Early in 2015, Mexico’s Ciudad Juarez, a city of 1.5 million people just south of the border from El Paso, Texas, was set to get an electricity makeover and the plan was taking shape beautifully.
The country’s Federal Electricity Commission (CFE) had tapped the Spanish power company Abengoa to build a state-of-the-art 900 megawatt combined cycle power plant that would burn natural gas sourced from Texas. GE’s Power business prepared to outfit the bold new power plant with four gas turbines and accompanying generators.
A year later, the project, called called 38 CC Norte III, stalled because it was unable to attract new funding. What remained was a silent promise of additional power generation in the outskirts of Ciudad Juarez.
But the original stakeholders didn’t abandon hope. After months of searching, they found a new sponsor to complete the power plant’s original plans — the Australian investment firm Macquarie Capital and Argentinian contractor Techint Engineering & Construction. The duo swooped in with a plan: Macquarie would raise the money, and Techint would build the plant.
The partners spent weeks circumnavigating the world to keep the negotiations going and bring in fresh investors and suppliers. The colossal undertaking culminated in August 2017, when the Macquarie-Techint consortium penned a deal for just over $700 million in new financing.
After all the deal-making, GE ended up holding one of the key components of the project: The company’s Power Services business will provide an “integral services solution” that includes overseeing operations and maintenance (O&M), contractual services and digital support for Norte III over the next 25 years, under agreements valued at more than $330 million.
The arrangement made sense — GE has been operating and maintaining power plants for nearly half a century. Enlisting a company like GE to provide O&M support gives Macquarie peace of mind that industry experts are handling day-to-day operation and any required maintenance at the facility.
GE has begun caring for Norte III before it is even built. A technical crew of advisors, working closely with Techint experts, currently is helping install the GE gas turbines and their generators. Soon the technical O&M team will collaborate with Techint, putting software into place, coordinating environmental health and safety protocols, and boning up on Norte’s equipment.
“We have our staff shadowing contractors as they install each system to gain knowledge of equipment on site,” explains Esteban Hesse, O&M sales leader for GE’s Power Services business in Latin America. “We’ll work closely with Techint and look at every detail of how the plant works from its inception so that it is better prepared for the plant’s opening, expected at the end of 2019.”
In addition to GE gas turbines and generators, the plant will use the company’s Asset Performance Management (APM) software running on Predix, its app development platform for the Industrial Internet. The software will gather data from the plant’s equipment, analyze it, use the results to help predict potential problems, and take care of maintenance when it is the least disruptive.
As Hesse explains, APM picks up on signs of potential failure so the GE O&M team can go from, “‘Hey, this equipment broke and now we have downtime at the plant!’ to ‘Hey! I want to predict essentially when this will fail and take preventive action at the appropriate time.’” Avoiding unplanned downtime using APM translates directly into revenue for the customer.
GE has a stake in the plant’s success, too. As part of its agreement, GE guarantees that Norte IIl’s equipment performance will meet certain contractual benchmarks. “If GE complies with the targets or goes above, the company essentially makes more money through bonuses,” Hesse says. “If we don’t, we have a loss. When the customer suffers, we suffer.”
While that suffering is mitigated by specific caps, the main takeaway is simple: GE is financially tied to the well-being of Norte III and the customer’s outcomes. All of which further motivate the GE O&M team at the plant to stay committed to keeping the equipment in optimal condition.
The deal was so innovative that Thomson Reuters Project Finance International awarded Norte III with its 2017 LatAm Power Deal of the Year award.
With similar projects afoot in Africa, India, the Middle East, Asia-Pacific, the Americas and Europe, power producers around the globe are increasingly gravitating towards the operational know-how of companies like GE. Investors are looking at the power industry as a revenue-generating opportunity, and to help ensure a positive return on investment, they need to make sure that whatever plant they invest in is operated and maintained in a profitable way.
The trend also bodes well for consumers, who can expect better service in once underserved areas. For proof just look to Norte III’s progress in Chihuahua. Plans to reboot the project are happily chugging along, with up to 2,000 people working on the site. The power desert has a new oasis.