In South Africa, ABB is a dominant player in the power and automation business. With huge contracts underway in energy, rail, mining and many other industries, the future looks bright for this innovative organisation, despite the bleak economic outlook. Managing Director, Leon Viljoen tells us more…
ABB South Africa needs no introduction. The local entity of the global power and automation engineering company is involved with several important projects across the SADC region and further afield. In SA, the group has a strong local manufacturing capability with three manufacturing sites in Gauteng. Having operated in SA since 1988 with the Swiss BBC (1891) and Swedish ASEA (1883), ABB SA now employs up to 1200 people.
When we talk to businesses around Southern Africa, especially those of a similar size to ABB, there is always talk of the current economic climate and how it is making business very difficult. Yes, it is true that unemployment is high, GDP growth is low and confidence is waning because of low commodity prices, but shouldn’t businesses of significant size and importance be prepared for fluctuations in the market?
Well, simply put, yes they should and ABB SA is a perfect example. In 2012, when the global economic slowdown was at its worst in many cases, ABB SA increased its order book by 36%, increased revenue by 2% and improved productivity at its facilities in Longmeadow. In 2013, revenue and orders significantly increased again and 2014 saw a strong order backlog and the realisation that the African growth strategy was on course.
ABB Southern Africa Managing Director, Leon Viljoen, tells Enterprise Africa: “The market is tough but there are still huge opportunities. It’s not a declining market. There’s also a few large orders that we have landed, including the projects with Kusile Power Station and Venetia Mine and all of this assists us in reaching our targets.
“The South African operation is responsible for what we call ‘Southern Africa’ and that’s anything south of the equator – everything up to Angola, DRC, Kenya, and Tanzania. In these countries there is much larger growth, sometimes up to 7% GDP growth, and there is a lot of focus on infrastructure spend. We are working in an interesting, dynamic region compared to Europe or other regions.
“We’ve got 11 offices in our region outside of SA and most of these are sales and service offices. We are well positioned in the region and growing our market share, so from that perspective we are better positioned to leverage our business.
“I think the reality is that it’s going to be a turbulent market for the next 12 to 24 months. From the customer perspective, there is a lot of change in the sense that the mining and oil companies are not spending on Capex. However, this means that there are opportunities in OPEX spend because they need to keep equipment running for longer and there’s a lot of focus and pressure, specifically on the mining companies, to get their productivity up and you can do that by making sure that the equipment is reliable. So for us it’s a change in focus from new capital spend to maintenance, service and refurbishment spend. Call me an eternal optimist but I believe there’s a lot of work.”
MICROGRIDS, MACRO OPPORTUNITIES
One growth area for ABB, both internationally and especially in Africa, is with Microgrids. Microgrid solutions enable very high levels of wind and solar power penetration in diesel-powered grids, reducing dependency on fossil fuel supplies and curtailing CO2emissions. ABB’s comprehensive Microgrid offering includes a range of technologies for off-grid applications like islands, isolated grids, remote communities as well as commercial and industrial facilities, ensuring utility-grade power quality and grid stability. ABB is a global leader in Microgrid technologies with a proven track record of more than 30 installations.
Recently, the company announced two new micro grid projects, one in Kenya and one at its own headquarters in Longmeadow, Gauteng, South Africa.
“Microgrids is one of the areas that ABB internationally is focussing on. It’s one of four growth projects in the 2020 strategy for ABB and very applicable to the African continent,” explains Viljoen. “With Microgrids, we take solar, wind and other renewable types of generation, and also diesel, and we make sure that it works effectively. It’s easy to install renewables but it is extremely important to control the mix and within ABB we have excellent products for this.”
In September, ABB SA announced that it had received an order from Socabelec East Africa Ltd to design, supply and install a PowerStore™ flywheel-based Microgrid stabilization solution for the Marsabit wind farm in northern Kenya.
Currently relying on diesel generators and two 275 kW wind turbines for all of its power, Marsabit is an oasis at the edge of the desert in a windy area, 530 km north of Nairobi. The city has a population of 5,000 and is not connected to any national grid for its power needs.
