By Chayut Setboonsarng
BANGKOK (Reuters) - Japanese gas turbine producer Mitsubishi Hitachi Power Systems (MHPS) expects stronger demand in Southeast Asia for high efficiency coal and gas turbines due to low input prices for the fuels making such investment more attractive.
Although the company has been struggling to meet annual sales goals since the merger in 2014 of the power units of Mitsubishi Heavy Industries Ltd and Hitachi Ltd, the partnership still sees Southeast Asia, its biggest market, as its key prospect.
"We had difficulty in getting purchase orders at first," chief executive Kenji Ando told Reuters on Tuesday.
But due to growing demand for flexible operations and more efficient turbines, and due to coal and natural gas being the region's main energy sources, Southeast Asia is its primary target, Ando said.
"Indonesia, the Philippines, Malaysia, Vietnam and Thailand would like to install coal power plants. The next step is integrated gasification combined cycle turbines," he said, without giving further details.
MHPS's annual net sales have been flat since 2014, slightly above one trillion yen ($9 billion). It is 500 billion yen short of its 2017 target of 1.5 trillion yen.
There is intense competition with General Electric and Siemens, but in the last three years, MHPS has developed higher efficiency, more reliable and environmentally-friendly turbines for gas and coal power plants.
If regional governments implement stricter regulatory requirements for efficient turbines, the company will be able to beat out competitors, he said.
One challenge in operating in Southeast Asia are the 25,000 islands that create a fractured market across Indonesia and the Philippines, Ando said.
"We are studying distributed power systems and smaller units to better service clients," he said.
In addition to Southeast Asia, other major markets for MHPS are the Middle East and North America, Ando said.
For North America, simple cycle gas turbines will be needed due to frequent start and stop requirements from a higher share of renewable sources. This allows utility companies to better manage power supply, he said.
Mitsubishi holds a 65 percent stake in Mitsubishi Hitachi Power Systems, with Hitachi holding the remaining 35 percent.
While high quality thermal coal out of Australia's Newcastle Port is still holding near $100 a tonne and some of its highest prices of the past five years, lower quality coal out of Indonesia is less than half that level.
Liquefied natural gas (LNG) prices in Asia are also still down around 70 percent from a peak hit in February 2014.
($1 = 111.5700 yen)
(Reporting by Chayut Setboonsarng; Editing by Tom Hogue)
Disclaimer: No Business Standard Journalist was involved in creation of this content
