Aggreko is the largest global player across both the Power Solutions and Rental Solutions businesses, with an estimated 40% market share in Power Solutions (Utility) and 25% market share in the Rental Solutions and Power Solutions (Industrial) businesses.
The competitive environment in Rental Solutions has been relatively stable in recent years; however, competition has intensified in Power Solutions. We remain the only operator across both businesses on a global scale; there is one other global operator in the Power Solutions market. Although it is easy to enter the market on a local level, it is very difficult to grow to a global company. It has taken 50 years for Aggreko to get to where we are now; our in house manufacturing and development capability, our unique culture and our global footprint have taken many years to develop.
Our Power Solutions business exclusively operates in emerging markets and our Rental Solutions business operates in developed markets.
Supply-Demand Shortfall Increasing
The power generating infrastructure across the world is ageing fast - 1,000 GW of capacity will be over 40 years old by 2015 – and demand continues to outstrip supply, but power outages are becoming less acceptable across the world and Aggreko is ideally placed to help bridge the gap.
We expect the Power Solutions market to grow at 5-6% per annum, with gas growing faster than diesel. A number of factors will influence demand, including:
- the rate that capacity is added
- the rate of breakdown of power plants
- the rate of economic growth
- increasing intolerance of power outage
- the affordability of temporary power.
We have modelled the industry supply-demand dynamics and we expect a global shortfall in power supply of 105GW in 2020.
To put this figure in context, the peak demand for power in the UK is around 60GW, and Aggreko’s current fleet is nearly 10GW. The global shortfall in power supply is increasing, as demand continues to grow at a faster rate than supply. A power shortfall in one country cannot generally be mitigated by surplus in another; power must be generated where it is needed. Some of this demand will be met by permanent power coming online, some will just not be met and a proportion will continue to be met by temporary power. Historically temporary power has penetrated around 12% of the market.
This clearly presents an opportunity for Aggreko, particularly in emerging markets and particularly in the Power Projects business, as the shortfall continues to grow.
Rental Solutions Grows in line with GDP
As economies grow, so does demand for energy and rental equipment in particular due to the speed at which it can be brought online. As such, the Rental Solutions business grows in line with GDP. Current forecasts suggest that Rental Solutions markets will grow at c.2% per annum over the next few years.
Find out more about our industry and our outlook.
Aggreko has grown substantially since 2003. Underlying this impressive performance is a strong business. Scale and operating efficiency continue to improve, as has customer satisfaction.
Our new strategy is to grow ahead of our markets and deliver operating margins and ROCE of around 20% in the medium term.
Find out more about our track record and our key performance indicators.
We have unique strengths which are hard to replicate, creating a significant competitive advantage.
People and Culture
Aggreko is characterised by its committed and passionate people who display a strong can-do attitude.
Our Orange Excellence programme, along with our talent management programme and unique ‘Orange Blood’ culture, delivers a superior operating capability.
Our customer service is outstanding – we are in the top quartile of B2B companies globally for Net Promoter Score, a tough and respected measure of customer service.
We have over 50 years experience operating in our sector and therefore substantial expertise in sales, manufacturing, engineering, operations and commercially. This is critical to understanding and serving the markets that we do.
Our competitive advantage comes in the interplay of them all.
We can provide more generating capacity than the total grid capacity of 170 countries, and our global reach means that we can respond to rapidly shifting demand and are aware of any market opportunity as it arises.
Economies of scale mean that we have a 20-40% lower capital cost / MW and lower operating costs than our competitors; it remains very hard for competitors to build scale to match us. In addition, it allows us to have fleet available, to respond quickly and to run at good levels of utilisation.
Importantly, our scale means that we have a diversified portfolio and an inherent risk management mechanism.
Technology is an important enabler for our business.
We have close working relationships with a number of OEMs, which combined with our world-class manufacturing facility in Scotland allows us to design and produce a breadth and depth of competitive product optimised for the varied and challenging environments we operate in. Our generators are designed to be mobile and standardised, with a focus on flexibility and granularity, so that any generator can be moved across the world and will work wherever it is placed.
The fleet is exceptionally reliable due to the design approach we take and through continuous investment and constant innovation we continue to develop efficient, cost-effective engines for the future, which our competitors will struggle to match.
In 2013 we launched an innovative new engine design. Our new diesel generator (G3+) produces 14% more power than our standard set (G3) with reduced fuel consumption.
Our capital cost/MW is significantly lower than competitors’, and it will reduce further as more fleet is refurbished.
Find out more about our resources and our product strategy in Innovation