Interview with Mr Philippe Guillemot, AREVA T&D Chairman and CEO

November 4, 2008  
 
Press Conference in Sydney, NSW on Tuesday 4 November 2008
 
The following article summarises Phillipe Guillemot’s views on major issues facing AREVA T&D and the electricity transmission and distribution industry world-wide, and Australia’s role in AREVA’s global strategies. 
 
He spoke to representatives of the Australian technical press during his visit to Sydney, and Contributing Editor Charles Williamson was there.
 
Q1: What are the major drivers in AREVA T&D’s global markets? What is the effect of the credit crunch on AREVA T&D’s sales, both at present and for future growth going forward?
 
There are a number of factors impacting on markets for AREVA T&D products & services at present. We believe there is a unique combination of drivers such as has not been seen in the last 30 years.
 
Since 2005, the rise in oil prices has impacted substantially on generation, and this has stimulated the development of renewable energy resources (mostly wind energy).  This in turn impacts on existing electric energy grids, which have to deal with generation variability, stability and network management.  There are also massive infrastructure investments in developing economies, particularly in the Middle East, Russia, China and India, to meet the demands of economic expansion and social development. 
 
In combination with capital investment programmes, refurbishment and management of existing assets must continue in parallel.  Ongoing asset management is very important to supply existing customers, and AREVA T&D is well-placed to provide such services to customers round the world.
 
At present, 25% of AREVA T&D’s global sales come from Asia, and this will increase to 40% within 2 years.  We estimate that by 2012 half of AREVA T&D’s global sales will be in Asia.  India is very important to us.  50 million people, 2½ times the population of Australia, move to Indian cities every single year, and this requires infrastructure expansion and investment to meet the energy and demand growth. AREVA T&D has 17% market share in India, and we have 3 production plants presently under construction in India to meet the demand for our products.  We are confident we will increase our market share in India.
 

 The global credit crunch may create some short-term difficulties, but the underlying drivers I mentioned previously will underpin continuing growth in our markets.  Beyond 5 years, it is impossible for us to forecast with certainty, but the general outlook for us is very good for the medium term.
 
Q2:  Where is AREVA T&D locating its manufacturing plants to meet this global demand, and what is AREVA T&D’s investment in manufacturing?
 
Most of AREVA T&D’s manufacturing is now located worldwide, including in emerging economies, with less manufacturing in Europe today. Our strategy is to have our operations close to our customers. In Australia, we have an important site in Rocklea, Brisbane, where we manufacture Australia’s largest power transformers and assemble medium voltage switchgear. AREVA T&D is investing some €200M in 19 plants worldwide at this time.
 
Q3:  How important is Australia to AREVA T&D’s global growth?
 
We’ve been here a long time. Almost a century, since 1910. Having held a strong position in utility markets for many years, we have decided to be much more proactive in the industrial, mining and oil & gas sectors. Australia is one of the most resource rich economies in the world. So, we are developing new solutions to better meet the growing demands of these markets both in Australia and globally.
 
For all AREVA T&D’s offer, our Australian units will benefit from our worldwide experiences, like the application of new manufacturing processes, including best practices from other industries such as the automotive, and from our global leadership positions in product lines such as GIS.
 
We are also world leader in energy management systems. In this area, we export our engineering expertise to support customers outside Australia. For example, in New Zealand we have recently upgraded Transpower’s EMS system and are completing the upgrade of the Market Management System.
 
Q4: Is speed of growth a problem for AREVA T&D?  Is there a skills shortage here in Australia, and is this a problem worldwide?
 
To keep pace with growth, we have to improve all of our processes within the AREVA group. We have to develop new ways of doing business to meet new challenges.  Of course, we must maintain consistent quality in our products and services to maintain the respect of our customers and improve our market position.
 
Our worldwide resources are what makes us unique, and differentiates us from our competitors.  Because of our global presence, we are able to recruit many good engineers.  This year, we are recruiting 5000 people globally, although this is a challenge in Australia, like everywhere.  AREVA T&D offers a wide range of career choices and mobility for the many people who join us.
 
 Q5:  What unique challenges does Australia offer for AREVA T&D products and services?
 
