NEG Micon announced half-yearly results that were worse than expected. The managing director, Jens-Erik Kristensen, left the company.
The new management found problems involving the gearboxes in its 600 and 750 kWe turbines. With Flender, the gearbox suppliers, NEG Micon devised a retrofit programme for all affected gearboxes to be refurbished over three years, for which $28 million per year has been set aside.
Over 1200 turbines are affected. Damage to the bearings of some gearboxes took place, and the decision was taken to improve bearing lubrication by switching to a different type of oil, mounting an oil filter, reducing operating temperature and building in a high pressure lubricattion system.
These problems were exacerbated by NEG Micon’s overestimating the number of new projects it could cope with, especially in the booming US market. A total of 452 turbines in the affected range had been ordered from the USA, with severe financial penalties for failure to meet a 30 June, 1999 deadline. NEG Micon met this deadline, although projects in Europe slipped behind schedule.
NEG Micon said that the problem only applied to 600 kWe and 750 kWe turbines installed after 1996.
To avoid similar problems in future, NEG Micon has made the following changes: injecting $71 million of new capital; reorganising divisions into profit centres; improving project management system and quality assurance; and ensuring projects are taken on a sound business footing, with clear areas of responsibility and shorter decision-making processes.