Schneider makes formal offer for Invensys

Schneider Electric has today published its formal offer to acquire the Invensys Group for just over GBP3.3Bn, as previously discussed.

Relevant statements were  published this morning.

Jean-Pascal Tricoire, Chairman and CEO of Schneider Electric, commented:
“We are delighted to announce the combination of Invensys and Schneider Electric in what is an exciting day for the stakeholders of both companies. The addition of Invensys’ businesses will considerably strengthen Schneider Electric’s overall offering to its industrial and infrastructure customer base, reinforcing us as a global leader in energy management solutions integrating power and automation, as well as leading software for customer efficiency. The transaction will allow Schneider Electric to benefit from increased scale and realise substantial synergy benefits from the combination. We believe our offer is compelling to Invensys shareholders who will realise significant value for their holdings while having the opportunity to participate in the future strengths of the combined business. We warmly welcome Invensys’ team and believe that the combined business will provide new and larger growth opportunities for employees and customers as well as offering Schneider Electric’s shareholders significant future value creation.”
Sir Nigel Rudd, Chairman of Invensys, commented:
“Following the recent disposal of Invensys Rail, the agreement with the Pension Trustees and the reorganisation of the Group, the Invensys Directors believe that Invensys is strongly positioned to execute on its growth strategy going forward. However, the Invensys Directors believe that the offer from Schneider Electric represents an attractive value for Invensys Shareholders and reflects the future growth prospects of the business and a significant proportion of the benefits which are expected to accrue from the strong strategic fit between Invensys and Schneider Electric. Combined with the disposal of Invensys Rail and return of £625 million to shareholders, this represents a very attractive result for Invensys Shareholders. Furthermore, the members of the Invensys Pension Scheme will benefit from the ongoing support of a significantly larger, leading, global automation business.”

What happens next?

The press conference highlighted that there has been a lot of contact between Schneider and the Invensys operational management already, in the recent due diligence work. Jean-Pascal Tricoire expressed a lot of appreciation for their knowledge and expertise. He sees the two companies as neighbours, in fact with little overlap of business, but many common customers. Schneider comes from the market sectors in the discrete operational part of industrial processes, whereas Invensys comes primarily from the continuous process side. Schneider supplies the MV and LV power interfaces to the major customers where Invensys supplies the automation. Tricoire therefore sees the match as a meshing, rather than as an acquisition where bits need to be cut out.

However, the formal offer document, now being prepared, will not be distributed until late August or September, and an Invensys EGM to vote on the offer will not be held until Q4, maybe even November 2013: the target for completion would be the end of the calendar year. So there is plenty of time to mull over the proposal, and discuss the joining of the Invensys ArchestrA and InFusion with the Schneider PlantStruxure PES and their use of totally Ethernet communications….

The offer price

The formal offer presented today restates the deal as initially described by Invensys on 11 July, and uses the figures at that date for the Schneider share price and the Euro exchange rate. This results in a total offer price of GBP5.02 per share on the basis of 11 July figures, or GBP5.07 on the basis of 31 July figures for the Schneider share price, and the GBP/Euro exchange rate. Invensys shares in London recovered to GBP5.02 after the Schneider announcement, having fallen off below the £5 mark because of a lack of interest, or news!

Krohne NIR spectrometer announced

On July 1st, Bayer Technology Services (BTS) and Krohne signed a distribution agreement to commercialize the SpectroBAY inline NIR spectrometer system. The agreement comprises the worldwide marketing and sales of this analytical system in the chemical processing industry (CPI) outside the Bayer group, through Krohne.

SpectroBAY is an in-line optical spectrometer system that uses near-infrared wavelengths (NIR) to determine the composition of liquids, solids and gases in real time. The information about the composition of process streams can be used for closed loop control. By knowing the composition at any time, chemical producers can operate their process at the chemical and economical optimum with as high yield as possible. Applications for the SpectroBAY range from incoming chemicals (reactants, catalysts etc.), chemicals being converted (reaction tracking) to quality/purity analysis of final products. Since its development in 2001, the system has gained a track history of more than 400 applications with over 600 measuring points in chemical plants worldwide.

Due to the large success as a compact optical analysis system which can even be applied in explosive areas, BTS decided to make SpectroBAY available outside the Bayer group. Out of an assessment that included 30 companies, Krohne was chosen to become the exclusive sales partner in the CPI.

