ATOMEXPO 2009 , 26-28 2009

EPC Contracting Strategy balancing Risk & Rewards for Customers and Contractors
Juan Ccahuana Tito, Director Fossil Power Sector Energy, OOO Siemens Moscow

, 2006

Historic Development of World Power Plant Market Since 1950

GW/a 300 250 200
Penetration of nuclear power

Extraordinary growth in Europe, Russia, China, Middle East and RSA Market boom in S/E Asia replaced by USboom Overestimation of demand, impacts of oil price crises

Slow down due to lower consumption growth, high backlog?

Drivers, uncertainties
Economic growth Energy prices Ecology awareness Power plant types Commodity prices Liberalization Customer behavior Replacements Regional markets Grid extension Production capacity

150 100 50 0 1950

Steep rise in power demand

Fossil Market >100MW Renewables Renewables Hydro Hydro Nuclear

All Types Unit Size > 1 MW

1960

1970

1980

1990

2000

2010

2020

Source: Siemens Energy GS4 Base Case scenario Status: April 2008

Short term is characterized by stagnating market after extraordinary high growth

, 2006

Strong market demand led to bottlenecks in the entire supply chain

Sub-supplier Limited capacities at sub-suppliers Presently no capacity extension in the market available Long lead times for key components High price level for supplies e.g.:
Forging Civil Casting HRSG

Power Plant Manufacturers

Customer / Market
Steep Market Increase
203 144 178 GW/a

05-07

08-10

11-13 135%

Volatile Market Prices

200 200 200 200 200 5 7 Lead times and cost have increased significantly (+35%) within4 3 years 6 last 4
Erection/Commissioning

Engineering Procurement Manufacturing Construction

100% 105%

112%

125%

Feb

Oct

Aug

Jul

Feb

Source:Thermoflow, e.g.Iberian peninsular CCPP

- Current EPC business models need to be rethought by industry e.g. -> EPC-M - Develop alternative business models - Siemens is strengthening its product business by providing pre-engineered product packages to the market.
, 2006

Reference sales models structure the Siemens offerings to our customers

General model: Customer request vs. Siemens offering
Entire Power Plant Power Block Power Island Extended Power Train

Siemens offering

Entire Power Plant as Turnkey business from Siemens -Models: Customer award for an EPC full scope delivery will be served from Siemens and a partner (e.g. EPC Consortium). - Models: Customer awards reduced scope. Integration to complete Power Plant is under responsibility of customer or a 3rd party contracted by the customer (e.g. EPC-M, Architect Engineer)

xa
Entire PP

2a

3a Partner needed

4a

2b 3b

xb

t se uqer r e m t s u C o

Reduced scope

4b

Scope of service and deliveries

Source: New Business Mix Initiative , 2006

Reference sales models cover the full range of solution business

Reference sales models - Overview
Priority
Limited volume depending on resources and project risk

Model
20-30%

Scope of delivery
50-60% 70-80% 100%

Applied principle

1 2a 2b 3a 3b 4a 4b
Power Block Power Block

Turnkey Consortium Partner Customer scope Consortium Partner Customer scope

Entire power plant as General Contractor Appropriate rebalance risk tools to be applied Control over Power Block design (incl. 3D model) Model to cooperate with construction companies Carve-out of civil & erection to ensure ~40% partner scope Control over Power Block design (incl. 3D model) Customer is responsible for scope outside power block Control over process: Min. scope for gross perf. guarantee Model to cooperate with AE/EPC capable of power plant eng. Consortium partner responsible for plant integration Control over process: Min. scope for gross perf. guarantee Customer responsible for plant integration No Siemens plant design Model to cooperate with EPCs in multi block projects Min. scope for SAG (~40%) only in case of multi block projects No Siemens plant design Delivery of components (GTs, STs plus e.g. electrical equipment, I&C, etc.)

