|Frost & Sullivan Market Insight||Published: 21 Jul 2009|
By Karthikeyan Ravikumar
The waste incineration business has considerably evolved over the years; initially what started as just incineration or burning of waste now involves the recovery of heat and steam to generate electricity thus converting useless waste into useful energy. Europe is the largest waste-to-energy plants market in the world with a very well developed infrastructure and over 429 installed plants in 2008. The stress from the European Union to shift away from landfills towards better alternatives has indirectly helped the waste-to-energy business. This diversion of waste from landfills has resulted in the planning and commissioning of many waste-to-energy plants in the last 5 years.
In spite of the growth potential that the European waste-to-energy plants market offers, the number of players involved in this market is quite restricted and this could be attributed to the high level of technical expertise required especially in the designing aspect of the plant. In addition pricing, references, finance, local knowledge and the ability to offer complete turnkey solutions as represented in figure 1 have been the other key features that separate the key players from the rest.
Figure 1: Key competitive features of the European waste-to-energy plants market
Competition Shrinks Market Participants
One of the key features of the European waste-to-energy plants market is the high level of competition involved in this business. The heat of competition has forced many participants to leave the business, merge or get acquired by another company. Since 2000 there have been quite a few mergers and acquisitions (M&A) which have changed the dynamics of this market. Listed below are some of the key M&A's witnessed over the last 5 years.
One of the main changes observed was the emergence of Austrian Energy & Environment Group (AE&E) as one of the key and dominant players in the European waste to energy plants market. Their acquisitions have certainly enhanced their market shares and helped them reach the top spot in this industry. The Swiss based Von Roll Inova, a leading player in the European waste to energy plants market became a part of the AE&E group in 2003. The company with its strong experience and technology added strength and enhanced the business of the Group by bringing its loyal customers which included public, private power and heat companies, local authorities, waste disposal firms and industrial companies from across the globe. Now Von Roll Inova has become the company responsible for the waste-to-energy business as part of the AE&E group.
In addition, in 2007, the acquisition of Lentjes was another major boost to the waste to energy business activities of the AE&E group. Lentjes was a subsidiary of the German company GEA Group AG, with a great reputation in the international power plant construction industry. Lentjes has strong experience in the field of designing, process technologies, components and construction of fossil fuel fired plants, biomass fired power plants and waste incinerators. The acquisition of Lentjes complements the already thriving energy business by offering its product portfolios and technical expertise to the AE&E group. The strategic acquisitions of Von Roll Inova in 2003 and Lentjes in 2007 has catapulted the growth of AE&E group and has also increased their market shares thus, making them one of the leading players in the European waste-to-energy business.
These mergers & acquisitions have however decreased the number of players involved in waste to energy plants market and have led to market consolidation. According to a recent study conducted by Frost & Sullivan on the European waste-to energy plants market it was found that the top three players hold around 71.0 percent of the market shares, thus indicating the level of consolidation in this market.
With many European countries such as France, Germany, Benelux region having met their Landfill Directive requirements, the demand for new waste to energy plants is expected to drop in these markets. Drop in the number of new plants and growing maturity in established markets is expected to increase the competition further. Growing competition will certainly impact the tier 3 and some tier-2 players, who may find it hard to obtain contracts and keep their business running. Thus the European waste-to-energy plants market is expected to witness more M&A's which would eventually result in further market concentration and an increase in the shares of the major players.