“We have been working with Krohne on many projects for quite some time. With Krohne we have chosen a partner with a very good fit of company cultures, a strong track record of bringing technologies into the market and very good access to customers in Europe, NAFTA and China which we will be focusing on first” says Dr. Klaus Sommer, Senior Vice President and Head of Customer and Product Management at Bayer Technology Services.

Stephan Neuburger, Managing Director Krohne Group, adds: “Efficiency is the key-word of our times, hence plant owners and operators desperately need real-time measurement and control. They cannot afford to not exploit the full and entire plant capacity. So large plants are increasingly upgraded with NIR spectrometer systems. SpectroBAY represents a new flagship product in our analysis portfolio for this market. In addition, BTS will benefit from our proven experience as well as from our well-established and diversified customer relationships worldwide.”

Invensys bid speculation – Monday 15th

Reuters have reported that  US General Electric is gearing up for a GBP3.5 Bn ($5.3 Bn) counterbid for British engineer Invensys, that would trump last week’s offer from Schneider Electric, as reported by the UK Sunday Times.

A bid battle between GE and Schneider, two of the world’s biggest industrial companies, could drive up the offer price for Invensys to 550 pence a share, valuing the company at GBP3.6 billion pounds, The Sunday Times said, citing unnamed sources.

Invensys said on Friday Schneider was considering an offer of 505 pence a share in cash and stock, 15 percent above Invensys’ closing price on Thursday.

The Sunday Times said its sources had cautioned that there was no certainty GE would enter the bid race, but shares in Invensys rallied to a ten year high on Friday on speculation Schneider’s offer could flush out other bidders.

Invensys has long been mooted as a takeover target in an industry where larger rivals dominate.

US group Emerson Electric was in talks to buy Invensys a year ago.

GE declined to comment. Invensys, which said on Friday it was likely to recommend an offer at 505 pence a share, also declined to comment. Schneider advised in a statement that the Invensys announcement about their discussions and a possible acquisition was made without the agreement of Schneider Electric.

Invensys/Schneider and those share maths pundits

The stock market valuations and ratios are fine, but being a basic maths guy let’s look at the Invensys/Schneider deal, quoted as a higher than average 22.4 P/E ratio for Schneider.

The proposed deal is worth GBP3.3Bn. But for that Schneider buy a company with a minimum of GBP0.6Bn in cash (see below), so it actually costs them GBP2.7Bn. Schneider had GBP2.4Bn of cash at the end of 2012, so they have the resources. But the P/E ratio. If it is 22.4 based on a price of 3.3Bn, the actual P/E ratio after deducting the cash resources is 18.4, which is well below the 20 times average earnings Schneider has paid for deals since 2005 (according to BNP Paribas).

So Schneider has a fairly standard deal, in their terms, with some upside if needed. Plus from the European view, Invensys fits well with Schneider, having a significant European, and French, presence.

Somehow the Schneider/Invensys combination makes sense: what would be more interesting would be to hear what Schneider plan to do with the whole new horizon that Invensys would open up for them.

Schneider statement:

The Schneider website contained the following paragraph explaining their rationale:

Schneider Electric believes that the strategic and financial rationale for this transaction, if consummated, is compelling. Schneider Electric is considering making an offer for Invensys in order to increase its focus on the attractive industry automation sector. The enlarged group would significantly expand its access to key electro-intensive segments where Schneider Electric offers leading low and medium voltage as well as energy management solutions. It would also gain a leading position in the fast growing software business for industrial operational efficiency.

INSIDER Newsletter Comment:

So the statement follows the Invensys view of their future growth potential, in terms of Energy Controls on the one hand, and Software, for operational efficiency, on the other.

Possibly, in the middle, there is InFusion, and Archestra, able to sit in the plant management and operational efficiency space, and get closer to the customers – whoever has supplied the basic automation systems. Who is going to recognize this and take it on, or is it still outside the accountant’s horizons?


* For Schneider comment in the INSIDER Newsletter see January 2013 page 7.

* For the last INSIDER valuation of Invensys, post Rail sale, see the newsletter of December 2012, page 6: the price quoted there was GBP3Bn.

