Eatons chairman and CEO, Alexander Cutler spoke exclusively to Oil Review about the global power solutions providers ambitious expansion plans, its overall strategy within the Middle East and the opening of its new regional HQ in Dubai. Ian Roullier reports
While much of the world groggily continues to recover from the global economic crash of 2008, key parts of the Middle East region have maintained or returned to relatively rude health. This is a fact that power management solutions provider Eaton is keenly aware of and this is reflected in the company’s regional growth plans and projections.
"We expect to achieve US$800mn in Middle East revenue by 2015," Eaton CEO, Alexander Cutler told Oil Review, adding that further ambitious investment plans for the region would be announced in due course. "This is a significant step up from where we've been. It is but one milestone in terms of our growth in this region."
Eaton has gradually increased in size and global stature since its foundation in 1911 and now operates in 175 countries and employs a workforce of 102,000. Headquartered in Dublin, Ireland, Eaton has become one of the world’s leading power management companies, providing solutions to the oil and gas, construction and aerospace industries to name but a few. Eaton’s current, all-encompassing position within the market has been bolstered, and its business model altered, by a series of acquisitions, 65 in total.
The largest of these took place in November 2012 when the company acquired Cooper Industries for US$13bn. The Cooper acquisition added and strengthened Eaton’s ability to offer electrical devices used within the oil and gas industry, lighting solutions and large utility products. Cutler said the acquisition "has added both scale and breadth to our company".
In 2012, the electrical sector accounted for US$13.2bn (60 per cent) of revenues, while the industrial sector accounted for US$8.6bn. Eaton has targeted an overall growth rate of six to eight per cent per year and analysts estimate that it will achieve sales of between US$22bn and US$23bn in 2013 as the company's push to consolidate its global position continues. At present 50 per cent of sales are derived from outside of North America and Eaton is targeting 60 per cent by 2015.
Key regional drivers for Eaton include the building of new oil and gas facilities and refineries, with the company's capabilities covering both the electrical and hydraulic requirements of the sector, the implementation of metro systems and airport expansion (both airports themselves and aeroplane hydraulics and electrics).
Eaton is no newcomer to the Middle East, having started operating in Dubai in 1976 via the Westinghouse brand which it acquired in 1994. Eaton currently has 160 employees in the UAE and the company has also been present within Saudi Arabia since the 1970s. With 19 offices and a total of 300 employees across the region, Eaton has solid foundations on which to build.
"One of the reasons that we're so bullish about this particular region is when you look around the world today we think there are three areas of global growth that will be outsized compared to the rest of the world," said Cutler. "One is very clearly here, for all of the reasons you will understand. The second is probably the west coast of South America, then the third is Sub-Saharan Africa. Outside of that, world growth has slowed significantly since the 2008 recession and we think it's likely to be 25 to 35 per cent less than the growth we saw previous to 2008. So it really does mean the opportunities for growth are even more significant here in this region in proportion to the rest of the world."
Ruwais refinery
Key projects that Eaton has been involved in within the region include the Burj Khalifa, which Eaton provided a significant proportion of the power and emergency infrastructure for Dubai Mall, where Eaton was solely responsible for providing all electrical equipment; Dubai Airport; and it is also providing all of the electrical power infrastructure – distribution and back-up – for Gulf Data Hub. In Abu Dhabi, Eaton has played a significant role in the development of Yas Hotel, Ferrari World and the Ruwais refinery.
Dubai winning its bid to host the World Expo in 2020 will only increase Eaton’s investment within the region. Cutler, said that a Dubai win "would set off another entire generation of commercial developments" including the building of hotels and the expansion of the metro systems and airports, all of which Eaton can play a leading role in.
Eaton’s intention to strengthen its presence within the region is exemplified by its decision to set up its new Middle Eastern HQ in Dubai’s Jebel Ali Free Zone (Jafza). All of Eaton’s UAE offices will gradually be consolidated into the new 9,000-sq m facility in Jafza’s TechnoPark during the next year.
The HQ, which opened in November 2013, has the capacity to double in size in the coming years and will allow the local manufacture and supply of products, project management, services and solutions and result in shorter lead times. Eaton's product distribution and logistics will all be dealt with at the new facility. A full training centre and product demonstration facility will also be implemented at the site by early 2014.
"While our primary support functions will be in that centre here as well as a manufacturing centre, we've got sales engineers and local offices around the region," said Cutler. "So it's really expanding both the sales and local application support as well as bringing together these functions in the large training centre.
"At its most basic, it represents a larger dedication of resources, of people and capital to the region. We just recognise the growth opportunity here is very substantial and we need to really supercharge our activities to get ourselves moving more quickly."
The training centre will be key for Eaton in meeting the UAE’s Emiritisation requirements.
