EWEC 2006 Athens Opportunities in Outsourcing O

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EWEC 2006 - AthensOpportunities in Outsourcing
OM01 March 2006
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Agenda
Heard in the Field Addressable Market
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Emerging Opportunities for Outsourcing OM Key
Messages from the Market
Companies are looking for

• more transparency in OM with explanations and
  shared analysis of problems
• component level warranties, direct supply of
  replacements without vendor markup
• consistent preventive repairs and improvements,
  better (low wind times etc) and more predictable
  scheduling i.e for major overhauls defined times
• Many companies considering increasing role in OM
  after initial period
• Many companies believe they can get better
  performance from the park if do it themselves

Heard From the Field
Companies are not entirely satisfied with vendor
service during initial 5 years
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Emerging Opportunities for Outsourcing OM OM
Costs
Comments
Repairs and Maintenance Costs per MW by years in
service (1 MW or greater)

• Subset of data showing 1 MW or greater machines
  in Germany
• Some US Comparisons
• Annual cost _at_ 30 utilization
• Replacement Parts 5,700 MW (parts only)
• Large Repairs 10,500 MW
• Small Repairs 15,800 MW

Euro / MW / year
Years in Service
Source ISET, Hahn Wind Study 2005
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Emerging Opportunities for Outsourcing OM What
breaks?
Comments

• Electrics and Electronic most common point of
  failure every 2 years
• Rotor Blade - approximately every 5 years and
  down for 6 days
• Gearbox and Generators not often but down time
  of 8 days.
• Without a replacement a gearbox can take 8 to 10
  weeks to repair

Source ISET, Hahn Wind Study 2005
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Emerging Opportunities for Outsourcing OMTwo
points of view
Owners / Operators
Vendors
Components
Developers

• Balancing cost of turbine with profit from after
  sales where are the profit pools
• Warranty and performance requirements vs
  penalties and reputation
• Business model in house vs outsource
• Time to return components to OEM
• Park or machine or component level
• Proprietary Components or design

• Currently - future OM cost models based on
  Vendor / independent engineer inputs
• Perception of overcharging for consumables
• More experienced companies have proprietary
  models and consider them competitive advantage
• Driving focus is on maximizing output -
  minimizing cost of ownership

Predictability, Transparency Competitive
offerings post warranty
Risk management, profit pools
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Emerging Opportunities for Outsourcing OMMarket
Forces
Owners
Vendors

• Years 1 to 2/5 reflect risk premium especially
  with new machines
• Vendors extending service 15 yr, 12 yr
• Service is either it is profitable by itself or
  recovers discounted cost at time of sale
• Allows management of problems and reduces
  exposure to bigger systemic failures
• Vendors reviewing in-source vs out-source options
  from manufacturing
• Global market overextending Vendor OM
  capabilities ?

• Smaller developers do not have resources to do
  own OM
• Increasing size and resources of developer /
  owners have scale to support OM, acquiring
  skills
• New groups of owners financial based hold for
  a few years and then sell. Want vendor to
  maintain .but what about after they sell

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Agenda
Heard in the Field Addressable Market
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Emerging Opportunities for Outsourcing
OMAddressable Market
Assumptions
Addressable Market for Outsource OM - EU

• Based on turbines which became operational
  starting in 2000
• Based on expiration of Standard 2 3 WOMA
• Includes Turbines which may have longer term
  Service agreement

MW
Over 27,600 MW of addressable market between now
and 2010 in EU countries
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Emerging Opportunities for Outsourcing OMMarket
Opportunity Post Warranty
Owner Benefits

• Cheaper cost of ownership
• Options for 3rd party refurbishment
• Wider range of parts supply
• Component level warranty
• Competition for Independent service companies
  focused on improved output and lowering cost

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Emerging Opportunities for Outsourcing OMMarket
Opportunity Post Warranty
Key Success Factors

• Approved by insurance
• Trained teams
• Performance incentives
• Management of consumables
• SCADA / Condition monitoring integration
• Develop local supply chain for majority of
  components spare parts and inventory management
• Establish Component X Vendor Certified where
  required

Components OEM or ?
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Emerging Opportunities for Outsourcing OM
Taking it One step further
What ?
Benefits

• Third party owns blades
• Leases directly to turbine owner
• Leasing company Independent blade mfg, Vendor
  owned Leasing company, OM company

• Save 15-20 on capital costs
• Shift to 20 yr operating expense ( tax benefit
  ..)
• Provide OM, Blade cleaning, repair / replacement
  / improvement,
• Improve performance

Why do owners of parks have to own the blades (
airlines do not own engines..) ?