Company Briefs - 4 Jul 2007

ST Engg aerospace unit targets Eastern Europe

SINGAPORE Technologies Engineering's aerospace unit intends to set up aircraft maintenance facilities in Eastern or Central Europe by next year, to replace the Bournemouth Aviation Services Company (Basco) the group closed down last year.

According to group chief executive Tan Pheng Hock, ST Aero has considered re-establishing a presence in Europe ever since closing Basco in December last year, and 'over the last couple of months has been looking at possibilities in East and Central Europe'.

The group set up Basco as a joint venture in 2002. Despite capital injections and attempts to turn it around, high operating costs meant the facilities failed to turn a profit, and led to the group closing it. ST Engg is looking to set up similar facilities but 'in a lower cost location, where the economics are better', Mr Tan said during a visit by the media to MAE, the group's facility at Mobile, Alabama.

He declined to specify which countries the group is looking at, but said the decision 'will be out by next year at the latest'.

Factors to consider include issues such as political stability, availability of skilled engineers and whether the local authorities will grant investment incentives. Critically, however, the new facilities must have 'baseload customers', he said.

This being so, the new facility could resemble ST Aero's acquisition of hangars in Panama in August 2006, when it bought over the lease of hangars for 12 narrow body aircraft and signed Panama's national carrier Copa Airlines as a base customer.

'Greenfield investment is possible, but we prefer to buy over existing facilities. This can be faster and comes with a baseload of existing customers, who may have owned the facilities and may be our partner,' said Mr Tan. The new facility will also seek customers among Basco's old customers and Europe's low-cost carriers, with the majority being carriers in Western Europe.

ST Engg's hangar footprint currently consists of space for 25 wide-body and 42 narrow-body aircraft, with two locations in Singapore, two in North America, one in Central America, and one in China.

Meanwhile, the group's traditional aerospace offering is 'changing shape', said Mr Tan. For example, the acquisition of SAS Component, a Denmark-based aircraft components firm, helped ST Engg expand its service range beyond airframe maintenance, repair and overhaul (MRO) - in which it was ranked by AviationWeek last month as the top global player - into one of total aviation support.

The latter, which includes things like line maintenance, components support, and planning, is a relatively new niche and allows the airline to outsource everything except its core expertise in operating and marketing flights.

ST Engg has so far won one major client in this area - Skybus, a new US-based low-cost carrier.

PTF, or passenger-to-freighter conversion, is another recent capability. At MAE, ST Engg is converting 87 Boeing 757s into freight carriers for FedEx. It is also converting two 757s into multi-role aircraft for the Royal New Zealand Airforce. These are serviced in the US, because so far only MAE has PTF capabilities within the group, though the facility is also training engineers from Singapore locations. But while ST Engg has ample real estate to expand operations at MAE, it may be constrained by lack of engineers and higher wages.

Mr Tan said 'manpower will always be an issue' and the group would in some cases prefer to manage a limited workforce by adding more capital equipment, rather than take on workers who could compromise standards.

Tuas Power diversifies into waste sector

TUAS Power - one of the big three power generation companies being divested by Temasek Holdings - is further diversifying into waste management to provide a total services package to its customers, including pharmaceutical plants to which it is already providing in-house trigeneration plants.

It has just invested S$10 million for a 60 per cent stake in a new joint venture - NewEarth Pte Ltd - with Sesdaq-listed Beng Kuang Marine (BKM) which has patented technology to transform industrial waste like heavy metals into building bricks, paving blocks and synthetic aggregates. NewEarth will invest an initial $25 million in a new pioneer plant in Tuas for this.

Tuas Power (TP), estimated to be worth over US$2 billion, is entering this 'focused niche' in recycling and conservation to cater to its pharmaceutical customers which need treatment of their waste like contaminated heavy metals and solvents, Ben Lau, TP's vice-president (business development) told BT. Currently, the waste is incinerated.

TP is already in a separate JV with Indonesian gas importer Gas Supply Pte Ltd to supply small to medium-sized trigeneration units - producing electricity, steam and cooling water - to companies like Schering Plough and Pfizer in Tuas. So its latest waste management JV with WET, a subsidiary of BKM, will complete the package, he said.

'While waste management is a non-core business for us, the latest JV resulted from our listening to our customers,' Mr Lau said.

TP has been looking for such waste management technology for a while, and it was approached by BKM which has the patented 'crystallisation' technology and which has developed a pilot plant to transform the waste into environmentally safe products that can be used in construction, reclamation and road building.

NewEarth is now looking to build its first commercial plant in Tuas, with construction expected to start in the fourth quarter. Costing an estimated $25 million, the medium-sized plant, which is expected to start operation in Q4 next year, will be able to process about 10,000 tonnes of waste materials monthly.

'Longer term, we plan to scale up and build a second plant, the size of which will depend on market demand,' he said.

Mr Chua Beng Kuang, managing director of BKM, said that 'currently, there is more than a million tonnes of industrial waste generated each year in Singapore. Both TP and ourselves see immense potential in the environmental recycling business.'

NewEarth's products will help reduce disposal as landfill, as well as reduce reliance on imported raw materials such as sand and stones, especially after Indonesia's ban on sand exports, BKM said.