Globalization of Large Thermal Power Plant Business 404 Globalization of Large Thermal Power Plant Business —Example Projects and Future Developments in Southeast Asia— Seiichi Kazama OVERVIEW: For reasons of economics and security of supply, worldwide Tomonori Wakita use of thermal power generation is forecast to grow in the future, with rapid Mitsuhiko Shimizu growth anticipated in Southeast Asia. Hitachi has been utilizing its overseas operation bases to strengthen the global operations of its thermal power Satoru Itano plant business. In Southeast Asia, Hitachi was part of the consortium of three companies (including a local construction company) that undertook the North Bangkok Combined Cycle Power Plant Block I Developing project in the Kingdom of Thailand, which commenced commercial operation in 2010. Hitachi intends to continue contributing to resolving global-scale energy and environmental problems by supplying thermal power plants with high efficiency and excellent environmental performance. INTRODUCTION TRENDS IN OVERSEAS MARKET FOR THE history of Hitachi’s thermal power plant business THERMAL POWER AND CHANGES IN goes back about 85 years, during which it has supplied GLOBAL OPERATIONS thermal power plants in Japan and overseas that Market Trends featured the best efficiency and reliability possible at Fig. 1 shows the forecast for thermal power the time. Overseas business commenced in the 1960s generation capacity. The market for new plants is with the supply of turbine and generator units and shifting to emerging economies, particularly China, expanded into EPC (engineering, procurement and India, and other parts of Asia. In the Association of construction) projects for total plant in the 1980s. Southeast Asian Nations (ASEAN) region, demand The company established local operation bases, for electric power is outstripping generation capacity particularly in North America and Europe, which it and while most of these nations are rich in natural had identified as key markets, and pursued a strategy fuel resources such as coal and gas, they suffer from a of encouraging local management of those local operations. With the slowing down of the economies Unit (GW) in North America and Western Europe in recent 6,000 5,585 years, growth markets have emerged in places like 5,049 5,000 Southeast Asia and Eastern Europe. Competition has 4,206 4,000 also become fiercer with the entry of emerging nation 3,182 Other non-OECD suppliers onto the global market. 3,000 nations ASEAN Given these circumstances, Hitachi’s strategy for its 2,000 India thermal power business is to grow its plant business by 1,000 China increasing its competitiveness through measures such OECD nations 0 as enhancing the performance of its core products, 2008 2020 2030 2035 increasing the proportion of production carried out Source: IEA “World Energy Outlook 2010” outside Japan, globalization of procurement, and OECD: Organization for Economic Co-operation and Development collaboration with local companies and emerging ASEAN: Association of Southeast Asian Nations IEA: International Energy Agency nation suppliers, and also by organizing projects and offering products and systems in ways that suit local Fig. 1—Forecast Growth in Thermal Power Generation Capacity. requirements. Construction of new plants is increasingly taking place in This article describes the history of Hitachi’s thermal emerging economies, particularly in the ASEAN nations, India, power business outside Japan, its policies towards China, and other parts of Asia. Total installed capacity is Southeast Asia, and a number of recent projects. expected to reach around three times its current level by 2035. Hitachi Review Vol. 60 (2011), No. 7 405 Hitachi conducts operations (sales, engineering, manufacturing, and power plant) supplied to the Islamic Republic of procurement) throughout the world, primarily from its three main bases Pakistan in 1984, the Tarong Power Station (350 MW Hitachi Power Babcock-Hitachi Hitachi Power Hitachi, Ltd. Europe GmbH K.K. Systems America, Ltd. × 4, sub-critical pressure coal-fired power plant) supplied to Australia in 1984, and the Lagos Power Plant (220 MW × 6, sub-critical pressure oil-fired power plant) supplied to the Federal Republic of Nigeria in 1985. More recent examples include the Genesee Power Plant (495 MW × 1, super- critical pressure coal-fired power plant) supplied to EPCOR Utilities Inc. of Canada, which commenced Walsum Power Plant, Germany Walter Scott, Jr. Energy Center, USA commercial operation in 2005, and the Walter supplied to STEAG GmbH supplied to MidAmerican Energy Company Scott, Jr. Energy Center (870 MW × 1) supplied to Fig. 2—Example Overseas Operations of Hitachi’s Thermal MidAmerican Energy Company of the USA in 