Norwegian industry and development aid
Changing development aid
Employment in Norway
13. 2 NORWEGIAN HYDROPOWER DEVELOPERS
Governmental agencies and financial institutions
13. 3 THE CONSULTANTS
13. 4 THE PRODUCERS
Export and activities abroad
13. 6 THE CONTRACTORS
13. 7 COOPERATION BETWEEN CONTRACTORS
The NORCON program
BUSINESS PROVISIONS IN NORWEGIAN DEVELOPMENT AID
DIFFICULT FOR THE UNION TO TAKE A STAND
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The profits from the sale of goods and services to hydropower development amount to billions of dollars every year. In this chapter we will give a description of the internationalisation of the Norwegian hydropower industry, the different actors and the parts they play.
All companies and agencies involved in the development of hydropower development through deliveries of goods, services or financing are referred to as hydropower developers. These can be divided into the following categories: The equipment producers, the consultants, the contractors and the financiers.
13. 1 INTERNATIONALISATION
As the domestic market for the Norwegian hydropower industry has declined, the industry has increasingly had to rely on export in order to survive. Today Norwegian hydropower companies export technology and equipment to the entire world, but the most important export market is in the Third World.
The Norwegian hydropower industry has lobbied hard for development support to the export of Norwegian hydropower technology. Increased competitive pressure in Norway have created increased acceptance of this demand, and Norwegian development aid is gradually shifting towards supporting Norwegian industry.
Norwegian industry and development aid
Even on a global scale, Norwegian hydropower industry is leading on hydropower technology. These days there are few assignments in Norway, and export is an important part of the turnover, especially for the largest companies. The areas of most interest to Norwegian hydropower industry are Latin America, Southeast Asia and China.
Development aid has become good business for the hydropower developers. Tore Halvorsen, ABB’s Director of Information, states that the main part of the world’s remaining hydropower potential is in the Third World, but according to Mr. Halvorsen it is impossible for the hydropower companies to compete in these countries without development aid.
Says Managing Director of Kvaerner Eureka, Jon Sivert Nilsen: "We have managed to keep our activity in the hydropower sector alive in Norway, not because of Norwegian hydropower developments, but because we have succeeded in the export market. 60-70 percent of our production of hydropower equipment is exported. We have been able to find projects which are covered by development support provisions" (Dagens Næringsliv 17. 12. 1991).
The Director of the Kvaerner corporation, Erik Tønseth, told the Norwegian newspaper Dagbladet in January 1993 that Norwegian development support could create 20 000 new jobs. Tønseth thinks that Norwegian aid should be tied to Norwegian deliveries, and states that while only 15- 20 percent of Norwegian development aid is returned to Norway, France has a return of 170 percent. In this way, Norwegian development aid is subsidising French industry, Tønseth claims.
The Export Council’s hydropower spokesman, Morten Sørbye, illustrates the industry’s attitudes towards development aid with this statement, made during a 1993 interview with FIVAS: "Norway used to give untied aid, donating money to poverty reduction, women and those kind of things. At the moment times are more difficult in Norway, and our demands are starting to increase. We can’t keep on giving away money without getting anything in return. All aid should be tied! Why should we donate money to a country that only uses it to buy goods from another country? If a country for instance is going to build a hydropower plant, we can use our expertise and secure jobs in Norway".
From what the business representatives are saying it may sound as if aid financing is necessary to keep the Norwegian hydropower industry alive. Before accepting this as an argument to increase the business provisions in the Norwegian development aid budget, some questions need to be asked. First of all: Is it true that this is a question of life or death for the hydropower industry? And secondly: If so, should development aid be used to save Norwegian industry?
Changing development aid
The Norwegian development aid is gradually changing from the traditional recipient oriented and mostly untied aid, towards increased emphasis on boosting Norwegian competitiveness abroad.
The Norwegian Agency for Development Cooperation (NORAD) has special provisions designed, in NORAD’s own words, "to stimulate the Norwegian industrial community into increased cooperation with developing countries", the so-called business provisions. In 1991, the Norwegian parliament voted in favour of increasing these provisions, and in 1992 business provisions amounted to 9.8 percent of Norwegian bilateral development aid. In the 1995 development aid budget, different forms of business provisions totalled 400 million Norwegian kroner (62 million US dollars), up from less than 100 million kroner in 1989.
NORAD’s Industrial Development Department is in charge of the different business provisions (see box). The head of the department, Oskar S. Oskarsson, emphasises that it is not a mere passive distributor of funds, but plays an active role in connecting Norwegian companies with companies in recipient countries. "The role of the industrial sector in development aid is now accepted in a totally different way than in the past", Oskarsson told the NORAD magazine Ressurs (1-1995).
