Isb Hyd_the Simple Minds

7/30/2019 Isb Hyd_the Simple Minds

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EX

ECUTIVES

UMMARY


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MARKET

SIZE

ESTIMATION

AND

GEOGRAPHIC

PRIORITIZATION

Drivers of market attractiveness:

Unique value proposition of the product

Market indicators in natural gas power generation market: Mainly growth rates ofnatural gas generation and current installed distribution by region. The latter in turn

has a critical linkage with the models value offering in terms of average turbine

capacity(150 -190 MW).

Key Statistics:

The data on estimated growth rates of natural gas electricity generation show that theregions of Middle East, North America & Latin America are attractive with 10 year

annual compounded growth rates of 4.7%, 4.5 % ,0.4% & 3.8 % respectively.

The potential in these regions specifically emerges when this data is juxtaposed by the

distribution of the current GT distribution in these regions. For instance, Asia has 16.1

% & 11.3 % of turbines with generation capacity in the range 120-180 MW and excess

of 180 MW respectively.

North America with 58.1 % of turbines having generation capacity in excess of 180

MW is significant not withstanding the low growth rate.


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M

ARKETSIZE

ESTIMATIONAND

GEOG

RAPHIC

PRIORITIZATION

Total number of natural gas based power plants in the

world(as on 20.07.2013)

(Source: www.globalenergyobservatory.org)

2557

Number of power plants in excess of 150 Mw 1475

Assuming one turbine per plant,total number of turbines 1475

Out of these number of turbines with generation capacity 120- 180 MW : 111

Turbines with capacity greater than 180 MW :1363

Using the geographic spread and market attractiveness, close to 84% of 111 turbines

i.e. 93 And close to 89% of 1363 i.e. 1213 can be considered for market size evaluation.

Hence the target market segment (no of turbines ) =1213+111=1324

Assuming that on an average each of these turbines produce 180 MW power , the

number of cartridge synthetic filters = 180*10*1324 = 2383200

(Since one such filter is required for every 10 MW power generation).

At a unit price of $330 the estimated revenue from the market would be 2383200*330 $

=$786 millionConsidering replacement rate of 2 years the projected annual steady cash flows per year

from the installed base would be $343 million.

5 year projected revenues from new GT installations =786*(1.033)^5-786= $138.5 million

10 year projected revenues from new GT installations= *=786*(1.024)^10-786=$210.37million


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M

ACRO

ECONOMICTREN

DSAFFECTI

NGGAS

TURBINEBU

SINESS

UPSIDES:

Cap on CO2 and other GHG are being slashed to half and cost of emission allowances

have been pushed further in several nations including USA boosting a switch from coal

fired to gas fired turbines.

Current regulation(Apr 13) by EPA(Environment Protection Agency) requires new powerplant to meet emission standards of max 1000 Lb CO2/MWh against the current emission

of 1768 Lb CO2/MWh of fossil fired plants. So operating them would be impossible in

future without carbon capture and sequestration.The policy of energy diversity Producing more than 80 % of electricity from diverse set

of clean energy sources including natural gas will reinforce incentive of GT power plants.Proposed Government regulation to impose carbon taxes would drive the growth of

cleaner GT based plants. Chinese Govt (the most promising and emerging economy and

potential growth leader) have confirmed that the carbon tax law is on its way( announced on

22nd Jul 13)Talks are on for standardizing floor prices for carbon trading and for market linked

emission caps.

DOWNSIDES:

Diffusion and wider acceptance of cap and trade policy has resulted in excess of

allowances and triggered a drop in prices from 20 /tonne to 5/tonne of CO2 .

for the trading to be effective the prices must be shored up to 50/tonne of CO2 and

supply must be constrained by withdrawing allowances


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M

ICRO

ECON

OMICTREN

DSAFFECTINGGAS

TURBINEBU

SINESS

UPSIDES:

High real rates of return required by private/corporatized investors in electricity

generation favor less capital intensive cycle GT plants over capital intensive coal

plantsTechnology specific hurdle rate of return: Due to uncertainty about matching capacity

and future consumption technologies with shorter lead cycle (cycle GT plants) and of

a more modular nature have a greater advantage and allows decision to invest to be

deferred to a time closer to expected commissioning date thus enabling more timely

gathering of information about future levels of consumer demand & relative fuel

prices.Prospects of more competitive gas markets and expanded gas supplies through a fully

integrated network.

DOWNSIDES:

The fuel price effects of microeconomic reforms are adverse to the prospect ofnatural gas

Refurbishment of existing coal fired capacity as capital cost of refurbishment is

typically lowerHigher availability factor and longer lives for existing and new non conventional

coal fired capacity plants.


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BARGAINING POWER OF SUPPLIERS:

1.The raw materials required for

manufacturing the cartridge air filters are

fairly standard.

2. There is a high concentration of suppliers.3.Suppliers have little incentive for forward

integration.

4.Air filters are not highly differentiated..

BARGAINING POWER OF BUYERS:

1.It is a highly innovative product and

customers have no choices to match the

price performance trade-off.

