Aggreko Plc

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Aggreko Plc

121 W. Regent Street
Glasgow G2 2SD
United Kingdom
Telephone: ( + 44) 141-225-5900
Fax: ( + 44) 141-225-5949
Web site: http://www.aggreko.com

Public Company
Incorporated: 1962
Employees: 1,800
Sales: £279 million ($417.2 million) (2000)
Stock Exchanges: London
Ticker Symbol: AGK
NAIC: 532490 Other Commercial and Industrial Machinery and Equipment Rental and Leasing

Aggreko Plc is the world’s largest “temporary utility” company. The Glasgow, Scotland-based company specializes in the rental of power generators and other equipment, including air compressors, mobile air conditioning units, and other temperature control equipment chiefly to industry. The company’s prestigious clients include the Super Bowl, the Olympic Games, and the movie industry (the company provided power generation for the production of the blockbuster film Titanic, among others). Aggreko also comes to the rescue of the world’s utility companies, providing backup power generation for the city of New York and temporary utility services to the California market hard-hit by power shortages in the early 2000s. The North American market accounts for the largest share of Aggreko’s revenues, at 50 percent of the company’s £279 million ($417 million) in 2000. The United Kingdom and Europe contribute 28 percent of the company’s annual sales; other markets, particularly among Asian countries, including China and India, add 22 percent of the company’s sales, but also represent the fastest-growing markets for Aggreko. In all, the company operates more than 110 offices in over 20 countries. Spun off from Christian Salvesen Plc in 1997, as the company turned its concentration to logistics services, Aggreko is traded on the London stock exchange and is led by chairman Christopher Masters and managing director Philip J. Harrower, who replaced one of the company’s founders, David Yorke, in 2001.

Dutch Beginnings, Scottish Growth in the 1970s

Aggreko began as a small mobile generator rental business in the Netherlands in 1962 (Aggreko comes from the Dutch word for generator). Over the next decade, the company expanded its operations into other European market countries in continental Europe. At the beginning of the 1970s, Aggreko turned to the United Kingdom. In 1973, Aggreko opened an office in Glasgow, Scotland, headed by David Yorke and Gordon Tourlamain.

The Scottish office quickly outpaced its parent company, and Aggreko’s headquarters—and market focus—eventually moved to the United Kingdom. Aggreko grew rapidly over the next decade, expanding notably into Norway to support the booming North Sea oil industry. Yet, lacking the funds for further expansion, Aggreko began to look for a larger partner.

In the early 1980s, British shipping to food processing conglomerate (and former leader of the worldwide whaling industry) Christian Salvesen had been looking for new business opportunities in order to shore up its operations damaged by the economic recession of the period. Already strongly present in Norway—the company’s roots were historically Norwegian—Salvesen acquired Aggreko in 1984. The following year, Salvesen went public, and Aggreko became one of the company’s key divisions.

Under Salvesen, Aggreko, which continued to be led by Tourlamain and Yorke, started to expand rapidly. By 1986, the subsidiary had increased its number of U.K. depots, while also boosting its presence on the European continent, adding depots in Paris and Marseilles to build on its existing French presence. In 1987, Aggreko added a new depot in Germany, two more in England, and then acquired rival Dutch company Van Rijn to reestablish itself as a major generator rental company to the Netherlands’ market.

The year 1986 marked another turning point for Aggreko. In that year, the company made its first acquisition in the United States, of Electric Rental Systems in Louisiana, marking Aggreko’s entry into the North American markets. The company’s new U.S. component, led by Gordon Tourlamain, began a rapid expansion drive, and, by the beginning of 1987, Aggreko had doubled its U.S. operations, with new facilities in Los Angeles, Texas, Alabama, Florida, and San Francisco.

Aggreko’s North American presence took on still greater importance in 1988. In that year the company paid $4 million to acquire Mobil Air and Pierce Industrial Air. The purchase not only gave Aggreko a new business area—that of mobile air conditioning and other temperature control rental equipment—but also a position as leader of that market in the United States.

Part of Aggreko’s success, both in the United States and in Europe, was its commitment to developing its own generator and equipment designs, allowing the company to adapt quickly to customers’ needs. In 1986, the company introduced the first in a range of super-quiet generators. The following year, Aggreko began offering customized rental equipment.

At the end of the 1980s, Aggreko continued to explore new markets. In 1989, the company made its first move into the Asian Pacific markets with the acquisition of Singapore’s Yeok Kong Electrical Company. The following year, the company expanded its position in that part of the world with the purchase of Generator Rentals Pty, based in Australia.

