Hydro Review

Viewpoints from the Board Room: Weir American Hydro

James G. Board was named president and managing director of Weir American Hydro in 2011, not long after American Hydro was acquired by the Weir Group. Board discusses his transition to the hydro industry and the future of Weir American Hydro.

By Marla J. Barnes

James G. Board
James G. Board

James G. Board has been involved in companies that build high-end machinery in the energy industry for decades. But his career took a new turn after his employer, Glasgow, Scotland-based Weir Group PLC, acquired York, Pa.-based turbine component manufacturer American Hydro Corp. in November 2010.

Board joined Weir in 2007, and in 2011, he was picked to lead Weir American Hydro as its president and managing director.

The pump technologies of the oil, gas and mining industries he was familiar with had great similarities to the machinery of hydropower. But Board says he was amazed at the sophisticated nature of the design, manufacturing and operation of hydro as well as the passion of those who work in the industry.

Hydro Review sat down with Board recently to talk about the transition that came with the Weir Group's acquisition of American Hydro, where he sees the hydroelectric business heading and what actions his company plans to take to help secure the future of this industry.

Q: You mentioned Weir American Hydro was expanding its plant and offices in York. What kind of timeline are you looking at for your expansion?

Board: Hopefully the offices will be done sometime this summer. The shop will break ground this summer, with the intent of being completed by the first quarter of 2013. So we should be fully operational on the new facilities by the middle of 2013. We are going to need that capacity in 2013 because we are forecasting that Weir American Hydro will more than double its order intake from 2012 to 2016.

Q: It sounds like for Weir, the acquisition of American Hydro is a nice complement to the rest of the business. Can you describe how Weir's plans in the hydro market fit in with its overall business strategy?

Board: It is a nice complement. But it is a little different than the other businesses. Right about the same time Weir bought American Hydro, we bought another company in Madrid, Spain, called YES, and they service wind generators for wind farms. That was Weir's first foray into the renewables market, so that formed our baseline in renewables.

Weir has three divisions. The first is the Oil and Gas Division, which plays a huge part in the fracking business.

The second is the Minerals Division. They participate in the mining industry worldwide and primarily make pumps and other circuit equipment.

American Hydro is part of the Power and Industrial Division. About 50% of the P&I division's business is in valves.

With these three different divisions, they become different points of the spear into different industries and markets.

Weir American Hydro absolutely is a focus because it has a niche market offering. We are the center of excellence for hydro for Weir. We will be controlling all of the resources around the world in our quest for new hydro business.

That is part of our strategic plan - to grow internationally. Prior to the acquisition, I think American Hydro was about 95% North American based, primarily in the U.S. and Canada. We are trying to force our boundaries off of American shores. We have some activity in Vietnam, in the Philippines and South America. So I think that if we are going to grow this business significantly, we are going to have to capitalize on the Weir presence on a global basis.

Q: What are the differences and similarities between pump manufacturing versus hydro turbine manufacturing?

Board: The hydraulics are similar. The technology that drives hydro turbines is superior to the technology that is used in centrifugal pumps. We build hydro turbines as a one-off. We are building each unit to a specific set of conditions, a specific set of hydraulics. The equipment is expected to run for 50 years plus. In the pump world, you design a product that is a little more generic so that you can apply it to multiple facilities and multiple applications. In this business (hydro), you are making unique equipment every time. So you can afford to take the extra time and energy to design it to obtain as much efficiency as possible.

Q: Being new to the market, give us an idea what you think is going to happen in North America in the next five years.

Board: A lot is going to depend on the price of gas. With natural gas at a very low price, that is going to be a strong competitor to hydro in terms of capital investment. On the flip side, with power companies looking to invest in alternative means of producing power to get away from the big three - nuclear, oil/gas and coal - a lot of them are dabbling in wind and solar. Most of them have a component of hydro in their portfolios. I see that component growing in the next 20 years. Whether that means they will increase their hydro resources by rehabilitating existing plants to try to get more power out of them or whether that means adding a new hydro facility to an existing structure remains to be seen. But I do believe that hydro will play a bigger part in power companies' portfolios going forward.

I think globally, there are new hydro projects popping up all over the world. In Europe, natural gas prices are much higher than in North America. I think hydro has been a big part of mainland Europe and the United Kingdom in their power development for many, many years. But I think they are just now realizing what the potential of that business is and they are looking at upgrading those facilities.