In his book Bistand eller Børs (Aid or Stock Exchange), Bjørn H. Amland questions the role of the industrial community in Norwegian development aid. Concerning the pressure from the industry to change development aid, Amland writes: "As an example, the most controversial business provisions, mixed credits, were quadrupled almost without discussion in February 1992. Mixed credits, which is a pure export support arrangement for Norwegian industry, suddenly constituted almost ten percent of Norwegian bilateral development aid. Other posts on the development aid budget had to be cut correspondingly" (Amland, 1993).
Through mixed credits, development support becomes part of the financial package when a company places a bid. Most OECD countries have special financial arrangements for companies participating in Third World projects, and Norwegian companies are becoming increasingly dependent on development support provisions in order to meet competition from other industrial countries. In short, hydropower developers are arguing that "everybody else use tied aid, so we have to do it too".
However, several reports have pointed out that tied aid can be expensive and ineffective compared to untied aid. NORAD’s Environmental Department has also expressed some frustration caused by the sometimes conflicting interests of supporting Norwegian industry and promoting ecologically sound development.
Development support has become an important tool for the export of Norwegian hydropower equipment to the Third World. As Bjørn Amland writes: "Parts of the Norwegian private sector has had an alternative in Norwegian development aid. This has been a safe and protected market for many major companies such as Norsk Hydro, Dyno, Kvaerner and Asea Brown Boveri, among others. Almost all Norwegian development aid is in the form of grants. This type of export is therefore free of problems connected to credit ratings and loans, even though many of the recipient countries are bankrupt" (Amland, 1993).
In 1991, NORAD made a report to the Ministry of Foreign Affairs, describing among other things the cumulative effects of development aid for Norwegian industry: "As a result of development aid, several Norwegian companies gain good international contacts and better knowledge of international terms. The development aid opens doors, both for the Norwegian industrial sector as such and for individual companies, to markets and partners that will be of great importance for ordinary business as well. One example of Norwegian involvement in the development aid sector creating this kind of positive consequences is the participations in the hydropower sector in China and Vietnam."
As a result of Norwegian development aid, the Norwegian private sector supplied goods and services totalling an estimated three billion Norwegian kroner (468 million US dollars) in 1993. This equalled 42 percent of the total Norwegian development aid, which in 1993 was 7.2 billion kroner (Dagens Næringsliv, 13. 12. 1994).
The development of the hydropower industry during the last decade is characterised by a strong international orientation and coordination of activities. Through acquisitions and mergers, several companies have joined forces to meet the international competition. In some sectors, almost all competence in one area has been concentrated in one company. In this way the companies strengthen their international position while avoiding competition between themselves. The individual companies will be discussed below (3.3-3.8).
Several of the Norwegian hydropower companies have a large international network, either through being part of a multinational company or through their own subsidiaries or agents abroad. If NORAD does not want to finance a project where a Norwegian company is a potential participant, a branch of the company based in another country will often take over the contracts. One example of this is the Biobìo project in Chile (see chapter 9), where the Swedish-based Kvaerner Turbine AB won the contract for turbines with development support from Sweden, after Kvaerner initially received signals that NORAD probably would not support the project. Another example is the Lesotho Highlands Water Project in Lesotho, which was turned down by NORAD, where the UK-based Kvaerner Boving and ABB Sweden eventually won contracts for delivery of equipment (see chapter 11).
Business sources claim that in international tender competitions, the different companies might agree on which financial arrangements to use, thus avoiding a situation where some bids are subsidised by development support while others are not. One example of this is the Caruachi hydropower project in Venezuela (see chapter 10), where the companies agreed to use guarantees, not mixed credits. According to Kvaerner employees, Kvaerner Energy would not have won the contract for turbines if mixed credits had been involved.
In an interview with FIVAS, ABB Director of Information Tore Halvorsen explains how the company exports its equipment: "Exports from Norway take place in two ways. One way is through open international competition, when we operate on our own with our own capital. We do quite a lot of this, especially on equipment. The other way is through aid financing, which makes up a very important part. Asea Brown Boveri has two employees working full time on projects in developing countries, identifying possible financial arrangements and channelling the projects through ABB. We identify actual hydropower projects through a combination of information from NORAD and our own activity in the Third World."
