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Interview

Eduardo Montich – President, EMA Electro Mecanica, Argentina

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The president of EMA Electro Mecanica, one of the leading companies for medium and high voltage equipment in the Americas, highlights the significant opportunities existing in Argentina’s power generation and power distribution segment. Furthermore, he explains how their innovation capabilities have brought them a market leading position across North America.

Could you please give us a brief overview of the company’s evolution?

“Just in North America, our products are now involved in more than 28,000 megawatts of wind energy generation— which is almost as much as the entire energy generation of Argentina today!”

EMA as such, has been existing since the 1950s. We bought the company in 1995 by which time the original owners divested out of all their industrial businesses. We seized the opportunity and took over EMA, whose product lines at that time were in strong need of rebuilding. One of our first decisions was to enter the vacuum technology segment, which led to our first innovative product launch in 1996: the MV vacuum circuit breaker. From there on we continued innovating and expanding to become the leading manufacturer of medium voltage technology in Latin America, remaining independent the entire time. In 2001 Argentina fell into recession, hence why we started to expanding our business internationally, mainly through exporting. One of the largest export markets was the US wind energy market –at that time still a niche—and in 2007 we dedicated more of our innovation capacity to wind energy, thus establishing ourselves as dominant player in this market. We soon realized that if we want to fully tap into the vast potential of the US market, we would need to have local presence. Therefore, we opened a manufacturing facility in the US in 2010, which enabled us to grow rapidly in the US market. Last year, our products were present in more than 50 percent of all new wind installations in the US. Next to the US, we also realized significant success in Canada and Mexico with a market share of approximately 20 percent in each respectively. Just in North America, our products are now involved in more than 28,000 megawatts of wind energy generation— which is almost as much as the entire energy generation of Argentina today!

Is Argentina still a significant part of your business today?

It still is, on 2015 it represented the 68% of our sells, on this 2016 it will be the 56%, we experienced a slight downturn because the new administration put all public contracts on hold when taking over in order to scrutinize the state of public works, but in the whole picture, total sells will grow 8% in 2016, and that’s based in our international business. In 2016 44% of our sells will be beyond the Argentinian border.

What is your strategy that creates this tremendous growth?

Our strategy is simple yet effective. We focus on the four key pillars applicable to any business seeking success: high quality and reliable products, extensive aftermarket servicing, presence in proximity to the customer and highly creative and innovative products. We excel in all of these four dimensions which enabled our strong growth.

What are some of the most important markets for you in the future?

Our focus is growing all over the America’s. Hence this strategic focus, we are currently investing into expanding our US facilities with the aim to increase production by 50 percent. We anticipate a significant growth period in the US market; how much growth is obviously depending on the outcome of the upcoming US presidential election.

What role will your Argentinean operations play in your companies’ development in North America?

We have our engineering and innovation capacity concentrated within our Argentinean operations—for now! For instance, our main product on the US market was developed and initially produced in Argentina, once it reached full maturity we moved the production into the US directly. We currently have a full pipeline of innovative products we plan to launch the next year and for this kind of innovation we will follow the same path of US introduction. Nonetheless, the long term plan is to establish an engineering department in the US as well – for now, however, our Argentinean operations will remain the brain of our company.

Where do you source this high innovation capability?

I have a highly experienced team who works close with me on innovating new products. All of them are Argentinean, highly educated with significant expertise and superior skills. I am the patent holder of all of our innovative products, however, this is mostly due to the fact that I am the majority shareholder and president of the company; I am strongly involved in the innovation process nonetheless it is a team effort. Currently we focus to improve some of the products we manufacture in the US and for the Latin American market we are developing a new product line for MV and HV usage.

In 2014, 52 percent of all electricity produced in Argentina was generated from natural gas, 16 percent from oil and only 1.8 percent from renewable resources – current trajectories as well as government ambitions show, that this balance will shift in Argentina’s future towards more usage of natural gas as well as renewables. How does EMA position itself in anticipation of these developments?

