NEWS RELEASE                                                                                                    DECEMBER 2015

Major Changes in the Structure of the Fossil-fired Power Plant Supply Industry

The players and the locations in power plant activity have radically changed in the last several decades. In the 1960s, Combustion Engineering (CE) was one of the premier NYSE stocks with a long record of growth and profits.  The company dominated the steam turbine and coal-fired power plant supply industry worldwide.  During the oil crisis of 1974 U.S., power plants panicked and ordered nearly 100 GW of new coal-fired power plants of which nearly half were tentatively awarded to CE. 

Most of these power plants were never built.  In fact most were canceled and were not offset by other new projects.  CE was also finding more competition from rivals in Europe and Japan relative to its international business. The CE profits disappeared and the company was sold under fire sale conditions to ABB.  ABB then struggled and sold the former CE to Alstom.

Alstom struggled with the power plant business and has now sold the power plant group to GE. Along the way Alstom set up a joint venture agreement with Shanghai Electric to supply boilers in Asia including China and India. CE had a large existing boiler manufacturing facility in India which also is now under the Shanghai Electric Alstom joint venture.

Shanghai Electric has also purchased 40 percent of the Ansaldo power group that gives them a good start in the gas turbine industry which the company believes will be a good opportunity in China. Shanghai Electric, Harbin and other Chinese coal-fired boiler plant operators are moving into the international market with 100,000 GW of construction in 27 countries outside of China.

Babcock & Wilcox has emerged as a strong international player following several organizational re-arrangements along the way.

The Japanese companies have been a major force in the world fossil power plant market.  The recent merger of the power plant businesses of Hitachi and Mitsubishi into MHPS creates one large Japanese player.

CE was the largest supplier of rotary heat exchangers for coal-fired power plants around the world. This business has now been sold to a private equity firm Arvos.  This company is identified with 15,000 existing systems or about 20 percent of the global units in operation.

The cooling tower business has changed continually over the years.  Marley was acquired by SPX. In 2015 SPX split into two groups.  The dry cooling business has just been sold to an Indian company, Paharpur Cooling Towers Limited.

The air pollution system sector of the supply industry has had the most structural changes. For example, GE bought a power plant scrubber business in the 1970s and then sold it in the 1980s.  Now, with the Alstom acquisition, it is back in the scrubber business. Alstom, in turn, has been a major force in power plant scrubbers starting with Flakt. Under ABB the Flakt Group and the CE group were merged into one entity in Knoxville, Tennessee.

Research Cottrell, the largest air pollution company in the world in the 1960s, fell on hard times and ended up as part of Hamon who has also struggled but has now carved out a position which is less dominant and does not include the power plant scrubbers.

The carnage in Europe ended with few standing.  Andritz and Doosan have picked up some of the pieces but more than 10 companies have disappeared.

Chinese suppliers now lead the world in terms of the supply of both precipitators and scrubbers.  Much of the technology has been licensed but the license fees are shrinking.

China has also surged into the lead in the DeNOx segment.  Fifteen years ago all the catalyst was imported.  Today, China manufactures as much or more catalyst than the rest of the world.

We are now on a new course.  The big markets for coal-fired boilers are in developing countries in Asia and Africa.  Chinese OEMs are leading the way in these countries.  So the power industry activity of the future will be centered more in China and less in Japan, the U.S. and Western Europe.

McIlvaine tracks power plant activity in a number of publications

The gas turbine markets and projects are found in 59EI Gas Turbine and Combined Cycle Supplier Program

The coal-fired boiler forecast is found in N043 Fossil and Nuclear Power Generation: World Analysis and Forecast

Individual coal projects are tracked in 43I Utility People and42EIC Chinese Utility Plans