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Renting power equipment is becoming increasing popular across industries

Venugopal Pillai ,  Thursday, May 12, 2011, 12:42 Hrs  [IST]

Abid Ahmed.jpgAbid Ahmed, Country Manager—India, Aggreko Energy Rental India Pvt Ltd

Aggreko Energy Rental India is the domestic arm of Aggreko—one of the biggest suppliers of rental power globally. Abid Ahmed, in an exclusive interaction with Venugopal Pillai, discusses the brisk growth of Aggreko in India since its inception in 2009. Abid Ahmed explains why rental solutions are the best mode of procuring temporary power, and notes that industrial clients are getting increasingly responsive to this cost-effective and flexible solution, especially when it comes to sourcing quality power at short notice.

How has Aggreko grown in India since its entry around two years ago? How did the acquisition of the rental power business of Cummins help Aggreko build a base quickly?
Ever since Aggreko entered the Indian market in 2009 with the purchase of the Cummins India power rental business, Aggreko has been building a strong foothold in the country. With a huge potential for rental power and temperature control in the country, various companies and government bodies are utilising the benefits of Aggreko's rental power solutions.

Tapping into our quick turnaround track record, turnkey and customized power solutions and globally acclaimed project management expertise, we have won mandates for facilities like the Bharat Oman Refineries Ltd, Polyplex Corporation Ltd, Amara Raja Batteries Ltd and Kaveri Gas Power Ltd.

Our customers are choosing to work with us due to the reliability of our solutions and our response time which has made Aggreko the preferred choice for power rental requirements in India. Facilitating flexible power packages specifically tailored to suit individual needs further highlights the value and expertise that Aggreko brings to its customers.

India, as we perceive, is still new to the concept of rental power. What business challenges do you face whilst dealing with this mindset?
India's rapidly developing economy is fuelling a constant need for fresh supplies of power in all its forms. Rental power is an extensive potential benefit to the country because of its flexibility and rapid availability, as well as its positive impact on the cash flow of rental power customers. The benefits of rental power make it a practical solution that provides relief in quick time, as compared to permanent power plants that require long lead times.

One of the most frequent reasons for choosing a rental solution is timing. This fast delivery is critical to many users, especially if there has been an unplanned power outage and reliable power is of paramount importance. Long lead times can be a serious problem for companies purchasing permanent equipment. It is at times like these when power rentals are the more practical answer.

Untitled - 53.jpgWhen Tata Chemicals, a division of the giant Tata Group and India's leading producer of inorganic fertilizer and soda ash, faced disruption to production at its facility in Gujarat, India, due to a fire that damaged the company's power generation facility, they required power at short notice.

Tata Chemicals required a reliable 5 mw power supply to be made available at very short notice. Aggreko quickly mobilized a complete power package comprising of five 1,250kVA generators plus a transformer, fuel tanks and ancillary equipment. In addition, Aggreko provided engineers on site for the duration of the contract to operate and maintain the equipment and ensure 24-hour availability of power. The additional power allowed the customer to maintain production during the emergency period and minimized any financial losses.

Another benefit of renting power equipment is the flexibility it offers, as rentals allow the customer the freedom to increase or decrease the amount of power generating capacity according to need. In addition, there is the extensive range of technical support services provided by the rental company which ranges from advice and design through to replacing faulty equipment and even operating and maintaining the equipment.

Our process of providing all-around power solutions for a customer of projects specific requirement include the timely and effective provision of the equipment, mobilization, installation, operation, servicing and maintenance of the plant. This service for all our customers enables us to offer them turnkey solutions according to their individual requirement.

Which sectors do you consider as Aggreko's biggest growth drivers in India? Given that projects investment (setting up of new capacity in the industrial sector) is a significant activity in India, how do you gauge the prospects for Aggreko's rental power?
We are focused on providing temporary power solutions for industries such as manufacturing, oil & gas, shipping, process industries, mining and construction, as well as for major sporting events. Increasingly renting power equipment for large and small projects is becoming popular in various industries as it represents quick delivery and avoids the need for large capital expenditure. In cost terms, the financial benefits of a temporary rental solution are that the system's regular and predictable costs are factored into the business plan of the project in hand. Then, when the project is finished, there is no need for the user to arrange for the removal and storage of the power equipment as this is carried out by the rental company.

Untitled - 54.jpgWe are keen to support the rapid growth of India by assisting in overcoming capacity constraints by providing multimegawatt power projects and a full range of services including power system design, commissioning, operations, and maintenance and fuel deliveries. We want to be recognized as the only reliable temporary power suppliers across India.

Aggreko recently won a power solution contract from Bharat Oman Refineries. Tell us about major orders that Aggreko has landed in India.
Yes, we have been awarded a prestigious contract by Bharat Oman Refineries Ltd (BORL) to provide them a 53-mw power package. The contract was for commissioning power to the 6 million tpa grassroots refinery at Bina located in Madhya Pradesh enabling BORL to commence its operations on schedule. The most important challenge faced by Aggreko was restrictions on land availability to locate a single power plant. To overcome this challenge, Aggreko designed a unique solution to provide power at three different locations within the refinery in different phases over a period of three months.