+PLUS there are lots of cash piles stashed away in the Invensys future, not the least of which must be the payments due from the Chinese nuclear power plant orders, due for realization this year. Then, for the future, what about the pension fund “just in case” GBP225m reservoir trust bank accounts? They should hopefully realize a few bonus GBP in 5-10 years, one way or another.

Schneider approach Invensys

All I do is take a Friday off to go to an air display, and look what the Guardian comes up with:

Shares in the UK engineering group Invensys have surged 16% on news of a £3.3bn takeover approach from France’s Schneider Electric.

The French power equipment maker said it was in early talks to buy Invensys to boost its industry automation business. Invensys said it was likely to recommend Schneider’s offer of 505p a share, which would represent a 15% premium to the stock’s Thursday close on the London Stock Exchange. The shares reached 511p in early trading on Friday.

Schneider has indicated it would pay 319p in cash and 186p in new Schneider shares, Invensys said.

Schneider said it had until 8 August to say whether it intended to make a firm offer or walk away under UK rules. This could be extended with UK takeover panel consent. The group, whose products help utilities distribute electricity and which makes automation systems for the car and water treatment industries, said last summer that it planned to step up acquisitions to boost sales and tap new markets.

Schneider had €2.8bn (£2.4bn) of operating cash flow at the end of 2012.

Invensys emerged as a potential takeover target earlier this year on speculation that the sale of its rail business could lead to substantial net cash and raise interest from suitors.

Société Générale analysts said in late April that Invensys could be valued at 460p a share following the disposal.

The Wall Street Journal provided a very perspicacious report:

Schneider Switches on for Invensys

Schneider Electric has stirred Europe’s mergers and acquisitions market from its slumbers, with an indicative £3.3 billion ($5 billion) cash-and-shares offer for the U.K.’s Invensys . In truth, Invensys—a specialist in providing automated systems for large-scale industrial processes—has looked ripe for the picking since it last year sold its rail division to Siemens for £1.7 billion. That helped it reduce a pension deficit that had put off previous potential buyers. Invensys’s share price rose 16% on Friday, to just above the £5.05 per share offer price.

The question is whether Schneider’s bid will be generous enough to see off Invensys’ other potential suitors.

Invensys looks a good strategic fit for Schneider, even though adding Invensys—worth around 15% of Schneider’s current market value—wouldn’t be transformational. The French electrical equipment maker has lagged its peers in the automated process business, with a 4% global market share compared to Siemens’ 21%. Whereas Schneider operates more in what’s called “discrete automation,” selling products for specialized manufacturing processes, Invensys will give it more exposure to larger industrial clients like oil and gas or companies or nuclear plant operators.

Moreover, Invensys has scarcity value: The only similar asset Schneider could buy is Japan’s Yokogawa Electric . That could be why Schneider’s price looks high. At 22.4 times Invensys’ expected earnings before interest and tax last year, it’s above the 20 times average Schneider has paid in deals since 2005, according to BNP Paribas . It’s also above the 17 times median paid in deals in the capital goods sector over the past year, according to a person familiar with the deal.

Schneider, which has only said it’s in early discussions with Invensys, hasn’t laid out any cost savings that might justify the premium it is paying. It might be more concerned to knock out potential competitors: Emerson Electric, which discussed a deal with Invensys last summer could be interested, while the likes of General Electricand ABB have been rumored bidders in the past. This deal may not herald a slew of M&A activity in Europe. But for Invensys investors, it could prove to be a profitable summer.

Invensys said in May it planned to return £625m to shareholders after selling Invensys Rail for £1.74bn to Siemens.

Schneider said on Thursday that a takeover of Invensys would lead to “significant cost savings” and “revenue synergies”.

Invensys provides software, systems and controls to clients ranging from oil refineries and power stations to mining companies and appliance manufacturers, to help monitor, control and automate products and processes.

Its Industrial Automation unit supplies control systems, safety systems and instrumentation to customers operating oil refineries, nuclear power stations and petrochemical plants.

Invensys said its advisers were Barclays and JP Morgan Cazenove.

Reuters then added:

The prospect of a bid battle powered Invensys shares to a ten-year high on Friday, after the British engineer said it had received a 3.3 billion pound ($5 billion) takeover proposal fromFrance‘s Schneider Electric.

Invensys said Schneider, which confirmed only that it had made a proposal, was considering an offer of 505 pence a share in cash and stock, 15 percent above Invensys’ closing price on Thursday.