Several dam projects in the Third World are examples of Norwegian hydropower developers cooperating to create a complete package. ABB has been involved in several projects where Kvaerner is involved, but does not have any formal cooperation with Kvaerner. According to Mr. Halvorsen the cooperation is strictly on a project basis. The Theun Hinboun project in Laos (see chapter 7) illustrates how the Norwegian hydropower industry might choose to manage projects in the Third World. In this project, Norwegian interests are involved both as consultants and as owners/developers of the dam.
The state-owned power company Statkraft is also getting involved internationally. This was made possible through the 1991 liberalisation of the Energy Act. Statkraft is at present involved only in a few projects in Asia. Recently Statkraft, Veidekke and Selmer established the joint-stock company NOCON. NOCON is to engage in international contractor activities, including hydropower projects.
Employment in Norway
The hydropower sector currently represents about 11 000 jobs in the private sector, in addition to a number of jobs in governmental agencies. The jobs in the private sector are distributed as follows: 1 000 in consultancy, 1 500 in the production of mechanical equipment (turbines), 7-8000 in the production of electrical equipment and 500 in the contractor business. This is a decrease from the 1987 level, mainly due to the low number of contracts in Norway.
Norwegian hydropower developers have first-rate technology and know-how, but this advantage in the international market does not necessarily guarantee domestic employment. Norwegian companies delivering equipment to hydropower projects are either controlled by foreign companies or have their own production units in other countries. An increasing proportion of the equipment is produced abroad, partly because production costs in Norway are high and partly because other countries provide access to closed tender competitions or financing.
As the Norwegian hydropower industry is becoming internationalised there has been a lot of take-overs, mergers and re-organisations. After EB was bought by the Swedish-Swiss company Asea Brown Boveri in 1987 the company was rationalised, and EB National Transformer at Hasle was closed down. Standard Telefon og Kabelfabrik A/S (STK) was taken over by the French company Alcatel in 1987, and during the next five years 700 employees were laid off. Kvaerner has bought companies abroad to access their financial arrangements, thus moving parts of Kvaerner’s business out of Norway. To sum up, the internationalising of the Norwegian hydropower developers have strengthened Norwegian capital interests, but does not necessarily secure Norwegian jobs.
13. 2 NORWEGIAN HYDROPOWER DEVELOPERS
Norwegian companies can offer all kinds of services and equipment connected to hydropower development. Norway is also involved in financing hydropower projects, both directly through bilateral development aid and indirectly through the World Bank and the regional development banks. Table 13.1 gives an overview of the Norwegian participants in the international hydropower business, while the different Norwegian agencies and companies engaged in hydropower development are described in some detail below.
Governmental agencies and financial institutions
In addition to the hydropower companies, several governmental agencies and financial institutions are involved in Norwegian hydropower development.
The Norwegian Agency for Development Cooperation (NORAD) plays an important role, both as financier and as a door opener for the hydropower companies. NORAD has special provisions for the private sector (see box).
The Norwegian Water Resources and Energy Administration (NVE) has an agreement of cooperation with NORAD, and provides expertise in cases where hydropower projects are being considered for NORAD support.
The Norwegian Guarantee Institute for Export Credits (GIEK) provides state guarantees in connection with export.
The Norwegian Export Council acts as a common representative for Norwegian export, and plays an important role in marketing Norway and Norwegian hydropower abroad. Several hydropower companies jointly finance an employee in the council. The Export Council is a subordinate of the Ministry of Foreign Affairs, and is financed by the duty on export. The council is involved in identifying projects, coordinating companies and exploring the possibilities of parallel financing.
Eksportfinans is an internationally oriented financing company owned by Norwegian commercial banks.
13. 3 THE CONSULTANTS
Since the end of the eighties, several efforts have been made to unite Norwegian consultancy competence in the hydropower sector, in an attempt to gain a stronger position on the international market.
In 1988 Norpower was established to secure contracts for equipment and services to international hydropower projects. The company was established with both state and private capital, and funds were provided for the participation of the state-owned company Statkraft. The intention behind the establishment of Norpower was to unite Norwegian hydropower expertise for the export market, but the result was more or less the opposite. When the consulting companies Norconsult International and Norplan did not become part of the newly established Norpower, the two companies made a formal agreement to cooperate in international promotion of their services internationally. At this point, Norconsult International and Norplan represented 90 percent of the international activity of Norwegian consulting companies.
