On a Silver Salver
Core competencies and nothing but core competencies – the motivation of producers in the chemical industry to divest themselves from their onsite activities is still very strongly defended, as it is also in other industry sectors. For some considerable time, the business segment involved in the provision of infrastructure facilities for utilities, such as energy, water, effluent and waste disposal etc., have not been segments of core competency for many producers. The fact that the operating companies of such infrastructure and supply facilities within industrial and chemical manufacturing parks still frequently remain in the hands of the producers, has now become merely a question of time. This is fundamentally due to a dilemma both users and onsite operating companies at industrial parks find themselves in: In order to equip a given location for the long-term, certain investments are essential, be they concerned with the protection of production sites, with road and media networks or with the supply of energy – the tasks are many and diverse. Yet, depending on the ownership structure, they attract only limited interest from the proprietors of the company on site. Production companies in the chemical and pharmaceutical industries only want to invest their capital in their own specific core business.
For some time now, strategic investors have been present the arena: In the meantime, energy and utility providers, such as Nuon, MVV and Sembcorp, are operating their own industrial parks; facility management providers, as for instance Bilfinger Berger, Hochtief, MCE and Thyssen Krupp Xervon, are standing by to take on the service provision at such locations; even private investors, such as Infrareal and Pharmaserv, are engaged in the business of service provision for industrial parks.
Low Margins, but also Low Risks
Particularly in times, when financial markets make everyone painfully aware of the fact that high investment returns are also connected to an element of high risk, the industrial park business, yielding low returns, but, set against that, offering manageable risks combined with a constant cash flow, becomes more attractive for investors interested in long-term business. Onsite operating company models differ in particular in the extent of the net added value and the spectrum of the services on offer to the producing companies located within the industrial park.
At one end of the scale are onsite operating companies who concentrate on the commercial marketing of the site, i.e. the administration of the assets and the facilitation of service provision contracts. (Example: P-D-Chemiepark in Bitterfeld). The other end of the scale is occupied by providers offering integrated services, who, in addition, deliver basic infrastructure services, services such as those linked to the location, for instance logistic, energy provision and IT, as well as one-stop provision of services not directly associated with the location, such as technical maintenance, analytics, staff restaurant provision and so on. Such examples include the chemical parks in Marl (Infracor), Knapsack (Infraserv Knapsack) and the location at Marburg Behringwerke (Pharmaserv). “Client value can only be successfully created by integrated site operating companies, with many years of practical experience and comprehensive competence, especially in the core functions of materials flow networks, energy supply, and infrastructure management”, according to Dr. Hartmut Müller, managing director of Infracor GmbH, Evonik Industries company.
Whilst the operation of the basic infrastructure of an industrial park, combined with that of the running of premises, provision of supply, the disposal infrastructure and the like are capital intensive, services not linked to the specific location, for example technical mainte-nance, analytics and so on, as a rule do not require large capital investments. Yet they require high staffing levels – interchangeable to a high degree – and are subject to fierce competition. Over the last few years, these diverse business sectors have therefore been divided organisationally at a number of sites: Bayer Industry Services (now known as Currenta) has created the separate company Tectrion as a spin-off for these technical services. Today, Currenta is responsible for the operation of the chemical park as well as for its infrastructure. A few years prior to that, the technology business of Infraserv Höchst was sold to the industrial service provider Reinhold&Mahla, now part of the organisation known as the facility management provider Bilfinger+Berger Industrial Services. A similar pattern emerged in Gersthofen: Following the creation of the spin-off company TSG to provide technical services, that company has since been taken over by the facilities manager MCE in May 2008.
It depends very much on the particular structure to establish which model holds the maximum benefit for a given user within an industrial park. The desirability for an onsite operating company capable of relieving the production company of as much complexity as possible is all the stronger the more users a location attracts and the smaller those companies are.
On the Look-out for the Most Suitable Owner
A recurring contentious point is concerned with the respective interests of proprietors. On the one hand, occupants of industrial parks would prefer to benefit from all-encompassing service provision, in conjunction with the least number of interfaces, on the other hand, the services and facilities are to be sourced in line with most advantageous market requirements. In cases where the onsite operating company is owned by the users at the location, the provider should – as a rule – not operate a profit maximisation scheme. On the other hand, this could mean that the provision of essential infrastructure investments is frequently not in place. “The concept of the customer as shareholder is not a business model with a future”, is the conclusion reached by Dr. Lothar Meier, director in charge of maintenance management at Thyssen Krupp Xervon.
Infraserv Höchst, as well as Currenta, see industrial parks also as a model for export business and have, for some time now, been advising locations in Russia, The People’s Republic of China and in India. However, as a rule, such instances are initially associated with investment – for example in relation to marketing initiatives – investment which requires the appreciation as well as the financial backing of owners right from the start.
Set against that, strategic investors, such as energy providers or facility management companies, are frequently accused of being merely interested in their own benefit, seen as an impediment to the competitiveness of the manufacturers at the locations. Infrareal, an organisation founded in mid-2008, intends to offer an alternative solution: The company, founded by the private proprietors of the location Behringwerke at Marburg, proposes the establishment of an independent group of onsite operating companies that follows the example of Pharmaserv. “Only the bringing together of ownership and operational activity can generate the essential inducements for continuous cost optimisation“, explains Markus Schwerzmann, one of the proprietors of Infrareal. Schwerzmann: “In our opinion, the best owner of a site operating company can be neither an onsite client company nor a utility company. For us, integrated site management means ownership of the infrastructure and a holistic approach to site operation and development. Only the owner of the property will be truly interested in site development.” Among the 30 multi-user production locations in Germany, the onsite operating company envisages a good potential for adoptions.
Different parks demand different solutions
However, what constitutes the most advantageous solution for one industrial park is not necessarily the guiding rule for other parks. During the recent past, numerous examples illustrate the complexities connected with a takeover of an industrial park. “This is due more to the determination of the leaving company than the preparedness of the new entrant,“ Lothar Meier clarifies the situation.
Conclusion: Whether to opt for infrastructure or technology, service provision plays a vital role in the competitiveness of any industrial park. The act of balancing low-margin, long-term business structures, given service provision packages and cost considerations, combined with the complexity facing users, is not an easy one. The fact that willingness to invest in infrastructure is predominantly dependant on ownership circumstances adds a further dimension. In Europe, numerous – if not complicated – adjustments and changes are becoming evident in this field.
Facts for Decision Makers
For Site Managers and Users
- The choice between infrastructure and technology: Service provision plays a vital role in the competitiveness of any industrial park.
- The task of balancing low-margin, long-term business structures, given service provision packages and cost considerations, combined with the complexities facing users, is not an easy one.
- The willingness to invest in infrastructure is predominantly dependant on the relevant ownership circumstances.
- Within industrial parks in Europe, numerous adjustments and changes in ownership are becoming evident.
“The concept of the customer as shareholder is not a business model with a future”
Dr. Lothar Meier is the director of maintenance management at Thyssen Krupp Xervon
“Independent site management as core business is the best owner model“
Markus Schwerzmann is one of the six proprietors as well as managing director of Infrareal
“Client value can be created by integrated site operating companies“
Dr. Hartmut Müller is managing director of Infracor