A deal would allow Schneider to tap the British firm’s strength in industrial automation, which is enjoying rapid growth in the oil, gas, petrochemicals and utilities sectors.

However, Invensys shares jumped as high as 513.5 pence on speculation the proposal could flush out other bidders.

U.S. group Emerson Electric was in talks to buy Invensys a year ago, while a report in May 2012 said Germany‘s Siemens, Switzerland’s ABB and U.S. giant General Electric had also made informal contact.

Those companies either declined to comment, or could not immediately be reached for comment.

“The most obvious candidate is Emerson, which was in related talks with Invensys back in June 2012,” Societe Generale analysts said.

If a bid battle for Invensys breaks out, the share price could go even higher, said Neil Veitch, a fund manager at SVM Asset Management, which holds Invensys stock.

However, a banker active in the sector said Schneider would be tough to beat. “You need to find someone willing to table an all cash bid,” the banker said.

Invensys said it was likely to recommend an offer at 505 pence a share.

“Schneider is finishing its due diligence. There is a deal, there is a handshake,” a source familiar with the matter said, speaking on condition of anonymity.

He said he expected Emerson to look at Invensys because there were few companies like it available to buy. But Emerson could be put off by the price.

“I don’t think there is anyone else out there,” he said.


Morgan Stanley analysts said the price proposed by Schneider was “fair and reasonable”, valuing the British company at around 22 times earnings forecasts for 2014. That compares with an average multiple of 13 times for Britain’s industrial machinery and equipment sector, according to Thomson Reuters data.

They said a deal would boost Schneider’s share of the industrial automation market from just over 4 percent to around 6-7 percent, compared with world No.1 Siemens’ 21 percent.

Analysts said a deal would also create an opportunity for Schneider to sell its energy management products to Invensys’ customers in the oil, gas and petrochemicals sectors.

At 1503 GMT, Invensys shares were up 15.4 percent at 508 pence. Schneider’s were down 3.9 percent at 55.81 euros on concerns it could get sucked into a bid battle and the cost of insuring its debt against default jumped on expectations it would raise new debt to fund a deal.

Invensys has long been mooted as a takeover target in an industry dominated by larger rivals, particularly after the disposal of its rail unit last year, which enabled it to strengthen its balance sheet and pension fund.

The British firm said Schneider’s takeover proposal comprised 319 pence in cash and 186 pence in new shares for each Invensys share.

The French group, which said last summer it planned to step up acquisitions, has until Aug. 8 to say whether it intends to make a firm offer or walk away under UK takeover rules.

Activist investor ValueAct Capital Management has been building up a stake in Invensys. It holds 8.16 percent of the stock, according to Thomson Reuters data.

Barclays and JP Morgan Cazenove are advising Invensys, while Deutsche Bank and BofA Merrill Lynch are working for Schneider.

($1 = 0.6615 British pounds)

($1 = 0.7668 euros) also added their comments as follows, with a lot of Schneider background:

Schneider Electric Offers $5 Billion for Invensys Takeover

By Francois de Beaupuy

Schneider Electric SA (SU), (SU) the world’s largest maker of low- and medium-voltage equipment, is in talks about a 3.3 billion-pound ($5 billion) offer for Britain’s Invensys Plc (ISYS)(ISYS) to add industrial software and control systems.

France’s Schneider is offering to pay 505 pence a share, comprising 319 pence in cash and 186 pence in new shares, London-based Invensys said yesterday. Invensys indicated it’s likely to accept an offer at the proposed value, which is 15 percent higher than the closing share price yesterday. Schneider said that the talks are at an early stage.

A logo sits on a sign outside the offices of Invensys Plc in Crawley. Photographer: Chris Ratcliffe/Bloomberg

Invensys shares rose as high as 513.50 pence today, indicating that some investors expect a counterbid. Emerson Electric Co. (EMR), a U.S. maker of technology for refrigerators and air conditioners, approached the company last year about a possible deal. Other potential suitors may include General Electric Co. and ABB Ltd., according to Royal Bank of Canada.

“Emerson is perhaps better placed than Schneider to offer a higher bid given the greater synergy potential, which we estimate at 5 percent of sales versus 4 percent at Schneider,” said Societe Generale analyst Alasdair Leslie. “Invensys remains a highly prized asset for Emerson,” given the size of its process automation offerings and a “highly complementary” product portfolio, he said.

