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BUSINESS CHALLENGE FOR MAVERICK

Case study : Gas turbine market analysis for ABC filters

Compiled By:

Team Name: BELLATORCaptain Name: SRIJU NAIRMembers: KIRAN KANNAN

K.V.MINI

Air filters and filtration equipment are ubiquitous equipment used in diverse industries and fields, given the universal need to maintain particulate cleanliness to ensure efficient functioning of equipment/machinery and the growing pressure to improve urban and indoor air quality.

What are Air filters?

GAS TURBINE FILTER MARKET

•Reduction in natural gas price•Turbine inlet air filter sales to over $400 million in 2013.• This segment -6% of the $7 billion air filter market•Demand for filters -Asia Pacific -USD 17.78 billion in 2011.•In Europe the demand for filters -25% of the total market share by 2018

Market Insights

FUNDAMENTAL MARKET CHARACTERISTICS

Global filter market-USD 70 billion, Air filter market -USD 10.3 billion.

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Go to Market -WHOM will we actively target

6.90%

41.40%

16.10%

9.20%

16.10%

10.30%

Between 120- 180 MW

Europe

Middle east

Rest of Asia

Africa

North America

Latin America

11.20%12.90

%

11.30%

58.10%

6.50%

More than 180MWEurope

Middle east

Rest of Asia

Africa

North America

Latin America

MARKET TARGET1. Africa2. Europe3. Rest of Asia 4. Others

15.00%

45.00%25.00%

15.00%

MARKET SEGMEN-TATION

EuropeAfricaRest of AsiaOthers

World energy consumption

Distribution of turbine installation

3Refer exhibit 1 for further details

TARGET –AFRICA The IEA forecasted a growing role for natural gas in the world's energy mix, with the natural gas share growing from 21% in 2010 to 25% in 2035.

African gas production reached about 203 bcm in 2011, Gas production in Africa since 2000 has been growing by about 4% per year.

Hence distribution of turbine in these area in future for power generation will be more and hence the client should focus these markets where no competitors for turbine capacity ( more than 180 mw )

5 year CAGR - 7.3 % , 10 year CAGR – 5 % approximate stable growth.The average loss of power for synthetic cartridge filter in arid region is 2% in arid region

Future energy demand and export

Focus on new market

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POLITICAL

ECONOMICAL

SOCIAL

TECHNOLOGICAL

Micro and Macro trends analysis

1. Support the quality standards set by the policy maker and t he manufacturer

2. The filter offers High Efficiency Particulate Arrester(HEPA)3. Reduced fouling and no performance loss of GT4. Well proven and very high combined cycle efficiency

1. Sales growth is expected to be strong in South Africa2. Over 150 gas turbines are expected to be sold in sub-Saharan

Africa between 2009 and 2014-resulting in an additional capacity of at least 12 000 MW by 2014 (Frost & Sullivan )

1. The projected average annual growth for Africa is expected to be rebound further to 5.15 points in 2013

2. Africa is endowed with substantial gas resources for electricity generation .Eg. Nigeria-has about 186-trillion cubic feet of gas resources- enough to power the whole of West Africa for the next 20 years

1. Government initiatives taken to build a reliable power sector2. Sizeable amount of financial resources have been channelled

towards the development of gas power projects3. As per 2005 amendment hydrocarbon law, foreign companies will

be taxed on profit rather than revenue

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Client 2012 sales report shows that it’s maximum distribution ( 43 % ) is in Europe – hence no need to diversify its market .

Average loss in power generation using synthetic filter cartridge is 5 %, hence consumer preference is more for greater efficiency

5 year CAGR -2.4% , 10 year CAGR – 1.1%

Gas production growing in future ,hence industry will try to expand which makes E10’s market grow.

3rd largest client distribution is in Asia 16% , hence client is well aware of the market

As Asia ramps up its infrastructure, better filtration devices have become a necessity. With this trend sure to continue, nonwovens makers targeting filtration are investing rapidly in the region.

5 year CAGR – 5.2 , 10 year CAGR- 4.5

With the increasing power consumption and increasing power generation plan by its policy makers bring E10 a target market

Europe Rest of Asia

World increase in gas production by country grouping , 2010-2040 6

E10 Portfolio

Climate conditions 1. Arid2. Marine3. Subtropical

Value Proposition :Competitive advantage

1mw power generation – requires 10 filters

E10 downtime for filter cleaning – 200 hr/year

Filter replacement rate – 24 months

Average turbine uptime - 99% hence high productivity

High productivity rate, time saving

Highly efficient

Less downtime for filter cleaning

Less idle time

Used for turbine capacity range from 150- 190 mw

No competitor above 180 mw

E10 Filter life time = 20 hours per year

Minimization of total cost = Deployment +Operational

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LIMITATIONS TO CURRENT FILTERS

Poor efficiency High cleaning downtimeExtensive replacement of filtersIncreasing foul in turbine functionHigher filter pressure loss & short lifetimeLess efficiency in electricity generation in harsh operating conditions

CLIENT’S COMPETITIVE ADVANTAGE Lower price ( E9 and E12 )E9 customers facing less fouling , less erosion and no corrosion and hence lower turbine wash time is 90 hr/yearCompetitor B and D provide filter servicingCompetitor A and C provide both filter servicing and gas turbine maintenanceAverage turbine capacity of both E9 and E12 is 160- 180

Particulars E10 E9 E 12

Downtime for filter cleaning

200 hr/year 600 hr/year 3000 hr/year

Filter replacement 24 Months 24 Months 12 Months

Average Turbine capacity

150 – 190 MW 160 – 180 MW 160 – 180 MW

Average turbine uptime

99 % 98% 96%

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Comparative Analysis of E10,E9 and E12

Refer exhibit 1 for further details

1. Utilizing its filters servicing expertise to provide associated services for E 10 Customers.Since the government policies are favorable in Africa , the selected target market can be justified for investment in servicing or other maintenance purpose.

2. Although currently E10 filter is expensive in the market ,the prices of the same is expected to come down once we meet the initial target market.The future for E10 with self cleaning mechanism filter is very bright considering the compounded annual growth rate for the next 10 years in the desired segment.

3. New technology brings new marketWe have focused more on countries having future expansion plans which support volume and product flexibility.

4. Prepared for challenges in target market Africa as a focused market faces problem in water and coal which we intend to

cater to by importing the same at the cost saved from tax benefits 9

Conclusion

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EXHIBIT 1 : Current installed GT distribution by region

Estimated growth rates of natural gas electricity generation

Client 2012 sales by region type

Source : Case study High efficiency filter consideration set