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NEW YORK (Reuters) - Saudi Arabia, one of GEs biggest and most valuable customers, has been rallying rivals to bid to compete for lucrative work at power plants, five sources said.
State-controlled Saudi Electricity has given at least two companies to provide services or spare parts for some of its more than 50 GE-class turbines and is in talks with two other companies over investments to build facilities to service its stations over several years, Sources directly familiar with the matter.
According to industry sources and databases, qualifying these companies for the first time allows Saudi Electricity to break General Electrics control over these businesses by encouraging others to offer competitive bidding to maintain the F-Class turbine fleet, one of the largest fleets owned by one entity and one of the most profitable service providers in the sector .
The sources said that Saudi Electricity has not yet offered any large contracts for the turbines of the category-F on new companies, and it is not clear when it intends to put bids.
In response to questions from Reuters, General Electric said, "At present, the C-Class units produced by GE at SEC are still covered by long-term service agreements."
In a joint statement to Reuters on Sunday, Saudi Electricity and General Electric confirmed their partnership in power generation for nearly 40 years.
"Saudi Electricity is always implementing a very balanced procurement policy to ensure good diversification in supplier sources," said Khalid Al Taaimi, Executive Vice President, Generation, Saudi Electricity.
"The company has always qualified many suppliers to offer services, and we have repeatedly found GE as an excellent strategic partner to meet our service needs."
"We support more than half of the Kingdoms electricity supply, and we are proud to be part of the ongoing development of the sector," said Joseph Anis, President and CEO of General Electric Services Africa, India and the Middle East, and Hisham Al Bahlaki, President and CEO of General Electric Saudi Arabia and Bahrain.
Saudi Arabia, the worlds largest oil producer, is keen to rationalize expenditures. The kingdom is seeking to reduce dependence on oil, reduce budget deficits and create jobs under the "Vision 2030" reform plan. A source familiar with Saudi Arabias electricity work said the kingdom also wanted to get the best prices possible in large contracts with big companies.
The source said that Saudi Electricity is also on track to bring other companies to participate in power station service offerings, rather than relying on General Electric alone, because qualifying other competing companies will lower prices.
The sources pointed out that Saudi Electricity has been launched by competition on a previous generation of turbines known as the category - E. After bidding began, GE ended up with fewer jobs and costs down 40 percent.
A source familiar with the history of GEs services in Saudi Arabia said some of the recently purchased Saudi-supplied F-5 turbines may not be subject to long-term agreements because of high service prices, and the company may then bid for these turbines at any time.
Three sources said that one of the side effects of qualifying Saudi Electricity for third-party maintenance of the F-Class turbines was that the volume of the operation was large enough to allow GEs competitors to launch operations that could exploit them to sell parts and maintenance services to customers outside Saudi Arabia, Of the activities of GEs services around the world.
One source said that for the bidders, the qualification process would pave the way for them to sell their products to other facilities and even other sectors because Saudi Electricity is technologically advanced and other companies will rely on their rehabilitation.
Saudi Arabia has been granted electricity to work on Class-F turbines, Power Systems of Ansaldo Energia in Genoa, and Compasses Parts of San Diego. The two companies declined to comment.
General Electrics chief executive, John Flanery, said utility revenues were important to restore growth in GEs electricity business, with earnings down 45 percent in the second quarter.
The companys electricity sector, which manufactures gas, coal or nuclear power plant equipment, faces a sharp decline in orders for new plants.
In an indication of the companys keenness to increase revenue from its services, General Electric posted videos on YouTube in May in which it said it was offering high-tech updates to the turbines manufactured by Siemens and Mitsubishi Hitachi Power Systems.
In addition to the two service companies, two companies, Cromalui, based in Palm Beach Gardens in Florida and Masoud John Brown in Dubai, said they were in talks on qualification to work in Saudi Arabias F-Class turbines. The two companies said they were already working on Saudi Arabias Class-A turbines.
Masood shareholders agreed to invest in some of the C-F components in its Dubai facility. "The company plans to present this to Saudi Electricity as a means of launching the previous formal qualification process," General Manager Brian Wadeel said in an e-mail.
Cromaloy said it was considering a large investment to be able to operate in Saudi Arabias F-Class turbines in the long term.
"We absolutely want this commitment, and we are having discussions with Saudi Electricity on this," said Jeff Romain, a spokesman for the company.
"We are studying the maintenance of parts or the manufacturing of components over the long term ... that is what Saudi Electricity is asking us to do," he said.
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