At the time of the agreement, Norplan's chairman, Knut Ekeberg, stated: "We think that if Norway is to survive in this market, there must be a combined effort and a coordinated strategy, so that we appear united on the international arena in order to meet the hardening competition. Norway is literally too small to have four or five competing groups in the same export market" (Dagens Næringsliv, 19. 9. 1988). Knut Ekeberg tells FIVAS that Norconsult and Norplan no longer have this formal agreement, but that they still cooperate on specific projects. In relation to NORAD-supported projects the companies operate independently, because NORAD wants to be able to choose between different companies. The three consulting companies Norpower, Norconsult and Norplan are described in some detail below.
When Norpower was established in 1988, Statkraft was the major stockholder. Statkraft’s participation in Norpower was approved by the Norwegian cabinet in April 1988. In July 1988 the city council of Oslo decided that Oslo Lysverker (Oslo Electric Company) would buy into Norpower. Statkraft ended up with 34 percent of the stocks, while Oslo Lysverker controlled 13 percent, Hafslund Engineering 20 percent and the consulting companies Nybro-Bjerck, Siv.ing. Elliot Strømme, Ingeniør A.B. Berdal and Ingeniør F. Grøner each had 8.25 percent.
The governmental participation in Norpower was an advantage in the international marketing. The company appeared solid and reliable, both technically and economically. Parliament proposition 106 (1988) states: "Especially in developing countries, the participation of a state-owned company like Statkraft will make it easier for the new company to win acceptance for its consultancy services".
In addition to securing contracts for Norwegian consulting companies, Norpower was supposed to help other Norwegian companies getting contracts. By giving contractors and equipment producers advice on tenders, Norpower would be able to recommend these companies to the contractors. Roar Haugen in Norpower and Statkraft told FIVAS that although a coupling of consultancy services and industrial interests is considered unfortunate, it is not unusual.
Norconsult is one of the large companies in the Norwegian aid industry, and has specialised in aid-financed contracts. NORAD-supported projects usually make up a large percentage of the turnover, which in 1994 was 310 million Norwegian kroner (48 million US dollars). In 1994, Norconsult received some 50 million kroner of Norwegian development support for hydropower projects.
Bjørn Amland writes: "Norconsult is the only consulting company among the big companies in the aid industry, and it has been a part of the aid business from the beginning. Already in 1965 Norconsult was involved in hydropower development in Ethiopia. Presently road construction, telecommunications, irrigation systems and environmental protection are other important activities. NORAD has turned over the practical execution of several projects to Norconsult. Half of Norconsult’s activity is in Africa" (Amland, 1993).
In 1988 Norconsult merged with NPC, and the international department was re-established as Norconsult International. The four consulting companies behind Norconsult's hydropower projects (Ingeniør A.B Berdal, Siv.Ing. Elliot Strømme, Nybro-Bjerk and Ingeniør F. Grøner) left Norconsult when Norpower was established.
Norconsult offers consultancy services in many other areas than hydropower, for instance transport, bridges, buildings, environment, information technology and heating systems. If the company does not have the necessary expertise, outsiders are hired to do the job. This was the case with the NORAD-supported feasibility study for the Nam Theun hydropower project in Laos (see chapter 7). Norconsult did not have anybody on their staff with the necessary expertise on the ecology of Asian rivers to do the environmental impact assessments, and hired an Australian to do the job. This study has been heavily criticised by Norwegian environmental authorities.
Norconsult is involved in projects all over the world. The company has offices in Bhutan, Chile, Cyprus, Germany, Mozambique, Nepal, the Philippines, Saudi-Arabia, Sudan, Tanzania, Thailand, Uganda, United Arab Emirates and Zambia (Norconsult, 1992).
The consulting company Norplan is a lot smaller than Norconsult. Norplan usually operates as an independent company in projects supported by NORAD, but cooperates with Norconsult on most international projects. The company was established twenty years ago to offer consultancy services to the international market. The activity is divided into four sectors: hydropower and water resources, transport and regional planning, environment and industry and buildings, with hydropower being the biggest.
The Norplan Group consists of the companies Barlindhaug, NVK and Hjellnes COWI. All their international activity takes place through the company Norplan A.S. In 1992 the total turnover of the Norplan Group was 131 million Norwegian kroner (20 million US dollars), with Norplan A.S. representing 69 million kroner (Norplan, 1993).
Norplan is currently working in thirteen countries, and has experience from projects in more than sixty countries on four continents. The company has offices in Pakistan, The United Arab Emirates and in Tanzania. The Tanzania office expanded in 1993, making Norplan one of the strongest foreign consulting companies in the country. Norplan is at the moment involved in two hydropower projects in Tanzania, Kihansi and Pangani Falls (see chapter 14).