Remote Monitoring

A takeover of Invensys would bring the buyer meters, controls and safety systems that help to manage heating, temperature and remote monitoring applications. The products of the British company, which operates in more than 180 countries and employs more than 16,500 people, are used by a wide range of clients, from oil refineries and power stations to mining companies and appliance manufacturers.

David Farr, chief executive officer of St. Louis-based Emerson, said in September that the company had considered a deal with Invensys on and off for 15 years and would continue to look at the company’s process-automation business.

At the time of the talks between Invensys and Emerson last year, the British company was grappling with pension liabilities, which amounted to 490 million pounds at the end of September. Invensys then sold its railroad unit in May to Germany’s Siemens AG for 1.74 billion pounds and also reduced pension liabilities, making it more attractive as a takeover target.

Potential Opposition

Some Emerson investors would probably oppose a counterbid for Invensys,, said Christian Mayes, an analyst with Edward Jones & Co. in Des Pere, Missouri.

“Emerson investors still have a bad taste in their mouth from when Emerson got into that bidding war for Chloride just a few years ago,” he said. “Hopefully, management is looking to use their capital a little bit more wisely and not get sucked into a bidding war.”

In 2010, Emerson beat Zurich-based ABB in a competition to acquire London-based Chloride Group Plc, Britain’s largest maker of gear to protect against power failures, pushing up the final price. Emerson purchased Chloride right before Europe went into recession, making it difficult for Emerson to make the acquisition work, Mayes said.

Representatives for Emerson, ABB and GE declined to comment.

Lower Multiple

Before today, Invensys shares had gained 60 percent since Nov. 27, the day before it announced the Siemens deal. Still, the company had been trading at a multiple of 1.5 times its projected 2013 revenue, lower than 65 percent of measurement instruments companies valued at more than $500 million, according to data compiled by Bloomberg.

“The strategic and financial rationale for this transaction, if consummated, is compelling,” saidRueil-Malmaison-based Schneider. A deal would help to cut costs between the two companies and give Schneider access to “key electro-intensive segments” as well as energy management offerings and “the fast-growing software business for industrial operational efficiency.”

Invensys shares rose as much as 17 percent in London today and were up 15 percent as of 4:10 p.m., valuing the company at 3.3 billion pounds. Schneider dropped as much as 4.9 percent in Paris, giving it a market value of 31 billion euros.

Invensys said it disclosed the offer without Schneider’s consent, adding that there’s no guarantee a firm offer will materialize. Under U.K. takeover rules, Schneider has until Aug. 8 to make a firm offer or to walk away. JPMorgan Chase & Co. (JPM) and Barclays Plc (BARC) are advising Invensys. Schneider is working with Deutsche Bank AG and Bank of America Corp.’s Merrill Lynch.

Ratings Risk

Schneider has an A3 rating from Moody’s Investors Service, and an A- from Standard & Poor’s, both with a stable outlook, and an takeover of Invensys would put pressure on the company’s debt profile, said Nicolas Hue de la Colombe, a credit analyst at Credit Agricole in Paris.

“With about 2.3 billion euros of the transaction in cash, the A- and A3 ratings of Schneider are potentially at risk,” he said. “We had earmarked a leeway of about 1 billion euros in acquisitions for Schneider to be able to keep its A- rating.”

Since Jean-Pascal Tricoire was named as Schneider CEO in May 2006, he has bought dozens of companies, spending more than 11.6 billion euros and doubling Schneider’s revenue to 24 billion euros. Although the company’s power solutions push eroded margins — because such sales outgrew more profitable products like switchgears — the CEO is eyeing purchases that will make the company’s foray into services more lucrative.

‘Pockets of Software’

Tricoire said in February the company may buy “pockets of software and know-how” if needed, and still favors “bolt-on” deals.

Schneider spent just 242 million euros on acquisitions in 2012 compared with 2.87 billion euros in 2011, when it bought companies such as Spanish software company Telvent GIT SA, Chinese energy-savings drives maker Leader Harvest Power Technologies, and Indian maker of inverters and power-storage systems Luminous Power Technologies to expand in emerging markets and broaden power-management systems.

“It’s going to be interesting to see if others come in here, whether it’s peers like Emerson or someone else,” Sachin Shah, a special situations merger arbitrage strategist at Albert Fried & Co in New York, said by telephone. “It’s possible.”

