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Heating Newsletter
April 07
International Market Strategy
Topics
Austria The Prices of Pellets on Decline
Denmark DANFOSS in Acquisition Spree in China
Germany German CENTROTEC 2006 Net Profit 14.3 Million Euro
Ireland VIADRUS to Sell Boilers Worth CZK 22 Million in Ireland in 2007
Italy MTS To Build New Solar Panels Plant
Spain Código Técnico de Edificación (CTE)
Switzerland AFG Net Profit Rises to CHF 66.2 Million on Strong Sales
Turkey DEMIRDOKUM Net Profit Up 45% Y/Y 2006
USA BOSCH Expands Production of Solar Technology
USA LSB INDUSTRIES swings to 4Q profit
Monthly Special
European Agreement On a New Energy Policy
Europe Micro-CHP Trials Gather Momentum
International strategic market research and consultancy on building product and related markets
BRG Consult Newsletter
Heating April 2007
Austria: The Prices of Pellets on Decline
The high prices of pellets in Austria have declined in March 2007 to an average of €198/t. Pellets are
now 33% cheaper than heating oil and 32% cheaper than gas. The Austrian Pellet Association
believes that increased customer orientation and greater cooperation between industry partners had
been successful in reducing prices.
There is a reason to believe that the prices of pellets are likely to stay low in the long term. New pellet
production facilities are being constructed and existing plants are increasing their capacity throughout
Austria and Germany. Annual pellet production in Austria will increase to around one million tonnes
by the end of 2007, easily supplying domestic consumption of around half a million tonnes.
Source: www.propellet.at
Denmark: DANFOSS in Acquisition Spree in China
The danish industrial group DANFOSS A/S is currently in talks with several acquisition targets in
China where the group expects a turnover of DKK 3.0 billion ($534.2 million/402.7 million euro) in
2008, Danish media reported on March 26, 2007.
Currently, DANFOSS owns three Chinese companies but the aim is to expand to 10 in the coming
three to four years.
In late November 2006 the group signed an agreement to set up a joint venture company in
Hangzhou, eastern China, with local air conditioning and automotive equipment maker SANHUA
HOLDING GROUP CO Ltd.
The takeover negotiations were confirmed by DANFOSS president and CEO Jorgen Mads Clausen,
who had previously said that China would be the group's second domestic market.
DANFOSS is getting closer to its turnover target of DKK 24 billion ($4.273 billion/3.222 billion euro) for
2008, following record high net sales of DKK 19.4 billion ($3.454 billion/2.604 billion euro) in 2006, up
18 pct year-on-year. Sales were boosted by the positive development on key markets, including
Germany, Russia, Latin and North America, and China.
DANFOSS market capitalisation increased by DKK 10 billion ($1.781 billion/1.342 bilion euro) in the
course of 2006 and is projected to grow by an additional DKK 5.0 billion ($890.3 million/671.2 million
euro) to about DKK 38 billion ($6.766 billion/5.101 billion euro) in the next two years.
Source: Nordic Business Digest
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Germany: German CENTROTEC 2006 Net Profit 14.3 Million Euro
German engineering plastics and energy-saving systems supplier CENTROTEC SUSTAINABLE AG
posted a net profit of 14.3 million euro ($19.1 million) for 2006, the company announced in a
statement on March 22, 2007.
Earnings before interest and tax (EBIT) dropped to 12.5 million euro ($16.7 million), down from 17.7
million euro ($23.7 million). As indicated in January 2007, CENTROTEC failed to meet its 2006
earnings target. The company explained this shortfall with one-time expenses of 7.0 million euro
($9.4 million) on the acquisition of German travel group TUI AG's heating technology unit, WOLF
GMBH. WOLF's integration in the climate systems segment led to reorganisation at the Dutch unit
INNOSOURCE NEDERLAND B.V. that cost 3.0 million euro ($4.0 million). Adjusted for these one-off
effects, CENTROTEC's operating result exceeded the 2005 figure.
The company generated record high sales of 396 million euro ($530 million), compared to 153 million
euro ($205 million) in 2005. CENTROTEC attributed this large sales volume to strong organic growth,
acquisitions in the solar segment and the first consolidation of WOLF figures in the fourth quarter
result.
For 2007 CENTROTEC (www.centrotec.de) targets high organic growth and an over-proportional
earnings increase in all segments. Excluding photovoltaic (PV) unit CENTROSOLAR AG, the
company expects sales to stand between 390 million euro ($522 million ) and 400 million euro ($535
million).
