of the fractured nature of the filtration industry, it is a market leader in an expanded number of segments thanks to this acquisition.
The market shares of suppliers are continually tracked in:
Coalescer Supplier Program http://home.mcilvainecompany.com/index.php/markets/28-energy/1124-n065
NEWS RELEASE DECEMBER 2016
Largest Revenue Generation in the World FGD Market Will Be in the Aftermarket
The market for flue gas desulfurization (FGD) systems, components and services will grow over the next eight years despite the environmental initiatives to reduce coal-fired power generation. This is the latest forecast in N027 FGD Market and Strategies. The Trump Administration will not be able to reverse the movement away from coal in the U.S. The main reason will be the continued low cost of natural gas. However, Asia will continue to build coal-fired power plants. As a result, by 2025 Asia will have a coal-fired power capacity three times larger than that of Europe and the U.S. at their peaks.
In 2008, the U.S. was winding up a big FGD retrofit program and China was in the middle of a combined FGD retrofit and new coal-fired power plant expansion. Thus, the market for new systems was over $10 billion.
|World FGD Market $ Millions|
|Outsourced Repairs, Replacement and O&M Support||6,000||12,000||20,000|
|In House O&M||10,000||18,000||18,000|
Due to the abrasive and corrosive slurries, high temperatures and sheer size of the FGD systems and components, the market for replacement parts, repair and service is substantial Since most coal-fired power plants around the world cannot continue to operate when SO2 levels exceed requirements, there is a big investment in operation and maintenance.
Smart valves, pumps and fans are increasingly combined with software programs to provide remote operation of plants. As a result, a big market is developing for third parties to support the operations or even take over the operations of the systems. The first such example was in the 1990s when an Indiana power plant contracted with Mitsubishi and Air Products & Chemicals for a BOO system.
The opportunity to offer BOO systems and generate revenues from byproduct sales will be expanding. In the past, suppliers have offered to supply BOO systems and to generate revenues from the supply of ammonium sulfate. Byproduct gypsum is only a fraction of the value of ammonium sulfate. The biggest opportunity is the potential extraction of rare earths. A two-stage scrubbing system is likely to provide the lowest cost process to extract rare earths from flyash and at the same time generate hydrochloric and sulfuric acid.
For more information on N027 FGD Market and Strategies, click on: http://home.mcilvainecompany.com/index.php/markets/2-uncategorised/107-n027
NEWS RELEASE DECEMBER 2016
Connecting Things, People, Intelligence, Niche Experts and Wise Crowds for Power Industry Decisions
GE, Emerson, Siemens and many other companies are creating software to connect things. There is a large potential for this in power generation. This potential was reflected in a number of papers and displays at the recent PowerGen Asia exhibition.
“We believe the success of our power generation customers will be more and more supported by the intelligent use of data generated by ever increasing connectivity of devices. The integration of those data with people expertise and knowledge will create additional services in a cycle delivering unprecedented knowledge of the behavior and potential of their assets,” said Marco Sanguineti, Head of Technology for ABB’s Power Generation business unit.
McIlvaine recently conducted nine hours of webinars focused on a problem for one utility. Presentations by Siemens, GE and Emerson addressed the optimization route to a lowest total cost of ownership (TCO) solution but the participants (wise crowd) concluded that incorporating innovative new technologies and components would be equally important in a system which would provide the lowest TCO.
Companies such as ABB are integrating the data from many thousands of sensors which are monitoring thousands of pumps, valves, mixers, fans, compressors, burners, conveyors, filters, etc. In a large utility with multiple plants, there are hundreds of individuals with specialized knowledge that may be valuable in a specific lowest TCO determination. As a result, there are likely to be many thousands of people who can contribute to the decision-making process. How do you take advantage of all this niche expertise?
Jeff Immelt of GE observed that the power industry needs to adopt the “hurry up” attitude of Silicon Valley in developing new technology. McIlvaine believes that this “hurry up” mode can best be achieved by decision systems which interconnect machines with people, intelligent databases and systems, niche experts and wise crowds. Systems have been created which provide the four knowledge needs: Alerts, Answers, Analysis and Advancement. The newest addition has been to supplement periodic webinars with very focused LinkedIn discussion groups. These groups facilitate “wise crowd” decisions by addressing all the criteria needed for a “wise crowd” to function properly.
Wise Crowd Criteria and LinkedIn Role
|Diversity of Opinion||Each person should have private information.||Small LinkedIn discussion groups lend themselves to extracting the niche expertise and unique ideas.|
|Independence||People's opinions aren't determined by the opinions of those around them.||The small LinkedIn discussion groups are not subject to the peer pressure of the large webinars. McIlvaine editors then integrate the conclusions reached in the discussion groups.|
|Decentralization||People can specialize and draw on local knowledge.||The small LinkedIn discussion group is the ideal way to extract the local knowledge and benefit from niche expert participation.|
|Aggregation||Some mechanism exists for turning private judgments into a collective decision.||The LinkedIn discussion groups are a bridge between analyses and webinars which result in the collective decisions.|
The LinkedIn discussion groups are an important part of the entire interconnection system between:
- Separate individuals and divisions within a supplier conglomerate
- Separate individuals and divisions within a utility conglomerate
- Separate individuals and divisions within a consulting company
- The final interconnection between all the many individuals in each of the above
Supplier knowledge can be transmitted through individuals who are encouraged by management to focus on becoming more expert. These individuals will be “rainmakers.” If they demonstrate that their company has the knowledge and the products to provide the lowest TCO, they can be very effective in boosting sales.
The same is true of consulting companies. However, the challenge will be to offer just enough expertise to achieve the rainmaking without reducing the potential actual consulting revenues.
The LinkedIn discussion groups are incorporated in three Decision Guides:
44I Coal fired Power Plant Decisions (formerly PPAQD)