Our Fleet

Fleet is at the heart of any rental business. It is by far the largest tangible asset; it is the core of the service we offer; managing it efficiently is the sine qua non of any rental business.

The vast majority of large rental companies use standard manufacturer's products in their fleets; the vehicle, hammer-drill or bulldozer you rent is the same as the one you can buy. Aggreko is unique amongst large equipment rental companies in that we design and build the vast majority of our fleet in-house at our own state-of-the-art development and manufacturing facility. And we do not sell our equipment to anyone else; our entire design and manufacturing effort is focused on making our fleet, not someone else's, the most cost-efficient, highestperforming power and temperature control rental fleet in the world.

We believe that being able to develop and manufacture our own fleet is an important competitive advantage, for a number of reasons:

• First, it means that we can optimise the equipment to meet our particular operational requirements. Manufacturers of standard generators and temperature control equipment design their products to be permanent installations, because that is what the vast majority of their customers want; their products' performance will be limited to the regulations and ambient conditions of the country in which it is to be installed. An Aggreko generator has a very different requirement: it will be picked up and put down, moved (be it by truck, ship or aircraft) hundreds of times during its working life, and may be required to work faultlessly at +50°C in the Saudi Arabian desert and a few weeks later at –40°C in Siberia. This is not a capability that is available in off-the-shelf equipment. 
• Second, we design our equipment with the knowledge that we will own it for its operating life and the more reliable it is, and the longer it lasts, the higher the returns we will make for our shareholders. Given the choice of 6mm steel for a bed-plate, or 8mm, we choose 10mm, and the result is that our fleet can keep on earning us money for years. It is a peculiarity of our business that many customers are not concerned with how old a generator or chiller is; their priority is to generate electricity or produce cold water, and as long as the equipment is in good condition, is efficient and reliable, they will pay the same rental rate for a 10-year-old set as they will for a 1-year-old set. 
• Third, developing and manufacturing our own fleet gives us a material cost advantage. The volume in which we purchase the key components is significant in terms of the overall market, and in some components we are probably the largest buyer in our market. By designing and manufacturing our own equipment, we can capture for ourselves the benefits of being a volume purchaser; and, of course, we don't have to pay away any margin to another assembler or manufacturer. On a like-for-like basis we think we have a meaningful cost advantage over our competitors; in the larger node-sizes of generators we believe we have a cost advantage of between 20% and 40%. In a capital-intensive business, that is important, and is one of the reasons why our returns on capital are so much higher than competitors'.
• Finally, having our own design and manufacturing capability means that we can react extremely quickly to customer requirements. We only have to convince ourselves of the desirability of a particular design feature, not a third party manufacturer. We are also not driven by suppliers' design or manufacturing choices, and can maintain standardisation in our fleet, which in turn allows us to reap benefits of scale.

Most rental businesses have a model of buying assets and then selling them on at a relatively early stage in their useful life. This minimises maintenance costs and enables them to use income from used fleet sales to help finance new equipment purchases. Because we build longevity into our equipment, and failure rates in generators and chillers are more related to how well they are maintained rather than how old they are, we opt for a policy of rigorously maintaining our assets and running them for as long as possible. This also has the important benefit that our business model is not exposed to the vagaries of prices achievable in the used equipment market, which tend to fluctuate with the economic cycle.

Our power fleet is, by our estimates, around 5 times larger than our nearest competitor: at the end of 2013, it comprises around 20,000 generators ranging in size from 10KW to 2MW which, in aggregate, amount to over 9,500MW of generating capacity. To put this into perspective, out of 233 countries in the world we have more generating capacity than 170 of them. In aggregate, the net asset value of our power fleet is £914 million, and the original cost carried in our balance sheet is £1,960 million. This value includes large inventories of transformers, switchgear and distribution equipment which are essential in providing our customers with power they can use rather than just a large humming box.

Our chiller fleet is also much larger than any of our competitors, with over 2,300 units with a total capacity of 1,121MW. The net asset value of our chiller fleet is £51 million, and the original cost carried in our balance sheet is £126 million.

The rest of our fleet mainly comprises air-conditioners, oil-free air compressors, cooling towers and other ancillary equipment with an aggregate net asset value of £117 million, and the original cost carried in our balance sheet is £287 million.

TECHNOLOGY AND ENGINEERING

'Technology' and 'engineering' are not words normally associated with equipment rental companies. But just as we have garnered competitive advantage from building our own fleet, in recent years we have stepped up our investment in underlying technology. Most noticeably, we have invested millions of pounds adapting the design of our large generator engines to deliver better performance and new capability. We were the first company in the world to develop and manufacture in volume 1MW gas generators in 20 foot containers; and, as a result of a multi-million pound, 4-year development programme, we have increased the power output of our 1MW diesel engines by 15%, whilst improving fuel consumption by 4%; and we have re-engineered the same engines to allow them to run on Heavy Fuel Oil.

We have also invested in extending the useful life of our fleet. Whilst some parts of a generator deteriorate with age, others, such as the engine block, do not, so we have developed techniques to re-cycle and re-use these long-life components. Instead of scrapping a large generator when it reaches the end of its normal life, we re-build it, replacing the parts that wear, and keeping the parts that do not. By doing this, at the end of its first life – say 25,000 running hours – we rebuild the engine and effectively get a brand new generator for half the cost of buying a new generator. So far, we have re-built over 1,000 of our large generators and this has saved us well over £50 million in fleet capital investment.

Just as important as life-extension is performance improvement. When we re-build a generator, we re-engineer it to the latest specification; in 2013 we radically improved the power output and fuel efficiency of our G3 engines, and enabled them to run on Heavy Fuel Oil as well as diesel; this performance improvement is all retro-fitable to our existing fleet, so at rebuild, the engines get upgraded. In 2013 we re-built a total of 215 engines to these new specifications bringing the total fleet to 265MW.