When we considered our existing business profile, it was about a 50-50 split between the U.S. and Canada. Canada has some very large municipally owned power companies. They are big players - big bureaucracy, but they have a lot of hydro. There are definitely some favorable incentives for the power companies to invest in additional hydro capacity.

We are hoping that the U.S. government takes similar actions. One of the issues in the renewables market in the U.S. is that technologies like wind, solar and geothermal are getting twice the incentives that hydro is. If you look at it, you get the biggest bang for your buck with hydro. You get much more power for a given footprint with hydro. And yet, it seems that all of the buzz in Washington and in the press is with the others.

Hydro has been a distant second place. It has been around for a long time and is not considered to be cutting edge technology. However, with advances in the way the equipment is engineered and designed, there are many advantages available to hydro that were not there before. We would like the federal government to take an increased role in developing the incentives to provide hydropower as a source of "green" power. It is not an inexpensive venture to get into. The initial capital investment in the hydro industry is quite high. The upside is that once it is in, it's going to run for a very long time with minimal effort. It is very flexible, whether in peaking or base load power generation, and provides considerable flexibility for load shaping, spinning reserve and other ways to enhance the value of power.

If you look at what the ideal play for renewables would be, I think you would be looking at a pump-turbine combination, where you use the equipment as a turbine to produce power when you can sell it at a high rate and then, when the demand goes down, and the rates goes down, you could run it in reverse and use it as a pump to pump the water from a lower reservoir to a higher reservoir for use later in producing power in the turbine mode.

Now, if you want to take it to the next step, you could put in a wind turbine to produce the power to drive the motor in a pumping mode ... so you are not consuming any power out of the grid. The pump turbines are something not everyone is doing.

They are very technical, very hard to design, and they need to be very robust. That, from a hydro world perspective, is the top of the pile. If you can combine a hydro pump-turbine with wind or solar, when they're in the pumping mode, you are in a win-win situation.

Q: How do the prospects in Latin America look?

Board: There are laws in a lot of South American countries that make it prohibitive for American businesses to work there. Chile is a different case. We have done business in Chile. The Brazilian market is the biggest opportunity, but in order to play in it, you have to be in Brazil.

In our Minerals Division, we have a very large manufacturing site outside of Sao Paulo. So when we are ready to do something (in hydro), I suspect we will tie in with them to get a physical presence in the country.

Going into Latin America is going to be a strategic move on our part. It will be based on where we think the biggest opportunity is, what our competition's foothold is there, and where we think we can have the biggest success.

Q: So outside North America, do you think Asia is your best opportunity?

Board: Southeast Asia and Europe are our best bets right now. We have a very strong services business in the United Kingdom. So with the addition of the American Hydro team to the Weir Group, we're looking to consolidate and formulate a business plan to not only attack the UK hydro world, but also mainland Europe.

Q: American Hydro has had a lot of success in the rehab market. Is that something you will continue?

Board: That is where our stronghold is. We currently lack the capability of manufacturing a generator, and we are not aligned with a specific generator company at the moment, although we're exploring that opportunity. So to get into the new build, we really have to have both - the mechanical side and the electrical side. We don't have that right now, not that we won't have that in the future. But that will require a whole new infrastructure.

American Hydro has been in the hydro turbine and component rehab upgrade business for 25 years. That is our claim to fame, and that is where we are going to stay. We think we do it better than anyone else does. We have many loyal customers. We are in it to benefit the end user. At the same time, we are a business trying to make money, so we are trying to control costs where we can.

Q: So one key is to bring those American Hydro customers with you.

Board: It is a journey. I think eventually, our customers will see the quality has not been downgraded by the acquisition of American Hydro. If anything, it is going to get better. The response is going to be better, the on-time delivery will be better, our attention to corporate responsibilities is better, and we will still be, if not what they expected before, better than what they expected. That is our goal.

As I told our workers recently, Weir did not buy American Hydro to keep it the same. Weir bought this business because they believe in this business, they believe in the market it plays in, they believe in the people who work for it, and they believe it can grow and really add something to the Weir Group.

Q: In hydro, so much of the industry's assets are owned by government entities. Does that affect the way your run the business?

