Joining Hands for A Brighter Future, GE and Chinese Partners Along the Belt and Road

Burning lights and better lives are among the clear results of cooperative partnerships between GE Power and Chinese EPCs that are strengthening every day through the Belt and Road initiative.

Consider how infrastructure in developing Africa has improved through the efforts of GE Power and China Machinery Engineering Corp. (CMEC), one of China's largest EPCs.

GE and CMEC in recent years have helped alleviate the shortage of electricity in Nigeria by working together to develop the Omotosho power station. Four 9E gas turbines supplied by GE were installed in the CMEC-built power plant, which has been feeding the Nigerian power grid since 2012.

This and many other GE-Chinese EPCs partnership projects in Africa "have played an important role in promoting local infrastructure construction and improving people's lives," said CMEC Executive Director and President Zhang Chun.

And ever since China launched the Belt and Road initiative, GE and its China EPC partners have been exploring expanded opportunities in developing countries as well as growing their businesses. Doors have opened wide in scores of African, Middle East, Europe and Asian countries targeted by the initiative unveiled by China's President Xi Jinping in 2013.

Altogether, about US$ 1 trillion has been pledged for the initiative's projects. GE’s Chinese EPC revenues jumped from $0.4 billion in 2010 to $2.3 billion in 2016. It further projects EPC revenues will double by 2020.

GE Power’s Steam Power Systems has also been cooperating with Chinese EPCs such as Energy China, CMEC and Harbin Electric International on Belt and Road infrastructure projects.

These partnerships have built an impressive portfolio of case studies in countries from Angola to Ghana, Kenya to Equatorial Guinea, Iran to Dubai, Pakistan to Malaysia.

Senior leaders such as Joe Mastrangelo, President and CEO of GE Gas Power Systems, and Andreas Lusch, President and CEO of GE Steam Power Systems, are guiding projects now under way or on the drawing board while at the same time building stronger relations with Chinese EPC partners along the Belt and Road.

These relations were highlighted by Mastrangelo, Lusch and GE Senior Vice President, GE China President and CEO Rachel Duan at the 2017 “China for the World” Belt and Road Forum Nov. 2 in Beijing. This year's event was the fourth annual forum co-hosted by GE and Caixin Media. It is China’s first private-sector forum focusing on supporting Chinese infrastructure companies going global in Belt and Road markets.

Joe Mastrangelo, President and CEO of GE Gas Power Systems

In an interview with Caixin Global on the forum's sidelines, Mastrangelo said his business and its Chinese partners are benefiting from their cooperative efforts. He oversees global operations for GE’s Gas Power Systems business. The business has the largest delivered fleet of gas turbines in the world with more than 7,400 turbines operating in 112 countries.

GE's gas turbine business is poised to grow through the Chinese EPC partnerships, Mastrangelo said.

Andreas Lusch, President and CEO of GE Steam Power Systems

Lusch, who also spoke with Caixin at the forum, pointed to GE's teamwork with Chinese EPCs as proof of GE’s commitment to Belt and Road. Not only are GE and Chinese EPCs supplying and building power plants together, but they're also cooperating at the investment level to support project development worldwide. It's a partnership he says will yield more results in coming years.

GE Power are helping China EPC partners go global by building on the U.S. company's long history in China, Mastrangelo said.

"We've built relationships with the same Chinese companies that are now going outside China, going international," he explained. "We have what it takes to do this. We have global knowledge. Our technology brings the best life-cycle cost solutions to the market. And we help make our EPC partners better."

A good example, Mastrangelo said, is a new power plant in Pakistan. GE Power worked together with Chinese EPC partner Harbin Electric International (HEI) and successfully have its gas turbines synchronized to the national grid.

"This was our first, major HA program outside of the United States," he said. "And it was Harbin's first HA project as an EPC. We were able to do the commissioning in record time, in less than 120 days."

Lusch said GE Steam Power Systems is succeeding with Belt and Road projects because, in cooperating with Chinese EPCs to serve the global market, it brings to the table big advantages including a worldwide footprint and leading technology.

"GE has an advantage in the global EPC business because we're in every country," he said. "Whether it's in aviation, healthcare or power systems, you'll find GE in every country. This is of course a big advantage. If you want to be global and do business globally as an EPC, you must have a global presence."

GE Power and Chinese EPCs are "a perfect fit for our customers globally," Lusch said. "They want a very professional EPC that's competitive with the best available technology. We give it to them. That's why we've been quite successful in working together with EPCs in China."

Evolving Partnership

A business veteran, Mastrangelo was quick to remark GE Power’s evolving relationship with the Chinese partners. “As Belt and Road takes on its new form for the future, Chinese companies are not only wanting to execute projects globally but wanting to invest in projects globally. So the same EPC partners with which we did projects in China with 25 years ago are now going to co-invest with us in projects.”

One good fit is GE's partnership with HEI, which have been working together since1990s.

Today, HEI is an all-round GE partner, not only as an EPC service provider but also as a project financier.

The evolving relationship "reveals what Chinese EPCs can do," said HEI Chief Marketing Officer Ge Xin. "Nowadays, we can reach out to banks to fund EPC projects. We can be part of the financing solution."

