Siemens is ahead of schedule in delivering on its single biggest order ever: a trio of the world’s largest gas-fired combined cycle power plants that will increase Egypt’s power production capacity by nearly 45% by 2018. In this exclusive interview, the CEO of Siemens Egypt, Emad Ghaly, explains what and how the company has delivered so far, what’s next, and why this is history in the making for both company and country.
At the end of January 2017, Siemens announced that it had built and connected 4.8GW of new power generation capacity (three gas-fired power plants in open cycle mode) to the grid in Egypt. It beat its own timetable, which was to get 4.4GW of new capacity online by this time.
Siemens is breaking records with its “Egypt Megaproject”, a series of contracts worth €8 billion signed in June 2015 with the Egyptian government. These commit it to build the world’s largest ever gas-fired combined cycle power plants (three of 4.8GW each), plus up to 12 wind parks with some 600 turbines, to double Egypt’s electricity generation capacity by adding 16.4GW by 2018.
In this exclusive interview, the CEO of Siemens Egypt, Emad Ghaly, explains that the project is the culmination of a collaboration between Siemens and the Egyptian government that stretches back over 3-4 years. During this time, the two worked together to study Egypt’s future power needs and what kind of energy mix and grid could cater to them.
Ghaly, who took over as CEO of Siemens Egypt on 1 July 2016 (replacing Maximilian Egger, who retired after 40 years), is proud of the project, both as a Siemens man – he has been with the company for 21 years, most recently as Senior Executive Vice President for Wind and Renewables in the Middle East and for Power and Gas in Egypt – and as an Egyptian – the project will bring skilled jobs as well as enough power for 45 million people.
“This is the largest single order in Siemens’ history”
Other countries in the region are watching closely, he says. The record delivery so far, just 18 months after signing the contract, is good news for Siemens’ super-efficient H-Class gas turbines. In Egypt, Siemens is supplying the three turnkey power plants – Beni Suef, Burullus and New Capital – with 24 of these gas turbines,12 steam turbines, 24 heat recovery steam generators and three 500kV gas-insulated switchgear systems. Want an idea of just how big this project is? More than 20,000 people are engaged on site.
Now that the three power plants have been built, they will be equipped with steam turbines and heat exchangers to enable the switch from simple to combined cycle operation, where the waste heat from a gas turbine is used to produce steam to drive a steam turbine, thus increasing overall efficiency and power output. The next big milestone will be handing over the fully completed plants to the Egyptian government just over a year from now, says Ghaly.
Q: How would you describe the progress you’ve made so far?
A: We are ahead of schedule: we have been able to connect 12 gas turbines in open cycle configuration instead of the original plan of having 11 connected to the grid by the end of 2016/early 2017. So we have already achieved 10% more than according to our original timetable.
Q: What has enabled you to over-deliver?
A: Two factors. First, back in Berlin they were able to manufacture and deliver an additional gas turbine to Egypt ahead of schedule. Second, our local partners and engineers worked around the clock to bring the additional gas turbine on stream. So it’s really been a combination of efforts from headquarters, the project team and local on-site partners.
“Each gas turbine should provide around 400MW, but they are actually delivering 4-6% more than that. For us this is a breakthrough”
Q: What do your achievements mean in practice?
A: We are delivering 4.8GW of power to the Egyptian electricity grid. This will supply approximately 15 million Egyptians with electricity.
On top of the 12 gas turbines (six in Beni Suef, four in Burullus and two in New Capital), we have equipped each of the three power plants with a 500kV substation and on top of that, we have built an additional three substations outside the plants to connect their electricity to the grid.
Q: What happens next?
A: There are two things we need to deliver now: the combined cycle modules and converting the power plants from open cycle to combined cycle operation. At the end of the project we have to have 14.4GW in combined cycle configuration. (The 12 gas turbines are currently installed in open cycle configuration – this means without a steam turbine or a boiler.)
Each power plant will have four combined cycle modules that each produce 1200 MW. It’s basically connecting two gas turbines with one steam turbine. Now we are working to install the combined cycle modules. Later, we’ll start to convert from simple to combined cycle operation.
Q: How challenging is this project?
A: It’s super difficult because the amount of work is tremendous. Such a power plant – remember these are the largest worldwide – would normally take at least 40-48 months to deliver. Yet we are doing it in 36 months and we are working on three plants in parallel! There is also a lot of civil work, such as soil preparation and piling to do, especially at Burullus and Beni Suef.
‘Piling’ is what you do if the soil is not solid enough to put a foundation on, for example if it is water-logged or sandy. Then you need to build piles of concrete to support the foundations. When we got the land at Burullus, it was covered with 3 metres of water because it is right next to the sea. And at Beni Suef, there was a 40-45-metre difference between the level of the land in places! So we had a lot of work to do to make sure the equipment could be safely installed.
Q: What convinced you to take on this mega-project?
A: In my opinion this translates into what Siemens stands for. We go for challenging and complex projects where we can really build history. Here, it was a chance to put a landmark in Egypt.
We have been working to solve the energy challenges in Egypt over the last 3-4 years. When this project came, it was like the culmination of all our hard work and effort of the past few years. We were very proud and enthusiastic to take it on. Of course with the very tight timetable in particular, it would not have been possible without the support of top management.
