FGD and DeNOx
NEWSLETTER

July 2021
No. 518

Table of Contents

INDUSTRY NEWS

·        Ducon Emerges as Lowest Bidder in NTPC FGD Orders

·        Pump Forecasts for Every Market Niche

·        Forecasts For Each Market Niche in Power Can Be Provided

·        KSB Supplies FGD Pumps Valued at $1.1 Million to NTPC

·        Shell  Providing Design to Drax  For Capture of 8 Million Tons Per Year of CO₂

·        Cormetech Selected for a DOE Award to Demonstrate Technology to Increase the Amount of CO₂ Captured in DAC Operations

·        Valmet to Supply a Boiler Upgrade and a Flue Gas Cleaning System to Stora Enso’s Anjala-Ingerois Sites in Finland

·        Andritz Acquires Parts of Air Quality Control System (AQCS) Business from GE Steam Power

·        Valmet has Completed the Acquisitions of EWK Umwelttechnik and ECP Group to Strengthen Its Environmental Systems Business

·        Lean Marine and Yara Marine Technologies Become One

·        Hamon is Strengthening Equity

·        Isgec Bags a Major Order for FGD-FGC Package from Odisha Power Generation Corporation Ltd.

·        B&W Renewable Receives Limited Notice to Proceed for Engineering Portion of $24 Million Waste-to-Energy Project in Europe

·        Biomass Flyash Can Be a Source of Rare Earths

·        China Hydrogen Output Value to Reach $150 Billion by 2030

·        China’s Emission Trading of CO₂ From Power Plants Now in Effect

·        Donaldson Company Reports Strength Across All Regions Drives Sales to a Quarterly Record of $765 Million

·        Clearlake Capital-Backed Unifrax to Acquire Lydall, Inc. for $62.10 per share

MARKETS

·        Tracking Financial Performance of Flow and Treat Companies

·        Management Strategy Based on Niche LTCO Analyses

·        Market Share -TCO - Profitability Causation Loop

INDUSTRY NEWS

Ducon Emerges as Lowest Bidder in NTPC FGD Orders

Ducon Group of Companies (“Ducon”) announced that it has emerged as the lowest bidder (L-1) on NTPC (National Thermal Power Corporation) FGD ( Flue Gas Desulfurization) projects to provide its advanced FGD technology. The first project is 2x250 MW size power plant in Barauni, Bihar, India and the other is 2x195 MW size power plant in Muzaffarpur, Kanti Power plant in India. The value of the scope of work for Ducon group of companies on these two projects is approximately over $100 million.

Coal-fired power plants across India are required to meet the latest emission standards prescribed by the Indian government and to achieve this, most plants will need to install FGD systems to reduce sulfur dioxide emissions. The estimated investment required in FGD systems is over Rs 80,000 crore across India. Ducon is a supplier of FGD systems in the Indian market. Ducon is successfully operating limestone and seawater FGD installations in India. The notable ones include: (i) 500 MW seawater FGD systems at Dahanu power plant and (ii) 2 x 600 MW Limestone FGD system at Udupi Power Plant. Currently, Ducon has many additional outstanding FGD system proposals in India which will be decided in the coming months.

Ducon is a global engineering & construction firm providing custom engineered solutions in environmental control, renewable energy, infrastructure, and plant maintenance. Ducon, through its subsidiaries, licensees, and joint ventures, provides services to clients globally in a wide variety of industries, such as: chemical, refineries, cement, power, minerals, steel, mining, and infrastructure. Ducon has completed thousands of global installations and has compiled an enviable track record of completed projects which perform reliably and economically year after year. Ducon provides single source responsibility for execution of major turn-key projects throughout the world.

Pump Forecasts for Every Market Niche

Why has the Pump World Market Report expanded to include 272,000 individual forecasts and many hundreds of thousands of additional aggregates? The reason is that each number represents a unique combination of total cost of ownership (TCO) factors.

For each pump type, there are forecasts for 80 countries and sub regions further segmented by 17 applications. Forecasts are provided for future years through 2025 and historical revenues from 2016.

Now there is further segmentation by four performance factors.

The  performance segments are general, severe, critical, and unique. Each has a different set of TCO factors.

Profit is maximized by focusing on the niches where the lowest TCO can be achieved. For most companies, these niches are even smaller than provided in the basic report.

The major pump  types can be further divided into many sub segments.

The 17 industries each have individual segments with unique TCO factors. Large countries such as the U.S. often need to be segmented by State or Province.

McIlvaine can provide these more detailed forecasts to supplement the basic report

Details on the basic report are found at

http://home.mcilvainecompany.com/index.php/markets/water-and-flow/n019-pumps-world-market

Forecasts For Each Market Niche in Power Can Be Provided

The basic report has 16,000 forecasts just for the power industry. Coal is just one of 6 sub categories of Power.

The excel spreadsheet with the 272,000 forecasts can be used as the starting point to determine the markets in more narrow segments.

This excerpt from the spreadsheet has three examples relative to power and coal. In this example, there are four severe service forecasts and one critical service. There are three coal examples: One is a world number, one is India, and another is China. The supplier is a market leader.

The coal industry applications are segmented by  process. One example is FGD recycle pumps. The following article covers a million dollar order in India to KSB from NTPC for FGD recycle pumps for 10 FGD systems. This order represents 2.5% of the entire India power centrifugal pump market in 2020.

FGD is a very significant portion of the power severe service market and is one where a great deal of effort has been undertaken to provide pumps which meet the severe conditions.

McIlvaine covered the  various different unique designs to meet the cost of ownership needs for this application. It can be found at

https://www.google.com/search?q=FGD+recyle+pumps&oq=FGD+recyle+pumps&aqs=chrome..69i57.6599j0j4&sourceid=chrome&ie=UTF-8

KSB Supplies FGD Pumps Valued at $1.1 Million to NTPC

In India, FGD units will be installed at power plants, which will have a total generation capacity of 166 GW. Power plants were asked to install FGD units, which cut emissions of sulfur dioxides, in a phased manner. In all, 440 coal-fired power plants that produce 166.5 GW have to comply with the regulation by December 2020.

