8/6/2019 EPC Contracting Strategy balancing Risk & Rewards for Customers and Contractors

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ATOMEXPO 2009, 26-28 2009

EPC Contracting Strategybalancing Risk & Rewards

for Customers and Contractors

Juan Ccahuana Tito, Director Fossil Power

Sector Energy, OOO Siemens Moscow

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Overestimationof demand,impacts of oilprice crises

Steep rise inpower demand

Market boom inS/E Asiareplaced by US-boom

Penetration ofnuclear power

Extraordinary growth inEurope, Russia, China,Middle East and RSA

Source: Siemens Energy GS4Base Case scenario

Status: April 2008

0

50

100

150

200

250

300

1950 1960 1970 1980 1990 2000 2010 2020

GW/a

All Types

Unit Size > 1 MW

Renewables

Hydro

Fossil Marke

t >100MW

Renewables

Nuclear

Hydro

Drivers,

uncertainties

Economic growth

Energy prices

Ecology awareness Power plant types

Commodity prices

Liberalization

Customer behavior

Replacements

Regional markets

Grid extension Production

capacity

Slow down due tolower consumptiongrowth, highbacklog?

Short term is characterized by stagnating market after extraordinary high growth

Historic Development ofWorld Power Plant Market Since 1950

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Limited capacities at

sub-suppliers

Presently no capacity

extension in the market

available

Long lead times for keycomponents

High price level for supplies

e.g.: Forging Civil Casting

HRSG

Strong market demand led to bottlenecks

in the entire supply chain

Power Plant Manufacturers

Engineering

Procurement

Manufacturing

Construction

Erection/Commissioning

Sub-supplier Customer / MarketSteep Market Increase

Volatile Market Prices

100%

Feb

200

4

105%

Oct

200

4

112%

Aug

200

5

125%

Jul

200

6

135%

Feb

200

7

- Lead times and cost have increased significantly (+35%) within last 3 years

- Current EPC business models need to be rethought by industry e.g. -> EPC-M

- Develop alternative business models - Siemens is strengthening its product business by

providing pre-engineered product packages to the market.

Source:Thermoflow, e.g.Iberian peninsular CCPP

144

05-07

203

08-10

178

11-13

GW/a

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Reference sales models structure

the Siemens offerings to our customers

General model: Customer request vs. Siemens offering

Scope of service and deliveries

Reduceds

cop

e

Entire

PP

Custom

erreque

st

Siemens offering

3b

4b

1

2b

Entire

Power

Plant

Power

Block

Power

Island

Extended

Power

Train

3a 4a2a

Partner needed

Source: New Business Mix Initiative

1 Entire Power Plant as Turnkeybusiness from Siemens

xa -Models:Customer award for an EPC full

scope delivery will be servedfrom Siemens and a partner(e.g. EPC Consortium).

xb - Models:Customer awards reduced

scope. Integration to complete

Power Plant is underresponsibility of customer or a 3rd

party contracted by the customer

(e.g. EPC-M, Architect Engineer)

%

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Scope of delivery

Source: New Business Mix Initiative

Reference sales models cover

the full range of solution business

Reference sales models - Overview

1

2b

3a

3b

4a

4b

SAG Customer Consortium Partner

100%70-80%20-30%

Model

50-60%

2a

Entire power plant as General Contractor Appropriate rebalance risk tools to be applied

Control over Power Block design (incl. 3D model) Model to cooperate with construction companies

Carve-out of civil & erection to ensure ~40% partner scope

Control over Power Block design (incl. 3D model) Customer is responsible for scope outside power block

Control over process: Min. scope for gross perf. guarantee Model to cooperate with AE/EPC capable of power plant eng. Consortium partner responsible for plant integration

Control over process: Min. scope for gross perf. guarantee Customer responsible for plant integration

No Siemens plant design Model to cooperate with EPCs in multi block projects Min. scope for SAG (~40%) only in case of multi block projects

No Siemens plant design Delivery of components (GTs, STs plus e.g. electrical

equipment, I&C, etc.)

Applied principle

Turnkey

ConsortiumPartner

Power Block

Customerscope

Power Block

Consortium PartnerPower Island

Customer scopePower Island

Consortium PartnerExt.

PowerTrain

Customer scopeExt.

