Sunday, February 14, 2016

Plant on Demand

In its February 2016 issue, PMV Middle East magazine spoke to rental firms to find out how the market was going their way. One of the respondents was Altaaqa Global Chief Commercial Officer, Julian Ford. Here is what he said:

  • As the provider of rental services, are you experiencing growth in your segment? And is it possible for you to provide any figures to quantify such developments?
It is important to recognize that that the growth of the rental power industry in whatever region in the world, goes in cycles, and is dependent on the prevailing market and economic situation.

In the Middle East, for instance, the buoyancy of the rental power market is spurred by several factors, including the availability of diesel, utility shortages, intensified construction activities, sustained oil & gas production, repair and maintenance of refineries, and unreliable electricity connection in many areas.

In Africa, on the other hand, the nascent increase in the supply of natural gas combined with an underlying increase in demand for power in developing markets, and the ongoing El Nino weather phenomenon that adversely affects hydropower dependent countries drive the growth of the temporary power market. 
  • Is there any segment that is developing more strongly for your business than others?
Among the rental power technologies available, diesel generators will continue to dominate the market, mainly owing to the wide availability of fuel, fuel safety and economy and ease of installation. 

We are, however, observing that generators running on other fuels, such as natural gas or natural gas-diesel combination are gaining popularity. The growth of the segment can be attributed to the increasing availability of locally extracted natural gas, and, to some extent, to the environmental stewardship regulations in many countries around the world. Several countries in Africa are looking to monetize their ‘stranded gas’ reserves to generate useful low-cost electricity for the national grid, and rental power technologies can contribute towards that cause.
  • What rental or leasing pricing structures are currently the most popular among your customers?
In the depot business, where transactions are much more frequent and are lower in value, it is usual to have a daily, weekly or monthly charge for the use of equipment. On top of this, there can be an option to supply fuel, or the customer can provide his own fuel.

When it comes to larger power projects, as supplied by Altaaqa Global, it is more usual to make a capacity charge for having the power plant available, plus an ‘energy charge’, which covers the variable maintenance cost of operating the plant. The situation with regard to fuel supply is more complex here.

We are observing that customers of power projects business are increasingly asking for guaranteed levels of fuel consumption, and even for fuel supply arrangements to be made as part of the service. While fuel consumption can be guaranteed within certain operating parameters, the funding of fuel is usually subject to a separate financing arrangement.

Julian Ford, CCO, Altaaqa Global
  • What reasons are your customers providing as to why they are opting for rental arrangements? And are you seeing any particular trends?
Renting power affords many advantages to customers. Temporary power plants are readily available and are immediately deployed to virtually anywhere in the world where electricity is urgently needed. Rental power plants offer utmost flexibility in power and voltage, so that customers can choose to increase or decrease electricity output at short notice. Renting power also offers the customers the possibility of paying for the electricity produced by the hired power plants from their operating revenues. Additionally, renting electricity negates the need to spend scarce CAPEX that is usually required to build permanent power stations.
  • How are you currently adapting your services to adjust to changes in the market’s demands?
The temporary power services that we offer vary from industry to industry and site to site.
In recognition of the changes in the market’s demands, we will continue to offer the most fuel efficient, reliable and technologically advanced generators and power systems to our clients to reduce their overall operating costs. We will combine it with consistent technical support and expert advice on equipment selection.  

As we have stated above, the diesel generator market will continue to grow in the next several years, so we will continue to have diesel generators readily available in our fleet. As natural gas becomes increasingly available, and gas power generation technologies progressively find application in bigger and longer-duration projects, we will ensure to offer natural gas generators where it is appropriate.  
  • Is the push by more and more dealers and distributors to develop their own rental services noticeably increasing competition in the market compared with previous years?
Yes, definitely. The drive of more dealers and distributors to develop their own rental services have increased the number of players in the marketplace, particularly in the depot sphere. The depot entities often offer smaller generators and provide a wider range of services, which go beyond the realm of power rental. This makes putting up a depot business an attractive venture to new regional players, for instance. 

The power projects business, on the other hand, is more specialized, and offering integrated power services requires a high degree of experience, engineering expertise, technical skills, and equipment efficiency and reliability. Having said this, the increase in the number of entrants to the power projects sector may not be as pronounced as in the depot sector. 


Altaaqa Global
Tel: +971 56 1749505

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