To contact the reporter on this story: Francois de Beaupuy in Paris

To contact the editor responsible for this story: Simon Thiel at

Automation and control projects: the MAC or the EPC rôle?

In response to a recent question at a European press conference, Roel van Doren, president of Emerson Process Management in Europe, explained that Emerson partner with EPCs  (Engineering, Procurement and Construction contractors), and have strong relationships with them, but do not wish to take on the full rôle themselves. This might even be seen as trying to compete with their own customers.

ABB on the other hand have recently described a North Sea project for an automation and control upgrade where they are pleased to take on the responsibility of being the EPC for the whole contract.

Van Doren explains the Emerson approach to project work:

Subsequent to the press conference, van Doren provided a more detailed explanation of their project involvement when operating as a MAC (Main Automation Contractor) on the increasingly complex projects now emerging.

He explains:
“The rôle of the MAC is very much to coordinate the automation aspects of the project, whilst the role of the EPC contractor is to oversee the construction, mechanical and process parts of the project. This includes overseeing the automation element, but this is typically less than 5% of their scope.

“Emerson is not looking to fulfil the EPC rôle in projects. We are very much focused on providing automation solutions to our customers. Indeed, we have vast experience of being the MAC on very large and complex projects globally, including many multiple and mega-size projects. Because of our expanded services capability we will be able to provide even greater support as a MAC to both existing and new customers.

“This is important because process automation touches every part of the process, making it a critical component of a successful project. So much so that major end users now tend to choose the automation supplier as early as possible. By doing so, customers are moving away from the traditional EPC model and moving towards a “PEpC” approach, where:

P= Procure critical packages and front end loading services
E= Engineer
p= Procure the balance (non-critical items)
C= Construct

“Emerson supports the PEpC approach, in which procurement of critical packages and front end loading services (FEL) occurs much earlier in the project lifecycle, prior to project sanction. PEpC also utilises a MAC. This greatly influences key project design philosophies, which affect plant operation and maintenance. It also ensures that the MAC is brought into a `circle of influence’ with the plant owner and the EPC. PEpC is supported by the Construction Industry Institute and studies have shown that it creates an average opportunity for a 10% saving in cost and time.

“For very large projects or train of plants that may have multiple EPCs, such as the one quoted at our press conference, at the INA Refinery, consistency is provided by the MAC, especially when they have the ability to provide more than 90% of the scope from within their own portfolio, as we can at Emerson.

“Emerson is working directly with many end users to provide them with automation technology and services. If required we do sometimes also take responsibility for other scope to support the projects.”

ABB Process Automation Division adopts EPC approach to North Sea upgrade

In a recent press release about a $27m upgrade project won for the safety and automation systems on the Statoil Heimdal platform, ABB advises that they will have “the complete engineering, procurement, construction and installation (EPCI) responsibility” for the project. Following the upgrades, the Heimdal platform will have ABB’s modern 800xA Extended Automation platform as the main control system, adapted to comply with Statoil’s guidelines for workstations layout and design of process graphic.

ABB’s scope comprises a new human-machine interface (HMI) for the control system, control room modifications, simulator, fire and gas detectors, integration of telecommunication in the control room and information management systems (IMS).

“We are upgrading parts of the safety and automation system on Heimdal to contribute to profitable and safe operation of the platform. ABB’s maintenance and modification service solutions extend the life span of installations that have been in operations for a significant amount of time”, said Per Erik Holsten, Manager of ABB’s Process Automation division in Norway.

“We are pleased that Statoil has the confidence that we can deliver this type of service with EPCI responsibility. The agreement strengthens our position as a supplier of maintenance, modification and service of existing fields and confirms our ability to manage complex projects involving all of our core areas: automation, power, telecommunication and instrumentation”, added Holsten.

Today the Heimdal field has reduced its own production and the platform is now primarily a hub in the central North Sea for the processing and distribution of gas. The platform receives gas from the Huldra, Oseberg, Skirne and Vale fields and exports it via Vesterled or Statpipe pipelines for processing. At its peak the amount of processed gas in Heimdal represents 15 to 20 percent of the total Norwegian gas production.