"It's not unique to the Emirates," said Cutler. "We've seen this around the world as nations develop: how do you develop sustainable workforce opportunities for people in that area? How do you put together the training programmes that enable employees to gain higher skills? It's something we've dealt with in many areas of the world so it's not new for Eaton. It's things as fundamental as knowing the hours you work, to what people should wear in a workplace to be safe, to specific skills. So we do a lot of training around that.
"We also have EatonUniversity, which we run 36,000 people through a year. It's global, we have multiple campuses and it's also taught on our internal intranet. Everyone of us, I think, has to continue to learn new things and be adaptable. We want our employees to have broad experience and we want to expose them to as much as they're able to absorb. That's how they'll really be able to fulfil their potential.
"I think the question for any global enterprise is how do you get the best talent? And, once they have joined you, how do you ensure that it's interesting and challenging and that they continue to grow? Then if you put them in what we call a values based culture, which is what Eaton is, people then do their best work. We use the expression 'Doing business right' and it's fundamental to Eaton."
As the region's power demands continue to rise, a 70 per cent increase in liquid petroleum demand in non-OECD nations is expected by 2040 and a 60 per cent increase in global energy demand for energy in buildings is projected by 2050, energy efficiency is key. It is megatrends like these that make the region so attractive for Eaton, which is ideally placed to respond to such developments.
Hazardous environments
The Cooper acquisition saw Eaton benefit from Cooper's significant presence within the region's oil and gas industry. Eaton serves the industry via its factory in Dammam, Saudi Arabia, and provides solutions for major clients including Saudi Aramco and Qatar Petroleum.
The company provides not just electrical power solutions to the oil and gas industry, but also offers hydraulics and filtration solutions, all of which are tailored for use within hazardous environments such as on oil rigs and in gas drilling facilities. Eaton's reach is therefore a broad and multifaceted one that touches upon a vast array of different industries.
"It really is all about power management," said Cutler when asked about what he perceived as the company's overall remit. "LED lighting alone can probably ensure a 23 to 25 per cent saving over traditional fluorescent lighting and it lasts 50,000 hours.
"Think about it on an oil platform. When they replace lighting on an oil platform it is hazardous, people have got to be fully garbed in all of their safety equipment and it's 110°F outside, nobody wants to do it. So if you can figure out how to get the lighting to last a couple of years - it doesn't die under vibration on a well and it actually gives better light - it's enormously valuable."
Sustainability and energy efficiency are key considerations given the ever-increasing power demands of the region, but the Middle East is sometimes labelled as placing little onus on environmental considerations. Cutler said that such considerations are vitally important to Eaton, but there are something we think we're pretty good at.
"We're pretty pleased already with the number of local employees that we have and that's something that we'll continue to work on. One of the reasons this new facility has such a substantial training facility is you've got to make a commitment to train people and we'll now have the physical facility to do that as well."
The facility will also enable Eaton to address the common and oft-cited skills shortage issue which, as Cutler highlighted, is not confined to the Middle East.
"We find the same thing in the United States and Europe as well," he said. "The formal educational processes don't often get people ready for the workplace and it can be speaking before the result was announced, other factors that also need to be taken into account.
"It's different for every customer. When we're working in the oil and gas area, clearly, it's safety number one, it's continuity of the production, and then ensuring that it's done in as sustainable way as possible," Cutler explained. "I think that the number one issue that we're involved with is ensuring safety because all forms of power are inherently unsafe, you just can't take it for granted.
"I think there is an interest in what I call diversity of energy supplies. So we're seeing utilities having to deal with power sources including solar, wind and traditional fossil sources. Energy policy comes in 40 year blocks and I think the countries that are doing a really good job are trying to think through their transitions for how do you move from one to another and you probably won't move totally, you're going to be supplementing at the edge."
Awareness
Cutler said that alongside Eaton's investment within the region, it was also important to raise awareness of the company and its far-reaching power management solutions.
"So many customers know us through brand names we've acquired," he explained. "They know us as Westinghouse, they know us as Cutler-Hammer, they know us as MEM or BILL or Moeller or Holec, the list goes on. What we're trying to do is help them connect the fact that this is one company. We're trying to run the company as an integrated operating company. Those brand names won't go away because they're important references but they'll become product series and Eaton will be the name that they recognise.
"There's not an application that goes on here in the region that we don't have the products for and there really aren't any large companies that we haven't worked with as well. So our opportunity is now to enrich that and have more local resources because each of their requirements is increasingly local as well. Everyone in the region wants those local resources again for a very basic reason: they need to make decisions more quickly, the economy is moving fast and that means that you've got to be local to support people."
With the company's new regional HQ, huge investment plans and increased awareness of the far-reaching range of power solutions it can offer, Eaton is set to become an even greater force within the Middle East. As Cutler said, "We are very bullish on this region and it's really time for Eaton to supercharge its growth here."
To find out more about Eaton's operations across the Middle East, please click here
This article originally featured in Oil Review Middle East - Issue 8 2013
