Aggreko: Power Supply to Poorest Nations

It's a proposal that has come up in neither President Nicolas Sarkozy's energy plans for France, nor President Vladimir Putin's power diplomacy for Russia, nor Britain's debate over nuclear plants. But then, it's hard to imagine temporary electric generators' being held up as a viable national energy plan.

In fact, that's exactly the plan in much of the developing world, as governments coping with inadequate infrastructure and the galloping energy demands of growing economies try to keep the lights on, whatever the cost. The portable-generator business is booming—already, temporary electric generators (not too far removed from what rural homeowners in the West might have in their basements) light towns and factories from Yemen to Venezuela, Sri Lanka to Mongolia. In Africa, diesel engines supply 50 percent of the power grid in Uganda, 10 percent in Kenya and similar proportions in Mauritania, Angola, Sierra Leone and the Democratic Republic of Congo. In nearly every market, the No. 1 provider of this power is a little-known British company called Aggreko, which makes electricity generators in Dumbarton, near Glasgow, and rents them to energy-hungry clients all over the world.

In the last three years, Aggreko has moved beyond airlifting temporary power into disasters such as Hurricane Katrina or set-piece events like the Olympics and the Super Bowl, and into the new territory of supplying temporary power to developing-nation governments. "There's not many places we aren't," says Rupert Soames, Aggreko's chief executive.

The first consequence is profits. Rental power costs about three times as much as permanent; in September, Aggreko announced that its revenues had risen by 33 percent to $654.9 million in the first six months of 2007 (earnings were up by 65 percent). The success was echoed by Caterpillar, Aggreko's only big rival in power rental, which had more than 20 percent growth in many generator markets.

Aggreko's London share price has doubled in the last 12 months, and analysts expect it to rise, because power supply is political. "What politicians don't want are people complaining that the lights won't go on … so if you're Aggreko and you're on a six- or 18-month project, that often gets extended because of the dynamics of demand. Once you're part of the grid, you're part of the grid," says Wayne Gerry, an analyst at Dresdner Kleinwort.

Soames, the voluble, energetic grandson of Winston Churchill, agrees. Already Aggreko is replacing permanent power stations that are too expensive or complicated to fix. One 30-megawatt temporary plant in Venezuela is still running two years after being set up as backup for a broken GE turbine. The company will spend $413 million on new generators next year, based on in-house projections that by 2015 the world will face a shortfall of between 500 and 600 gigawatts, which equals the present generating capacity of the European Union.

In the same period, according to International Energy Agency forecasts, up to a quarter of the world's existing power plants will reach their sell-by dates, many of them in Europe and the United States, pushing poor countries to the back of the queue for new turbines, funding and expertise. Soames's working assumption is that giants like General Electric, Siemens and Alstom can meet 90 percent of the world's demand for new power "without going anywhere less comfortable than Shanghai," and leaving the rest to players like Aggreko. Development experts agree, but bemoan the poor government planning, insufficient rainfall and international financing debacles that have left the poorest nations with so few options. Aggreko is "providing a good solid service, and it's needed, no question about it, but it's so expensive," says Malcolm Cosgrove-Davies, an African energy specialist at the World Bank. "I don't wish they weren't there, I just wish they weren't needed."

Clients have similar ambivalence. "Certainly we want to have it out of the system as soon as possible," says Jo Nganga, the deputy CEO of KenGen, Kenya's electricity provider, which extended its current Aggreko deal by two years in October. "But the whole of Africa has this dilemma: whether you want expensive power, or whether you want no power at all." For now at least, the lights remain on.