The current financial
crisis has meant that many industrial companies are looking for
ways to avoid large capital purchases, long-term investments and
hiring expensive staff. At the same time they need to be planning
for the coming upturn as they know there will be an improvement in
the near future and their company must be ready for the
recovery.
In these troubled times, the rising
cost of energy is high on the agenda of many of the world's
industrial and construction companies as the current economic
downturn continues to affect demand and in turn the turnover and
profits of their companies. As the vital task of reducing operating
costs without damaging their company's performance takes on a new
urgency, many managers are looking at improving the energy
efficiency and power purchase for their operations as an effective
and valuable answer to their pressing need to lower costs and
improve the bottom line of their organisation.
Whilst it is essential for
companies to strongly manage the overall usage of energy throughout
the company's day-to-day activities, it is vital that they assess
the cost of their prime power source, be it from a power grid or
from their own power plant. This cost analysis is especially
critical for companies that are operating in remote locations far
from national power grids as they do have a variety of choices.
Companies should be closely assessing the cost benefits of
generating their own power or calling upon the services of a
specialist power rentals company, such as Aggreko.
The decision to be made between
purchasing a power system or employing power rentals will depend
largely upon the urgency of finding a solution to the power problem
being faced and the length of time the power solution will be
needed for. Purchasing a power system may at first seem to be the
preferred option. However, serious consideration should be given to
the benefits of power rentals as this solution will often provide
the most effective use of a company's working capital when timing
is included into the operating and financial equation.
Power rentals becoming popular
Financially, power
rentals for both large and small industrial and construction
projects are becoming increasingly popular as an immediate benefit
of power rentals is that they avoid the need for large capital
expenditure. In most cases, the financial benefits of power rentals
will compare favourably against the large fixed costs of a power
plant that will tie up large amounts of a company's working
capital.
There are many
advantageous features that make the proposition of renting power
supplies increasingly attractive such as improved cash flow and the
speed by which the much needed power can be supplied to the user.
Other key factors are that there are no down payments for a loan
for power plant purchase required and power rentals have a
guaranteed payments schedule over the agreed term, with options to
extend or decrease the rental period if required. Additionally, the
power rentals option provides the end user with operational and
maintenance services from the specialist power rentals company.
The decision to rent
power simply means that the company transfers the cost
uncertainties and the risks of power equipment ownership onto the
power rental company. This shift of liability allows the company to
concentrate on its core business knowing they can be confident of
the supply of continuous supplies of power from the power rentals
arrangement. An added benefit is that if required the rental
company can take over all power generation and distribution process
so all the end user company does is switch on their equipment and
get on with their business.
In recent years, with the
economy booming and industry growing, one of the most common
reasons for a company choosing a power rentals energy solution from
Aggreko has been timing. During an economic up-turn, the lead-time
for the purchase and installation of generation equipment can be
anywhere up to two years, meaning that companies which need power
urgently will find a rental option very attractive, due to the
'fast-track' aspect of rentals. However, the current financial
turmoil is encouraging companies to consider rental for different
reasons, such as how to better utilise working capital and to
ensure that it is not tied up in large capital purchases for items
such as power plants.
Hidden costs and human capital
When deciding between power plant
purchase or power rentals, a company should first evaluate the many
hidden costs that are incurred with purchasing a power plant.
Insurance is one key item which is often overlooked by companies
seeking to purchase such equipment. Also, with power plants there
are a multitude of spare parts and ancillary items that need to be
purchased regularly to ensure that the power system is operable.
Not only do spare parts need to be purchased, but they also require
storage space and skilled engineers to install the spares. With
power rentals all plant spares and ancillary items are the
responsibility of the rental provider, thus enabling the customer
to budget more effectively.
Another key factor to consider is
fuel stocks for the generating units, an additional cost that is
often forgotten when the decision is made to buy a power plant. The
process of re-fuelling one small generating set (genset) is a time
consuming task. A power plant featuring a number of large diesel or
gas gensets or a power plant that features many smaller gensets on
it will require the company to purchase trucks and staff simply for
refuelling or engaging a specialist fuel contractor for this
essential task. Therefore, the use power rentals specialist who
includes fuel deliveries as part of the rental package is an
attractive option for companies taking this decision.
Another critical factor in the
power rentals versus purchase debate that becomes even more
significant during an economic downturn is the element of human
capital. A modern power plant with its automation and controls
requires a large number of skilled engineers and technicians to
operate and maintain the complex equipment so that it is reliable.
If the purchasing company does not have employees available with
the technical knowledge to run the equipment they may be forced to
hire new staff. However, these skilled engineers are hard to find
and even harder to hire if the power plant is in a remote location.
This staffing situation is solved with a rentals company such as
Aggreko which supplies full operations and maintenance (O&M)
services for the duration of the hire period.
In today's world of power plant
optimisation and the ever higher electrical efficiencies and output
being gained, the power plants are now as technical as they are
powerful needing skilled technicians to operate them. Companies
with their own power plants need to either have their own skilled
personnel or they need to sign an O&M agreement with the
equipment provider or with an O&M service company. All of these
costly personnel can be supplied by Aggreko as part of their power
rentals contract.
Fast track and financial
benefits
In recent years, the specialist
power company Aggreko has seen their power rentals business
increase significantly around the world. In the last few years the
company has opened up business in many new regions such as China,
Brazil and South Africa. There are many influencing forces behind
this swift growth, with the drivers being customer's requirements
for fast-track power supplies and financial control over working
capital. Up until recently, the main drivers have been the
imperative need for quick-fix power solutions in order to satisfy
urgent demands of many different projects in a broad range of
industries and companies. However, the current needs of companies
to control capital expenditure whilst not neglecting their
company's business needs is creating new interest in power rentals
as rentals offer financial benefits.
Crucially, power rentals
provide significant support towards getting projects completed on
time and within budget. The services that a specialist power rental
company offers are not just about power generation; they are more
to do with energy solutions. From technical advice and design
through to installation and commissioning, Aggreko provides
customers with complete power generation and electrical engineering
services in the form of fuel management services, electrical
transformers and switchgear for connection to a utility grid as
well as being able to supply automation and controls for a site's
own electrical distribution equipment. In fact, Aggreko offers
customers peace of mind in the form of total energy solutions.
Power equipment rentals
offer a number of instant benefits to Aggreko’s customer as the
rental packages are delivered in such a short time frame. The range
of financial benefits include the release of capital for other core
activities, an agreed fixed price for power over a given term, the
flexibility to increase or decrease the amount of equipment on hire
at short notice, the elimination of labour plus the ordering and
stocking of the cost for spares normally associated with power
plant maintenance. A rental solution also includes all the other
added value services such as technical advice and installation and
decommissioning, O&M plus a high quality 24/7 service and rapid
response times.
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