2008-03-10 Power Service strategy

POWER SERVICE

ANALYST DAYS IN DUBAI Power Service Strategy

Walter Gränicher

10 March 2008

P2 POWER SERVICE

Agenda

Introduction Page 3

Page 8Power Service market

Page 13Alstom Power Service today

1Strategy - The Way Forward

P3 POWER SERVICE

Alstom Power ServiceOur Business Scope

Power Service's market is the Power Generation elementin the energy value chain, specifically:• operation• maintenance and repair• performance improvement and lifetime extension of existing power generating plants

Fuel Electricity

Power Generation

Mai

nten

ance

Oper

atio

nAs

set

Man

agem

ent

P4 POWER SERVICE

Alstom Power ServiceVision and Mission Statement

VisionVisionTo be the undisputed leader in servicing and upgrading power plants around the globe.

We provide the most responsive, reliable and innovative solutions to keep power plants competitive throughout their life cycle.

MissionStatementMission

Statement

P5 POWER SERVICE

Alstom Power ServiceKPIs

vs. Sept. 06 (%)

6 months12 months

March 07 (€M) vs. March 06 (%) Sept. 07 (€M)

Orders backlog

Orders received

Sales

Operating Income

Operating Margin

5,219

4,058

3,198

510

15.9%

+20%

+16%

+12%

+15%

5,882

2,512

1,756

286

16.3%

+14%

+6%

+18%

+20%

Fast growth and improving profitability

P6 POWER SERVICE

The Power Service Opportunity

• Global installed capacity continues to grow, especially in China, India, and Middle-East

• Customers focusing on increasing existing plant efficiency to reduce costs and emissions

• Increased environmental focus

• Technology is key to differentiation in the marketplace, and to profitable growth

P7 POWER SERVICE

Agenda

Introduction Page 3



Page 21Strategy - The Way Forward

P8 POWER SERVICE

World Installed Power Generation Capacity

0

20

40

60

80

100

120

140

160

others

Hydro

Nuclear

ST - conventional

GT / GTCC

1 6 11 16 21 26 31 36 41 46

~4400GW Installed Capacity; 30% older than 30 years

2006 2000 1990 1980 1970 1960 Year ofCommission

Age of Power Plant

GW 1312 GW >= 30 Years(at End 2007)

Source – UDI 2007 / PS BD, Power Generation Market, all sizes

5%

60%5%

29%

1%

• A growing and old fleet with predominance of coal fired plants• Lead time for new units and environmental regulation is driving the need for

efficiency increase / lifetime extension

P9 POWER SERVICE

Alstom installed fleet

PS Workshop / Engineering locationPS Field Service HubPlant containing at least 1 major Alstomequipment

• Alstom has leading positions in all key equipments in terms of installed fleet (GT; ST; GEN; BOI; ENV) -> A good basis to develop service business

• Plants containing Alstom equipment are historically concentrated in Europe and North-America -> opportunity for OOEM strategy in other areas

P10 POWER SERVICE

Total Market€26bn(*)

• Power Service presence to be adapted to capture growth from most dynamic areas• Service strategy is not limited to own fleet: focused OOEM initiatives based on Alstom

technology and local network are pursued to address the entire market potential

(*) Scope excludes industrial, <20MW, retrofit, construction and uses average regional utilisation 2000-2004. Growth rate MACA 2006, *incl. BOP, basis -2006

Rest of Asia€3.0bn

China€1.9bn

Russia & CIS€1.0bn

Europe€5.5bn

North America€7.4bn

South America€1.3bn

Australasia€0.4bn

India€0.9bn

MEA€3.5bn

7.2

18 1.9

2.7

1.28.8 % 8.7 %

10.9 %

Plants containingat least 1 Alstommajor equipment

No Alstomequipmentinstalled

-> Specific OOEM

initiatives developed

Outsourced revenue potential in €bn

> 5 %CAGR

(to 2015)

The Power Service market: 26B€; growth above 5% p.a.

