This article first appeared in The Edge Malaysia Weekly, on December 7 - 13, 2015.

LOCAL companies have not been the only ones to benefit from the government’s massive spending on infrastructure over the past few years. Siemens Malaysia, for one, expects its revenue to exceed €500 million this year — an all-time high.

“If you look at the numbers, it has been three continuous good years for Siemens in Malaysia. We have more than doubled our revenue in that period and in the past one year alone. Revenue has grown by over 70% to 80%. For the first time, our [annual] revenue will be more than €500 million,” says president and chief executive Prakash Chandran.

“Order book-wise, we have a book-to-build ratio of 1.25 times, which is very healthy. As for bottom lines, we have been able to achieve [margins] of over 10%,” Prakash tells The Edge.

This performance makes Siemens Malaysia one of the top-performing companies in the world and by far the best in Asean, he adds. The performance is even more impressive given that Siemens AG as a whole has been battling a global slowdown in new energy projects.

This year, Siemens AG — which is involved in trains and turbines — has cut almost 13,000 from its 340,000-strong workforce. That said, the Germany-based firm is not lacking in cash. With the anticipated global slowdown, the DAX-listed company last month completed a €4 billion share buyback programme, acquiring 4.9% of its shares — the largest since 2013. It was a move that analysts say reflects the engineering firm’s reluctance to invest in R&D and expansion, preferring instead to use cash to boost returns on equity for shareholders.

While Malaysia had managed to buck this global trend in the past, can it continue these large infrastructure projects with the low oil prices putting pressure on the federal government’s ability to spend on the projects?

Prakash is confident that there are more projects in the pipeline, and that Siemens can win some of them.

One of the largest that Siemens will keenly contest is the Kuala Lumpur-Singapore high-speed rail (HSR) project. After all, the company has the Velaro train that boasts a top speed of 350kph, and is more than capable of taking on the role of turnkey contractor.

Of course, competition for the HSR is intense and is seen as a contest between the Chinese and the Japanese. But don’t count  out the Germans yet.

Siemens Malaysia has gone toe to toe with the Chinese before — CSR Zhuzhou Electric Locomotive Co Ltd — and won, in the Klang Valley mass rapid transit rolling stock tender worth RM1.8 billion back in 2013.

“To date, we have already delivered 25 four-car train sets to the Sungai Buloh train depot and we are on schedule to deliver all 58 four-car train sets,” says Prakash.

With the first MRT line under its belt, Siemens is now setting its sights on the rolling stock for the second MRT line. However, just because the company won the rolling stock for the first line does not mean it can take it easy in the Line 2 tender.

Prakash expects the second MRT rolling stock tender to be just as intense as the first one, and says Siemens cannot assume that it has an outright advantage.

“One project is right after the other, so I can’t understand the concept of pricing advantage. But from a customer’s perspective, if they are happy with us, then they know exactly what they are getting. That, we think, is the differentiator,” he says.

Prakash points out that Siemens’ cost advantage would depend heavily on whether there are changes to the design and specification of the trains. Since the rolling stock tender is only at the prequalification stage, the exact specifications for the second line’s rolling stock are not yet known, he says.

However, he points out that from a risk perspective, Siemens would have some advantage.

“When it comes to technology transfer, because we are doing local assembly of the trains, it takes some time to achieve the ‘overall working smoothly concept’. Now, it is already happening. In that sense, there will be lower risk for us.”

It is noteworthy that this is not Siemens’ first train project in Malaysia. It also provided the project management, system integration, track construction and rolling stock for the Express Rail Link that links KL Sentral and Kuala Lumpur International Airport.

Siemens’ mainstay in Malaysia, however, has been its turbines that form the heart of power plants. The company has had plenty of success introducing its H-class turbines to Malaysia. 

Tenaga Nasional Bhd’s 1,070mw combined cycle gas turbine (CCGT) power plant in Prai, Penang, is utilising one of the first H-class turbines in the region and the first dual fuel turbine in the world, capable of handling both gas and diesel.

The turbine in Prai has already undergone first firing and is expected to begin commercial operations next year, says Prakash. While this project, which is worth about €1 billion, is drawing to a close, Siemens has an even larger turbine project that is not in full swing yet.

The company has only reached 11% to 12% progress, for supplying four units of H-class turbines to the Pengerang Co-generation Plant in Petroliam Nasional Bhd’s Refinery and Petrochemical Integrated Development (RAPID).

The 1,228mw co-generation plant will supply hot pressurised steam to the RAPID facility, while producing electricity as a by-product that will be more than enough to power the entire facility.

Prakash points out that there are still two big power projects that will need turbines — Project 4A, a 1,100mw to 1,400mw CCGT power project, and Project 4B (also known as Project Tuah), a 2,000mw to 2,400mw CCGT project.

Over in Sarawak, Siemens is bidding to supply equipment to the 350mw to 400mw CCGT Kidurong power plant.

It is worth noting that the aggressive planting up in Malaysia has drawn more competition to the market. Siemen’s long-time international rival, GE, has also been determinedly pursuing power projects here.

Looking ahead, Prakash certainly has his work cut out for him. The abundance of projects in Malaysia may have given Siemens three good years but it has also attracted fierce competition that have come to challenge the German’s dominant position.

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