A marriage ready for serious business

Integration of a small revolutionary firm of inventive engineers into the structured world of a major engineering conglomerate with a century of tradition behind it has not been easy, but it seems the worst is now over for this Anglo-German marriage

Eighteen months after the takeover of German wind turbine producer Dewind by FKI, integration of Dewind into the British engineering group is progressing more or less to the satisfaction of Reg Gott, FKI board member, managing director of FKI's Energy Technology division, and the main driving force behind the deal. "We have had to put more into the Dewind takeover than we expected," he admits, mainly in connection with insurance and supply guarantees. But he is still "convinced by the opportunity," which he sees as a neat fit within FKI business. "What other market can expect double digit growth over the next few years?" he asks.

Not that Gott expects a swift expansion at Dewind. "It took us two years to find a way into the wind sector. And now profitability is more important than sales. Many chase top line growth at the expense of profit." He concedes that wind energy is viewed as high risk by the financial markets. "On the other hand we have competencies." And company strategy will not be to go for the big projects, he adds. Instead, Dewind will specialise in the short term in niche geographic markets, such as Japan, where the company recently delivered 15 machines, and eastern Europe.

Dewind is a small cog in the machinery of FKI, a company Gott describes as a mini GE or Alsthom. "Wind energy comprises less than 5% of FKI turnover and less than 15% of turnover in the electricity sector," Gott says. Without the takeover, Dewind revenues in 2002 would have reached about EUR 75 million. The company has installed over 450 wind turbines, with a combined capacity of about 350 MW, mostly in Germany.

Blood to be spilt

Although Dewind is now the only British company producing utility scale wind turbines, it still has eyes for its old home market. "Germany is still the major market even though insurance companies and banks have grown fussier over projects," says Gott. The company also has plans for the UK, Belgian, French and Czech Republic markets. Canada and the US, too, have potential, although Gott sees the US as a tricky prospect, despite FKI's strong presence in the country. FKI has annual sales of $1.5 billion in the US and 40 factories located there, providing a solid platform for the wind division.

"But GE Wind will defend its market territory. That company is better politically connected than any other company in the world," comments Gott. "We won't go in yet, there's a lot of blood to be spilt on the floor there first," he warns. Dewind markets variable speed turbines. GE holds a US patent on variable speed wind technology.

Meantime, FKI is sorting out the problems that had threatened Dewind's existence. "It's a matter of driving changes through or coming a cropper," says Gott. In part, this has involved re-shaping Dewind's by the seat-of-the pants operations to fit into FKI's more rigid structures. "Dewind remains nimble though," assures Gott. A new managing director is being sought for Dewind to replace Andrew Sharratt, who is in the post temporarily after Hugo Schippmann, Dewind's long time boss, moved to FKI Energy Technology to look after "development of new business areas and markets." At the same time, the low technical availability of some of the operating Dewind turbines "is a problem that we are focussing on," says Gott. Clusters of turbines installed over the past two years are being improved and "availability has been stepped up to 99.5% over the last three months."

Customer service, too, has been inadequate, says Gott. FKI has been putting resources into building an extensive service structure. Eighteen service teams have been established in Germany and others are planned, including in Austria where 30 Dewind turbines are being installed. Altogether, 120 people out of around 400 staff at Dewind are employed in services, installation and maintenance and a 70,000 square metre service centre and spare part base was opened in late summer at Elze, near Hanover, at the site of an existing FKI production and service centre. "Spare parts will now be made available more swiftly and reliably," says Dewind. The 400 staff are based at Dewind's former headquarters in Lübeck in northern Germany and at Loughborough in the UK's industrial Midlands.

Offshore future

Other FKI production sites could, in future, play a role in Dewind's development. FKI's Rotterdam facility may be useful for potential offshore business, says Gott. Fully assembled turbines could be taken out to sea from the deep water harbour. "We don't have a specifically offshore design turbine but we could adapt the D8 2 MW turbine," he says. "We are bidding for offshore projects. It'll take nine to twelve months to marinise and test an offshore adaptation of the 2 MW machine and the time scale of offshore development allows this," he says.

FKI has plenty of experience in power applications for offshore equipment, including platforms, ships and nuclear submarines, but would have to buy in or develop the subsea geology know-how. "The offshore specific would be 3 MW, towards the end of next year," Gott says.