Advances in technology, the age of plants in mature regions, and the strategy of plant owners in the era of seeking more non-carbon energy resources, are key trends driving growth in the hydro turbine and generator markets.

All those activities and prospects come before looking at yet another, relatively young but potentially large, sector – offshore energy, which calls for more standardised units to work in farm arrays to tap the more regular patterns of marine and tidal energies.

With so much happening, the hydro sector is a notable part of turbine and generator manufacturers’ portfolio planning. However, it is not dominant, and the energy sector as a whole is also experiencing strong growth with rising demand. But strategic decisions are being made to seek competitive advantage, which can affect hydro – such as the recent race for the energy assets of Alstom.

The race for Alstom

In early May, GE made a binding offer to buy Alstom’s energy business. It offered Euro12.35 billion in equity value terms (or Euro11.4 billion "enterprise value", after allowing for debt and liabilities), said Alstom.

Alstom’s energy business had Euro14.8 billion in revenues in FY 2012-13, and a total of 65,000 employees. The business is dominated by the Thermal Power division, which brings in about two-thirds of the sales and has just over half the employees. The other units are Renewables (including hydro), Grid, and Central and Shared Services.

As initially pitched, GE’s proposal would have left Alstom to re-focus on its Transport division, which in FY2012-13 accounted for Euro5.5 billion of the group’s sales, and has 27,000 employees. The French group does see the division having particularly strong prospects.

While GE’s offer was being weighed, Alstom received a rival bid from Siemens – which was joined in its unsolicited proposal by Mitsubishi Heavy Industries (MHI). The race was on.

However, talks over the proposed acquisition led to French Government requiring that control of Alstom’s nuclear energy activities and capabilities (including steam turbines) should remain with domestic ownership, in the national interest. As the nuclear unit is part of Thermal Power, and that division was the focus of the acquisition strategy, GE revised its bid to allow for a different ownership structure.

While the price was unchanged, the amended offer proposed holding the energy activities in three joint ventures, each held 50:50 between Alstom and GE. The proposed JVs are Grid, Steam, and Renewable – which includes hydro. Alstom would have the right to buy up GE’s stake in the Renewables JV, and the French Government would have ownership and governance rights related to Steam.

Extra parts of the deal included Alstom: reinvesting about Euro2.5 billion in the JVs (assuming "cash free/debt free" balance sheets); acquiring GE’s transport signalling business; and, establishing a global rail alliance with GE.

On the same day, Alstom received a revised proposal from Siemens and MHI. The proposal was for Siemens to but Alstom’s gas business, while MHI would take a 40% stake in the other key energy activities – steam, hydro and hydro.

Alstom’s board accepted GE’s offer. Subject to workforce consultations, and the necessary competition, regulatory and shareholder approvals, the companies expect the deal to close in the first half of 2015.

GE expects the deal to bring it synergistic savings of US$1.2 billion annually by about 2020.

Hydro: part of the picture

For the rival bidders, GE and Siemens/MHI, the race for Alstom’s energy business was about much more than hydro. The sector is important but it was not at the core of their respective interests.

Back in 2008, GE had exited hydro, selling its interests to Andritz (see below). As the winning bidder for the Alstom energy assets, GE is about to reintroduce hydro to its portfolio, but as part of a larger acquisition package. The rules of the 50:50 ownership deal allow for hydro to be fully re-absorbed by Alstom.

In the intervening six years, however, the marine/tidal sector has taken off. Therefore, the return of hydro also lets GE get a toe into those offshore energy waters. The Renewable JV also includes wind power.

Watching the race, Andritz noted in a company presentation, in early June, that Alstom is one its two main competitors in hydro; the other is Voith. Therefore, Andritz was watching Alstom possibly bring GE back into hydro; or, see it sell a stake in hydro to MHI, which was bidding alongside Siemens – and both already had hydro ventures: MHI with Hitachi, and Siemens with Voith (since 2000).


Major turbine and generator manufacturers in the sector – including Alstom, Andritz, Voith, Impsa and Power Machines – have had a range of new project and plant modernisation contracts over the last 18 months. The large schemes call for multi-year engagements that began before and are still ongoing.

Following commissioning of four large units (each 800MW) at 6.4GW Xiangjiaba, in China, and installing units at Uri II, in India, Alstom has a number of commitments still underway, including: new variable speed pumped storage plants in Switzerland and India; an increase in the already large order being fulfilled for Santo Antonio; and, major contracts to supply Belo Monte, in Brazil, and Grand Renaissance, in Ethiopia.

Other recent contracts award also include:

• Retrofit two generators, supply a new generator, to upgrade Harjavalta plant, in Finland, from 72MW to 110MW;
• Supply two generators and exciters for the Obervermuntwerk II pumped storage scheme, in Austria;
• Two turbines and generators for the 178MW Shaukhevi plant, in Georgia;
• Turbine-generator sets to the Soubre projects, in Ivory Coast;
• Two 150MW pump-turbines for the Gilboa scheme, in Israel; Alstom will also operate and maintain the plant;
• Two units for La Romaine 3 plant, in Canada;

The company also inaugurated its first hydropower global technology centre in Latin America, located in Taubate, Brazil. It says the country is a large market for Kaplan plants, and the firm is focused on projects of 15m-60m head.

