Aggreko is unique amongst large equipment rental companies in that we design and build the majority of our fleet in our own, purpose-built manufacturing facility in Scotland. We believe that this is an important competitive advantage, for a number of reasons:
- First, it means that we can optimise the equipment to meet our particular operational requirements. A generator or chiller is normally designed to be permanently installed and rarely, if ever, moved; its performance will also be adapted for the regulations and ambient conditions of the country in which it is sold. An Aggreko generator will be picked up and put down hundreds of times during its working life, and may be required to work faultlessly at +50°C in the Saudi Arabian desert and a few weeks later at –40°C in Siberia. This is not a capability that is available in off-the-shelf equipment. We also design our equipment with the knowledge that we will own it for its operating life and the more reliable it is, and the longer it lasts, the higher the returns we will make. Given the choice of 6mm steel for a bed-plate, or 8mm, we choose 10mm.
- Second, the volume in which we purchase the key components is significant in terms of the overall market. In some sizes of equipment, we are probably the largest buyer in the world. By designing and manufacturing our own equipment, we can capture for ourselves the benefits of being a volume purchaser. On a like-for-like basis, we think we have a cost advantage over our competitors and, in a capital-intensive business, that is important.
- Third, having our own design and manufacturing capability means that we can react extremely quickly to customer requirements. We only have to convince ourselves of the desirability of a particular design feature, not a third party manufacturer.
Most rental businesses have a model of buying assets and then selling them on at a relatively early stage in their useful life. This minimises maintenance costs and enables them to use income from used fleet sales to help finance new equipment purchases. Because we build longevity into our equipment, and failure rates in generators and chillers are more related to how well they are maintained rather than how old they are, we opt for a policy of rigorously maintaining our assets and running them for as long as possible. This also has the important benefit that our business model is not exposed to the vagaries of prices achievable in the used equipment market, which tend to fluctuate with the economic cycle.
Our power fleet is, by our estimates, about 7 times larger than our nearest competitor: at the end of 2012, it comprises around 18,000 generators ranging in size from 10KW to 2MW which, in aggregate, amount to over 9,100MW of generating capacity. To put this into perspective, out of 233 countries in the world we have more generating capacity than 170 of them. In aggregate, the net asset value of our power fleet is £1,005 million, and the original cost carried in our balance sheet is £1,909 million. This value includes large inventories of transformers, switchgear, cable and distribution equipment which are essential in providing our customers with power they can use rather than a just a large humming box.
This fleet includes around 600 one MW generators that have undergone at least one refurbishment. This refurbishment capability, most important for our Power Projects business, is a major competitive advantage in that it delivers 'as good as new' generators, modified to the latest specifications, for around two-thirds of the original cost.
Our chiller fleet is also much larger than any of our competitors, with over 2,250 units with a total capacity of 1,080MW. The net asset value of our chiller fleet is £47 million, and the original cost carried in our balance sheet is £118 million.
The rest of our fleet mainly comprises air-conditioners, oil-free air compressors, cooling towers and other ancillary equipment with an aggregate net asset value of £144 million, and the original cost carried in our balance sheet is £304 million.