3 1 4 2

Power Island Power Island Ext. Power Train Ext. Power Train SAG Customer

For equipment supply only

Consortium Partner Customer scope Consortium Partner

Source: New Business Mix Initiative , 2006

Standard scopes of supply including SGT5-PAC 4000F multi-shaft plants

SGT5-PAC 4000F SCC5-4000F 2x1 Power Island SCC5-4000F 2x1 Turn key

SGT-PAC
Gas fuel and auxiliaries Air intake / exhaust system Gas fuel system Modules Connectiong lines Generator and auxiliary systems Fire extinction system of GT plant Electric and I&C equipment Options

SCC Heat and power equipment

SGT-PAC SST-PAC without condenser Steam turbine and auxiliaries without piping Generator and auxiliary systems Electric and I&C equipment Heat recovery boiler Options

SCC Power Island

SCC heat and power equipment Condenser with air exhaust system Feeding pumps of a boiler Condensate pupms Safety valves Fuel preheaterwith filters, counter unit etc. Power Island monitoring system Options

SCC Turn key

SCC Power island Building and structures Cranes and life support systems of the turbine building Power plant cooling system Water treatment Initial and waste water system Tankage Piping and valves of the plant Electrical equipment I&C of the power plant Additional fire alarm and fire extinctions systems Erection and commissioning Other options Complete turn key delivery of the plant

Manufacturing and delivery

Cycle optimization / Manufacturing solution

System inegration / Optimized solution

, 2006

Flexible Approach to balance Risk Sharing

Sales Model (Customer Value)

e llue a u a gV gV n ci n sk nc i Riis k n alla nd R a a nd b Re b a Re a

Full Scope EPC Turnkey Power Block

Power Island Extended Power Train

Shared Risk
Focus on Customer Value and balanced risk Focus on Customer Value and balanced risk
, 2006

Partnering Initiative: Selected EPC partners worldwide

Boiler IHI Doosan Babcock Burmeister & Wain Water Island Sidem Doosan Water Fisia Hitachi Zoosen Techint AE&E Duro Felguera Iberinco Bilfinger Berger AE&E Bilfinger Berger AE&E Fluor Gama Kentz AE&E Enka SNC Metka Bilfinger Bergar Enka Gama Metka Enka Metka

GS E&C Daewoo Daelim Posco E&C Hanwah E&C SK E&C

Aker Kaeverner Kiewit Worley Parsons Fresh Meadow BE&K Al Ghanim ASTE ETA Doosan Heavy Samsung Daewoo Marubeni HHI HDEC SNC Techint Al Rahji NCC Saudi

Marubeni Samsung Daewoo GS E&C Sumitomo YTL CTCI

Duro Felguera Partner with SAG experience Partner w/o SAG experience Bold Strategic Partner Normal Project Partner

Orascom YTL Daewoo SNC Bilfinger Berger Iberinco Techint

Fluor Bilfinger Berger YTL

John Holland Sumitomo

L&T Daelim Samsung

Source: Partnering Initiative

, 2006

Partner co-operation program covers full life cycle of partner relationship

Partner Development Process
Identification of Partners Perform partner workshop Sign a partnering agreement defining basis of partnership Step 3 Partner agreement signed and projects identified to bid together Co-operation development plans detailed and tasks allocated Dedicated Liaison manager identified. Build up of relationship and bid projects in consortium Step 4 Execute executive relationship mgt., projects developed together, first bids prepared on the basis of partnering agreement Successfully implement projects in consortium Step 5 First project in implementation as per partnering agreement, regular feedbacks, evaluation of the agreed cooperation development plans (1 p.a.)

Step 1 Identify Partners with sales for regions and countries Collect feedback from existing projects with the partners Get partner consent in taking part in program

Step 2 Perform partner workshop, discuss experience and find common ways for future cooperation, identify co-operation development plan and sign a MOU

Source: Partnering Initiative , 2006

ATOMEXPO 2009 , 26-28 2009

Thank you for your attention

, 2006