International Leader for the 21st Century

Changes at Salvesen had led that company to shed a large number of its operations to focus on a smaller core of logistics, food processing, and Aggreko. Aggreko itself represented the fastest-growing component of its parent company. While many other companies suffered through the economic recession at the end of the decade, Aggreko’s business benefited from industry’s increased interest in outsourcing for their generator and other climate control needs. After building up its temperature control wing in the United States, Aggreko introduced those operations to its European base in 1991. The company added temperature control rentals through an Antwerp, Belgium depot, and then introduced that operation to the United Kingdom, where it quickly became a segment leader.

Also in 1991, Aggreko acquired BDD, giving it another business component, that of industrial drying equipment rentals. Based in the United Kingdom, the new component also gave the company an entry into the Middle East markets. The company expanded elsewhere in that region, opening depots in Sharjah and Abu Dhabi in the United Arab Emirates. Meanwhile, in Asia, Aggreko set up facilities in Malaysia and Indonesia. Its Australian component was also growing, extending its network to six depots and 14 sales agencies. Aggreko then brought its new desiccant drying expertise to the United States, starting in 1992.

Back in Europe, Aggreko was eyeing a number of prestigious contracts. In 1992, the company won the contract to supply power to the 1992 Olympic Games in Barcelona, as well as the Winter Games in Albertville, France. Backing this effort was the opening of three new depots, in Barcelona, Seville, and Bilbao. The company received the power generation contract for the Lillehammer Winter Games of 1994, as well; yet the company’s Spanish success proved short-lived and the company was forced to close its new Spanish depots by mid-decade. Around the same time, the company was exiting from another unsuccessful expansion move. In 1992, Aggreko had attempted to enter the lighting systems rental market in the United Kingdom, purchasing Light & Sound Design. Unable to find its place in that market, however, Aggreko sold off that operation in 1995.

Aggreko was restructured as part of an overall retooling of the Salvesen group, which decentralized its operations and placed responsibility more firmly in the hands of the management of the individual businesses. David Yorke had by then taken over day-to-day leadership of Aggreko, while Dr. Chris Masters had been named chief executive of Salvesen. Aggreko’s operations were now organized along regional lines, rather than product segments, with divisions for North America, Europe, the United Kingdom, and the Pacific Rim. In the United States, the company set up its first national accounts program, appealing to the growing number of large corporate clients. That market had also grown to become the company’s largest single market, building up to some 50 percent of Aggreko’s total sales.

In 1995, Aggreko launched its own series of oil-free air compressors, particularly prized by the food processing and electronics industries, as these air compressors did not disperse the fine particles of oil thrown off by standard air compressors. The following year, Aggreko introduced its GreenPower series of environmentally friendly power generators. This new generation of generators was first used for the Olympic Games held that year in Atlanta.

A takeover attempt launched by rival logistics group Hays Plc for Christian Salvesen set in motion a chain of events that saw Aggreko become a separate company in 1997. While Salvesen had rejected the takeover offer, shareholder discontent forced Salvesen’s board to restructure the company again, now tightening its focus to become a pure logistics player. Aggreko was spun off as a separate, publicly listed company headed by Chris Masters as chairman and David Yorke as managing director. The spinoff helped Salvesen raise funds to begin an aggressive acquisition program, while Aggreko became a more visible company in its own right.

Company Perspectives:

Our Commitment: Aggreko is totally committed to enhancing shareholder value by delivering consistent growth in quality earnings through an ever-expanding range of added-value services focused on solving customers’ increasingly complex temporary power, temperature control and oil-free compressed air requirements around the world.

The move was greeted warmly by the financial community and Aggreko Pic’s initial public offering on the London Stock Exchange was a success. The company continued to build up its position as worldwide leader of the equipment rental market. While power generation remained the company’s primary operation ,its temperature control and other equipment rentals were also becoming significant revenue generators. In 1998, Aggreko brought its oil-free compressor equipment to the United Kingdom and Europe. In the United States, the company bought Tower Tech, a provider of modular cooling towers and equipment for the chemicals, nuclear power, pharmaceutical, and other industries. That purchase cost the company $8.4 million.

Aggreko’s power generation business had not only developed itself as a leading supplier of mobile power generation equipment and solutions, but also as a leading “temporary utility” company. Already by 1993, the company was completing projects developing as much as 100 MW of generating capacity. In 1999, the importance of this branch of operations was highlighted by the creation of a new division, Aggreko International Power Projects (AIPP). The new entity was formed in order to be able to provide multi-megawatt temporary power facilities around the world. The company quickly developed clients among many local and national governments. The company’s generator fleet found service in such far-flung locations as the war-torn Balkans, drought-crippled Africa, and in the United States, providing crucial supplementary power to such cities as New York. The state of California became another primary U.S. customer, as deregulation of the state’s utility market had caused major power shortages in 2001. Many private companies turned to Aggreko at the same time, as the growing reliance on electronics and computers made continued, stable power source an absolute necessity.