P11 POWER SERVICE

The Service players: typology

A specific environment with clear segmentation of players

The major OEMs: Alstom; GE; Siemens…• Comprehensive range of equipment and proprietary fleet

• Excellent technological level across the board

• Focusing on their own fleet first but having developed service as a specific business with its own key success factors

The emerging OEMs: Chinese; Indians…• Partial range of equipment and overall lower technological level

• Mostly focusing on new builds and therefore offering lower quality of service to their customers

The Independent Service Providers (ISPs): Wood Group; Sulzer; North American Energy Services…

• Spin-offs from utilities in Field Service activities

• From niche players with some technological know-how in their field to purely execution focused companies (selling manpower but no/very limited technology)

• Very different sizes and financial performance

P12 POWER SERVICE

Agenda

Introduction Page 3




P13 POWER SERVICE

Alstom Power ServicePresent in Key Markets

Gas Coal

Nuclear (conventional island)Industrial

P14 POWER SERVICE

Alstom Power ServicePresent in all Key Components

GeneratorsGas Turbines Steam Turbines

Boilers/HRSG Environmental Instrumentation & Control

P15 POWER SERVICE

Alstom Power ServiceOffering a comprehensive product portfolio

Plant Components ProductsParts Spare parts, re-conditioned parts, workshop

repairs

Field Service Outage management, field repairs, erection, commissioning, construction, supervision

Consultancy & Support

Technical services, condition assessment, consultancy, training, monitoring & diagnosis, performance analysis

Performance Improvements

Upgrades, modernization, optimization, life-time extension

•Mechanical BoP

•Environmental

•I&C, Electrical BoP

•Boiler

•Generator

•Steam Turbine

•Gas Turbine

= Total Plant Solutions

P16 POWER SERVICE

Power Service Organization: Our Objectives

• Meet our strategic goals (significantly grow revenues and profit)

• Meet the business needs of today and tomorrow

• Minimize inefficiencies and exploit our full potential

• Continuity and continuous improvement of established processes

Leverage centralized product know-how and execution capability with local Service Centers

P17 POWER SERVICE

Power Service Set-up: Locations & Headcount

~2000

~200

~300

~10,000

~2500

Workshop / Engineering locationField Service HubHeadcount by geography (all functions)

NAM

SAM

EUROPE

MEA ASIA

• 38 engineering locations; 26 field service hubs; ~ 15'000 people• Resources historically concentrated in Europe & (less so) in the U.S.• Recent acquisitions in Asia

P18 POWER SERVICE

Sales by Product (%)

Sales by Market (%)

Power Service at a glance (2006/07 figures)

20

30

40

35

30

35

Europe

Americas

AsiaAfrica – Middle East

Gas (GT+TG)

Steam (ST+TG)

Boiler island

Key Facts

• Balanced mix, with main pillars in Europe and U.S.• Still potential to increase market share in key areas• Challenge to develop business in fast growing areas

with limited own fleet

Key Facts

• 3 well balanced pillars• >60% of revenues from higher-margin rotating

equipments

10

P19 POWER SERVICE

Alstom Power ServiceCompetitive Strengths

• Technology leadership and ownership• Global reach – service at customer’s doorstep• Comprehensive portfolio• Largest installed base• Leader in Environmental Control Systems

Alstom Power Service has developed the right skills to benefit from a growing and changing market

P20 POWER SERVICE

Agenda

Introduction Page 3




P21 POWER SERVICE

Power Service Maturity Model: Continued Development

Leverage Existing Resources

Leverage Technical Strength

Leverage Technology & Size to differentiate

“Meet our Vision"

• Put marketing at the centre of the organization

Stage 1Informal

Stage 3Integrated

ProcessStage 2

Functional / Balanced

Start-up Power Service

1999/2000

2002/2004Stage 4

CustomerCollaboration

Integrated processes to act as One Business

2005/2010

P22 POWER SERVICE

Our Strategic Pillars to Growth

PLANTFull Plant Service Provider and expert in

optimizing performance and extending the lifecycle

Diversify geographically by

building up infrastructure and

capabilities in target areas

PRESENCE

Differentiate through products which

provide extra value to customers

PRODUCTS

Global excellence in integrated and

aligned processes

PROCESSES

PEOPLE

P23 POWER SERVICE

Steam Plant Strategy: from customer demand to products

CUSTOMER DEMAND

Com

pone

nt

Upgr

ade

Mai

nten

ance

Su

ppor

t

Oper

atio

n Su

ppor

t

M &

D

MARKET DRIVERS

IncreasingPower DemandIncreasingPower Demand

EnvironmentalLegislationEnvironmentalLegislation

Fuel PriceDevelopmentFuel PriceDevelopment

ElectricityTradingElectricityTrading

Lack of CompetentPersonnelLack of CompetentPersonnel

Increase Power Output

Increase Power Output

ImproveAvailability

ImproveAvailability

ImproveFlexibilityImprove

Flexibility

ReduceEmissions

ReduceEmissions

Increase EfficiencyIncrease

Efficiency

Extension ofLifetime

Extension ofLifetime

XX

XX

XX

XX

XX

XXXX XX

XX

XX

XXXX

XX

XXXX

XX

Component 1Component 2

Plant integration

Targeting the overall plant, the integrating systems and the non-ALSTOM components to offer an integrated solution to the customer

