A new hydraulics lab and expanded production capacity are planned in Araraquara, Sao Paulo state, Brazil, by the GE Hydro-Inepar (GEHI) joint venture.
The investment move is a strategic step with both industrial groups investing more capital in GEHI, through which GE will undertake its future new work in the hydro power sector globally.
While the percentage ownership split in GEHI has yet to be finalised, GE will be the majority partner, it has been agreed. IWP&DC understands that the capital invested will be accounted for primarily in equipment and facilities, the minority of the equity being cash.
GE is funding the new hydraulics lab, the first in Brazil, which will house equipment from both firms. Construction of the facility has yet to start but it is expected that it could take less than two years to build. The lab will have two universal test stands for low to high head models, and the facility will receive the majority of ge-hydro‘s model references from across the world.
The JV also plans to double its industrial production capacity over the next three years, including benefiting from the transfer of GE Hydro manufacturing equipment.
Under the changes to its hydro power operations, GE Hydro will close its workshop in Lachine, Canada, in mid-2008. Jobs will go but information on the numbers employed at the site was not available.
The engineering and project management functions in the Canada location, however, will continue as GE Hydro to complete its local, and international, backlog of hydro power work.
Other changes in GE Hydro include the transfer of its facility in Tampere, Finland, to the JV while operations in Trondheim, Norway, will be transferred to Norwegian industrial group Nordheim Larsen Industrier (NLI). IWP&DC understands that it is hoped, following the preliminary deal, that the sale will be signed within weeks. The firm previously acquired GE Hydro’s workshop at Sorumsand.
In China, the workshop of a JV there will complete its backlog of hydro orders and then move on to serve other energy sectors, it is understood.
The strategic shake-up in GE’s hydro operations follows the non-completion earlier this year of the proposed sale of most of the business to the Pescarmona Group of Companies – the parent of Argentina-based IMPSA. While GE had hoped the deal would be completed in the first quarter it failed to do so by the 31 May deadline and the deal was called off, IWP&DC understands.
In the meantime, GE had come to recognise the growing prospects for hydro power and after the deal evaporated it ordered GE Hydro management to produce a new business plan. In re-focusing its operations and assets in GEHI, which was established in 1998, the firm remains active in hydro. The Brazil-headquartered JV, based in Campinas, also in Sao Paulo state, will have transferred to it GE Hydro’s operations in Finland and Sweden, for which the final legal structure of the arrangement is being established, IWP&DC understands.
With respect to future operations, GE and Inepar will, within the JV, set up mechanisms to ensure that optimum risk measures are used in line with the scale of contracts being sought. It could be that for particularly big project bids GEHI would be backed by GE with commensurate requirements.
Under the changes, GE Hydro staff will have the opportunity of working with the JV or possibly other energy sectors within GE.
Previously, in a statement, GE said the restructuring move for its hydro business was in response to increasing cost competition in the hydro sector plus the corporation’s internal need to consolidate to secure advantages geographically and by product.
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