Source: German Business Digest
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Ireland: VIADRUS to Sell Boilers Worth CZK 22 Million in Ireland in
2007
Czech heating equipment producer VIADRUS plans to supply CZK 22 million worth of biomass-
fuelled boilers to Ireland in 2007, the company announced recently.
"Last year, the Bohumin-based company supplied the first biomass-fuelled boilers to Ireland worth
more than CZK 10 million," VIADRUS said in a press release. "This year VIADRUS will double the
supplies to as much as CZK 22 million."
VIADRUS, which is part of the leading Czech financial group KKCG, owned by tycoon Karel Komarek,
has been active on the Irish market since 2005.
In 2006, it produced more than CZK 27 million worth of biomass-fuelled boilers and exported as much
as 95% of the output.
This year VIADRUS has contracts for CZK 34 million worth of such boilers for export with a further
CZK 10 million to be sold on the domestic market.
Source: Czech Business News
Italy: MTS To Build New Solar Panels Plant
Italian heating and cooling equipment producer MERLONI TERMOSANITARI (MTS Group) will build
a new plant for the production of solar panels and will set up a solar energy research and
development centre in the central Italian region of the Marches by the end of 2007.
MTS will invest over euro 5.0 million ($6.6 million) in the next three years for the development of the
new plant.
The plant and the research centre will employ in total over 60, and will be the reference point of the
company in Europe in the solar energy sector.
At the plant, MTS will produce various types of solar systems and panels with the target of reaching
an output of 300,000 sq m per year in the next three years, with the possibility of increasing the
production in response to the market's demand.
MTS Group posted a turnover of euro 1.178 billion ($1.565 billion) for 2006, up 1.2% year-on-year.
Source: ANSA English Corporate News Service
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Spain: Código Técnico de Edificación (CTE)
From March 29th, all buildings under construction or renovation have to include sources of renewable
energies to produce sanitary hot water and electricity. This is to comply with the Código Técnico de
Edificación (CTE), set up by the Ministerio de Vivienda. The law, approved by the Spanish
government a year ago, took effect on March 29th 2007.
Source: El Mundo
Switzerland: AFG Net Profit Rises to CHF 66.2 Million on Strong
Sales
AFG Arbonia-Forster-Holding AG reported a record full-year net profit of CHF 66.2 million, up from
51.5 million last year, driven by improved conditions in the construction sector.
EBIT in 2006 rose to CHF 93.9 million from 72.8 million in 2005.
The group had previously announced full-year sales of CHF 1.244 billion, slightly up from 1.124 bln in
the previous year.
AFG plans an increase in authorised capital of CHF 1.89 billion - representing 25% of its current
share capital - to continue its expansion programme.
Source: AFX International
Turkey: DEMIRDOKUM Net Profit Up 45% Y/Y 2006
Turkish heating and air conditioning equipment maker DEMIRDOKUM said its net profit climbed by
45% on the year to 41.023 million lira ($29.53 million) in 2006.
Net sales rose by 36% to 775.78 million lira ($558.52 million). Sales on the domestic market reached
505.07 million lira ($363.6 million), up from 354.66 million lira ($255.4 million) and sales abroad
increased by 21.62% to 230.9 million lira ($166.23 million).
DEMIRDOKUM, part of local conglomerate KOC Holding, produces panel radiators, wall hung boilers,
instantaneous gas water heaters and electrical storage water heaters.
Source: Turkish Business Digest
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USA: BOSCH Expands Production of Solar Technology
The BOSCH Group announced that it is significantly expanding its production of solar thermal
systems. BOSCH's Thermotechnology Division expects sales of more than 150,000 solar collectors in
2007, 60 per cent more than it sold in 2006, and is looking to more than double sales by 2009.
This year, BOSCH is looking to use solar and geothermal systems to boost sales overall by about
euro 100 million ($125 million) to euro 400 million ($500 million).
The global market for solar thermal systems is growing strongly with sales expected to reach euro 2.6
billion ($3.26 billion) within the next five years. 2006 sales totaled euro 1.2 billion ($1.5 billion).
BOSCH is meeting this rise in demand by expanding production at its facility in Wettringen, Germany.
The number of employees at the location has doubled to 170 in the last two years alone. In addition,
a new production line recently went live in Aveiro, Portugal to cater for the increasing demand for
solar thermal systems in the south European market. New regulations came into force in Spain that
require solar technology to be installed in new buildings and whenever major renovation work is
carried out. This meant that the surface area of newly installed collectors nearly doubled in 2006
compared to the previous year. By 2010, the surface area of collectors installed in Spain is expected
to total five million square metres leading to 250 million fewer litres (66 million gallons) of heating oil
being used and reducing environmental impact by around 550,000 tonnes of CO2 compared with
conventional hot water systems.