P24 POWER SERVICE

Product strategy: principles

• Service “Products” are the basis for the Sector development model− Plans are defined and aligned centrally, then implemented locally

• Strategies are adapted to individual equipment − Defend or gain market share on own fleet by leveraging technology as

well as commercial levers on mature products − Develop organisation to support fast growing activities− Selectively address opportunities on OOEM fleets

Technology is key to differentiation

P25

Product strategy: example of innovative solutions

Market-driven R&D efforts to extend lifetime and improve availability and efficiency

Gas Turbine

Steam Turbine

Full Rotor Scanner• Automated ultrasonic modular scanning system for all rotors• Detecting and sizing of cracking and forging defects• Market: all OEM and OOEM rotors and cylindrical parts

Valve upgrade for ex ABB/BBC Fleet• HP valve groups (control valves) with reduced pressure losses

to increase plant efficiency

GT13 E2 XL• Development of GT13 E2XL with improved

lifetime/availability extension package at minimal possible cost

Robotics

P26

Product strategy: Acquisition of PSM in March 2007

• ALSTOM Power System Manufacturing− Headquartered in Jupiter, Florida− USD 70m sales in 2006− 100 highly qualified people− High-tech company focusing on

service for F-class gas turbines

A strong platform to develop Power Service activities in OOEM Gas Turbines

P27

Presence Geographic Expansion in the Middle East

• ALSTOM Power Service (Arabia) FZE, (APSA); Jebel Ali Free Zone• Focusing on CCPP:

– supply of field service personnel– gas turbine blade reconditioning– generator rewind and repair– spin pit for generator rotor balancing

• Local Resource: 140 employees; 3 200 sqm of offices and workshops

Adapt industrial footprint to key markets

P28

PresenceGeographic Expansion in China

• ALSTOM Strongwish− Headquartered in Shenzhen, China− 4 M€ sales in 06/07,

100 employees− Remote Monitoring and Diagnostic

services

• Alstom Sizhou− Qingdao Sizhou acquired in May 2007− 50 M€ sales in 2006, 1 100 employees− Ash handling systems and spare parts− Coal handling systems and spare parts− Wind Tower Manufacturing

Build-up platforms to develop Service activities

P29

ProcessesOne Business Platform – 3 Major Projects

Standardizing Business Processes

Lead Unit A SupportUnit B

SupportUnit C

Commercial Visibility of Internal Supply ChainInternal Offer and Order Management

Managing Customer Information & Sales

Opportunities

Processes PlatformsOne Platform for Sales

& Marketing (CRM)

One Platform for Commercial Business

Processes

One Platform For Local Unit Execution

Processes(ERP)

One Global Business Platform

P30

• Recruitment of >2 000 employees− Covering attrition and new positions

required to support sector growth− Mainly Europe, NAM, Asia

• Training / knowledge sharing: increase current training for employees by more than 50%

People by geography

PeopleHR: High attention given to people development

Key HR action plans

1215

55

12

Europe

Other Asia

ChinaMEA 6

Americas

Industry requirements: high skills; experience; service culture

P31

Support growth by driving a focused M&A strategy

Two main categories for M&A in Service

Product focused Execution focused

• Add complementary Service products and innovative resources− Increase own fleet / product

base− Acquire products

complementary to our fleet

• Add capabilities and resources− Establish stronger local

presence− Add capabilities to our existing

industrial footprint (focus on low cost sourcing and supply chain management)

P32

Past acquisitions have reinforced portfolio and execution capabilities

Technology value added

Geographic reach Global

PSM

Strongwish

SizhouHolmes

RMG Pointo

ETH

CSC

MSc

160 M € sales/year

1 700 new colleagues

100 new products

Execution

Technology

Intermediary

Local

Low

High Past 18 months

Turboteh

(FR)

(CN)

(USA) (CN)

(USA)

(CH)

(AU)(CR)

(FI)

Proven acquisition and integration capabilities

P33

Conclusion

• Power Service on track, but significant potential growth remains to becaptured

• Straight forward strategy based on:

PLANT

PRESENCEPRODUCTS PROCESSES

PEOPLE

We are committed to sustainable economic development

www.alstom.com

2008-03-10 Power Service strategy

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