Caterpillar (Peoria, Illinois, U.S.) recently wheeled out its new power rental business, Energyst. An amalgamation of Caterpillar and 10 of its dealers covering a territory from Italy to Norway and Portugal to Slovakia, Energyst aims to become one of Europe's foremost temporary power and cooling solution providers.

Caterpillar has been devising its power rental's strategy for some time, and rumors have abounded about its future direction, usually centered on dealer buy-outs. While complete dealer takeovers have not occurred, dealers' generator and temperature control (TC) operations have been bought out in strategic partnership arrangements.

Cat will invest heavily into buying its dealers' power and TC rental assets, which will allow it to completely revamp its fleets to provide customers with a consistent range of quality products and services across Europe. Cat Rental outlets will continue to be a feature of dealerships, although they will only provide units to around 100 kVA. Demand for larger units will be referred to Energyst in a reciprocal arrangement. Cat will take a 25% stake in the new business and its dealers' smaller shares. Of those involved, Finning will take 15.7%; Geveke, Zeppelin, CGT and Finanzauto will each take 10.9%; and the remaining 15.7% will be split between Avesco, Eltrak, Eneria, McCormick Macnaughton and Treco. Fifteen locations will be integrated in the short term, although this will increase by up to 200% as market penetration and opportunities increase.

Cat's estimate of the current market, according to its power and TC interests, totals Euro 500 million, which it forecasts to double by the end of the decade. By then, it plans to inhabit a leading market position through generic growth and acquisitions of other strategically placed competitors.

Also to be factored into any market equation is Energyst's plan to continually update its fleets every five years. While this is not a novel approach, competitors that already do this comprise those that aim for the “higher” end of the market, such as the industrial sector. They charge higher rates for quality and strive to increase the provision of other services and utilization rates to cover such a rapid turnover in units.

The higher turnover of units may impinge on Caterpillar's market sales of new gensets as used units begin to flood the market. Some also could appear in local rival's fleets, although the overall effects could be minimized by targeting European market outlets. Cat obviously has done its homework, but the experience of competitors in similar situations has sometimes been unexpected where units can be re-exported to originally unintended markets.

Exciting Times Ahead

This arm of the rental sector currently represents a young, dynamic and opportunistic animal, which has the potential to provide many competitors with a substantial long-term source of revenue generation. Cat's new venture adds one more thoroughbred to the race. Aggreko has a long head start and will recognize the strength of its nearest rivals, but it will not underestimate the challenge of maintaining its lead. On the other hand, the other larger players such as GE, Cummins and Energyst will make substantial investments into expansions, acquisitions or mergers while carving out their shares. With such activity likely in the next few years, it is undoubtedly an exciting time to be involved in this sector as the market develops and strategies unfold.
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