Ge cited the Hassyan clean coal power plant project in Dubai as an example of how the GE-HEI relationship has evolved.

Hassyan Energy awarded the project's EPC contract to HEI and GE in June 2016. GE will supply boiler, steam turbine generator, and environmental control systems for four, 600-megawatt units.

The financing group include banks and financial institutions such as Industrial and Commercial Bank of China, Bank of China, Agricultural Bank of China, China Construction Bank, and the Silk Road Fund. Also involved were First Gulf Bank, Union National Bank, and Standard Chartered Bank.

Ge noted Hassyan project team members including HEI were also involved in financing.

"We are proud to contribute to the first clean coal project in the region as its investor, financier, EPC, manufacturer and builder," said Ge. "In terms of project management, we are adhering to the highest standards possible, taking the strictest requirements from American, European, German and Japanese standards."

Paying close attention to the Dubai environment including marine life has been one way that the Hassyan project's partners have followed through with a pledge to follow the highest standards.

"The site is within the parameters of a nature reserve for sea turtles," Ge said. "HEI is working actively in the area of corporate responsibility by protecting the environment. We have transplanted and nurtured 28,000 pieces of coral, moved sea turtles and fish to safer zones, and monitored the living conditions of sea turtles during mating season to ensure their habitat and cycle are kept intact."

"With help and support from GE, we are adhering to the strictest project management standards," Ge said. "Now, HEI is one step closer to becoming the best EPC company in the world."

With over a century of industrial leadership, GE Power technology delivers over a third of the world’s power.

GE has been always focusing on building sustainable and innovative long-term partnerships with China’s leading companies to help them win both at home and abroad. GE Power offers a complete portfolio of power solutions in China and is committed to supporting China in its industrial transformation towards cleaner, more efficient and optimized power generation and usage.

GE Power is a world leader in power generation with deep domain expertise to help customers deliver electricity from a wide spectrum of fuel source, such as gas power and steam power. Headquartered in Schenectady, New York, GE Power is GE’s largest industrial business, with approximately $27 billion in revenue in 2016 and more than 55,000 employees serving customers in more than 150 countries.

Lusch noted that GE Steam Power Systems is keen to address customer demands for flexible, efficient and digital coal plants that deliver the cleanest possible energy.

"We have to address three things with coal," he explained. "First, you have to build equipment and plants with the lowest possible emissions. Second, you have to provide very flexible plants. With all of the renewables coming, a big coal plant has to be more flexible. Third, of course, is the cost of electricity. You must be competitive."

Power generation will always involve "a mix of fuel sources -- a certain amount of coal, gas and renewables," he further explained, "You need a balance that varies from region to region, country to country. There are a lot of different conditions in different regions. But every region has a certain mix. You have to find the right mix with the best available technology in terms of efficiency and emissions."

Thus on every front, Lusch said, GE Steam Power "is working on that. We're always leading in technology, which means more efficiency. For example, we just announced a new generation coal technology for which we signed a new contract in China and another one in Turkey."

The Belt and Road initiative has given GE a good opportunity to shine as a company with global footprint in the market. As a leading digital industrial company, GE has business in more than 180 countries and regions worldwide. It is well positioned to work closely with Chinese EPCs to unlock market opportunities in developing countries along the Belt and Road.

"We've got strong, local teams everywhere," Mastrangelo said. "So in Africa, we are as much an African company as we are an American company. In China, we can be a Chinese company when we have to be. What makes GE strong is that we share a common value system. We work well together globally. It makes us stronger than our competitors."

CMEC's Zhang noted that in addition to the business in gas power generation, his company's cooperation with GE in Africa also includes wind power, hydropower and other renewable energy projects.

"For example," he said, "we have the Kipeto Wind Power Project in Kenya. In this project, GE’s international financing channels and CMEC’s EPC project advantages have made a great, combined contribution to improving the energy supply and benefiting African people."

Kipeto is a "Power Africa" project linked to a U.S. government initiative. GE worked with CMEC through a joint development and construction scheme. The project includes a 120-megawatt wind power plant with 60 wind turbines, as well as power transmission and distribution system.

Kipeto's success underscores "a brand-new cooperation model for large enterprises between China and the United States, which are working closely to develop a third-party market," Zhang said.

Total Solutions

GE Power approaches every project and partnership with a "total solutions" perspective. Mastrangelo said the company looks at every market "as integrated across the value chain. So we have one part of the business focusing on any type of fuel source. We want to deliver the highest efficiency solution. And the second part is the power transmission and distribution business. After you generate the power, you have to efficiently deliver it."

GE's efficiency platforms "make these two, core platforms as well as industrial applications more efficient," he said.

GE Power's solutions are based on various fuels for global customers, including electric power digitalized solutions, highly efficient gas turbine equipment, steam turbines and generating

unit equipment, power generation services, solutions to upgrading power plant and data analysis software.

With a total solutions approach, Mastrangelo said, "you can go into a factory and put variable-speed technology from power conversion into a factory and reduce their energy use while increasing their efficiency. Or you can use our automation controls and a digital platform to run the power plant with better efficiency, better utilization."

