Wärtsilä Corporation Annual report 2014

Services operating environment

Wärtsilä Services supports the company's marine and power plant customers. Of the company’s existing installed engine base, measured in MW, approximately one quarter is power plant related with the remainder being marine industry installations. In terms of Services' revenues, the breakdown is approximately 40% power plant related and 60% marine sector related. The service portfolio includes everything from spare parts and field service work, to more advanced lifecycle solutions aimed at reducing operational costs and improving efficiency. Roughly half of Services’ revenues come from spare parts, one quarter from field service, and one quarter from service solutions, such as maintenance agreements and service projects.

General market drivers for Services

The main market driver in the service business is the size and development of the installed equipment base. The market conditions faced by end customers have a direct impact on the utilisation rate and the estimated lifetime of installations in operation. The lifecycle phase of an installation also affects maintenance requirements, and thereby the service needs in both the marine and power plant markets. Lifecycle solutions are offered through long-term service agreements and retrofit projects. The need for such solutions is driven by changes in, for instance, the cost or availability of different fuels, the cost or availability of crew, and/or the level of technical expertise needed to operate the vessels or power plants. Changes in environmental regulations, as well as improved safety aspects, also influence the need for lifecycle solutions. The outsourcing of operations and management to a reliable partner is today an important trend in the power plants service market. It is also becoming a more important driver for marine customers, whereby partnerships can improve clarity concerning future costs and improve operational efficiency.

Competition and market position

Wärtsilä has a strong position in servicing equipment sold and designed by Wärtsilä. Only a few players are able to provide such a broad services offering globally. Thus competition is mainly local, consisting of parts traders, repair yards, local workshops, and component suppliers for spare parts and the field service business. The number of local players is quite large; therefore competition is rather fragmented and focused on a limited scope of offering.

The competition for long-term service agreements for operating power plants comes from a few regional players capable of offering plant operational services. In the marine market the competition for long-term service agreements is even more fragmented with some ship management companies being competitors in this area. Wärtsilä Services offers a variety of options to ensure the best solution for the end user.

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