Australia has long networks spanning great distances.  AREVA T&D has developed advanced network management technology – indeed, 90% of energy delivery in Australia, and 100% in New Zealand, is managed through AREVA T&D’s network management systems.
 
Similar challenges exist in Asia.  For example, much of China’s electricity generation is located in the west of the country, but the main population and load centres are to the east on the coast.  Strong transmission systems are crucial to Chinese grid development, including transmission at “Ultra High” Voltages.  So transmission systems solutions contribute to meeting the evolving needs in Asia, but we also are exporting AREVA T&D’s technology and products to the world, which in turn benefits Australia. This is another example of AREVA T&D’s global capability.
 
Q6: as the Chair of CIGRE’s France committee, can you comment on the level of losses in electricity transmission networks?
 
Reducing technical losses is an important contribution by the electricity industry to a de-carbonised world.  Losses not only vary from country to country, but are sometimes measured in different ways.  In developed countries, technical losses are on average about 7% and Australia is probably typical. 
 
As I mentioned, China’s transmission system is extensive, and China is moving to adopt ±800kV DC transmission lines to reduce technical losses.  AREVA T&D has capabilities in HVDC which would be useful, for example, in a “transmission super-highway” from Adelaide to Brisbane, but it is best suited for point-to-point transmission with few infeeds. AREVA T&D has a number of other technologies to improve transmission network performance and capacity, and having a wide range of solutions is a key part of our competitive advantage.

Q7: What about other forms of generation? Is Australia missing out on an opportunity by not adopting nuclear generation?  And do alternatives require transmission network investment?
 
Invariably, all major generation projects require high-capacity transmission network connections.  This is demonstrated in the growth of transmission network investment worldwide.  Integration and control of renewables into existing networks is a major part of AREVA T&D’s thinking, through to its “smarter grid” developments.  The transmission and distribution network is at the centre of the “smarter grid”.
 
Australia has a number of renewable options.  When I was in Brisbane, I was impressed by the potential for geothermal energy in this country, which also needs transmission capacity from the remote centre of the country to load centres.
 
No doubt, nuclear energy is one part of the solution for a de-carbonised energy network, and countries adopt various mixes of nuclear generation according to their particular situations.  Australia is important as a major supplier of nuclear fuel, of course.  But nuclear energy generation is only part of the solution, as are all other renewables, together with energy conservation and efficiency measures.
 
Q8: What about AREVA T&D’s own environmental “footprint”?  Is this an important matter for your organization?
 
We are very aware of the need to reduce our own environmental impact in all areas of our operations throughout the world.  We think our measures to reduce environmental impacts are recognized by our customers, and indeed positive measures will be demanded even more by the market in the future.
 
Q9:  What investments do you make in research and development?
 
In 2004, we invested €100M in R&D.  This year, it has risen to €170M, and we expect to double it within 2 years.  We need to invent new solutions for new problems. Our customers will have new challenges in the future, and we will work closely with them to develop solutions. These could be in areas such as power electronics, managing our electrical networks, and the evolution towards “Smarter Grids”, with new requests like demand side management. R&D investments planned for future years will deal with many problems we don’t even know about yet – but we know these problems will appear in the future, so we must make plans for ongoing R&D investment.
  
Q10:  AREVA T&D is contributing to “smart grid” development as part of future de-carbonised energy networks.  Are present communication technologies and infrastructures adequate to meet the demands of modern energy delivery networks?
 
AREVA T&D already offers customers smart grid enabled solutions to help deal with these kinds challenges – such as our online stability solution, e-terra energy management solutions.
 
But a “Smart Grid” is not something you can buy off the shelf. The traditional grid model will need to evolve to meet future challenges, and this won’t happen over night.  There will be a continual process of re-invention of the grid.
 
We believe AREVA T&D is well positioned to bring real solutions. On one hand we have a view as a T&D company with a footprint in manufacturing and on the other we are number one in network management systems.
 
That’s why we prefer to talk about “smarter grids”, which doesn’t only mean smarter technologies, but also smarter teamwork.
 
We are partnering with customers, universities, local associations and IT companies.  We’ve recently also joined SmartGrid Australia.