“What we’re doing in Kenya,” says Viljoen, “is installing the flywheel for stabilization where the wind turbines are coupled to the weak grid. If you look at a traditional grid, the amount of harmonics is small and do not impact on the quality of supply. With wind that is intermittent and brings a lot of harmonics into the system, you can destabilise a system that is not very robust and this was the case in Kenya. ABB is putting in a system to stabilise that – with a flywheel that produces energy and feeds it into the grid when needed and absorbs energy as it is needed to stabilise what the wind turbine is causing within the grid. There is huge potential for this in Africa because many of the networks are weak and they can’t handle high penetration of renewables, specifically wind, because of the nature of its generation.”
A Microgrid will also be erected at ABB’s Longmeadow facility in SA which boasts 96,000 m2of warehousing, factory, office space and manufacturing facilities. Announced in September, this project includes a rooftop solar photovoltaic (PV) field and a PowerStore™ grid stabilizer, that will help to maximize the use of clean solar energy and ensure uninterrupted power supply to keep the lights on and the factories running even in the event of a power outage on the main grid supply.
“In Longmeadow, we’re building a Microgrid at our head office. That’s basically combining rooftop PV solar with a battery storage system, together with diesel generator and the Microgrid Plus™ system that controls the sources, so its looks at what is needed. It’s also grid connected, so we’re not taking Longmeadow off the grid, we will be connected to the grid and use whatever source is available and cheapest to run our building. In the day, if the sun is shining we’ll use the solar, at night we’ll use the energy stored in the batteries and if we need to we’ll use the grid,” says Viljoen. “This project should be completed around May 2016. These projects can be turned around quickly and that’s the beauty of the Microgrid. We talking about 750 kW of solar and 1 MVA of battery storage so it’s quite a lot of power needed for a building but we do a lot of manufacturing here – it’s more than just an office,” he explains.
RENEWABLE FUTURE
The Longmeadow headquarters is an energy efficiency hallmark in the industry. Renewable energy is becoming a major component of ABB’s strategy, both globally and in SA. The government has put plans in place to fundamentally change the way the country sources its power and renewable energy is a key factor in this policy.
“Renewables if not a new concept for ABB,” says Viljoen. “We’ve been using these technologies for over 25 years. In South Africa, we’ve been part of five solar farms – two in Polokwane and three in the Northern Cape. That was from an EPC perspective and we also have maintenance contracts for two of them, namely Witkop and Soutpan. Globally, ABB are moving away from the EPC concept and are working more on the Electrical Balance of Plant (EBoP). Our systems and products are used in EBoP so we will focus our attention in this area.”
One of the main drivers behind the growth of the renewable energy industry in Africa, apart from the obvious reduction in CO2 emissions, is the speed in which infrastructure can be developed.
“There’s a huge shortage of power all over Africa, including SA currently, so it’s very difficult to get an economy to grow, especially at the rates that African countries want to grow, if there’s no power available. The quickest way to increase the power supply that you do have is with renewables because a coal-fired or nuclear or hydro system takes many years to build but you can build a 50-75MW renewable plant in just one year.
“This industry will definitely grow, not only in SA but also in the rest of Africa, where the countries are trying to fast-track the start of renewable industries. There’s plenty of sun available in Africa so I think it’s a natural way to go.
“The products we have are well-researched and developed for the renewable market. It is a difficult market to penetrate if players do not have the relevant products but there are areas where new entrants can play such as rooftop PV for houses,” explains Viljoen.
BUSINESS DEVELOPMENT
Currently, the biggest contract that ABB SA is working on is in a more ‘traditional’ area of energy – coal. The organisation was awarded a contract from Eskom back in March 2015 for Control and Instrumentation (C&I) work at Kusile power station.
“ABB SA was awarded the contract after Eskom had cancelled their contract with their previous supplier,” explains Viljoen. “The Balance of Plant (BoP) and the first unit will be completed in 2016. This is a five year contract for all six units and the BoP – it’s the C&I work for the whole of Kusile.