2. Threat of backward integration is negligible.

3.Buyers are not very price sensitive assuming

that orders are generally in bulk and

components are generally covered under

comprehensive AMC.

THREAT OF NEW ENTRANTS:1.It requires substantial R&D expenditure and

industry is moderately capital intensive.

2. There is a threat of retaliation from existing

players.

3.Regulatory and statutory norms keep changing

frequently.

4.In the B2B scenario the existing players have well

established relationship with channel partners.

5.Incumbency advantage of proprietary technology

and established brand equity.

6. The switching costs are moderate.

7. Attaining economies of scale and economies of

scope is crucial.

THREAT OF SUBSTITUTES:

1.Switching costs are moderate.

2.It is a highly innovative productand hence has no substitute(it has a

unique property of self cleaning and

Wide range of operation).

COMPETITIVE RIVALRY:

1.The exit barriers are high.2.Despite the existence of multiple players the

dimensions of competition are limited.

LOW IMPACT LOW IMPACT

MODERATE IMPACT

LOW IMPACT

MODERATE IMPACT

BOTTOM LINE: ALTHOUGH IT IS A COMPETITIVE MARKET ABC SHOULD ENTER THE MARKET AS THEINCENTIVES FOR PROFIT ARE VERY HIGH AND IT HAS A PRODUCT WITH HIGH USP

ANALYSIS

FORMARKET

ATTRACTIVENESS


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VALUE

PROP

OSITION


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COMPETITIVE

ADVANTAGE

AND

SUSTAIN

ABILITY


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GO TO MARKET STRATEGY & RECOMMENDATIONS

CAPACITY CAPACITY


11/13APPENDIX1(C

OUNTRYWIS

EDISTRIBUTIONOFGT

POWERPLANTS)

COUNTRY

LESS THAN

120 MW

120-180

MW

GREATER

THAN 180

MW

Grand Total

COUNTRY

LESS

THAN 120

MW

120-180

MW

GREATER

THAN 180

MW

Grand

Total

Afghanistan 1 1 Liberia 1 1

Albania 1 1

Libyan Arab

Jamahiriya 2 6 8

Algeria 3 2 12 17 Lithuania 2 2 4

Angola 1 1 Malawi 1 1

Argentina 9 6 25 40 Malaysia 1 1 21 23

Armenia 2 2 Mexico 7 1 30 38

Australia 24 7 30 61 Morocco 2 1 4 7

Azerbaijan 1 2 3 Myanmar 1 2 3

Bahrain 1 1 5 7 Netherlands 3 3Bangladesh 4 2 7 13 New Zealand 2 3 5

Belarus 5 3 9 17 Nicaragua 1 1

Belgium 2 12 14 Nigeria 3 13 16

Bolivia 1 1 2 Oman 10 10

Botswana 1 1 Pakistan 4 6 11 21

Brazil 20 20 Panama 1 1

Canada 43 10 24 77 Philippines 3 3

Chile 1 1 Poland 1 1 2

China 25 25 Portugal 1 5 6

Colombia 2 7 9 Qatar 1 1 9 11

Congo 1 1 2

Republic of China

Taiwan 13 13

Cote DIvoire 1 2 3 Republic of Korea 1 25 26

Czech Republic 1 1 Romania 3 3

Denmark 1 2 3 Russian Federation 7 3 62 72

Egypt 7 3 17 27 Saudi Arabia 11 2 23 36

Estonia 1 1 Singapore 7 7

Finland 1 1 Slovakia 1 2 3

France 2 6 8 Slovenia 1 1

Georgia 1 3 4 South Africa 2 2 2 6

Germany 1 18 19 Spain 40 40

Ghana 1 3 4 Sri Lanka 2 2 1 5

Greece 1 1 11 13 Sudan 1 1

Hong Kong 4 4 Sweden 2 2

Hungary 6 3 5 14

Syrian Arab

Republic 2 1 5 8

India 14 11 39 64 Thailand 1 17 18Indonesia 6 6 Togo 1 1

Iraq 1 1 Tunisia 3 5 8

Ireland 4 1 8 13 Turkey 5 7 13 25

Islamic Republic of Ir 2 1 27 30 Turkmenistan 2 3 5

Israel 2 1 10 13 Ukraine 3 3

Italy 7 8 44 59

United Arab

Emirates 14 14

Japan 1 1 15 17 United Kingdom 3 5 41 49

Jordan 1 4 5

United Republic of

Tanzania 2 1 3

Kenya 1 1

United States of

America 754 111 511 1376

Kuwait 2 1 8 11 Uruguay 1 1

Latvia 1 1 2 Uzbekistan 5 5Lebanon 2 2 4 Venezuela 1 11 12

Viet Nam 8 8

Grand Total 966 228 1363 2557

CAPACITY CAPACITY


12/13AP

PENDIX2(EMISSIONNO

RMS

PREVALENT

IN

USA)


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Isb Hyd_the Simple Minds

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