Norplan has also made power sector studies for Indonesia and Angola, funded by the World Bank and UNDP.
Since 1988, most of the Norwegian competence on international hydropower development has been owned by Berdal Strømme. Berdal Strømme is an independent technical consulting company, one hundred percent owned by its employees. Norplan is the only international consulting company not owned by Berdal Strømme.
In 1992, Berdal Strømme gained ownership of Nybro Bjerck (including its subsidiary companies Norconsult International and Trond Horn). Nybro Bjerck was previously owned by Aker. The result of this take- over was a large company with about 700 employees and a 1991 turnover of 530 million Norwegian kroner (83 million US dollars). Roughly half of this turnover came from international activities.
Thus, Berdal Strømme controlled Norconsult and owned stocks in Norpower. During this period, Berdal Strømme also took over Hafslund Engineering. In 1988 Hafslund Engineering was sold to Berdal Strømme after losses of some 80 million Norwegian kroner (12.5 million US dollars) caused by hydropower projects in USA, China and Indonesia.
In 1992, Norconsult International and Norpower merged. Finally, the hydropower developers had succeeded in bringing together most of the Norwegian hydropower expertise in one company. Berdal Strømme was the driving force behind the merger, and is the majority stock holder in the new company with 52.3 percent of the stocks. The most important Norwegian hydropower developers such as Statkraft, Statnett and Oslo Energi are among the minority stockholders. Since the merger, all their international consultancy services is done under the name of Norconsult International. Norpower represents the professional marketing division of the new company.
13. 4 THE PRODUCERS
There are three major Norwegian producers of hydropower equipment: Kvaerner, ABB and Alcatel STK. Kvaerner produces mechanical equipment such as turbines, ABB makes various types of electronic equipment, while Alcatel STK mainly produces cables. Kvaerner and Alcatel are described below, while ABB will be discussed in some detail in 13.5.
Kvaerner has been producing hydropower equipment for the last 150 years, and today Kvaerner Energy is one of the world's leading suppliers of turbines and other mechanical equipment for hydropower plants. Around 80 percent of the company's turnover stems from foreign markets. Between 60 and 70 percent of all hydropower equipment produced by the company is exported. In 1993, Kvaerner won 90 percent of all international tenders for turbines (KværnerMagasinet 1-1994). Kvaerner Energy is, on its own and through its international subsidiaries, involved in hydropower projects in all parts of the world. In addition to turbines, related mechanical equipment such as valves, regulators, gates, gratings and pipes are supplied by Kvaerner. The company also offers maintenance service on existing equipment.
In 1992, all Kvaerner's hydropower activities were gathered in the company Kvaerner Energy. Kvaerner is the only large Norwegian supplier of hydropower equipment supplier which is still domestically owned.
Kvaerner's contracts for mechanical equipment amounted to 5 billion Norwegian kroner (780 million US dollars) in 1992. Hydropower represented 1.45 billion of this. From 1990 to 1991, the company experienced an increase of 28 percent in revenues from energy related equipment. In 1991, this business area had a turnover of 1.2 billion Norwegian kroner. Lately, Kvaerner has won contracts for equipment export to Tanzania, Mexico, Chile, Venezuela, Greenland, China, Malaysia, Laos, Indonesia and Uganda, among others. China represents some 30 percent of the hydropower projects in which Kvaerner is currently trying to secure contracts.
Until 1975, Kvaerner secured foreign contracts only during temporary lows in the Norwegian market. The increasing orientation towards export can largely be explained by the decreasing domestic market: "Eventually it became clear that Norwegian hydropower development would stagnate and later decrease. Norway did not have an unlimited amount of exploitable rivers, and conservation interests were fighting increasingly harder to save those that were left" (KværnerMagasinet 2-1987).
Export of turbines has become a main priority of Kvaerner. In order to strengthen this aspect of their activities, Kvaerner has bought a number of companies and established Kvaerner representation offices around the world.
|•||1981: Kvaerner buys the Swedish company Nohab Turbinteknik AB.