Board: It does. When Weir bought this business, government contracts were on their minds because, when you deal with the U.S. government, you have to deal with their terms and conditions. So, there is unlimited liability when doing business with the government. We bought this business knowing full well that there was a tremendous opportunity to do business with the hydro portion of the government, specifically with the Bureau of Reclamation and the U.S. Army Corps of Engineers, and we have worked with our group in Scotland to come to an agreement to do that. We're targeting that as a growth opportunity for this business.

I do not think we want to make it our life goal to only do business with the government. But it is a core part of our strategy for going forward, because they own about 40% of the hydro resources in the U.S.

So we have had visits from representatives from both the Bureau and the Corps since I've been with the company. I think they are cautiously optimistic that we will be able to play in their portion of the market, and I think they are happy to have another competitor in the market that is willing to do this business with them.

Q: How does Weir American Hydro intend to bring up a new generation of workers?

Board: Personally, I think it is fantastic. The age and enthusiasm we have in our work force is incredible. We have a great group of young engineers who are invested in this business. They believe in it, they are enthusiastic, they are passionate about it. It takes a different sort of person to develop that passion.

Generally, we have not been able to hire experienced people out of the general market that have a hydropower background. Basically, if you have solid experience in the hydro industry, you're already working somewhere. I think that the employment market for engineers and technical people in general, not just in the hydro industry, is having a big problem because there is a gap in the work force that was caused by the dot-com business in the 1990s and early 2000s. We are seeing this globally in most of our businesses.

So we are doing several things. We have invested in leadership training and a lot of development work from a group perspective in Scotland. When we identify people who show promise, we put them in these programs to begin the development process for them to be future leaders in this business. We need to have our successors, and we need to train them.

From an engineering perspective, we use Penn State, York College and other reputable universities as co-op resources for students who are in their undergraduate years or graduate years who want to do a semester of work and we put them right to the task as soon as they show up. We challenge them from day one until the day they go back to school. If they are interested in the business and they fit in, we offer them a job when they graduate. We have a number of young engineers who have gone through that program.

I am not discounting the "more mature" people in our industry. You have to have the experience of people who have been around this industry for 25 or 30 years because they provide the leadership and mentoring to the younger generation. I know this industry is not going to go away. We have to make it interesting to people who are coming out of school. And there is a lot of competition for good people in many different industries.

Weir American Hydro is headquartered in York, Pa. The Weir Group acquired American Hydro in 2011.
Weir American Hydro is headquartered in York, Pa. The Weir Group acquired American Hydro in 2011.

The Hydro Research Foundation is another example of how Weir American Hydro participates at a graduate level in trying to promote the hydro industry, primarily financially but also in having some input on the curriculum that is put forth.

Whether these young students graduate and come to work for us or for one of our competitors or go to something completely different, we know that we have at least given them the opportunity to participate in this industry. So we view that as a really smart way to invest our money.

We also do this in our manufacturing facility. We have implemented a welding school. We put five or six individuals through a course that is six to eight weeks long. They have to pass tests as they go along. By the time they are done, they are qualified to weld to our standards, and they have a skill they can take with them for the rest of their lives.

In addition to what we are doing locally, Weir has invested about 3 million British pounds into Strathclyde University in Scotland, and we have developed what we call Weir University. It is a two-pronged approach. One is that we have developed an online course for our employees. They can get advanced certifications in specific areas, technical areas within the Weir Group.

And the second is the university staff will do pre-approved research projects for us. So the one side is R&D, but the other is offering our employees opportunities to better themselves, and making it easier for them because they can do it online.

Q: What sort of technological advancements are happening within Weir?

Board: This is probably the biggest driving force in our business: the technology. It is our intellectual property. Everything we do revolves around excellent engineering. It is the true core of what this business is all about. We have some home-grown computer programs that we use. In addition, we have some other programs that we have purchased from third-party providers and modified to use in our own way. We have some very bright engineers who know how to do this for us. Technology is driving everything we do.

When I joined Weir American Hydro, the technology of the hydroelectric business really blew me away. Coming from what I thought was a fairly technical industry in the pump industry to this involves a quantum leap in technology. I think that is why it interests these bright new people. Not only is it a green industry, it is very challenging. It is truly amazing!

Marla Barnes is publisher and chief editor of Hydro Review.

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