In addition to expanding its production capacities for solar collectors, the BOSCH Group has also
stepped up its activities in the heat-pump field. At the end of January, it acquired Ft. Lauderdale, FL-
based FHP Manufacturing, a leading supplier in the heat-pump industry. Two years ago, BOSCH
also acquired Swedish manufacturer IVT Holding AB. BOSCH expects that systems that use
renewable energy will account for half of the German thermotechnology market by 2009 from 35 per
cent today. In Europe as a whole, this share will rise to 26 per cent by 2015.
The BOSCH Group is a leading global manufacturer of automotive and industrial technology,
consumer goods, and building technology. In fiscal 2006, some 260,000 employees generated sales
of euro 43.7 billion. Set up in Stuttgart in 1886 by Robert Bosch (1861-1942) as "Workshop for
Precision Mechanics and Electrical Engineering," the BOSCH Group today comprises a
manufacturing, sales, and after-sales service network of some 300 subsidiaries and more than 13,000
BOSCH service centres in over 140 countries.
In North America, the BOSCH Group manufactures and markets automotive original equipment and
aftermarket products, industrial automation and mobile products, power tools and accessories,
security technology, thermo-technology, packaging equipment and household appliances. BOSCH
employs nearly 22,700 employees in more than 80 primary and 20 associated facilities throughout the
region with reported sales of $8.8 billion in 2006.
Source: PR Newswire
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USA: LSB INDUSTRIES swings to 4Q profit
LSB INDUSTRIES Inc. said recently that it had swung to a fourth-quarter profit due to more robust
sales of its climate control and chemicals products.
The company, which makes heating and air conditioning products, reported 4Q sales growth of 30%
to $123.7 million from $95.5 million in 2005.
"The climate control business had especially robust sales growth led by geothermal and water source
heat pumps," said Chief Executive Jack E. Golsen.
For the year 2006, earnings increased to $13.3 million from $2.8 million in the previous year. Annual
sales grew to $492 million from $397.1 million in 2005.
Source: AFX International Focus
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Heating April 2007
Monthly Special: European Agreement On a New Energy Policy
On the 9th of March the 2007 Spring European Council showed once again the commitment of the
EU in taking the lead in the fight against global warming. EU heads of state and government set a
firm target of cutting 20% of the EU’s greenhouse gas emissions by 2020, and the EU will be willing to
put this goal up to 30% if the US, China and India make similar commitments. How individual
Member States will contribute to this target will be decided in separate negotiations.
EU leaders also set a binding overall goal of 20% for renewable energy sources by 2020, compared
to the present 6.5%. It was stated clearly that “nuclear power does not fall into this category”
(although in the context of greenhouse gas emission reduction, nuclear power could count as a low-
carbon energy source). A binding minimum target of 10% for the share of biofuels in overall transport
petrol and diesel consumption by 2020 was also set.
Federal Chancellor Angela Merkel was satisfied and happy at the outcome, saying that it would “lead
to a real change in our behaviour towards energy supplies.” This was a very significant goal because
renewable energy “means a boost in innovation for Europe”. "We can say to the rest of the world -
Europe is taking the lead. You should join us in fighting climate change", declared European
Commission President José Barroso.
This agreement, the related Action Plan for Energy Efficiency, existing or planned Directives and
related initiatives are likely to have a profound impact on the heating industry in the years to come.
This is one of the main topics addressed in BRG CONSULT’s ongoing study on “Eco-Related
Developments in the Domestic Heating Markets in Europe and the USA”, a preliminary draft of which
is now available.
For any additional information please contact Mr Andrea Corso on +44 1227 766 810 or email:
acorso@brgconsult.com.
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Monthly Special: Micro-CHP Trials Gather Momentum
Solid oxide fuel cell developer CERAMIC FUEL CELLS LIMITED (CFCL) is hoping to announce a
third utility partnership in the coming weeks, European CEO Brendan Bilton announced recently.
"We have an agreement with GAZ DE FRANCE and DE DIETRICH in France, and one with EWE in
Germany, but we have always said we would be comfortable with four utility partners, so watch this
space – we hope to make further announcements in the first half of this year," he said.