|•||1984: Kvaerner establishes offices and a production unit in San Francisco, USA.|
|•||1986: Kvaerner buys Boving-KMW Turbin, which has production units in England, New Zealand and Australia. The British company Kvaerner Boving has now merged Boving Chambers Ltd. under the Kvaerner Boving flag.|
|•||1986: Kvaerner takes over the technical assets of the turbine company J. Leffel in Springfield, Ohio, USA.|
|•||1987: Kvaerner buys the Swedish company Nordstjärnan, including the San Francisco company Axel Johnson Engineering Corporation.|
|•||1991: Kvaerner buys the Swedish company Götaverken Energy AB, and its subsidiary Generator AB.|
|•||1992: Kvaerner takes over the Finnish company Tamturbine OY, in order to strengthen its position on the Nordic market.|
|•||1993: Kvaerner establishes a branch of Kvaerner Energy in Beijing, China.|
|•||1993: Kvaerner opens representing office in Indonesia.|
The incorporation of the British Boving company into the Kvaerner corporation has been especially important to secure turbine contracts from developing countries. One reason for this, is the long experience of the British in doing business with their former colonies. Another reason is that some financing possibilities which are open to the British are closed to Norwegian companies. The Director of Boving, Michael Higgs states: "Clearly, as British we have some opportunities which are closed to the Scandinavians. One example is a job we did in Sudan, financed by the European Development Bank. The job was open only to member countries of the EEC, and we are the only Kvaerner company inside the EEC. Also, through the years, we have done a number of jobs paid for by British development aid" (KværnerMagasinet 2-1987).
When Kvaerner supplied mechanical equipment for the two largest of three hydropower stations in the Mahaweli project in Sri Lanka, the Swedish Kvaerner subsidiary won contracts financed by Swedish development support, while the English Kvaerner subsidiary won contracts with British development aid financing.
Kvaerner regularly cooperates with other Norwegian companies when engaging in projects abroad. In India, Kvaerner is part of the EUCONA consortium, together with ABB, Siemens and Sulzer Escher Wyss. This consortium recently won a contract for the Nathpa Jhakri hydropower project in Himachal Pradesh state, worth 1.5 billion Norwegian kroner (230 million US dollars). Also, Kvaerner is part of a Norwegian/Swedish consortium with Skanska and ASEA, which has won contracts for a project in Latin America.
One strategy employed by Kvaerner in order to secure international contracts is to conduct studies on possible hydropower development for potential buyers. This has been done for example in Thailand.
In 1987, the Norwegian company Standard Telefon og Kabel (STK) was bought by the French company Alcatel, and its name was changed to Alcatel STK. Alcatel STK is the leading Norwegian company on cables. Its subsidiary Alcatel Kabel Norge AS develops, constructs, produces and installs cables and cable systems for telecommunications, electric power transmission and heating. In 1992, Alcatel Kabel Norge AS, with its subsidiaries, had a total revenue of 1.3 billion Norwegian kroner (208 million US dollars). Of this, 297 million kroner were from international contracts (Alcatel, 1992)
The Alcatel Alstholm group is the world's biggest supplier of cables and telecommunication systems. The group has some 203 000 employees, sales and marketing organisations in 110 countries, and production units in more than 40 countries. The Alcatel Alstholm group has a very solid position in European and North American markets, and in 1992 its turnover amounted to around 204 billion Norwegian kroner. The corporation is rapidly expanding into the international markets, giving highest priority to Latin America, China and the Pacific region.
According to Alcatel philosophy, production is to take place where it can be done efficiently and at the lowest cost. STK has gone through a lot of restructuring since it was taken over by Alcatel, and more than one thousand employees have lost their jobs. In addition to the main company, the Norwegian branch of the transnational Alcatel corporation consists of the three subsidiaries Alcatel Kabel Norge, Alcatel Telecom Norway and Alcatel Distribusjon, as well as nine other companies wholly or partly owned by the corporation.
Compared to the other large companies, Alcatel STK receives a small share of Norwegian development support contracts. However, the company is eagerly pursuing possibilities of receiving such contracts. Alcatel STK has supplied equipment to Pakistan, Zambia and India, among others.
Standard Telefon og Kabel (STK) once played a central role in the Bakun project, the first hydropower project outside Norway to receive attention from the Norwegian environmental movement. Malaysian environmentalists have for many years opposed plans for the Bakun dam in Sarawak on Borneo. STK was interested in supplying the submarine power transmission line to connect the hydropower plant on Sarawak with mainland Malaysia. The project was temporarily shelved in 1990, but has recently been revived. Alcatel STK still appears to be interested in contracts for Bakun.
STK had long experience on submarine power lines, and have supplied equipment to Asia, Africa and Latin America. These parts of the world are considered particularly interesting for future expansion. According to Tor Hurlen of Alcatel STK, the company had no contracts for supplies to hydropower projects in Third World countries as of May 1994.
The story of ABB is a useful example of how the Norwegian industry is being internationalised. ABB in Norway is a one hundred percent owned subsidiary of the transnational corporation ABB Asea Brown Boveri. 25 percent of the revenue of ABB Norway stems from power-related activities, and large part of this is related to export.