"Countries all over the world have already installed FGD plants and in India it has come a bit late. Now due to the Supreme Court directive that all these thermal power plants have to install the FGD units before December 2022, everybody (in the industry) has to gear up within this short period of three years," KSB Ltd India Managing Director Rajeev Jain said.

National Thermal Power Corporation (NTPC) is the main-end user who are going to use these pumps, for which the company has received order worth Rs 100 crore, he said.

"Though the process is relatively new, the implementation of industrial pollution norms has been gaining momentum in India in the last few years. We have managed to bag orders for slurry re-circulation pumps for a large number of power plants in a short span of time," Jain added.

KSB foresees a huge surge for slurry re-circulation pumps for FGD systems in India up to 2022 considering the government's support for stringent industrial emission norms, he said, adding "we are quite upbeat about this new business in the country."

"To meet the Indian market demand, we have developed the entire supply chain for these pumps locally. The scope includes supply of slurry re-circulation pumps with drive units, performance testing and providing erection and commissioning support to customers," Jain said.

Globally KSB has been a supplier of German technology pumps for FGD applications since 1977, he said. KSB Ltd India is the Indian arm of KSB.

Jain, who is also the Regional Executive Officer for West Asia at the Germany-headquartered KSB Ltd, said that the company has been manufacturing these slurry re-circulation pumps locally for FGD applications after obtaining license from its parent company KSB Ltd.

"FGD units are comparatively new to India and KSB Limited has continued its tradition of indigenizing highly-specialized products by adding the Slurry Re-circulation Pumps required for FGD units in its portfolio for local manufacturing," Jain said.

The Pune-based KSB Ltd India, which has been in the manufacturing of pumps since 1960, has six production facilities in the country.

The pumps required for FGD applications are supplied from KSB's facility at Shirwal near Pune.

Shell Providing Design to Drax For Capture of 8 Million Tons Per Year of CO₂

Shell Catalysts & Technologies signed an agreement with Drax Power Ltd (Drax)  last November to provide the early front-end-engineering design (pre-FEED) study on carbon dioxide (CO₂) capture technology for the first two carbon capture units at the Drax Group’s power station near Selby, North Yorkshire, UK. Each of the carbon capture units would be designed to capture about 4 million tpy of CO₂. The pre-FEED study will be undertaken by TechnipFMC on behalf of Shell Catalysts & Technologies. This is one of the largest such studies awarded worldwide. If implemented, it will be the first low-pressure, post-combustion CO₂ capture application for a biomass-fired power station and one that will result in carbon negative power generation – another global first.

Drax Power Station is the largest, single-site, renewable electricity generator in the UK and supplies 12% of the UK’s renewable power. It uses compressed wood pellets, a form of sustainably sourced biomass, to generate 96% of its power. The pre-FEED study is to investigate the capture of the CO₂ from this carbon-neutral process using the Shell CANSOLV^® CO₂ Capture System when potentially deployed on the first two of Drax’s biomass generating units. TechnipFMC is Shell’s strategic alliance partner for CANSOLV technology and provides engineering, procurement, and construction expertise for such projects. The carbon captured would then be transported by pipeline for sequestration under the seabed in the North Sea as part of the bigger Zero Carbon Humber industrial decarbonization project.

In June 2019, the UK government signed a net-zero greenhouse gas emissions target into law. Bioenergy with carbon capture and storage (BECCS) projects are a key part of meeting this net-zero ambition, as they can deliver negative CO₂ emissions, which will be crucial to decarbonize hard-to-abate sectors of the economy such as aviation and agriculture. BECCS projects are carbon negative because the biomass is sourced from sustainably managed forests that absorb CO₂ from the atmosphere while growing; this offsets the CO₂ released by the fuel when used. The addition of carbon capture and storage means that more CO₂ is permanently removed from the atmosphere than is emitted.

Andy Gosse, President, Shell Catalysts & Technologies, says, “We are proud to be working with Drax as a partner for this pioneering project. The Shell CANSOLV CO₂ Capture System has been in operation since 2014 in a large scale, commercial, low-pressure application at SaskPower in Canada, where it is designed to capture up to 1 million tpy of CO₂. Our experience in amine-based systems extends over 60 years: more than 1200 amine-based gas treating systems have been deployed. This enables us to extend with assurance the application window to this new post-combustion BECCS duty. The project with Drax represents a step up in scale and will be a flagship project not only for the companies involved, but also in the world of carbon capture and storage.”

Stan Knez, President of TechnipFMC’s Process Technology, added, “We are pleased to be selected along with our CANSOLV technology partner, Shell, to work on this important carbon capture and sequestration project. Decarbonization is a key part of the energy transition program and a project of this dimension will make a significant difference in reducing carbon emissions.”

The capture of CO₂ will enable Drax to be the world’s first producer of carbon-negative electricity, thereby helping to deliver the UK’s net-zero carbon targets. At about 8 million tpy of possible CO₂ sequestration from the first two Drax biomass generating units, this would be equivalent to taking two million cars off the road.

The pre-FEED study follows the completion of a successful feasibility study and is expected to run until early 2021. When the study is complete, Drax will decide whether to proceed with a FEED study.

Cormetech Selected for a DOE Award to Demonstrate Technology to Increase the Amount of CO₂ Captured in DAC Operations

Cormetech has been selected for an award from the Department of Energy (DOE) Office of Fossil Energy and Carbon Management and the National Energy Technology Laboratory (NETL) to increase the amount of CO₂ captured in Direct Air Capture (DAC) operations. Cormetech plans to further develop its DAC “contactor”. The “contactor” is the engine of the DAC system. Air is moved through the “contactor” and CO₂ is selectively adsorbed onto it. The improved “contactor” will maximize the amount of CO₂ captured from the atmosphere, while reducing the amount of energy needed to operate.

From the DOE funding announcement (06/15/2021):

“Across the U.S., in states like Arizona and North Carolina, brilliant innovators are developing Direct Air Capture technologies that can extract carbon dioxide straight out of the air” said Secretary of Energy Jennifer M. Granholm. “These DOE investments, and the ones we will make with President Biden’s American Jobs Plan, are crucial to advancing technology that will help us avoid the worst effects of climate change and achieve carbon neutrality by 2050.'”