Another very important project handled by us was to supply 6.6 mw of power to Kaveri Gas Power Ltd making this the largest gas power contract in India for Aggreko. This was our first gasbased multi-megawatt project in India.

We also provided a 8-mw power package to Polyplex Corporation Ltd for continued production of one portion of their manufacturing plant located at Bazpur, Uttarakhand. The contract was initially awarded for a period of three months which was further extended by another two months given the good service and a reliable power package provided by Aggreko.

We learn that Aggreko had plans of setting up plants/depots in several major cities. What is the latest on this front?
We have already two operational service centers in Delhi and Pune, serving north and west India respectively. Chennai will soon be operational in couple of months. Going forward we plan to open service operations in other regions to become closer to our customers and cater them more efficiently. Our goal is to provide service to our customers across the country and to be the only rental power supplier who can offer 24/7 service support anywhere in India, even at a short notice.

Untitled - 55.jpgAggreko has provided turnkey power packages for customers in a variety of industries, including ABB, BG Group, ConocoPhillips, Fluor, IBM, Samsung, Shell and Tata Chemicals. Along with providing power for industrial uses, we are also the first choice in power rental for major sporting events. In the past two years, we have delivered temporary power to mega events and projects across the globe. Aggreko was the official supplier of temporary power for the London Olympics, the 2010 Asian Games and the FIFA World Cup.

As a global company entering India, how do you cope with competition from local players?
We are a global leader in power rentals which operates on a truly international basis. In addition to supporting local market through our depots, we also operate an international power project division. This has the capability to mobilize and operate temporary power plants up to several hundred megawatts in order to maintain or extend production levels. Many Indian companies are utilizing the power rental services of Aggreko to overcome the technical and financial problems caused by temporary unreliable power supplies from other sources.

 For temporary power rental projects in India, Aggreko offers the full range of electric power generation equipment and services that include: power system design, generators, controls, transformers, fuel tanks, cables, switchgear, distribution systems and load-banks. Also included are a wide range of back-up services that include commissioning, operations and maintenance, spare and fuel deliveries.

Untitled - 56.jpgAggreko has vast experience in providing support to a number of industries around the globe. We deliver high reliable and innovative temporary power solutions to our customers. Aggreko offers more than just rental of diesel generator equipment, we provide a turn-key, tailor-made solution that helps our customers to maximize their outputs and reduce business risks.

We perceive that gensets are marketed as B2C products, implying that gensets are products that should be "owned". How do you therefore deal with the "ownership" and "rental" dilemma?
Power plant ownership brings with it many responsibilities and hidden costs. Firstly there are all of the factors involved in the capital purchase such as up-front costs, loan repayments, interest charges and other hidden fees. In addition, the customer needs a team of skilled engineering personnel to operate and maintain the power generating system, spare parts, safe storage and administration. Additionally, the owner takes all the risk if the equipment breaks down or needs replacing. Over time the power asset will also depreciate in value and will therefore be worth less than the original purchase price.

When a company rents power supply equipment, its management team simply transfers the uncertainties and risks of power equipment ownership to the power rental company. Power rental companies like Aggreko can bring relief to these owners. Firstly being the payment option; power rentals have a guaranteed payments schedule over the agreed term, with options to extend the rental period if required.

One of the most frequent reasons for choosing a rental solution is timing as a power rental really can be a fasttrack supply, thereby giving the end user the vital power supplies needed within a short time. This fast delivery is critical to many users especially if there has been an unplanned power outage and reliable power is of paramount importance. We also provide extensive range of technical support services which ranges from advice and design through to replacing faulty equipment and even operating and maintaining the equipment.

Due to these reasons, renting power equipment for large and small projects is becoming popular in various industries, as it represents quick delivery and avoids the need for large capital expenditure.

Untitled - 57.jpgHow do you see Aggreko's business growing in India over the next 5-7 years, and how important will India be in your growth plans for Asia, and perhaps worldwide?
India has the fortune of being one of the few nations which are well-endowed with both exhaustible and renewable energy resources. In the energy sector, India has an arduous task ahead of providing satisfactory amounts of energy in desired quality in various sectors as well as ensuring it is sustainable and cost efficient. We therefore perceive India as a land of immense opportunity.

Gas availability in India has improved over the years. Has this reduced your inputs costs, as compared with diesel?
Utilizing gas power instead of other alternates is a huge benefit to some of our customers. In the power generating process, fuel is the most expensive component, comprising approximately 70 per cent of the total cost of power. Where customers have a steady supply of natural gas available, substantial cost savings can be made by switching to a natural-gas powered solution. In 2010, Aggreko's International Power Projects business saw the average MW of gas-powered units on rent increase by 30 per cent on the previous year.

As gas pipeline infrastructure improves with GAIL (India) and other gas supplier laying the pipeline in various regions, we believe that more and more people will use gas to produce power and Aggreko will be there to support customer with latest cost-effective technology to produce power with our latest gas powered rental fleet.
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