You are mentioning one of Argentina’s most significant problems: energy generation! The crux is that although we do not have enough power generation we already have bottlenecks on the distribution side. Solving this problem partially will not work because as soon as you enhance the generation side the distribution network will not be sufficient. As company, we work in all three phase of the electric energy cycle—generation, distribution and transmission—and we see huge potential in the distribution side! In the last decade, investment in the generation and distribution of electrical energy was kept to a minimum because the companies in charge had to cut down investments in an effort to survive. Not only did these companies halt investments, they also reduced the quantity –and quality—of servicing, which led to a significant increase of electricity shortages in recent years. This negligence of the domestic network, while challenging the population, creates significant opportunities for companies active in the distribution side; we are the major Argentinian player selling medium voltage equipment and know we will sell a lot in Argentina’s future!

The generation side of the equation, however, is probably at the worse state; literally everything needs to be done! The total energy production of Argentina accumulates to approximately 32 gigawatts—one might as well not produce at all. Today, we should have at least a total of 80 gigawatt of installed capacity! If we want to be recognized as serious country with reliably energy supply across the whole territory, this would be the absolute minimum. Just to put these numbers into perspective: in the US there is approximately one gigawatt of installed capacity each 300 citizens, in Chile it is about one gigawatt per 800 citizens and in Argentina we have today approximately one gigawatt per each 1300 citizens! I am not saying we need to get equivalent to the US, I am just saying we need to overcome our neighbor! Argentina has a wider base of small and medium industries compared with Chile, and all of them need electricity. The power generation in Argentina must at least be doubled in the short term future and I am confident that any company willing to tap into such opportunities will fare well here.

Large multinationals such as Siemens and General Electric already announced major investments in Argentina’s energy sector! What is your strategy to tap into this vast potential?

These are two very large companies positioning themselves with their wind and gas turbines respectively. Our products—switchgears, circuit breakers and much more—are suitable to use within these investments. Siemens and General Electric have their own companies building the niche products we provide, however, we are highly competitive and will tap into this potential. We continuously keep in touch with our existing customers to foster long-term relationships and I am confident that these will ensure that we are involved in this development. 50 percent of the entire wind farms in the US use GE turbines and last year alone more than 50 percent of our products were used in all new wind farms, thus we already have our products working together in the majority of the US market and we know that they are highly compatible.

To what extent are you the supplier of choice in Argentina?

To be frank: we are the only company in our segment which survived past crises, hence why we are the major medium voltage equipment manufacturer of Argentina. We are the only one who has always been there to service our products in a manner of hours. This is a significant aspect! All of the companies –Siemens, ABB, ourselves—make excellent products without doubt, nonetheless, they are mechanical products and the very nature of mechanical products is that there is a chance they may fail. Then, service is of utmost importance and we have a genuine track record of excellence in servicing—even in times of economic crises. This reputation will allow us to grow with these upcoming opportunities!

Renewable energy also gains more and more importance for the oil and gas majors, many of which are entering this sector. To what extend do you support the development of oil and gas majors towards renewable energy?

Global warming is a fact, and we—humanity at large—must solve this problem. There is really not much else to say to this matter. The only way to generate electricity in a sustainable way will be renewable energy; and frankly speaking, renewable energy does not count as alternative energy anymore because it is already part of the base energy supply. In the US, for instance, 80 gigawatts of energy are already produced by windfarms, this represents approximately eight percent of the countries entire electricity production already. If one were to withdraw direct and indirect subsidies to energy, renewable energy would be significantly more competitive in pricing than fossil energy. Therefore, the only question remaining is how fast the entire switch to renewable energy will be done.

Where will we see EMA positioned in the next three to five years?

Our main growth will come from the US; simply because it is the largest market we are active in. Nonetheless, I am confident that in a couple of years we can look back onto growth in all of our markets! Moreover, you will find us as company perceived as local company in all of the markets we are active in. We plan to carry into other markets what we did in the US already: working with local people, adapt to local thinking, understand and live local traditions and become part of local society.

What is the message you would like to be heard around the world?

We have the most competitive products within our niche. We will continue to innovate and continuously upgrade our existing product portfolio in order to constantly be on the frontline. We will always be able to provide immediate and quality service to our customers. Our main goal —now and in the future— is that our customers are happy with EMA products!

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