A year ago, Alstom and RusHydro extended their joint venture for modernisation and other activities related to eight hydro plants and a pumped storage plant on the Kubansky cascade, in southern Russia. The joint venture was established in 2011 as AlstomRusHydroEnergy LLC.
Andritz has won contracts in the last year that include supplying electromechanical equipment to: the Lysebotn II plant, in Norway; the Lauca plant, in Angola; and, the Chi Khe station, in Vietnam.

A major project is to supply four 206MW Kaplan turbines and generators for the Muskrat Falls scheme, in Canada, in an order valued at Euro125 million. The company is also to gates, trashracks and stop-logs. Commissioning is in 2017.

Andritz is also upgrading Kaplan units at the Shardarinskaya plant, in Kazakhstan; modernising the Innertkirchen 1 and Handeck 2 plants in Switzerland, the Ybbs-Persenbeug station in Austria, and Manantali plant, in Mali. It is also supplying generators to the Upper Kalekoy plant, in Turkey.

The contracts followed on from a very strong order intake in early 2013, compared to which the most recent quarter – Q1-2014 – was only a slight decline. The three months to 31 March delivered ‘satisfactory’ activity in modernisations/rehabilitations in Europe and North America, ‘solid’ activity in small hydro, and on new projects there was note of ‘some projects in emerging markets in implementation or planning phase.’

Andritz’s order backlog in hydro at the end of the period was Euro3.76 billion, slightly higher than at the end of FY2013. In its outlook for the sector, the company expects solid activity in modernisations and new projects, and adds that some large orders are expected.

In terms of delivery, recent events have included milestone progress at the Iovskaya plant refurbishment project, in Russia, and supplying the first bulbs to the Jirau scheme, in Brazil.

Voith, in its half-year interim financial report to 31 March, said the six months were strong for its hydro group though it expected a calmer second half to 30 September. Hydro sales, representing about a quarter of the group’s total revenues, nudged higher to Euro668 million with the large hydro market having ‘remained the strongest segment.’

Orders received by the hydro group rose significantly in the six months between October 2013-31 March 2014. The orders in H1 were 14% – or Euro747 million – up on the same period in the previous financial year, FY 2012-13. Overall, though, for the full year, FY 2013-14, it anticipates only a slight increase on last time.

At 31 March, the hydro order book stood at Euro2.88 billion. The largest recent contract was Euro200 million for the Tarbela 4th Extension project, in Pakistan. The project will add 1410MW to the existing scheme, increasing the capacity by 40% to 4.88GW.

Other recent contracts include:

• Modernisation at Salto Santiago, Passo Fundo and Chavantes plants, in Brazil;
• Four units for the Cambambe II plant, in Angola;
• Modernisation of Inga I plant, in the Democratic Republic of Congo;
• Francis turbines for Upper Kalekoy plant, in Turkey;
• A turbine-generator for Braskereidfoss plant, in Norway;
• Two pump-turbines for the Obervermuntwerk II project, in Austria;
• Refurbishment of electromechanical equipment at Zvornik plant, in Serbia;
• Modernisation of three units at Manitoba Hydro’s Kettle plant, in Canada. The 12-unit plant has a capacity of 1.22GW.

Projects ongoing include replacement runners for six units at the 4.5GW Bratsk plant, in Russia. Recently completed contracts include equipment for the new Jinping II scheme, in China, and Budarhals station, in Iceland, and also refurbishment of Cambambe I, in Angola.

Recent acquisitions for Voith Hydro group included: 80% of Canadian mechanical equipment company Vortex Hydrosystems; and gaining full ownership of German firm Voith Hydro Ocean Current Technologies, and Sweden company VG Power AB.

A major strategic move in Russia was made in early 2013 when Voith Hydro and RusHydro set up a 50:50 joint venture – VolgaHydro LLC. They will looks at new plants but have started with modernisation at the Miatlinskaya, Saratovskaya and Uglich plants.

Impsa has a number of contracts ongoing in South America and elsewhere, and recently completed a corporate restructuring (see below).

In Russia, Power Machines has been achieving multiple milestones in delivery of new units across a number of large-scale hydro refurbishment projects, not least for the Sayano-Shushenskaya plant. The repair, refurbishment and replacement of the last 640MW units on the massive contract is due to be completed later this year – five years after the company was contracted by utility RusHydro following the major accident that destroyed much of the plant. The 6.4GW plant is currently operating at 80% capacity, awaiting the last two units.