Cormetech’s CEO Mike Mattes commented “Cormetech is very excited about this award, which will allow us to continue developing CO₂ Capture technology with amine-based adsorbers in Direct Air Capture systems. With Cormetech’s long history of technology leadership in emission controls, we have demonstrated the technical feasibility of capturing CO₂ directly from the air with our adsorbers, and this award will allow us to accelerate the development and improve the CO₂ capture rates.”

Valmet to Supply a Boiler Upgrade and a Flue Gas Cleaning System to Stora Enso’s Anjala-Ingerois Sites in Finland

Valmet will supply a boiler upgrade and a flue gas cleaning system to Stora Enso’s Anjala-Ingerois sites in Finland. The goal of the investment is to reduce the emissions and to ensure flexible use of different fuel mixtures in heat production, as well as to achieve better boiler performance and higher boiler efficiency.

The order is included in Valmet’s orders received of the second quarter 2021. The value of this kind of boiler rebuild is typically around EUR 15-20 million. The boiler outage is scheduled for the third quarter of 2022, but the installation work of the new baghouse filter will be done mainly before the shutdown. The project’s focus has been in finding ways to minimize the boiler shutdown time.

“We are looking for a new wider operation range with better operational performance, high reliability and compliance with future emission limits. We believe in Valmet´s capability to deliver the boiler upgrade which will meet our requirements,” says Ari Pöntinen, Manager, Investments and Operations Development, Anjala Mill, Stora Enso.

“The upgrade will significantly extend the boiler’s lifetime. Many of the modifications include new waste-to-energy features to make the existing boiler more suitable for using solid recovered fuel. At the same time, modifications and replacements will improve availability, secure safe operation, and reduce maintenance costs,” says Jouni Koskinen, Senior Manager, Sales and Technology, Rebuilds and Conversions, Valmet.

Valmet’s delivery includes an upgrade to an existing biomass and solid recovered fuel (SRF) fired BFB boiler, with a thermal power of 110 MW_th. Maintenance type of replacements will be part of the work. The air emission control system modification includes an efficient new baghouse filter with additive feeding.

Andritz Acquires Parts of Air Quality Control System (AQCS) Business from GE Steam Power

Andritz has signed an agreement with GE Steam Power to acquire parts of their Air Quality Control System (AQCS) technology, including the technology center in Växjö, Sweden. Closing of the transaction was reached on 1st of July 2021.

Andritz takes over the product portfolio for industrial dedusting (electrostatic precipitators - ESP, fabric filters (FF) and wet ESP), dry/semi-dry flue gas treatment, and industrial scrubbing, including condensation scrubbers and low-temperature heat recovery solutions. The acquisition also includes the AQCS main location in Växjö, Sweden, as well as employees involved in this business in Sweden and Finland. Andritz acquires the respective intellectual property (IP), including patents, references, and trademarks, for global use with some exceptions. For parts, upgrade & service business in India, Bangladesh, Sri Lanka, the USA, and Canada as well as for FGD products in India, Bangladesh and Sri Lanka GE Steam Power will continue business as a licensee of Andritz.

The dedusting portfolio acquired – especially the ESP and FF technologies – completes Andritz’s air pollution control capabilities in the important pulp, metals, mining, and power markets.

Valmet has Completed the Acquisitions of EWK Umwelttechnik and ECP Group to Strengthen Its Environmental Systems Business

Valmet has completed the acquisition of EWK Umwelttechnik GmbH and ECP Group Oy following the agreements that were announced on June 10. EWK Umwelttechnik is a German company manufacturing and supplying air emission control systems and after-installation services. ECP Group is a manufacturer and maintainer of electrostatic precipitators (ESP), focusing on power plants and pulp and paper industry, in Finland.

EWK Umwelttechnik and ECP Group will be included in Valmet’s financial reporting for the first time in Valmet’s third quarter financial reporting 2021.

The acquired business of EWK Umwelttechnik becomes a part of Valmet’s Pulp and energy business line. EWK Umwelttechnik’s offering of emission control technologies includes electrostatic precipitators, wet absorbers, catalytic and heat recovery systems, and wastewater purification products. The company serves multiple customer segments, including wood-based panelboard, glass, mineral wool, and steel industries. The net sales of EWK Umwelttechnik were approximately EUR 22 million in 2020. The company employs approximately 50

As of July 1, 2021, ECP Group is known as Valmet Environment Oy. The acquired business will be integrated into Valmet EMEA organization, to enhance energy and recovery services. The offering acquired from ECP Group consists of manufacturing and modernizing electrostatic precipitators as well as providing services, such as inspections, annual maintenance, spare parts, and performance improvements. The net sales of ECP Group were approximately EUR 6 million in 2020. The company, founded in 2002, is headquartered in Vantaa, Finland, and employs around 20 employees.

Lean Marine and Yara Marine Technologies Become One

Yara Marine Technologies, a front-runner in the development and implementation of emissions reduction technologies in the maritime industry, has acquired Lean Marine, a company at the cutting edge of automated fuel-saving, performance management, and reporting solutions for vessels. Lean Marine’s intelligent software and hardware solutions have already been installed on more than 200 vessels worldwide.

Lean Marine offers a unique combination of direct, real-time fuel optimization and data analysis over time. This improves operational efficiency, with potential fuel consumption and CO2 emission savings of up to 25 percent.

Their FuelOpt system optimizes a vessel’s propulsion line in real-time based on the commands from the bridge, enabling automated control of vessel speed and fuel consumption, and avoiding fuel overconsumption. Additionally, on vessels with controllable pitch propellers, FuelOpt acts as a dynamic tuning system controlling the propeller’s pitch and RPM automatically to produce the most amount of thrust with the least amount of power. Their second main product, Fleet Analytics, turns the vessel’s data into knowledge to improve decision-making and achieve operational excellence.

The great savings provided by these solutions ensure a short payback time and strong business case for customers.

