Brazil's Tecsis looks to exports amid domestic-market squeeze
IN DEPTH | The Brazilian blade maker has to find new markets as policy reverses and M&A fallout make life hard at home, its CEO tells Alexandre Spatuzza
With domestic orders dwindling fast, Brazilian glass-fibre and epoxy blade-maker Tecsis is taking steps to increase exports to around 70% of its output, up from around 45% over the past two years – a push that will go hand in hand with efforts to diversify its client base to mitigate any fallout from GE’s acquisition of LM Windpower.
“Increasing our client base has been our main task since last year,” CEO Fabiano Mori tells Recharge, pointing out that GE has cancelled orders through 2019 that had been placed by Alstom for local onshore projects, before the US group’s 2015 acquisition of the French OEM.
Tecsis is the oldest and largest blade maker in Brazil, founded in 1995. With 50,000 units manufactured since its creation, Tecsis now has capacity to make blades longer than 60 metres in Brazil, competing on a global scale, and with local rival Aeris and the Brazilian unit of LM Windpower.
According to a 2015 study by the Brazilian Industrial Development Agency (ABDI), Tecsis had a capacity to produce more than 6,000 blades annually in São Paulo, which compares with a capacity of 1,000 at LM Windpower, Aeris’s 600 blade capacity, and Enercon’s 1,500 blade-a-year vertical production arrangement.
With a production hub in the state of São Paulo and a newly-opened factory in the northeastern state of Bahia – to supply GE and former Alstom projects in the country’s Northeastern region – Tecsis has been adapting to the new conditions in the Brazilian and global markets.
Since late-2011, the company has been controlled and managed by Brazilian investment advisory company Estáter, while Brazilian petrochemical group Unipar and the investment arm of the Brazil’s Development Bank (BNDES) are also shareholders. During this period, Tecsis has undergone several bouts of production restructuring, the latest of which aimed to adapt the company to the current situation of Brazil’s troubled wind power market.
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With wind tenders in Brazil currently suspended because of declining power demand, the local wind sector is looking at a cliff-edge of orders starting from 2019, when some 8GW of contracted capacity will be completed.
According to projections by the Brazilian Wind Power Association (ABEEólica), in 2017 and 2018 some 2.3GW of new wind will be installed, but in 2019 demand will drop to some 1.2GW, declining further to 500MW and 600MW in 2020 and 2021. After that, no significant orders are seen due to the lack of tenders.
“The cancellation of the tender was horrible. There will be a gap of one or two years in the market ... so we are already seeing idle capacity in our factories, and although our adjustment was mostly concluded in 2016, we will see more than 50% decline in output in 2017 from 2016,” says Mori.
With 40% idle capacity in its production hub in São Paulo, and a slow ramp-up in Bahia, which today is still 50% idle, the company has shed workers in São Paulo – some 1,500 out of a previous workforce of over 5,000 – and further streamlined its built-to-spec production processes.
“This is how we gain competitiveness: innovating in production processes and researching materials, but we have the price and the quality to compete abroad and in Brazil,” says Mori.
Like all OEMs in Brazil, blade makers also face the crucial challenge of keeping the supply chain alive for when Brazil’s wind market revives after 2020.
“The supply chain, especially the units of foreign companies here in Brazil, will have to export to fill the order gap, but some may close up shop. So a tender in 2017 is needed to give a positive signal to the supply chain,” he says.
Just as important as keeping suppliers ticking over is the diversification of Tecsis’s client base.
Although Tecsis now supplies to most global OEMs abroad and in Brazil – including Acciona, and Gamesa – about 80% of its production is taken up by GE, which in Brazil alone has a 30% market share following the acquisition of Alstom's onshore manufacturing facilities there.
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It is not yet known whether the new GE-controlled LM Windpower will continue to supply blades to competing OEMs. But Mori believes that the outsourcing trend for blades will continue, and some of LM’s current clients will be looking for alternative suppliers in the near future.
In Brazil, for example, Gamesa is questioning GE’s planned acquisition of LM at the antitrust board CADE. The Spanish company claims it will be hurt if GE has information about turbine prices, projects and designs currently accessible to LM Windpower, which manufactures blades for its G114 and G97 machines currently assembled in Brazil.
While the fight for the Brazilian blade market goes on in the antitrust court, Tecsis’s biggest export destination will continue to be the US market. Mori claims demand for blades cannot be supplied solely by local companies, and especially by US market leader TPI Composites. Europe is Tecsis's second biggest export market, Mori adds.
But with Latin American markets such as Mexico and Argentina opening up and a growing market in Africa, Mori believes Tecsis is well positioned to diversify its client base.
“We are passing through a tough year but I am pretty confident that export market will lead the company to a turnaround. Where we export to depends on the strategy of the global OEMs,” he says.
Mori pointed out that he has already closed a supply deal with Acciona in Argentina, but he sees Mexico as having the biggest export potential in Latin America.