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Strong demand for gensets seen in Argentina, Chile - report

Tue, 06/11/2013 - 18:36 -- Editor

Revenues accruing from stationary gensets in Argentina and Chile totalled $54.6m in 2012, according to a new report by analysts Frost & Sullivan.

The report, titled ‘Analysis of the Argentinean and Chilean Stationary Genset Market’ estimates sales will reach $95.5 million in 2017 at a compound annual growth rate of 11.8% largely due to inadequate centralized infrastructure for electricity generation and distribution.

"Despite government efforts to reduce electricity tariffs, external factors have escalated prices in Chile and will keep them high in the long term," said Frost & Sullivan Energy and Environmental industry analyst Martin Cataife. "This has necessitated the adoption of affordable diesel gensets, particularly by large end-users in Chile."

However, the market is plagued by multiple challenges that shrink profit margins, says Cataife. Major market participants in both countries are genset importers and assemblers, who sell directly to consumers or service genset solution providers for their power rental businesses.

 In Argentina, import restrictions have increased the costs of gensets and thrown up operational challenges such as procurement delays. Further, the unavailability of gas and liquid fuels limits the use of stationary gensets in Argentina and the expensive and volatile pricing of fuels restricts uptake in Chile.  Low product differentiation weakens the bargaining power of genset suppliers.

While no perfect substitute for genset applications exists in the market, micro-turbines and certain renewable energy technologies such as wind, solar and hydropower plants are seen as an alternative. Their popularity too can dent genset revenues going forward. 

"In Argentina, genset vendors need to focus on developing and offering tailored made solutions that will meet the purchasing criteria of the main power utility. While in Chile, the mining sector will sustain the demand for diesel gensets," added Cataife.

The need for retrofit installations will provide additional avenues for revenue generation, as several engines in Argentina are based on obsolete genset technology and will need to be replaced."