PowerTrain

%

Priority

Limited volumedepending onresources and

project risk

3

1

4

2

For equipmentsupply only

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Standard scopes of supply

including SGT5-PAC 4000F multi-shaft plants

SGT5-PAC 4000F SCC5-4000F 2x1

Power Island

SCC5-4000F 2x1

Turn key

SCC Power Island

Condenser with air exhaustsystemFeeding pumps of a

boiler Condensate pupms

Safety valves

Fuel preheaterwith filters,counter unit etc.

Power Island monitoringsystem

Options

SCCHeat and power

equipment

SST-PACwithout condenserSteam turbine and

auxiliaries without pipingGenerator and auxiliary

systemsElectric and I&C equipment Heat recovery boiler

Options

SCC Turn key

Building and structures Cranes and life support systems of the

turbine building Power plant cooling system

Water treatment Initial and waste water system

Tankage Piping and valves of the plant Electrical equipment

I&C of the power plant

Additional fire alarm and fire extinctions

systems Erection and commissioning

Other options

SCC Power island SCC heat and powerequipment

SGT-PAC

Complete turn key

delivery of the plantSystem inegration /Optimized solution

Cycle optimization /Manufacturing solution

SGT-PAC

Gas fuel and auxiliaries Air intake / exhaust system Gas fuel systemModules

Connectiong lines Generator and auxiliary

systems Fire extinction system of GT

plant

Electric and I&C equipment Options

Manufacturing and delivery

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Sales Model(Customer Value)

Shared Risk

Power BlockRe

balan

cingV

alue

and

Risk

Reb

alancing

Value

andR

isk Full Scope EPCTurnkey

Focus on Customer Value and balanced riskFocus on Customer Value and balanced risk

Power Island

Extended Power Train

Flexible ApproachFlexible Approach

to balance Risk Sharingto balance Risk Sharing

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Partnering Initiative:

Selected EPC partners worldwide

Source: Partnering Initiative

KiewitWorley Parsons

Fresh MeadowBE&K

John HollandSumitomo

Orascom

YTLDaewoo

SNCBilfinger Berger

Iberinco

Techint

FluorBilfinger Berger

YTL

SamsungDaewoo

MarubeniHHI

HDECSNC

Techint

Al RahjiNCC Saudi

Al GhanimASTE

ETADoosan Heavy

L&TDaelim

Samsung

DaewooGS E&C

SumitomoYTLCTCI

MarubeniSamsung

EnkaMetka

AE&E

FluorGamaKentz

AE&EDuro FelgueraIberinco

Bilfinger Berger

Techint

AE&E

AE&E

EnkaSNC

Metka

Bilfinger Bergar

EnkaGamaMetka

DaewooDaelim

Posco E&C

Hanwah E&CSK E&C

Boiler

IHIDoosan Babcock

Burmeister & Wain

Water Island

SidemDoosan Water

Fisia

Hitachi Zoosen

GS E&C

Aker Kaeverner

Bilfinger Berger

Duro Felguera

Partner with SAG experience

Partner w/o SAG experience Project PartnerNormal

Strategic PartnerBold

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Step 1 Step 2 Step 3 Step 4 Step 5

Source: Partnering Initiative

Partner co-operation programcovers full life cycle of partner relationship

Partner Development Process

Identify Partners

with sales for

regions and

countries

Collect feedback

from existing

projects with the

partners

Get partnerconsent in taking

part in program

Perform partner

workshop, discuss

experience and

find common ways

for future coope-

ration, identify

co-operation

development plan

and sign a MOU

Partner agree-

ment signed and

projects identified

to bid together

Co-operation

development

plans detailed and

tasks allocated

Dedicated Liaisonmanager

identified.

Execute executive

relationship mgt.,

projects deve-

loped together,

first bids prepared

on the basis of

partnering

agreement

First project in

implementation

as per partnering

agreement,

regular feedbacks,

evaluation of the

agreed co-

operation

developmentplans (1 p.a.)

Identification ofPartners

Perform partnerworkshop

Sign a partne-ring agreement

defining basis ofpartnership

Build up ofrelationship andbid projects in

consortium

Successfullyimplementprojects inconsortium

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2006

ATOMEXPO 2009, 26-28 2009

Thank youfor your attention