Shang­hai Elec­tric’s as­tute ac­qui­si­tion

China Daily (Canada) - - SHANGHAI - By WANG YING in Shang­hai

wang_y­ing@chi­ cn

Stricter emis­sion reg­u­la­tions at home in China and abroad have forced many com­pa­nies to up­grade their fa­cil­i­ties and be in­no­va­tive in or­der to re­duce their car­bon foot­print. The Shang­hai Elec­tric Group Co Ltd, a Sta­te­owned com­pany, quickly tack­led this prob­lem by ac­quir­ing a for­eign com­pany.

Man­u­fac­tur­ing of power gen­er­a­tion equip­ment is Shang­hai Elec­tric’s core busi­ness and it ac­counts for up to 50 per­cent of the en­ter­prise’s to­tal rev­enue. But with coal­fired power plants no longer fa­vored by the gov­ern­ment due to their high emis­sion lev­els, the en­ter­prise knew it had to make a change.

“A few years ago, we did some re­search on the out­look of power gen­er­a­tion equip­ment and came to the con­clu­sion that the gas tur­bine will be the ideal fos­sil fuel-fired power gen­er­a­tion so­lu­tion, while wind energy looks to be the most promis­ing al­ter­na­tive in the re­new­able energy sec­tor,” said Huang Ou, vi­cepres­i­dent of Shang­hai Elec­tric Group Com­pany Ltd.

The gas tur­bine tech­nol­ogy is not new to the in­dus­try, but only ma­jor com­pa­nies such as Gen­eral Elec­tric, Siemens, Al­stom and Mit­subishi pos­sess it.

“To ob­tain the tech­nol­ogy, we had two paths — one is through in­de­pen­dent re­search and de­vel­op­ment, which re­quires a lot of time and has un­cer­tain­ties, and the other is to ac­quire an in­ter­na­tional cor­po­ra­tion,” Huang added.

For­tu­nately for Shang­hai Elec­tric, which had re­solved to master the gas tur­bine tech­nol­ogy by 2030, Ital­ian power en­gi­neer­ing com­pany An­saldo En­er­gia came knock­ing with a co­op­er­a­tion pro­posal they could not refuse.

The lead­er­ship at Shang­hai Elec­tric knew that work­ing with the Ital­ians would help shorten their R&D process by a decade and soon de­cided to pur­chase 40 per­cent of eq­uity in­ter­ests in An­saldo En­er­gia for 400 mil­lion eu­ros ($445.6 mil­lion) in May 2014. Be­sides get­ting im­me­di­ate ac­cess to the tech­nol­ogy, the shrewd ac­qui­si­tion also helped Shang­hai Elec­tric gain ac­cess to the full in­dus­trial chain in the gas tur­bine sec­tor.

“On one hand we are mak­ing steady progress of mas­ter­ing the core tech­nol­ogy by send­ing engi­neers to Italy for train­ing. On the other hand we can con­tinue the re­search on re­lated tech­nol­ogy for fu­ture con­sid­er­a­tions,” Huang said.

Shang­hai Elec­tric’s do­mes­tic mar­ket share in the gas tur­bine sec­tor has risen by 10 per­cent since the deal and it has also re­ceived its first or­der from the Mid­dle East. Rui Mingjie, a pro­fes­sor from Fu­dan Univer­sity, said that Shang­hai Elec­tric’s ac­qui­si­tion of An­saldo En­er­gia has set a good ex­am­ple for other in­dus­try play­ers.

“When we talk about over­seas ac­qui­si­tions, Chi­nese en­ter­prises, es­pe­cially State-owned ones, should not al­ways fo­cus on the con­trol­ling stake in the tar­get en­ter­prise. In­stead, it is best that they let for­eign com­pa­nies which have tech­no­log­i­cal strength take the con­trol­ling stake,” said Rui.

Shang­hai Elec­tric is now ai ming to be­come more com­pet­i­tive in the global mar­ket and it has iden­ti­fied tech­no­log­i­cal in­no­va­tions as the key to do­ing so. Huang said that at least half of the com­pany’s new tech­nolo­gies would be in­vented through their own re­search by 2025.


Shang­hai Elec­tric Group be­lieves the gas tur­bine will be the ideal fos­sil fuel-fired power gen­er­a­tion so­lu­tion.

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