Lean Marine will continue to offer FuelOpt and Fleet Analytics as part of Yara Marine’s portfolio of green technologies for the maritime industry, and these offerings will be backed by Yara Marine’s global service and support infrastructure.

Stricter emissions regulations are on the horizon. The International Maritime Organization is targeting a 40 percent reduction in CO2 emissions by 2030, which leaves the shipping industry under growing pressure to implement technologies that facilitate significant emissions reductions.

 Hamon is Strengthening Equity

Hamon’s management team would like to inform the market that the various stages of the first phase of the plan to strengthen the company’s equity were completed on Thursday June 3, 2021. The Bondholders Meeting has voted in favor of extending the term of the debenture loan for a duration of 10 years to January 30, 2035. The extraordinary shareholders’ general meeting has voted in favor of increasing the capital through contributions in kind resulting from the conversion of the respective receivables of EUR 2.1 million held by Sogepa and the Banks into Company shares, increasing the capital of the latter to EUR 39,370,611.60 by creating 8,400,000 new shares at a price of EUR 0.5 per share. The Board of Directors, acting within the framework of the authorized capital, has then decided to increase the capital in cash from EUR 15,000,000, through the subscription of Sogepa, increasing Hamon’s capital to EUR 54,370,611.60 by creating 30,000,000 new shares at a price of EUR 0.5 per share. Hamon’s capital is now represented by 49,057,761 shares. The listing of these shares on Euronext Brussels will be requested at the same time as that of the shares created during the second phase.

Isgec Bags a Major Order for FGD-FGC Package from Odisha Power Generation Corporation Ltd

Isgec has received a prestigious order for Wet Limestone Flue Gas Desulfurization System and Flue Gas Conditioning System Package (FGD-FGC Package) from Odisha Power Generation Corporation Ltd. for their 2x660 MW TPPIB Thermal Power Station at Banharpalli, Jharsuguda, Odisha, India.

Isgec has Collaboration and Technology Transfer agreement with Babcock Power Environmental Inc., USA for Wet FGD, and it is this advanced technology that will be utilized for this project.

The scope of work includes Design, Engineering, Procurement, Fabrication, Construction, Installation, Commissioning, Startup, and Testing of FGD- FGC Package.

“We are excited to associate with Odisha Power Generation Corp. Ltd. This is a very prestigious order for us from an esteemed State Government organization. This is our 4^th Project in the Wet FGD Business, and we are all geared up to take on and successfully execute this project.” Said Mr. Suman Jain, Group Head – Utility Boilers, Air Pollution Control Equipment, and New Technology Development, Isgec Heavy Engineering Ltd.

B&W Renewable Receives Limited Notice to Proceed for Engineering Portion of $24 Million Waste-to-Energy Project in Europe

Babcock & Wilcox (B&W) announced that its B&W Renewable segment has received a limited notice to proceed for a new-build waste-to-energy project in Europe as it finalizes terms for a $24 million contract with its customer. B&W Renewable anticipates a full notice to proceed later this year.

Under the limited notice to proceed, B&W Renewable has begun engineering on its best-in-class renewable energy technology — including a boiler, combustion equipment and DynaGrate^® combustion grate — to process municipal waste to produce electricity while controlling environmental emissions and eliminating harmful landfill methane emissions.

“The market for clean, renewable energy in Europe is extremely strong, and we’re pleased to expand beyond our already large base of DynaGrate customers in the U.K. and Scandinavia with this new-build installation,” said B&W Chief Operating Officer Jimmy Morgan. “B&W Renewable’s waste-to-energy technologies allow our customers to turn municipal waste that would otherwise end up in a landfill into a clean, baseload power-producing asset, while reducing greenhouse gas and other emissions.”

“By diverting municipal waste from landfills, we reduce the associated environmental impacts caused by burying trash – including water pollution, odors and emissions of the potent greenhouse gas methane, which is produced when biological waste decomposes,” Morgan said. “Waste-to-energy is also fully complementary to recycling programs, beneficially using waste that otherwise couldn’t be recycled.”

B&W announced an expansion of its presence in Europe in September 2020, as it looks to capitalize on an estimated addressable market of more than $7 billion in the region over the next three years.

Biomass Flyash Can Be a Source of Rare Earths

Researchers at the Institute of Mineralogy in Bulgaria has found that while rare earths in coal ash are much more prevalent, some of the ones in biomass ash are water soluble and can be easily extracted. This means that BECCS can not only reduce CO₂ but also recover a valuable product.

The contents and associations of 14 rare earth elements and Y (REY), as well as the phase-mineral and chemical composition of biomass ashes (BAs) from eight biomass varieties were studied. An elucidation of the REY contents in BAs was conducted and a comparison with coal ashes (CAs) was performed. The correlations and associations of REY with major and minor elements, and different mineral classes in BAs are given. It was found that REY commonly have about one order of magnitude lower bulk concentrations in BA than those in CA. The distribution of REY in BAs is strongly dependent on the plant species and their source, and the different inorganic ash types. The individual REY show numerous strong and significant positive correlations; however, three major associations can be divided according to these correlations, namely: (1) light Ce, La, Nd, and Pr with Al₂O₃ + Fe₂O₃ + TiO₂, Al, phosphates, and Ti; (2) medium Y with carbonates, oxides and hydroxides, and K; and (3) light Sm, medium Dy, Eu, Gd and Tb, and heavy Er, Ho, Lu, Tm and Yb with Si and silicates.

BA is a less prospective resource for a recovery of REY than CA according to their bulk concentrations; however, BAs are abundant in water-soluble components and their solutions may be used for REY recovery. The data also indicate that the low REY concentrations in BA would not have potential environmental and health concerns excluding their occurrence in mobile forms and in some radioactive silicate and phosphate minerals.

https://www.sciencedirect.com/science/article/abs/pii/S0016236119318794

China Hydrogen Output Value to Reach $150 Billion by 2030

China has been cranking up investments in hydrogen, a renewable and potentially clean source of energy. The country's central and local governments have inked the hydrogen industry into the 14th Five-Year Plan (2021-2025) as one of China's six industries of the future.