The Swiss company Brown Boveri and the Swedish company Asea merged in 1987. The resulting ABB Asea Brown Boveri Ltd. is one of the world's major electro-technical companies. In 1992, ABB Asea Brown Boveri employed around 213 000 people in 1 300 companies all over the world.
Before the merger, Asea had significant shares in the Norwegian companies Elektrisk Bureau and Asea Per Kure. NEBB, another Norwegian company, had been owned by Brown Boveri since 1907. In the eighties, National Industri and NEBB jointly held around 10.5 percent of the world market for hydropower generators. In 1988, the three companies were merged into the EB concern, which with its 15 000 employees and a turnover of ten billion Norwegian kroner (1.5 billion US dollars) became one of the largest private industrial companies in Norway (FIVAS, 1988). In January 1992, ABB bought all shares in EB, and the name of the concern was changed to ABB (ABB, 1992 and 1993).
According to the economic magazine EuroBusiness, both the making of the giant transnational corporation Asea Brown Boveri and its Swedish Executive Director, Percy Barnevik, are considered legends. Harvard Business Review gives this description of Barnevik: "Percy Barnevik (...) is a corporate pioneer. He is moving more aggressively than any CEO in Europe, perhaps in the world, to build a new model of competitive enterprise". Barnevik is seen as being strong enough to make controversial and unpopular decisions in order to increase business profits. ABB has doubled its turnover since 1987, from 100 billion Norwegian kroner (15 billion US dollars) in 1987 to 200 billion kroner in 1992. During the same time some ten thousand workers have been fired all over Europe to make the organisation more effective and profitable.
Barnevik initiated the rationalising of Swedish Asea when he took over the leadership of that company in 1980. His aim was to locate all production where it could be done most efficiently. After the fusion with Brown Boveri, the same philosophy has been the guideline for the new giant. A number of companies worldwide have been bought and rationalised in a process where only the strongest have survived.
ABB tries to act as a "local" company wherever they operate. The corporation buys national companies, and tries to gain control over the domestic market. ABB Norway is registered as a Norwegian company, and ABB owns such national companies in countries all over the world. The management of these companies is recruited nationally, when possible. Thus, the company acts as an "insider" in almost all countries where it is active (Panni, 1993).
The making of the EB concern in Norway, based on take-overs, rationalising and the concentration of production at the most efficient sites, closely follows the ABB recipe. Information in the Norwegian press also shows that the reorganising and trimming of the companies was planned from the start, despite ABB’s promises of more jobs in Norway (Hansen and Eilertsen, 1990; Amland, 1989).
ABB produces all types of equipment and services for electricity supply. When the EB corporation changed to ABB, hydropower related activities were gathered under the business area "Power Supply and Cable", to be handled by the departments ABB Energi, ABB Distribusjon, ABB National Transformer and ABB Norsk Kabel. ABB Distribusjon makes power distribution systems and instruments. At ABB Energi, systems for producing, transmitting and distributing power are designed and produced. ABB Norsk Kabel produces transmission lines, while ABB National Transformer is one of the world's leading producers of transformers.
Previously, Norwegian transformer production took place in Drammen and at Hasle in Oslo. In 1989, the Hasle factory was closed, and production moved to Drammen. In 1991, the factory of EB Distribusjon factory in Fredrikstad was closed down and moved to Skien, where the main office is situated.
Production at NEBB at Skøyen in Oslo was stopped in 1989. From then, all hydropower generators were to be produced at the EB unit in Drammen (previously National Industri). In 1991, hydropower generator production was transferred to ABB Energy, and in 1993 activities like repairs and service of hydropower generators were moved from Sarpsborg to Drammen.
Export and activities abroad
An increasing share of ABB Norway's profits comes from export and activities outside Norway. Since EB was bought by ABB, the corporation has bought a number of companies abroad, and sold or closed down domestic ones. Today, ABB Norway has plants in more than twenty countries around the world. Currently, almost half of its revenue comes from outside Norway, and around 16 percent is from export. Through the international ABB network, Norwegian power generating and transmission equipment was supplied to 49 countries in 1992.
The ABB annual report of 1992-93 states: "The export market is of great importance for power supply and cable activities. The Norwegian market being weak, it is important to increase the export proportion of these activities in order to retain a satisfactory economic result. The combination of more rational production units and the international marketing organisation of the ABB Group gives the Norwegian ABB corporation a good basis for achieving this".