Other hydro refurbishment contracts in Russia involve works at the following plants – Zhigulevskaya, Cheboksarskaya, and Volzhskaya – where it is replacing 10 turbines (145MW each) and 22 generators by 2021. Recently completed renovations include some works at Rybinskaya, in Russia. In 2012, the company completed equipment supply to the Vuiksinskie cascade plants, and also supplied a unit to Krasnoyarskaya.

Other domestic works include equipment for the new 320MW Nizhne-Bureyskaya hydro plant, in Russia.

Internationally, Power Machines has hydro contracts that include: renovating the Kegum-2 and Pjavinas plants, both in Latvia; providing turbines and hydraulic equipment to the new Kigi plant, in Turkey; and, supply units to the Punta Negra plant, in Argentina. Previously, the company supplied units to: San Juan plant, in Brazil; La Yesca, in Mexico; and Djerdap-1, in Serbia.


Flashback: GE hydro sale to Andritz

Less than 10 years ago, GE took a direct strategic decision to exit hydro.

Back in 2006, GE’s energy arm – GE Energy – was looking to sell most of its hydro business as its renewables activities were to focus on the booming wind power sector. Before achieving the sale, it would come to recognise growing prospects for hydro, but by mid-2008 it had exited the sector, selling to Andritz.

The businesses comprised GE Energy’s hydropower technology (turbines and generators), including R&D capabilities, engineering resources, and also specialised generator component production facilities in Canada; and, its share of GE Hydro Inepar (GEHI), the Brazil-based joint venture with local industrial conglomerate Inepar S.A. The JV also had sites in Finland and Sweden.

Andritz closed on the purchases of the hydropower technology and GEHI stake separately, barely months apart.

Initially, the GEHI stake was to have been sold locally in South America to the Argentina-based Pescarmona Group of Companies (PGC) which owned Impsa. PGC had planned to operate the two hydro businesses separately. The acquisition was to have completed by mid-2007 but failed to happen.

In the subsequent months, GE restructured the hydro business by transferring its global headquarters for the activity to the growing market of Brazil, and enlarging GEHI in the process. Established in 1998, the JV would serve the worldwide hydro sector, and both GE and Inepar were to invest more capital and assets in the business.

By the second quarter of 2008, however, GE had decided to divest its restructured hydro interests, and sold its majority share in the JV to Andritz. The JV then became Andritz Hydro Inepar do Brasil (AHI) JV.

Andritz had already been growing through a series of acquisitions – VA Tech Hydro (in 2006) and Tigep (in 2007). Incorporating most of the GE hydro assets (in 2008), the further expanded and consolidated group was rebranded in early 2009 as Andritz Hydro. Among its further acquisitions, Andritz added the following hydro-related purchases – Precision Machines, Ritz, and the majority share of Hammerfest Strøm all in 2010, and then Hemicycle Controls in 2011.

Now, GE is coming back into the hydro, albeit through a proposed deal with Alstom where the sector only plays a small part in a larger joint venture strategy.

Impsa reorg, steady hydro

Impsa recently finished a gradual ownership restructuring that began in 2008, and over the intervening period it has become increasing active in wind power as well as continuing with its strong base in hydropower.

The aim of the corporate restructuring was to: dispose of non-core businesses; keep control of businesses connected to environmental services; and, create holding companies abroad to attract investment and support growth in foreign markets. As part of the process, it established Venti S.A. in Luxembourg in 2009.

Venti held Impsa, which in turn held Brazil-based WPE and its various wind power subsidiaries. The change means WPE is no longer a subsidiary but directly owned by Venti, like Impsa which is focused on Argentina. But Impsa no longer reports in the local currency, pesos. With effect from Q4 2013, it reports in US dollars. The other Venti businesses, however, will continue to report in their respective local currencies.

In its latest corporate presentation, Impsa adds that the new ownership structure helps the group be seen as a global company focused in Brazil. The new corporate structure dilutes country risk, it adds, and so mitigates ‘future risk perception’.

Impsa’s hydro activities presently include the following contracts:

• Brazil: Simplicio, Anta, Colider and Belo Monte plants;
• Venezuela: Tocoma, Macagua I and Jose Antonio Paez plants; rehabilitation at Uribante Caparo;
• Malaysia: Bakun scheme;
• Colombia: La Tasajera rehabilitation;
• Canada: John Hart.

Impsa’s hydraulic research laboratory has two universal test benches, and the resource was key to winning the Belo Monte contract, it says. The company is to supply four 620MW Francis turbines, and generators.

The order backlog for hydro was just over US$900 million at the end of FY 2013, according to the latest corporate presentation. The figure is down on the hydro backlog for the previous year, FY 2012 (US$1.12 billion), and the recent peak in FY 2010 (US$1.43 billion), but otherwise is on par with order number of the recent years.

However, the dramatic increase in wind power orders since 2008 has resulted in the current backlog being triple that of hydropower. In addition, the group’s total backlog is it highest ever – at US$4.15 billion. Hydro is only about 22% of the total. In hydro’s recent peak, in FY 2010, it had a 45% share of the total of US$3.17 billion.