We’ll group these two markets together because the use of special metals from the likes of PCP for power generation and industrial markets are often very similar.
INDUSTRIAL GAS TURBINE (IGT)
This is the main driver for these two markets and why the power generation/industrial markets have so much potential for PCP. What are IGT’s? IGT is just a fancy name for jet engines that are used to generate power. Jet Engines just might be the most common way of generating power for heavy duty jobs from natural gas power plants to huge cargo ships. Since PCP is already the best at making jet engine parts for planes, making jet engine parts for other uses is a piece of cake.
Note: The momentum in IGT should prove even more lucrative for Woodward Governor, who has more than 60% in Turbine control technology. Basically, Woodward Governor’s control technology makes the IGT’s smart: allows IGT’s to operate under more situations, allows the IGT’s to self adjust during operations, and makes IGT’s more efficient and last longer, etc.
Estimates for IGT production will grow from about $9 Billion in 2007 to $15 Billion in 2011. IGT aftermarket and services are expected to grow from $1.3 Billion in 2005 to $1.7 Billion in 2010. The biggest players, GE and Seimens, are too big and diversified for this growth in IGT’s to significantly move their stock, which is why we’re turning to component players like Precision Castparts and Woodward Governor.
Why are IGT’s selling like hot cakes?
I found out from the Goldman Sachs Eighth Annual Power and Utility Conference that took place May 13-14, 2008. All the major utilities expressed the same outlook: natural gas will be the main source of electric power for this country for the foreseeable future…and short/medium term for these guys is looking out to 2030! Here’s why. Electricity demand continues to grow, but old coal power plants are being decommissioned while no new coal plants are built because of environmental concerns! Alternative energy sources like wind and solar are too unreliable and limited to replace the coal power plants. (For example, how dangerous would it be if the wind died down and stopped producing power for a hospital?) The only fuel clean enough and abundant enough is natural gas, which uses IGT’s to generate power. Also, natural gas power plants are much cheaper and faster to build compared to years and decades for coal and nuclear plants.
“Gas turbine electrical generation has much to recommend it. The capital costs of gas turbine electric power plants are the lowest of all. A light water nuclear power plant may cost as much as $4,000 per kilowatt. An installed kilowatt of a coal-fired steam turbine power plant might be $1,200 to $1,600. The latest gas turbine figures given by Gas Turbine World in its 2007-08 GTW Handbook are as low as $200 per kilowatt for simple cycle and $400 per kilowatt for combined-cycle gas turbine power plants. ” ~ Lee S.