2007. Power Business. Such plants have been supplied around the world, Outside Japan, Hitachi has also established bases in the USA mostly in developed economies. and Germany. The company is pursuing a strategy of local management with these bases taking a lead role and has won AGGRESSIVE GLOBALIZATION OF EPC contracts for large plants. THERMAL POWER BUSINESS Basic Strategy for Globalization chronic shortage of investment finance. Accordingly, if This section describes how Hitachi manages this problem is to be solved, it is also important to take overseas thermal power plant construction projects. advantage of yen-denominated government credits, the While the proportion of operations handled from Japan Japan Bank for International Cooperation (JBIC), the was large in the early days, as the number of projects Japan International Cooperation Agency (JICA), and other similar sources of finance. TABLE 1. Recent Examples of Large Plants Supplied by Hitachi Hitachi has supplied large plants, primarily in developed Transformation of Globalization economies. Because Hitachi supplies the key power plant Output/No. Commercial Plant Pressure/Fuel components itself; namely boilers, turbines, generators, of units operation and environmental equipment such as AQCSs (air Senoko 120 MW × 3 Sub-critical 1976 quality control systems), it is able to optimize the (Singapore) 250 MW × 5 pressure/oil and gas Bin Qasim Sub-critical overall plant while also providing a consistent and (Pakistan) 210 MW × 4 pressure/oil 1984 reliable supply of equipment. Fig. 2 shows the key Tarong 350 MW × 4 Sub-critical 1984 bases for Hitachi’s thermal power business and (Australia) pressure/coal Sub-critical example projects in which these companies have taken Lagos (Nigeria) 220 MW × 6 pressure/oil 1985 the role of lead contractor. For North America and Tuas (Singapore) 600 MW × 2 Sub-critical 1999 Europe, Hitachi established Hitachi Power Systems pressure/oil Sub-critical America, Ltd. (HPSA) in New Jersey, USA in 2005 to Ilo (Peru) 125 MW × 1 pressure/coal 2000 manage the North American region and Hitachi Power Krabi (Thailand) 340 MW × 1 Sub-critical 2004 Europe GmbH (HPE) in Duisburg, Germany in 2006 pressure/oil Genesee Super-critical to manage the European region. (Canada) 495 MW × 1 pressure/coal 2005 MidAmerican 870 MW × 1 Super-critical 2007 Past Deliveries of Key Plant and Equipment (USA) pressure/coal North Bangkok Gas combined Table 1 lists the major overseas projects to which (Thailand) 700 MW × 1 cycle 2010 Hitachi has delivered major items of plant for thermal Keephills 500 MW × 1 Super-critical 2011 power systems. The first such project was the delivery (Canada) pressure/coal Walsum Super-critical 2011 of the Senoko Power Station (120 MW × 3,250 MW (Germany) 790 MW × 1 pressure/coal (planned) × 5, sub-critical pressure oil-fired power plant) to Electrabel (Germany/ 790 MW × 3 Super-critical 2012 Senoko Power Ltd. of the Republic of Singapore in Netherlands) pressure/coal (planned) 1976, which was followed by the Bin Qasim Power Senoko: Repower 420 MW × 2 Gas combined 2013 Plant (210 MW × 4, sub-critical pressure oil-fired (Singapore) cycle (planned) Globalization of Large Thermal Power Plant Business 406 A more global supply chain Asia Accelerate adoption of global approach to sales, design, procurement, manufacturing, quality assurance, and service. Power Systems Company, Hitachi, Ltd. Babcock-Hitachi K.K. Strengthen coordination with sales offices in different Services Expand global network DHME parts of the world. of service centers. Sales HIL HCH HIMAC Quality Promote global Strengthen assurance BHPI approach to design. coordination Strengthen global quality between bases. BGR-T HAS Main bases Design assurance program. (established Sales offices Manufacturing Sep. 2010) Design and manufacturing sites Expand global BGR-B HAUL Procurement offices (IPO) procurement. Procurement Establish production sites in (established different parts of the world. Aug. 2010) Service centers HCH: Hitachi (China) Ltd. HAS: Hitachi Asia Ltd. Regional headquarters Service centers Manufacturing or engineering sites HAUL: Hitachi Australia Pty Ltd. HIMAC: Hitachi, Ltd. Philippine Branch Fig. 3—Globalization of Supply Chain. DHME: Dailan Hitachi Machinery & Equipment Co., Ltd. BHPI: Babcock-Hitachi (Philippines) Inc. HIL: Hitachi India Private Ltd. Hitachi is pursuing globalization to create an integrated supply IPO: International Procurement Office chain that extends from sales activities (including formulating the BGR-T: BGR Turbines Company Private Ltd. BGR-B: BGR Boilers Company Private Ltd. basic concept and proposal for large plants) to after-sales service. Fig. 4—Map of Thermal Power Business Bases in Asia. Hitachi has recently firmed up the framework