The China Hydrogen Alliance, a government-supported industry group, predicts that by 2025 the output value of the country's hydrogen energy industry will reach 1 trillion yuan ($152.6 billion), and by 2030 that China's demand for hydrogen will reach 35 million tons, accounting for at least 5% of China's energy system.

Increasing the use of hydrogen — a gaseous element in great abundance — could help support the government's goals of dramatically reducing China's emissions of carbon dioxide, one of the main greenhouse gases driving climate change. Hydrogen fuel cells use chemical reactions to generate zero-emission electricity that can be used in transportation and other applications. Expanding production of hydrogen and developing refueling infrastructure may help increase the number of new-energy vehicles on the road and help China hit peak carbon emissions before 2030 and reach carbon neutrality by 2060.

But to achieve those goals, technological obstacles need to be overcome to lower the costs of extracting, storing, transporting, and delivering the material to end users. China's advantages lie in strong government support and a huge market. Here are four things to know about the country's plans for hydrogen.

China's 14th Five Year Plan labels hydrogen a "frontier" area that the country pledges to advance. Even though a national strategy for hydrogen development has yet to be developed, 16 provinces and cities have launched their own five-year plans that specifically feature hydrogen. For example, Beijing includes accelerated planning and construction of hydrogen refueling stations. Jiangsu Province's plan includes development of hydrogen fuel cell vehicles and hydrogen fueling infrastructure.

China is initiating a four-year program to support local governments in researching hydrogen technology and developing an industry chain. Five city groups, including the Beijing-Tianjin-Hebei cluster, Guangdong and Henan provinces, and Shanghai have been selected for demonstration projects, participants told Caixin, though the central government has not published the names of cities in the program. Local governments that meet specific targets will be awarded up to 1.7 billion yuan as a fiscal bonus.

Five ministries, including the Finance Ministry, the Ministry of Industry and Information and the National Energy Administration, delayed releasing the final list because the review process has strict requirements and competition among provinces is fierce, participants said.

High production costs have kept hydrogen-powered cars from reaching a commercialized stage in China and elsewhere. The difficulties of storing and transporting the highly explosive gas add to the costs. At current market prices, hydrogen to power a fuel cell car in China costs about 70 yuan per kilogram. The figure needs to come down to less than 40 yuan per kilogram before hydrogen-powered cars can be competitive with traditional gasoline-powered vehicles, according to an estimate by Fu Guanyun, a researcher at the National Development and Reform Commission, China's state planner.

The most mature method for large-scale production of hydrogen without extracting it from fossil fuels is water electrolysis, using electricity to split water molecules into oxygen and hydrogen. The key challenge of electrolytic hydrogen production is cost, including the initial capital expenditure and electricity expenses.

More than 70% of the cost of extracting hydrogen from water is electricity. It takes about 60 kilowatt-hours of electricity to produce 1 kg of hydrogen. Based on the industrial electricity price of 0.65 yuan ($0.10) per kilowatt-hour, the cost would be as high as 39 yuan per kilogram of hydrogen.

Moreover, China generates most of its electricity by burning coal, which spews vast amounts of carbon dioxide into the atmosphere. Based on the average carbon emissions from generating electricity, extracting 1 kilogram of hydrogen from water would produce about 35.84 kilograms of carbon dioxide. That would be three to four times the carbon emissions from producing 1 kilogram of hydrogen from fossil coal or oil.

One solution would be to use renewable energy — such as hydroelectric, wind or solar — in the electrolysis of water. Beijing Jingneng Power, a state-owned coal power producer, is building a 23 billion yuan green hydrogen plant in Ordos in north China's Inner Mongolia autonomous region to be powered by solar and wind energy. China Petroleum and Chemical plans to launch its first solar and wind-powered green hydrogen project, also in Ordos, in 2022. Since 2019, China has had more than 30 green hydrogen projects in the works.

The mainstream view in the industry is that green hydrogen will be economical only when the cost of renewable power falls below 0.2 yuan per kilowatt-hour. The cost of wind and solar electricity now is around 0.3 yuan per kWh. Zeng Tao, chief analyst of power equipment and new energy at investment bank China International Capital, said he expects green hydrogen can cost less than coal-based hydrogen by 2040.

In terms of delivery, most of China's hydrogen is transported by truck, which is more expensive and less efficient than pipelines. China mainly uses trailers with a capacity of 300 kg of hydrogen, which is less than half the capacity of trailers commonly used in Western countries.

Transporting hydrogen via pipeline would be efficient but requires high upfront investment. Building a national hydrogen delivery infrastructure would also be a big challenge. State-owned China Oil & Gas Pipeline Network, or PipeChina, included hydrogen pipeline research in its 14th Five-Year Plan. State-owned China Petroleum and Chemical, or Sinopec, is accelerating infrastructure construction for hydrogen, including pipelines and filling stations.

Where does China stand in the global hydrogen race?

More than 30 countries have developed hydrogen road maps, and 228 large-scale hydrogen projects were announced across the value chain, according to a report published in February by the Hydrogen Council, a global CEO-led initiative of leading companies. The council projects that hydrogen could meet 18% of total global energy demand and create a $2.5 trillion market with more than 30 million jobs by 2050.

Japan is leading in hydrogen fuel cell technology, while the United States is at the forefront of laboratory research. Europe is more focused on upstream hydrogen production, and China has the largest hydrogen market, said Wang Cheng, director of the hydrogen fuel cell laboratory at Tsinghua University.

"In terms of green hydrogen production technology, China basically stands at the same starting line with the U.S. and European countries," Wang said.

Toyota Motor is a leader in hydrogen fuel cell vehicles. The Japanese automaker unveiled the world's first mass-produced hydrogen fuel cell car in 2014 and launched its second-generation Mirai -- the Japanese word for "future" -- last year. In the first quarter, Toyota sold 2,000 fuel cell vehicles, accounting for half of global sales, according to energy market researcher SNE Research.