“At the moment, this is by far our biggest contract. Over 30% of the engineers working on this contract are South African. For us, it’s a major breakthrough as we will have the ability to support Eskom when the project is finished. We will be able to support and maintain anything we have commissioned directly from South Africa going forward. For me, and for ABB, this is very important. We don’t want to do parachute types of contract where we fly people in and fly them out and then the customer needs to battle from distance to get things done. We have the expertise and the people that have been intimately involved, all located in South Africa.”
Another South African highlight for 2015 was winning a contract with De Beers for work at its Venetia mine. The Venetia mine is being converted from an open-pit mine to an underground mine and the conversion is expected to extend production at the site to 2043, with reports suggesting that the diamond site has potential to deliver an estimated 96 million carats. The project is the biggest capital investment in SA in the company’s history.
“ABB won scope related to the mine winders at the Venetia mine. Out of that, although the contract is signed between Venetia and ABB SA, we will produce around 50% of the contract and 50% will be done from Sweden. The design work will be done in 2015/16, manufacturing in 2017/18, and installation and commissioning will happen in 2019/20.
“For us, it’s part of our area of expertise and things that we focus on; we look at process control and electrification, and mine winders on existing mines so we are very happy to have received this contract,” explains Viljoen.
Philippe Mellier, De Beers CEO, said in a press release: “We’re proud to have been part of the country’s past – and, through this, our largest ever investment, we’re ensuring that we’ll be part of its future too.”
Away from Africa, ABB SA has also picked up work in Russia, something which Viljoen refers to as “a major breakthrough” as this was the first time the company had received a really large international contract for mine winders.
“ABB SA bought a company called Coilmech in March 2011 and they focus on mechanical mine winding equipment. We won a contract just over two years ago for Uralkali in Russia together with ABB Sweden and will produce the mechanical hoists for 12 shafts,” he says.
Partnering with other regional-divisions of ABB is not uncommon and Viljoen says that teaming with international colleagues can often have huge benefits for business.
“ABB SA is a centre of excellence for double and single drum winders, whilst Sweden is a centre of excellence for friction winders. This skills combination greatly benefits customers with a range of shaft depths and applications. At Kusile, we are working with ABB Italy and ABB Germany and we won the contract as one team.”
RIDING THE RAILS
Another opportunity that has the Managing Director excited is in the transportation business and specifically Africa’s rail industry. In March 2014, Transnet announced the R50bn contract with four manufacturers to build a 1,064-strong locomotive suite. This investment is part of a wider strategy from Transnet designed to turn the country into a key player in the global freight industry.
“Rail is definitely a focus area for us because we’ve got products like traction motors and traction transformers and we’ve got a large order from Bombadier. We are building traction transformers in Switzerland and then localising the production by setting up a factory in SA,” says Viljoen. “When that factory is set up, we will have the ability to supply other OEMs with traction transformers from SA. We’re doing something similar with traction motors where we will localise manufacturing. We’ve also got an order from Transnet for a prototype that they’re building where we are handling the propulsion system for them. From all of this, we see that rail is definitely growing; there’s the Gautrain expansion project, PRASA is expanding, Transnet is expanding and they’re also looking at the rest of Africa. There’s possible projects in Zambia and Mozambique and all over the continent so we are positioning ourselves as a local South African supplier so that we can capture quite a bit of that market through the product range that we sell,” he adds.
Earlier this year, Mike Asefovitz, Senior Media Relations Manager at Transnet told rail-technology.com of the organisations ambitions, saying: “We are looking at growing a business, we are looking at becoming the fifth-largest railway in the world, and we are on track to do that.”
This is good news for ABB SA who look set to become a supplier of choice in this growing rail business.
The scale of all of these opportunities means that ABB will have a strong order book for the foreseeable future and where others might struggle due to economic pressure, ABB has set itself up well to ride the wave and maintain its position as a leader in power and automation technologies within Africa and further afield.