Pierre Bastid, Converteam
Release Date: 2009-04-10
The renewable energy sector is relatively new in the portfolio of Converteam. What was the rationale behind entering this sector?I would like to put the energy sector and wind business into perspective within our portfolio of activities. We define ourselves as the specialist of power conversion. Power conversion is about systems turning electricity into mechanical energy and vice versa. For our customers a power conversion system is just one component in a larger system, which 90% of the time is a large rotating machine such as a electric motors or generators. It was quite logical and natural for Converteam to enter the wind industry because wind turbines are based on rotating machines. The nature of our business encourages us to identify emerging markets and of course by the same logic move out of some mature markets. Five years ago this company was part of the Alstom group and there was absolutely no business in the wind industry. Our first wind business started three to four years ago. Today, wind business is the main activity within our energy sector, which is around 20% of our total order intake. The wind business is about three quarters of this 20%, which means that it represents about 15-17% or our total business. Four years ago it was zero. Right now, together with the oil and gas industry, it is the fastest growing sector for Converteam.
Our ultimate mission is to help our final customers to improve the performance of their process. Rather than just looking at wind turbines as the process of generating energy, we actually look at the wind farm as a bigger system. Wind farm developers always strive to minimize the cost of energy in order to optimize the return on investment of the wind farm. Therefore, we take a systems approach to optimize the transformation of mechanical energy into electricity, as well as the process of collecting the electricity produced by the different wind turbines on the wind farm and transporting it to the grid. In each of these steps different components are involved, each creating an opportunity for electricity losses. Therefore, our job is to try to minimise the electricity losses, maximise the yield and maximise the return on the investment.
We provide different components for the overall system, such as generators, power electronics, inverters, collectors and the infrastructure to transport the electricity to the utility’s network. We believe that the wind industry is still taking shape. It is growing very fast and we are seeing some changes in the technology used by the main players. Basically, we want to be one of the leading component suppliers in the future, focussed on providing systems or sub-systems with the mission of improving the customer’s process overall performance.
I imagine that if you want to be one of the success stories in 5 years, you have to bet on the right direction. Where do you see the industry going?
The industry started in Denmark with people involved in local small-scale power generation. The founders of the wind industry did everything in-house and acted as wind turbine manufacturers, wind farm developers and operators, and even small utilities. As both wind turbines and wind farms are getting bigger and bigger a clear separation between the developer and the provider of hardware systems had emerged.
Initially, wind turbine manufacturers were quite integrated but we believe that it is going to be more and more difficult for wind turbine manufacturers to operate as integrated companies while remaining at the leading edge of technology; therefore there is a clear room for subsystem providers like Converteam. Our strategy within this industry is to integrate the maximum number of our subsystems in order to optimize the operating model and yield for the turbines. Therefore it is essential to have a good business relationship with the turbine manufacturers as well as the component and sub-system suppliers to ensure that our products are easily integrated in the system.
Who do you believe will be driving innovation behind this sector? Do you think it would be the component manufacturers like Converteam or the wind turbine manufacturers?
It is an interactive process between both and that is why it is very important for us to develop a close relationship with some of the key wind turbine manufacturers. If we understand their overall system, we can suggest technological improvements and innovation will come from both sides. There are a lot of opportunities if you work this way.
For example, one of the critical features of the wind turbine is the pitch control. If power electronics are used to monitor the generator it will be interesting to integrate the pitch control function. In that case, we could contribute the pitch control technology because we understand the critical nature of pitch control for the optimization of the system as well as the other components interacting with the pitch control system.
This year, according to the global prediction for the wind industry, China will become the largest manufacturer of wind turbines. Where is your wind business today in China?
We have a privileged relationship with wind turbine manufacturers such as Darwind which has the potential to become a big player as it is positioned to introduce the next generation of offshore wind turbines. We also have a close relationship with Siemens Wind Power, which of course is a European business that ships wind turbines all over the world. In China, we have a close relationship with Dongfang which we intend to further develop in 2009. Despite the global economic slowdown, there are going to be good opportunities in the wind industry for us, especially in the United States where they want to catch up with clean energy generation and China because the Chinese government is already very serious about developing the wind industry. There are three fundamental reasons: rapidly growing energy consumption in China, the environmental factor, and the fact that wind energy is a very good sector to stimulate the economy.
Our company is very well positioned because we already have good business in China, but I think there is more than that. In terms of strategy and scope, we want to be the power conversion expert in all applications in wind and renewable energy. In terms of development, our business model very clearly states that as our markets are global, we have to be as autonomous as possible in each of our main geographic areas. It means that eventually in China we want to be a Chinese company with Chinese staff, Chinese customers, Chinese business partners, Chinese competitors and Chinese technology. We have already localized our power electronics facility and started to construct a power generator production facility in China. Hopefully, 2009 will be a turning point for us as we continue to further localise our business in China. As early as 2010 we should be able to provide the components from our Chinese factories and workshops.
The China strategy has been there for much longer than the renewable energy strategy. Has the rapid growth in the Chinese wind industry opened a new door for you to use the success in this sector to build on other areas in China in the longer term?
The answer is yes and a very good point. Again, our fundamental strategy is to design, develop and implement power conversion systems around core components as motors and generators. We offer power electronics, software, and engineering solutions that fundamentally require the same hardware and a lot of common software for different applications. If we are able to grow substantially the business - right now wind is the largest business for us in China - there are going to be positive consequences for the other businesses. Each of our markets fits into the other one to develop and get the critical mass faster.
Within the wind industry, you are working with a lot of state-owned companies in China, with the Chinese government and in the longer term your business success will depend, to a large extent, on the networks that you establish there. What is the reputation that you would like to have in China in the longer term?
I would like Converteam to become the undisputed leader in power conversion around the world. The second target I have set for this company is to become the best company to work for. This is my personal objective - young graduates from engineering schools dreaming to work for Converteam. And why not do the same thing in China attracting young Chinese engineers? We are not yet there, but hopefully we are making our way.
China produces the greatest number of engineering graduates in the world and they will be more and more important in the future. How are you going to attract the Chinese talents and position yourself as the preferred employer around the world, especially in China?
According to our model, we are a small multinational company positioned as a local company in each of the countries. It is easier to compete in the local market when you are a local company. We are a local company in China and as a group we benefit from what our Chinese company can bring us. For example, we have set up international procurement offices in China to source high quality components, systems and sub-systems from China. It is not just a matter of price and cost, but also of lead time, service, and support. As we grow our business in China, definitely we would like to grow a Chinese team of engineers. We also plan to set up an engineering development centre in China. We have a joint-venture company in Wuhan with WISCO, with around 200 talented engineers in metals industry and currently we’re thinking how we can use our competencies in the metals industry for our development in China.
When Converteam was spun off from Alstom, it was a great opportunity for you to change the business model. What is the big difference between Converteam’s model and that of Alstom and Schneider Electric?
These large internationals taught me organisation, management, discipline, processes, but those large groups are not very good at managing small and complex businesses. I joined Alstom in January, 2004. I recognised the potential of Alstom Power Conversion, a €500 million business that was not very large within Alstom’s multi-billion euro portfolio, but very complex and not living up to its full potential. After the spin-off from Alstom, I brought people from other industries to apply what I had learnt in each group to the smaller business. What we did was a successful combination of organisational skills and professionalism of the larger organisations with the flexibility and agility of small companies. That is why I want to have local companies so that we remain flexible and agile in each country.
| Company: | Converteam |
| Position: | President & CEO |
| Country: | France |