Even with its world-leading technology and sales volume, Toyota's fuel cell vehicle portfolio is clearly at an early stage. As in China, infrastructure is a serious impediment to the adoption of fuel cell vehicles in Japan, according to a February report by Weekly Toyo Keizai. There are only 135 hydrogen fueling stations in the country — all subsidized by the government — compared with 30,000 public charging stations for electric cars.

The Japanese government set up a committee to get automakers and energy companies to work together in promoting hydrogen energy. But in practice, companies are pursuing their own interests, and hydrogen projects face difficulties moving forward quickly, said Ma Tiancai, deputy director of China's National Fuel Cell Vehicle and Power System Engineering Research Center. China has a stronger environment for nurturing the fuel cell vehicle industry, Ma said, as all parties are more willing to sacrifice short-term interests and promote the industry. In addition, China is rich in hydrogen resources and has far more production capacity than Japan, Ma said.

Since 2020, Toyota has stepped up cooperation with China's hydrogen fuel cell industry. In March, Toyota and Chinese hydrogen fuel cell engine-maker Beijing SinoHytec agreed to set up a 50-50 joint venture to produce fuel cells for commercial vehicles in China. In August last year, the Japanese carmaker established United Fuel Cell System R&D with five Chinese companies, including Beijing SinoHytec, to develop hydrogen fuel cells for commercial vehicles.

Toyota may play a role in a segment of China's hydrogen fuel cell vehicle industry that's similar to Tesla's role in battery-powered cars, Ma suggested. As the world leader in electric vehicles, the arrival of Tesla in China's market has encouraged smaller domestic players to innovate and compete, which in turn could promote growth of the entire industry.

China’s Emission Trading of CO₂ From Power Plants Now in Effect

The operational phase of China’s national emission trading scheme (ETS) has begun, with the measures that form the legal basis of the scheme coming into effect on February 1 and trading set to begin in mid-2021. The Ministry of Environment and Ecology, formed in 2018, is the scheme’s main regulator. Regional pilot schemes to test processes, rules and market infrastructure development have taken place over the past three years, with the National Development and Reform Commission releasing the initial ETS framework in 2017. The regional pilots have explored how carbon markets could function in different structures, including allocation mechanisms, sectoral coverage and the use of offset credits and carbon derivative products.

The national ETS will initially only cover the power sector, which accounts for around 30% of domestic carbon emissions, but will ultimately cover other sectors, including petrochemicals, chemicals, building materials, steel, non-ferrous metals, paper, and domestic aviation. Certain sectors that make up a significant proportion of overall greenhouse gas emissions, such as transport, agriculture, and construction, are still excluded from the scheme.

The first ETS compliance cycle runs from January 6 to December. 31, 2021, during which entities need to report and verify emissions, and trade allowances to meet any obligations. The first cycle covers emissions from 2019-2020. Entities with annual emissions of around 26,000 tons of carbon dioxide (CO₂) — which equates to total energy consumption of more than 10,000 tons of coal equivalent — in any year over 2013-2019 are required to participate in the first compliance cycle; 2,225 power generators meet this criteria. Entities that participate in the national ETS will no longer be part of regional scheme pilots.

Donaldson Company Reports Strength Across All Regions Drives Sales to a Quarterly Record of $765 Million

Donaldson Company, Inc. reported third quarter 2021 net earnings of $84.4 million compared with $63.4 million in 2020. Earnings per share (EPS)1 for the third quarter 2021 increased 32% to $0.66 compared to $0.50 in 2020.

“Donaldson’s third quarter sales were the highest quarterly sales in our 106-year history and reflected strength in the economy as seen in our Engine segment and the beginning of recovery in our Industrial segment,” said Tod Carpenter, chairman, president, and chief executive officer. “Additionally, although we faced pressures from our supply chain, raw material costs, and sales mix, we were able to offset this with volume leverage and recorded a year-over-year increase in gross margin of 50 basis points to 33.7%. We continue to expand our leadership position in filtration technology as we deliver on our strategy to increase our addressable market and generate higher returns.

“With one quarter left in our fiscal year and customer demand at a high level for most of our businesses, we are confident the sales momentum we experienced in the third quarter will carry through our fiscal year-end. While challenges in supply chain are expected to continue through the fourth quarter of fiscal 2021, we are increasing our 2021 sales guidance due to our strong third quarter sales results along with continued strength in our Engine Off-Road and Aftermarket businesses, an uptick in our On-Road business, and increasing momentum in our Industrial segment. Total sales are expected to increase between 9% and 11%, compared with prior guidance of between 5% and 8%. I am proud of how our Donaldson employees have worked together tirelessly to address the challenges related to the COVID-19 pandemic and supply chain constraints while managing increased demand for our products to ensure we meet the needs of our customers and advance filtration for a cleaner world.”

1. All earnings per share figures refer to diluted earnings per share.

Operating Results

Third quarter 2021 sales increased 21.5% to $765.0 million from $629.7 million in 2020. Excluding the positive impact from currency translation of 4.4%, third quarter 2021 sales increased 17.1%.

Third quarter 2021 Industrial sales increased 11.8%, or 7.1% excluding the impact from currency translation. This increase was driven primarily by improvement in Industrial Filtration Solutions (IFS), which increased 19.2% compared to 2020, due in part to a strong sales increase in China. IFS sales growth was driven by a mid-teens increase in Industrial Air Filtration (IAF) as IAF experienced a rebound in demand for dust collection products with all major regions reporting year-over-year growth. Process Filtration experienced double-digit sales gains, particularly in the Europe, Middle East, and Africa (EMEA) and Asia Pacific regions. Sales of Gas Turbine Systems (GTS) declined 12.6% year-over-year due to a decline in demand for gas turbines used in the oil and gas market, a slowing of retrofit activity, and the timing of projects. Special Applications recorded a 4.9% increase in sales compared to 2020, although on a constant currency basis sales were down slightly owing to continuing softness in the disk drive market. Partially offsetting the decline in disk drive sales were increases in Integrated Venting Solutions, Semicon/Imaging, and Membranes.

Third quarter 2021 gross margin increased to 33.7% from 33.2% in 2020. The year-over-year improvement was driven by leverage on the increased volume and pricing activities, partially offset by commodity and freight rate inflation and an unfavorable sales mix.