Aggreko’s focus in the United States had been primarily on generator rentals. In 1999, however, the company acquired L&S Industries Inc., based in Baltimore, Maryland. That company had been Aggreko’s first sales agent in the United States in the late 1980s. Founded in 1983, L&S had initially targeted the engine repair and maintenance market, before changing its own focus to equipment rentals. The addition of L&S’s strong service component helped expand Aggreko’s service operations. It also marked the first time the company had acquired one of its sales agents.

In 2000, Aggreko, which was able to boast about its contribution to the blockbuster movie Titanic, added another worldwide operation, that of the air compressor rental fleet of Ingersoll-Rand. The two companies also announced a strategic alliance agreement as part of the acquisition. The company also secured a number of other prestige contracts that year, including power generation for Euro 2000 and the PGA Championships.

The announcement by General Electric that it was entering the power supply market at the beginning of the century—with the business expected to be online by 2002—sparked speculation that Aggreko might become GE’s takeover target. Aggreko affirmed its intention to remain independent, while at the same time downplaying the coming competition from the global giant. Yet some observers cautioned that Aggreko’s fleet of primarily diesel-based generators placed it at a disadvantage, as GE, capable of building its fleet from scratch, was able to choose among a number of new generator fuel technologies.

Nonetheless, Aggreko remained buoyant entering the new century. The company secured the contract to supply power to the 2002 Olympic Games to be held in Salt Lake City. Aggreko also received a new managing director, as David Yorke retired in April 2001, turning over the company’s operational leadership to Philip J. Harrower. Aggreko meanwhile was riding high on a wave of power blackouts affecting California, which were expected to continue for some time as that market adjusted to the realities of deregulated utilities.

Key Dates:

1962:: Aggreko is founded in the Netherlands as a power generator rental business.
1973:: David Yorke and Gordon Tourlamain open Aggreko’s U.K. subsidiary in Glasgow, Scotland.
1984:: Christian Salvesen acquires Aggreko as part of a diversification program.
1986:: Christian Salvesen goes public on the London Stock Exchange; Aggreko enters United States with acquisition of Electric Rental Systems Inc.
1987:: Aggreko acquires Mobile Air and Pierce Industrial Air in the United States and becomes the leader in temperature control equipment rental market; company introduces customized rental equipment.
1989:: Aggreko acquires Yeow Kong Electrical Company, based in Singapore, to begin expansion into Asia.
1990:: The company acquires Generator Rentals Pty, in Australia.
1991:: Aggreko launches temperature control rentals in Europe and the United Kingdom, acquires BDD, and adds desiccant dryer systems in the U.K. market before launching drying equipment in the United States the following year.
1995:: The company launches oil-free air compressors in the North American market, later introducing these in Europe as well.
1997:: Aggreko is spun off from Salvesen and becomes separate publicly listed company.
1998:: The company acquires Tower Tech modular cooling tower rental business.
1999:: Aggreko forms Aggreko International Power Projects (AIPP) to provide temporary multi-megawatt capacity on a global basis; the company also acquires U.S. sales agent L&S Industries.
2000:: The company acquires air compressor rental fleet from Ingersoll Rand.
2001:: Aggreko wins contract to provide power generation for 2002 Olympic Games in Salt Lake City.

Principal Subsidiaries

Aggreko Holdings Limited; Aggreko UK Limited; Aggreko International Projects Limited; Aggreko Inc. (U.S.A.); Aggreko Holdings Inc. (U.S.A.); Aggreko Finance BV (Netherlands); Aggreko Investments BV (Netherlands); Aggreko Nederland BV (Netherlands); Aggreko Belgium BVBA; Aggreko Deutschland GmbH (Germany); Aggreko France SARL; Aggreko Norway A/S; Aggreko (Singapore) PTE Limited; Aggreko Generator Rentals Pty Limited (Australia); Aggreko (Malaysia) Sdn Bhd; Aggreko (Middle East) Limited (Cyprus); Aggreko Canada, Inc.; Aggreko SA de CV (Mexico).

Principal Competitors

Airlease Ltd.; Algeco SA; ATEL Capital Group; Caterpillar Inc.; Electro Rent Corporation; GATX Corporation; GE Power Systems Inc.; ICON Holdings Corp.; National Equipment Services, Inc.; PLM International, Inc.; Rental Service Corporation; TTX Company; United Rentals, Inc.; Willis Lease Finance Corporation.