The discussion will no doubt continue in the next issue of the Industrial Automation INSIDER newsletter, due in August: see

Optimizing the use of variable quality feedstock

Over the last few months there have been frequent enthusiastic references to the optimization of processes to cater for variations in available raw materials, mostly coming from the Invensys board after their purchase of the Spiral Software business, which builds on a database of crude oil properties.  A similar optimization approach can be supplied to many processes, particularly where most raw materials are now available from many and varied sources, or might come with variable composition.

Co-fired biomass fuels

The Metso Corrosion Management solution is a package for corrosion monitoring and control that has been developed in close cooperation with customers and help from various of the Metso business segments: last month it won the award for the best paper presented at Power-Gen Europe 2013 in Vienna.

Their Fuel Diet Corrosion Management solution tackles the effects of corrosion, optimizes the fuel diet and extends equipment lifetime, based on the long Metso experience of working with various fuels and boilers. It gives relevant information for fuel diet optimization to control the amount of corrosive gases in the boiler, and helps plan preventive maintenance and replacement operations. Online measurement and corrosion rate calculation, based on wide material know-how, together with information and control applications, ensure higher plant efficiency in parallel with wide fuel flexibility. Power producers no longer need to avoid inexpensive, lower-quality fuels due to risks of corrosion. A concrete case example was presented, with results, in an application where recycled and biomass fuels are co-fired.

Biomass water content monitoring

Another approach to improving power plant combustion efficiency on biomass fuelled plants comes from the Emerson Ovation expert control system: this is said to help reduce maintenance costs and boost net yearly MWh production. Biomass fuel with a high moisture content will generate far less heat than dry fuel: traditionally the control would be based on flue gas monitoring to control the combustion air supply.

The ovation system takes a biomass sample from the fuel transport system, measures the moisture content using microwave absorption, and sends the measurement to the Ovation system as an input to the thermal cycle control logic, on a 2-3 minute cycle.

“The variable moisture content of biomass fuels presents a challenge for operators who are under pressure to maximize performance from their power plants,” said Bob Yeager, president of Emerson Process Management’s Power & Water Solutions business. “With continuous moisture monitoring data incorporated into the Ovation control system, operators can make rapid adjustments to the combustion process to help enable an increase in net yearly MWh production.”

The system has been applied to a 15 MWe – 50 MWh power station in Italy fuelled by wood chips with variable moisture content. The system has helped improve plant efficiency and reduce maintenance costs.

GE expands subsea facilities in Scotland

GE Oil and Gas has strengthened its position in the worldwide energy market, unveiling the results of a significant expansion of to its subsea systems manufacturing, test and assembly facility in Montrose, Scotland. The product of a GBP10.4m ($15.8 million) investment, the 9,000 square meter Brent Avenue site has almost doubled in capacity, enabling GE to harness the growing global demand for its products and services.

The expansion includes a new 2,250 square meter assembly and test facility, which will allow for the in-house manufacturing of large, deepwater horizontal subsea trees (DHXTs) used in the extraction of oil and gas reserves from the seabed in some of the most challenging environments across the globe. It also will lead to a significant increase in machining capacity, from 63 systems a year to more than 90, as well as in-house machining of much larger vertical tree systems (DVXTs), allowing the GE Oil & Gas Subsea Systems business to meet anticipated long-term demand.

Included in the investment is a new state-of-the-art assembly and test line for the construction and testing of sub-assemblies and master valve blocks (MVBs). The site will now be able to produce all key components, from raw material through to a fully built, flat packed subsea tree.

Growing subsea activity and GE’s increased market share prompted the investment, which also is expected to lead to an increase in staff numbers from 85 to 138 at the facility during 2013. The expansion project ties in with GE’s broader strategy to modernize and upgrade their UK subsea manufacturing facilities to keep pace with the global demand for critical subsea production components.

“The ongoing GE investments in its Brent Avenue facility are a direct reflection of both the skilled and dedicated workforce we have here, as well as our need to align our production capacity to quickly respond to the growing demands for our offshore products and services,” said Rod Christie, ceo — Subsea Systems, GE Oil & Gas.

GE Oil & Gas has been heavily investing to expand the capabilities of its existing facilities in the UK. Last month GE announced the expansion of its Newcastle facility, which specializes in the engineering and production of Wellstream high-quality flexible pipeline products and solutions used in the subsea oil and gas production sector. The move was made possible with a Regional Growth Fund grant of GBP3m ($4.6 million) to help with the expansion and will support us in the creation of 200 new jobs.