Third quarter 2021 operating expenses as a percent of sales were 19.4 %, an improvement from 19.8% in 2020. The improvement reflects leverage on higher sales partially offset by higher incentive compensation expense.

Donaldson’s third quarter 2021 operating income as a rate of sales (“operating margin”) increased to 14.3% from 13.4% in 2020.

Third quarter 2021 interest expense declined to $3.2 million, from $4.4 million in 2020, reflecting a lower debt level. Other income, net was $4.7 million in third quarter 2021, compared with $4.3 million in 2020.

Third quarter 2021 effective tax rate decreased to 23.9% from 24.9% in 2020, driven primarily by an increase in discrete tax item benefits. Donaldson paid third quarter 2021 dividends of $26.5 million and repurchased approximately 0.4% of its outstanding shares for $32.4 million. Year-to-date Donaldson has repurchased 1.1% of its outstanding shares for $78.7 million.

Fiscal 2021 Outlook

Donaldson is increasing its fiscal 2021 guidance due to strong third quarter fiscal 2021 results, current backlog levels, and incoming order rates. GAAP EPS is expected to be between $2.20 and $2.26, compared with fiscal 2020 GAAP EPS of $2.00. Excluding a negative impact of $0.08 per share related to restructuring activities in the second quarter of 2021, adjusted fiscal 2021 EPS2 is expected to be between $2.28 and $2.34. The Company expects full-year sales to increase between 9% and 11% versus fiscal 2020, compared with prior guidance of between 5% and 8%. Currency translation is expected to benefit fiscal year 2021 sales by approximately 3%.

Fiscal 2021 Industrial sales are expected to increase between 3% and 5% from fiscal 2020, compared with prior guidance in a range between a 2% decline and a 2% increase.

2 Adjusted earnings per share is a non-GAAP financial measure that excludes the impact of the restructuring charges recorded in the second quarter of fiscal 2021.

Growth in Industrial reflects an expected sales increase in IFS led by IAF and Process Filtration partially offset by declines in GTS and Special Applications.

Donaldson expects fiscal 2021 adjusted operating margin between 13.8% and 14.2%,3 compared with 13.2% in fiscal 2020. The year-over-year improvement is expected to come from higher gross margin, reflecting improved absorption on higher sales, pricing initiatives, as well as operating expense leverage. The improvement is partially offset by higher raw material and freight costs, second half sales mix pressure, primarily in the Engine segment, and increased incentive compensation expense.

The company expects fiscal 2021 interest expense of approximately $13 million, and other income, net is forecast between $5 million and $7 million. Donaldson’s fiscal 2021 effective income tax rate is forecast between 24% and 25%.

The Company expects fiscal 2021 capital expenditures between $55 million and $60 million. Cash flow conversion is still expected above 100%, reflecting strong year-to-date conversion and an increase in working capital. Donaldson expects to repurchase 1.5% to 2.0% of its outstanding shares during fiscal 2021.

3 The adjusted operating margin forecast excludes the impact of the restructuring charges recorded in the second quarter of fiscal 2021.

Clearlake Capital-Backed Unifrax to Acquire Lydall, Inc. for $62.10 per share

Unifrax, a leading global provider of high-performance specialty materials focused on thermal management, specialty filtration, battery materials, emission control and fire protection applications backed by Clearlake Capital Group, L.P. (“Clearlake”), announced it has signed definitive agreements to acquire Lydall, Inc. a leader in the design and production of specialty filtration materials and advanced material solutions. With its leading technologies and 23 manufacturing facilities around the world, Lydall is well positioned to capitalize on growth in clean air filtration and electric vehicle adoption, among many other attractive markets. Under the terms of the agreement, Lydall shareholders will receive $62.10 per share in cash for each share outstanding, implying a total enterprise value of approximately $1.3 billion.

“The combination of Unifrax and Lydall creates a global specialty materials platform with new cutting edge technologies in advanced filtration, electric vehicle battery systems, and energy saving applications,” said John Dandolph, President and CEO of Unifrax. “The addition of Lydall’s people, technologies, and assets to the Unifrax portfolio will help accelerate our innovation pipeline and creates a world class platform capable of solving the world’s most pressing energy consumption, environmental and filtration challenges. We are excited to partner with a company that is similarly focused on our commitment to a Greener, Cleaner, and Safer® world.”

Sara Greenstein, President and CEO of Lydall, added, “We are excited about the combination of Lydall and Unifrax. With this transaction, we are creating a leader in specialty filtration and advanced materials with over 250 years of combined expertise and experience delivering innovative and compelling solutions to customers worldwide.”

“We have long admired Lydall and what it would bring to our platform investment in Unifrax and could not be more excited about partnering with the Company and its team to build one of the world’s leading global specialty materials platforms,” said José E. Feliciano, Co-Founder and Managing Partner at Clearlake, and Colin Leonard, Partner at Clearlake, in a joint statement. “We have supported Unifrax’s development of new technologies over the last few years that have the potential to change how we think about the industries in which both Unifrax and Lydall operate and inform their futures. The addition of Lydall to the Unifrax portfolio and its strong capabilities in advanced filtration creates a global platform with significant scale that together can accelerate each company’s respective compelling growth plans.”

The transaction, which has been approved by the boards of directors of both companies, is expected to close in the second half of 2021 subject to the receipt of required regulatory approvals, approvals of Lydall stockholders and other customary closing conditions.

MARKETS

Tracking Financial Performance of Flow and Treat Companies

Jordan Knauff publishes a quarterly analysis of flow control company financial data as well as analyses of the valve, pump, and filter industries  You can receive the March 2021 Insights at https://www.jordanknauff.com/research-library/industry-sight-request/?ris=3255

The latest report shows the following mergers and acquisitions.

Acquisition Advisory – Assistance to clients in the successful closing of an acquisition. Pertinent services include valuation, optimization of structure, direction of the due diligence process and negotiation of transaction documents. Acquisition advisory services encompass work on a standalone target or a series of acquisitions that form a strategic consolidation plan.