"We try to get our assets chosen as the best technology with the best operating cost, and then use other platforms to improve that over time," he continued. "So even if a plant is 15 years old, people running the plant still feel like it's state-of-the-art."

And in the environmental protection area, he said, GE works hard to improve gas turbine performance and emissions controls for every kind of fuel. "It's always important to meet all environmental regulations wherever we install a power plant," he said.

The final piece of the total solutions puzzle is project financing. Outside China, Mastrangelo said, 80 percent of GE's sales are to power developers, not utilities. " So having a project financing arm to help people get projects going, or give them seed money to develop a project, helps our customers realize their dream and put a power plant on the grid," he said.

GE has worked with over 30 Chinese EPC companies in more than 70 markets across Africa, the Middle East, Latin America and Europe, providing a global network of technology, knowledge and tools accompanied by local market expertise and on-the-ground-support.

The equipment includes more than 140 heavy-duty gas turbines, more than 50 steam turbines, over 200wind turbines, as well as O&G equipment.

Furthermore, GE hopes to work together with more Chinese EPC companies in the overseas market and jointly build an ecosystem featuring suppliers, contractors, builders, financiers and O&M service providers throughout the industrial chain. This will help realize greater interconnection and win-win cooperation in various domains.

Meanwhile, the Chinese EPCs "are now going through what GE went through 20 years ago in China," Lusch said. In those days "everybody said that in China you have to localize in China. Chinese companies now have to localize in other countries."

But GE's experience in countries around the world means "we can help them evolve successfully," Lusch said.

Setting World Record

HEI's recent success of two power plants highlights the advantages of working with GE in Pakistan.

The Bhikiki and Balloki projects in Pakistan were turnkey projects built by HEI in collaboration with GE through the Pakistani government. HEI's Ge noted that the power plants used the most powerful, efficient and technologically advanced GE 9HA gas turbines.

“Total installed capacity for these two power plants is 1223 MW, with 2XGE 9HA gas turbines installed. Bikki and Balloki projects are expected to add a combined capacity of 2400MW to Pakistan’s national grid, substantially easing local electricity shortages.” Mastrangelo told the reporter.

And in terms of the construction of Balloki power plant, he said, "we set a series of world records. For example, for Unit 1, it only took 104 days to finish installation and commissioning, which is significantly below the previous record of about 120 days, let alone the average 180 days. In addition, the net output of the Unit 2 rose to 397 megawatts, far more than the contract guarantee output of 380 megawatts ."

HEI and GE are well recognized for their hard work. "Our performance was praised by the Pakistan government and the end user," Ge said. "These projects will greatly improve local people’s lives."

GE and Chinese EPCs are also partners in terms of project financing, which in some cases can make project a reality.

One advantage, brought by the Belt and Road initiative, Lusch noted, is the financial support from China. Among the financing sources cited by him are government financing with support from China as well as European countries through export credit schemes. Traditional commercial banks are also supporting projects, while international commercial banks are funding sources for a lot of independent power producers.

"And of course, there are suppliers such as GE," Lusch said." But Chinese suppliers can also provide a certain amount of financing."

GE and Chinese EPC company PowerChina, also a long-time GE partner, recently joined hands to launch a first-of-its-kind EPC roadshow in Africa. The roadshow brought together stakeholders including project developers, end-users, financiers, equipment-service providers and policymakers from African countries as well as China’s diplomatic community based in Africa. All parties had in-depth discussions about opportunities on working together to meet Africa's infrastructure demands.

This approach is different from EPC + Financing or other funding models. It calls for early engagement, demand creation and total solutions for each project. This new model also fully leverages all participant's potential and resources, as well as EPC execution, operations and services.

In addition, GE can tap capital market through Sinosure and the Silk Road Fund. It also has its own global financing resources.

China for the World

Lusch also noted that GE has leading manufacturing facilities in China, and thus has been exporting “made in China” products to support projects along the Belt and Road.

"We have a big boiler factory in Wuhan for our steam power business, and a big factory in Beijing for our steam turbines and generators," said Lusch. "We also have a big Beijing center for environmental control systems. So our technology for exports is already available here in China. It's perfect.”

Chinese employees have also contributed to GE's successful cooperation with EPC partners for Belt and Road.

"What makes us strong is our depth of talent. We've got a great team here in China," he said. "And pulling together the localization that we have around the world plus technology and a great China team allows us to be a global facilitator for big, complex projects."

Lusch praised GE's Chinese employees as "very engaged, very motivated. The workers are so loyal. They really want to do better every day."

And Chinese EPCs "can often do things no one thought was possible," Mastrangelo said. "A Chinese EPC company will look at a challenge and figure out how to get it done. They don't say, 'That's never been done before. It's too hard.' They say, 'Let's sit down and work together.'"

GE executives including Lusch and Mastrangelo are thus firmly committed to building success with Chinese EPCs.

"We will continue building on the strategy of our China partners who want to globalize," Mastrangelo said. "I think the relationships will become less and less Beijing- or Shanghai-based. These will become global relationships through which we work together around the world. The ability to do a project anywhere in the world together is going to make the difference."