As an industry temperature check for the power sector, transformers are a good place to start. They are an essential infrastructure link in the route to the customer. During the boom years, transformers were also subject to considerable lead times, as suppliers experienced a surge in demand.
Despite downturns affecting high-profile markets, there are signs that elsewhere the transformer business continues to be strong. The dynamics of regional population growth continue to drive demand for infrastructure. There are also continued requirements to improve the safety and reliability of electricity networks and modern transformers are central to the success of any serious upgrade programmes.
The industry appears to be expecting a period of reasonable stability over 2009, as healthy order books keep business ticking over, with some predicting a gradual upturn beginning in 2010.
A demonstration of this stability can be seen in the Dammam-based Saudi Transformers Company (STC). The company has been manufacturing distribution transformers and compact sub-stations for the past 27 years and its management continues to be confident about the company’s future.
Saud Abdul Aziz Shallali , the executive president of Electrical Industries Company (EIC) – the parent company of STC – is certain that the Middle East energy sector is set for consistent expansion as governments throughout the region continue with a host of vital infrastructure projects.
“One area that is not slowing is the power sector – we realise that this sector is vulnerable to shortages and need a constant investment from the governments,” he said.
“Accordingly the transformer market will continue to thrive and is currently performing very well. Most of the utilities in the region have expansion plans. Especially in Saudi Arabia, where the power generation capacity is to continue to increase in the next few years, we foresee a very good future. Besides, other countries in the region offer a lot of potential too.”
Shallali believes it is vital to consider the long-term structural trends that are reshaping the industry.
He believes that as significant changes emerge they are likely to transform traditional relations with customers and suppliers. Although the current downturn will affect the industry’s performance, short-term steps taken now to counteract the situation and improve performance can affect companies in the long run.
“Unnecessary restraint or excessiveness can both prove detrimental to the long term interest of the companies,” he said.
“In this period of economic instability, discretion and efficiency will be the operational slogan for us.
Boosting efficiency will be a major challenge in the near future. It will allow us to enhance our competitive advantages. Successful companies innovate and expand. We will need to innovate within our core business and also explore opportunities to diversify into new ventures as well as new technologies.”
This technological innovation may need to be focused on accommodating alternative energies, as solar, wind and nuclear energy sources become more important in the regional energy mix.
“We need to mould ourselves to cater to the future demand in these sectors,” said Shallali. “Technological advances have also been made to introduce biodegradable oil and high quality insulation material, which improves the efficiency and reliability of the transformers.”
Shallali sees the prospects for his industry and his business as strong. With power being part of the critical infrastructure on which the socio-economic development of his country, and others in the region, depends, it’s a reasonable position to take.
Demand is split, with regional utilities accounting for 60-70% of STC’s production. The remaining demand comes from private sector, which Shallali says is also an important contributor to the growth of the transformer industry.
“We believe that the investments in the growth of transmission, sub-transmission and distribution systems will match the increase in generating capacity,” he said. “Consequently, demand for transformers will increase. We foresee a bright future ahead.”
