Objective:
The primary objective was to secure a favourable LTSA extension that addressed the owner’s evolving needs. This include adding more flexibility to the restrictions on operating hours and starts and extending the maintenance interval. As the top operational expenditure for the plan behind fuel, gas turbine maintenance costs were also extremely important. The rotor lifetime also had to be addressed within the timeframe of the contract extension.
Challenges:
- Changing Operational Requirements:
- The owner’s energy portfolio had evolved, leading to changes in the operational requirements and duty cycles of the gas turbines. The new LTSA needed to accommodate these changes.
- Cost Optimization:
- Balancing the need for comprehensive support with cost optimization was a key challenge. The company aimed to negotiate a competitive pricing structure that aligned with its budget constraints in a period where a large influx of new gas turbine hot gas path parts were required.
- Technology Upgrades:
- The original LTSA had very conservative gas turbine maintenance intervals compared to today’s market standards. The owner wanted to extend the gas turbine maintenance interval without taking on additional risk.
- Rotor Lifetime:
- The gas turbine rotor was due to reach its lifetime limits within the next LTSA period. The owner needed a cost effective plan that would minimize outage time.
- Flexibility in Contract Terms:
- Ensuring flexibility in the contract terms to accommodate future changes in the company’s operational strategy and potential gas turbine upgrades was a critical consideration.
Process:
- Needs Assessment:
- Conducted a comprehensive analysis of the current and future gas turbine operational requirements, identifying specific areas where the LTSA needed modification or enhancement.
- Engagement with Manufacturer:
- Initiated discussions with the gas turbine manufacturer to understand their perspective on technology upgrades, pricing models, and the feasibility of accommodating changing operational needs. Helped owner challenge to understand what were real gas turbine technical limitations versus commercial issues.
- Cost-Benefit Analysis:
- Conducted a thorough cost-benefit analysis to justify the requested changes and enhancements. Evaluated options to repair the existing gas turbine rotor, purchase a new rotor, and purchase a used third party rotor.
- Technical Workshops:
- Organized technical workshops with representatives from the owner and the gas turbine manufacturer to discuss the feasibility and implications of incorporating new technologies and features into the LTSA.
- Negotiation and Agreement:
- Engaged in a series of negotiations to finalize the terms of the LTSA extension. This included discussions on pricing, warranties, liabilities, taxes, insurance, division of responsibility, performance guarantees, and the implementation of gas turbine technology upgrades.
Results:
- Extended Turbine Life:
- Successfully negotiated an LTSA extension that allowed another 20 years of operation, allowing the owner to maximize the return on its capital investment.
- Cost-Effective Maintenance:
- Achieved a cost-effective LTSA that balanced comprehensive support with budget constraints, optimizing maintenance costs over the extended agreement period while minimizing owner risk.
- Access to Latest Technology:
- Secured access to the latest gas turbine technological advancements, including performance optimization, enhancing the overall availability and efficiency of the gas turbines.
- Flexible Contract Terms:
- Incorporated flexibility into the LTSA terms, allowing the owner to continue to operate profitably under a number of different operating regimes, allowing more flexibility for future market changes.
Conclusion:
The successful negotiation and extension of the gas turbine LTSA demonstrated the importance of proactive engagement, a thorough needs assessment, and challenging the gas turbine manufacturer to adjust terms and conditions that are no longer in line with market standards. By addressing the evolving operational landscape and securing favorable terms, the company ensured the continued reliability and efficiency of its gas turbine fleet for years to come.