GE also has recently spent more than GBP620k ($1 million) on modernizing the Master Control Station  workshop and Subsea Electronics Module at its Nailsea facility near Bristol. Earlier in the year, GE announced plans to create a new subsea centre in Bristol at the Aztec West Business Park, creating another 200 new jobs.

Emerson describes Gladstone LNG project

Australian oil and gas leader Santos has used process automation technology from Emerson Process Management to coordinate and enhance operations across its US$18.5Bn Gladstone Liquefied Natural Gas project in Queensland, Australia. Emerson served as Main Automation Contractor for the project, providing technologies and expertise to help Santos gather and integrate real-time information from thousands of wells.

The pioneering project will convert coal seam gas to liquefied natural gas (LNG) for export to global markets. Gas from the Bowen and Surat Basins in eastern Queensland will be transported by a 420 kilometer underground pipeline to an LNG plant on Curtis Island, near Gladstone on the coast. Santos’ operations centre at Brisbane, approximately 500 kilometers south of Gladstone, integrates data from the gas fields, pipelines and plant for 24/7 real-time monitoring and collaboration with teams in the field.

“We have developed a world-class remote operation centre,” said Santos general manager of operations Rob Simpson. “The centre has changed the way our gas fields in the Bowen and Surat Basins are operated. Emerson’s team brought the process automation expertise we needed to meet global standards, and their solutions have equipped us with the ability to centrally monitor the production and progress of our intelligent assets up to 1,000 kilometers apart.”

Santos and Emerson collaborated to plan and equip the Brisbane remote operations centre where management, engineers and planners can use real-time information from the intelligent fields to anticipate issues, collaborate, improve decisions, and take actions to maximize key performance indicators.

Emerson technologies for the Gladstone LNG project include the DeltaV digital automation system using electronic marshalling with CHARMs technology, as well as Rosemount measurement and analytical instruments, Fisher valves, Bettis actuators, Roxar multiphase flowmeters, ROC remote operations controllers, and AMS Suite predictive maintenance software.

“We are excited about our work with Santos on this world-class remote operations centre,” said Sabee Mitra, president of Emerson Process Management Asia Pacific. “It showcases the integration of control and asset information that helps make GLNG a reliable, safe and efficient operation.”

The GLNG project is on track to make its first LNG shipments in 2015. Initial capacity is planned to be three to four million tonnes annually.

New Invensys M+A manager named

The major restructuring of Invensys without the Rail Division continues, and is fully reported in the July issue of the INSIDER Newsletter, see Also announced just after the Capital Markets Day presentation in New York, was the appointment of Jeremy Morcom as Group Head of Corporate Development, ie covering the expected M+A activity in the next two to three years, spending their GBP600m cash pile in typically smaller scale GBP50m investments in software and energy control products.

Since 2006, Jeremy has been Head of Corporate Development and a member of the global Executive Committee at Spectris plc, the leading supplier of productivity-enhancing instrumentation and controls for industrial markets.  In this role he has led a successful programme to expand existing businesses and acquire in new areas with approximately $900 million invested in over 20 completed acquisitions in the last five years.

Prior to joining Spectris, Jeremy was Head of Acquisitions & Divestitures at Invensys plc where, amongst other things, he implemented a multi-$billion disposal and restructuring programme.   Before joining industry, Jeremy worked in investment banking for twelve years focusing on M&A advice for clients in the engineering and industrial sectors.  Prior to investment banking, he worked in management consultancy.

Jeremy will be taking up his new role on 9 September 2013.

Wayne Edmunds, Chief Executive of Invensys plc, commented:

“I am delighted to welcome Jeremy back to Invensys.  He has led the highly successful acquisition programme at Spectris for seven years, during which time the company achieved significant growth in scale and profitability.

“Following the sale of Invensys Rail, we have significant funds to reinvest into our business segments mainly through acquisitions and his appointment demonstrates our commitment to deploy these funds in a rigorous and disciplined manner.”

Added on 12 July: In view of the take-over bid from Schneider, which Invensys plc regards as acceptable, is the role for Jeremy Morcom still viable? It is likely that Schneider will need the cash in the Invensys bank account to pay out the ISYS shareholders, so future acquisitions may be a long way down the line now!