Strategic Business Services – A suite of consulting projects designed specifically for middle market business owners and executives to enable them to make better decisions about their companies or industries. Services include:

·        Company Specific Valuations
 

§  Capital Road Maps^® 

§  Strategic Industry Analyses

The report also conveniently displays lots of financial data including important ratios for  specific companies segmented by filters, valves, and pumps.

McIlvaine estimates the world flow and treat market at over $600 billion/yr. Of this, $300 billion is for general service products. General Service is defined as where the performance of the product is less important than price and delivery. McIlvaine has identified three additional segments: severe service, critical service, and unique service.

In these three segments product performance is the parameter which should set the price However, unless the customer can be convinced that the product will provide a lower total cost of ownership (LTCO), the company cannot take advantage of the superiority. However through validation (LTCOV), the company can increase prices, sales, and profit margins.

Validation will be made easier by the Industrial Internet of Wisdom, which is being created by the vast amount of online information being made available. All that is necessary is for the suppliers to organize it and work to make sure customers have access to it.

The cost of validation will be less than 1% of sales. If the price of high performance products can be raised 4% there will be a net 3% increase in EBITA. The average EBITA is now around 18%.  If there is a 3% increase for high performance products, the average EBITA could rise to 19.5.

We have extracted current annualized sales and EBITA %.

There can be a substantial increased EBITA just in validating  high performance. Those flow and treat companies, which can achieve LTCO by a large margin, can enjoy much higher EBITA. A few companies on the list are achieving close to 30% EBITA. So it is possible.

We will be reporting sales and margin data on a weekly basis in the E-Alert.

Management Strategy Based on Niche LTCO Analyses

Digital communications and content marketing are providing cost of ownership factors which will allow purchasers to make better choices.

Nearly $300 billion/yr of flow and treat purchases are based more on anticipated product performance than on price and delivery. This decision on Lowest Total Cost of Ownership (LTCO) is based on the following factors and examples.

• Financial: interest rate, evaluation life
• Common: energy, maintenance, product value
• Shared product features: some competitors also have these features
• Unique product features: only offered by one supplier

Too many products are purchased because they are what is being used rather than what might be better. In order to gain market share suppliers need a Lowest Total Cost of Ownership Validation (LTCOV) which includes substantiation of all factors.

Shared product features need to be incorporated. Dry scrubbers reduce water usage compared to wet scrubbers. Diaphragm valves have hygienic advantages over other types.

It is possible to have the best performance even though there are no unique features. If the product incorporates more of the shared cost reducing features than any competitor, it can claim LTCO.

 Product based associations are well equipped to communicate shared product features. Other associations such as those built around the environment or safety can contribute common factor evidence. The media can help communicate this knowledge.

The Mcilvaine company is working with suppliers to help them quantify the unique product benefits in each niche. With many industries, many processes, and many geographies it is critical in each niche to

• Determine the present and future size of each niche
• Determine present competitor market shares
• Determine future competitor market shares based on LTCO
• Rank opportunities relative to profits which can generated

Use of niche LTCO Analyses to Determine Strategy

The program is explained at http://home.mcilvainecompany.com/index.php/30-general/1658-holistic-content-marketing-program

A number of multi-client flow and treat market reports are available and described at www.mcilvainecompany.com  Click on markets at the top.

Bob McIlvaine can answer your questions at rmcilvaine@mcilvainecompany.com

Market Share -TCO - Profitability Causation Loop

The extent to which market share correlates or causes profitability is debatable. To answer this question for the Flow and Treat industry, it is desirable to separately analyze the general performance and high performance segments.

The general performance segment depends on price and delivery. There are economies of scale. The large producer achieves lower production costs and potentially higher margins.

The high performance Flow and Treat purchases are $300 billion per year. For this segment there are a number of related factors forming a causation loop consisting of

• Market share
• Total cost of ownership (TCO)
•  Industrial Internet of Wisdom (IIoW)
• Lowest Total Cost of Ownership Validation (LTCOV)
• Profit margin and total profits

TCO is dependent on the performance of the product. Higher prices and margins can be achieved if the customer can be persuaded that the product is the best choice (LTCOV). 

If a company has a high market share it can infer LTCO. It does not need proof but only to point to the many happy users. So market share is an important factor in LTCOV. Competitors have to prove that their product is better. This is not an easy task.

It is necessary to gather all the available information and provide evidence or opinions of experts. Due to digitalization and the willingness of media  to provide permanent access to published articles there is now an IIoW. 

This path provides the opportunity for LTCOV of better products. It is enhanced to the extent that the TCO can be more accurately assessed with on line monitoring (IIoT).

A new valve or pump may only be installed at a few sites. However if there is continuous monitoring of TCO there is considerable validation. Therefore IIoW including IIoT becomes a route for suppliers with low market share to overcome a disadvantage.

IIoW allows companies to provide LTCOV in each niche area. The purchaser at a vaccine manufacturer is going to be swayed by case histories and analysis of the product use at other vaccine plants.

This LTCOV in each niche eliminates the market share advantage of the large company with a major share of the broader market e.g. hygienic.  The multi product company can show that lots of food and pharmaceutical plants use his product. But if the smaller supplier shows LTCO in the niche, he has the advantage with the customer in that niche.

Knowledge of the industry and all the niches becomes important. The large companies with many products serving a specific niche have the advantage of more cost effectively gathering the knowledge. If they do not leverage IIoW this is no longer an advantage.

There is a new environment where market share is more quickly impacted by new and better products. There is a causation loop where leveraging each of the factors can lead to higher profits.

McIlvaine Company tracks market share and profitability of many thousands of flow and treat companies. This is reflected in multi-client market reports and private consulting. There are global market shares in the reports.

For individual clients, the level of detail can be as specific as trunnion not floating ball valves for mid-stream gas applications for 18-24 inch sizes in Algeria.

Information on the multi-client reports is shown at  www.mcilvainecompany.com under markets at the top of the page.

Relative to private consulting you can contact Bob McIlvaine at 847 226 2391 or rmcilvaine@mcilvainecompany.com.

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