Field trials in Germany are entering their second year, with CFCL now working with both EWE and
GDF/DE DIETRICH to design ways to integrate its metal-ceramic fuel cell stacks with gas condenser
boiler units. "We are aiming for alpha trials of integrated units by the end of 2007," Bilton said.
CFCL is striving towards two industry targets: 40,000 hour operating life and fuel cell stack cost target
of US$500 (£250)/kW. Bilton believes utilities will be "comfortable" with an initial unit lifetime of "at
least 20,000 hours", in the knowledge that improvements will come over time. On costs, Bilton does
not argue with the £250/kW target, and sees it as achievable in the longer term.
The closure of Stirling engine-based Microgen, meanwhile, sent a small shudder through the
domestic CHP sector.
At a recent heating industry exhibition in Frankfurt three boiler manufacturers were exhibiting micro-
CHP units incorporating Microgen's Stirling engine. The technology may well rise again, albeit with
different owners.
Stirling partner conundrum
According to domestic CHP expert, Jon Slowe: "Stirling engine is the technology delivering a solution
now – or imminently; fuel cells are still some years off market readiness," Slowe said.
"The problem that some Stirling engine developers have faced is finding a manufacturing partner to
deliver Stirling engines at the right price. That may have been the problem for Microgen. Currently,
we track over 30 companies developing micro-CHP product."
"Because there are so many competitors vying for the same market, manufacturers may be nervous
about committing to one, and also be uncertain about how markets will develop. It is a few years
since E.ON UK said it wanted 80,000 Whispergen units, but there has been no announcement on
who is to be the European manufacturing partner, although we understand encouraging progress has
been made."
David Moriarty, managing director of WhisperGen Limited, confirmed this was the case on March 5:
"We are currently working to finalise a joint venture manufacturing arrangement with a major
European manufacturing conglomerate with a view to begin production of WhisperGens through that
JV by the end of 2007," he stated. "At that stage the E.ON 80,000 order will begin and they will then
begin serious marketing of the WhisperGen in Great Britain."
Moriarty said E.ON UK had been reluctant to promote the units until the mass manufacturing
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arrangements were in place. "Once mass manufacturing begins they [E.ON] have a plan for market
seeding in selected applications and geographical areas thus controlling the opening of the mass
market," he said.
"In the meanwhile we have been supplying them with limited numbers of WhisperGens which we have
manufactured for them in New Zealand; these have been used by E.ON UK for "market tests" so they
could evaluate their customer propositions, determine their installation and service plans and refine
their sales plans and billing operations."
Moriarty added that WhisperGen had commitments with various partners to install about 200 trial units
in Germany over the next 4-5 months, and had field trials underway in France, Italy, Belgium and
Spain.
Dutch market promising
According to Slowe, the Netherlands is the market to watch in terms of utility involvement. The three
leading retailers Essent, Nuon, Eneco are all involved in WhisperGen trials, and have stated a desire
to install 10,000 micro-CHP units over the next three years – if the right product is available at the
right price. The German market, meanwhile, is the most active for direct-to-customer sales, with
SenerTec selling around 3,000 units a year, mostly to single and multi-family housing. On cost,
Slowe said Powergen sells the Whispergen machine for around £600 more than a modern gas-fired
convection boiler. Although the units cost more today, as they are made in low volume, Powergen
believes this price is realistic once they are mass produced.
Japan ahead of game
Japan is well ahead of the game in fuel cell testing – over 1,000 PEM (polymer electrolyte membrane)
fuel cells in CHP mode are being tested in homes, and 45 solid oxide fuel cell (SOFC) units are due to
be tested in the next financial year. The Japanese are aiming for a 2008 market introduction, Slowe
said. He and CFCL's Bilton noted that SOFCs' high electrical efficiency and relatively low heat output
are well suited to new housing stock while Stirling engines, with high heat output, were suited to older
stock with greater heating needs.
Slowe was cautious on the utility ownership plan being encouraged by companies like CFCL. "It is
culturally challenging for utilities in Europe to own CHP units inside homes and residences – that will
take time to establish, although some Dutch utilities already lease boilers to homeowners, and in
Germany EWE is developing a business whereby it owns boilers and sells the heat to households.
Slowe is more confident that utilities in the UK will end up owning their customers' carbon emissions.
"There are ways of linking utility incentives to energy efficiency commitments," he said. "That could
be extended to a carbon saving target – and it is easier to apply that target to six utilities in the UK
than to millions of customers."
Source: Power in Europe
European micro-CHP trials: the main players
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