Q: What are your biggest technical achievements to date?
A: Besides delivering 4.8GW in 18 months – 10% more than scheduled – our greatest achievement so far is that our gas turbines, especially in Beni Suef but I believe also in Burullus, are performing better than expected. Each gas turbine should provide around 400MW, but they are actually delivering 4-6% more than that. For us this is a breakthrough. The H-class gas turbine is delivering more power than its rating.
Q: Why is the H-class gas turbine delivering more power than expected?
A: There are a lot of factors involved, including the environment around the turbine. We are also a bit conservative wen we rate our turbines. And of course, a lot of engineering optimisation took place during planning, installation and commissioning.
“Siemens developed a concept called the “trusted advisor” concept: we approach our customer, we identify their challenges in the energy sector and then we analyse several energy mix scenarios together”
Q: How is this project unique for Siemens?
A: First, in terms of scale: this is the largest single order in Siemens’ history. Second and third, these are the largest H-class power plants in the 50Hz market and they will be the largest H-class power plants globally. It is also the first H-class technology to be introduced in the Middle East. Finally, we are building it in record time. Internally, this has required breakthroughs in engineering, logistics, procurement etc.
Q: Do you usually deliver complementary infrastructure such as substations?
A: In Egypt we are one of the market leaders in building turnkey substations. Our original contract was for three inside the power plants and six on top. So what’s left to do now is build the last three outside. Of course other suppliers are also building substations to help evacuate the potential of the three new power plants.
Q: Will the Egyptian grid be able to cope with the new capacity?
A: We are also supporting our customer [the Egyptian government] with this. We are doing a grid analysis study together with them, where we take into consideration all the planned power generation up to 2025 and advise on the number of substations at 500kV and 220kV and their potential locations. This is to ensure that what we do on the ground today fits with our customer’s future requirements.
Q: In what way is this project a natural conclusion to your work in Egypt over the last 3-4 years?
A: Siemens developed a concept called the “trusted advisor” concept: we approach our customer, we identify their challenges in the energy sector and then we analyse several energy mix scenarios together. We did that for almost 2.5 years in Egypt. Then we built a 650MW power plant – it was a relatively small project but we built it to schedule in six months together with our local partner. These activities together were like the spark that gave the customer confidence that we really can solve their energy challenges.
We should not forget the financing either – we had very attractive financing deals that we were able to close in a very short time for the three power plants. It was basically export credit assurance financing backed up by Europe. Many banks also provided money to the customer.
Q: What does the project ultimately mean for Egypt?
A: It means that Egypt’s electricity challenges are now solved for good. With those three power plants, Egypt’s total generation capacity will increase by almost 45%. This will fulfill its power needs until at least 2022, maybe even 2023. It will have 14.4GW operating on one of the highest fuel efficiencies worldwide – more than 60% – which we expect to save Egypt at least $1.3 billion a year in natural gas costs (that’s comparing the H-class turbines to other combined cycle gas turbines – compared to the existing fleet, the saving would be far greater.) Additionally, we are training 600 engineers for our customer, to operate and maintain the three power plants.
“I think the government is also looking at ways and means to export electricity because there will be a surplus over the next few years”
So we are introducing new technologies and creating new, highly skilled engineers and technicians. This will not only have an impact on Egypt, but on the Middle East too. Other countries in the area where Siemens is active, such as Saudi Arabia and the United Arab Emirates, are all looking at this project. After this, it will be easy for us to promote our H-class technology there.
Q: Will all the electricity produced from the new power plants stay in Egypt?
A: This is the plan for the time being, but I think the government is also looking at ways and means to export electricity because there will be a surplus over the next few years.
Q: How does this project fit into Egypt’s broader energy strategy, also with respect to sustainability?
A: We were advising our customer on a certain electricity generation mix. Gas was part of that mix, but we also recommended increasing the penetration of wind power for example, so the customer already has targets to reach some 25% renewables in the energy mix by 2025. The two go hand in hand.
Q: What is your next milestone, for this project and beyond?
A: Within the project, we will start to hand over each completed power plant to the customer starting in spring or summer 2018. That is really the biggest milestone to look ahead to there. Then they will start commercial operation in combined cycle configuration.
Beyond the project, we are going to establish a power generation service workshop. We are currently building it and we hope that it will be up and running by 2018. Then we will be able to repair all types of rotating equipment – steam turbines, gas turbines, compressors etc, either for power generation or the oil and gas market – here in Egypt. This is a very important milestone for us as Siemens in Egypt and for us Egyptians because it will create a new industry and introduce new types of highly skilled jobs. What we do today is send parts for repair to Germany. Once we’ve built this, we will have the ability, tools and people to repair locally.
Q: As an Egyptian, what does this project mean to you?
A: I am very proud, that goes without saying. Two years ago I would never have dreamed of it being such a success. It fills me with real pride both for our positioning as Siemens in Egypt and for our positioning as a local subsidiary in Siemens’ global organsation.
Q: What are your plans for Egypt in the longer term?
A: There are other industry segments in the country that Siemens can help develop, such as the mobility market (we are in signalling and locomotive development), digitalisation (the Internet of Things) and of course, oil and gas – we have won the first phase of supplying power generation equipment to extract and process natural gas from Egypt’s largest gas field, Zohr.