ABB is by far the largest company in the Norwegian aid industry, and is involved in all main recipient countries of Norwegian development aid. The amount of deliveries varies greatly from year to year, but ABB's annual turnover from these activities may amount to one hundred million Norwegian kroner (Amland, 1993). Since the business provisions were introduced in the eighties, ABB has received some 700 million Norwegian kroner (110 million US dollars) through the different provisions.
Long before ABB bought EB, the latter had been involved in projects funded by NORAD. ABB and the Norwegian companies now part of the concern have supplied equipment to a number of hydropower plants outside Norway, including several projects in the Third World. (See appendix 1 for an overview of the participation of Norwegian companies in hydropower projects in the Third World.)
13. 6 THE CONTRACTORS
The contractors are perhaps most strongly affected by the decline in the Norwegian hydropower market, and these companies have aggressively redirected their activities towards export. However, they face strong competition from Austria, Switzerland, Germany, Japan, Italy, USA, France and Spain, as well as from the many skilled contractor companies in developing countries, for example the Chinese with their more than two thousand years of dam building experience. When a large dam is to be built in a Third World country, the main contracts are usually won by large foreign companies, while sub-contracts are awarded to local contractor companies.
After merging with Aker Entreprenør in 1991, Veidekke is currently the leading contractor company in Norway. As a result of a number of take-overs and mergers, Veidekke has strengthened its position significantly since the early eighties. In 1992, the company's turnover was close to 3.7 billion Norwegian kroner, or 578 million US dollars (Veidekke, 1992).
Veidekke has more than 35 years of experience from projects in Eastern Africa. In 1992, foreign activities amounted to some 13 percent of the total turnover. Furthermore, Veidekke owns A/S Noremco, one of the largest recipients of NORAD-supported contracts. Veidekke also cooperates with other large companies on the export market.
Noremco specialises in projects financed by development aid. Annual turnover is around 150 million Norwegian kroner (23 million dollars) , of which contracts financed by NORAD represent a major proportion. Noremco has a British subsidiary and has a joint venture with the Swedish company Skanska in Tanzania. Noremco is presently involved in the largest development project ever undertaken by NORAD, the Pangani project in northern Tanzania (see chapter 14).
The company Selmer A.S. is a result of the 1987 fission of Selmer-Furuholmen a.s. In 1992, the contractor activities of Selmer was collected in one single company. When engaging in hydropower projects abroad, Selmer usually cooperate with other large companies.
In 1992, Selmer had a turnover from foreign activities of 242 million Norwegian kroner (38 million US dollars). Total profits were 3.6 billion kroner (Selmer, 1992). The company is presently involved in Chinese hydropower projects through the Advisory Group of Norway (AGN) and in the Nuuk project on Greenland, where several Norwegian companies cooperate.
Aker A.S. is active in two sectors, cement and building materials and oil and gas technology. In the past, the company was active as contractors of hydropower projects abroad through Aker Entreprenør. Aker sold 91 percent of the Aker Entreprenør stock in 1990. In 1991 Aker took over NPC-Holding, which then owned Norconsult International (Aker, 1990 and 1991). The company sold this stock to Berdal Strømme in 1992. Aker now owns 15.8 percent of Selmer (Aker, 1994). In 1992, Aker had a turnover of 17.3 billion Norwegian kroner (2.7 billion US dollars).
The Aker-owned company Norwegian Contractors recently participated in creating a new corporation which is a continuation of the working group Norwegian Construction Group (see 13.7). Norwegian Contractors is originally an offshore company, and hydropower is a new area of interest for the company.
Aker also owns 50 percent of Scancem International. The activities of Scancem encompasses production and sale of cement. Scancem International has taken over the activities of the former Aker-owned company Norcem International. Scancem was established in 1986 as a cooperation between Aker and the Swedish company Euroc to deal with their international activities in the fields of cement and coal. Scancem in Norway is presently not directly involved in any hydropower projects, but has fourteen companies abroad that are independently involved in different projects.
13. 7 COOPERATION BETWEEN CONTRACTORS
During the past years, several new cooperating companies have emerged in the Norwegian contractor business.
Norwegian Construction Group (NOCON) was established in 1993 as a joint venture between the three largest construction and contractor companies in Norway: Selmer A.S, Statkraft and A/S Veidekke (NOCON, 1993). The rationale is to be competitive on the international market, especially regarding construction of underground installations like hydropower stations. Much of the total Norwegian hydropower expertise on construction is united under the NOCON label. The companies of which NOCON consists have built 80 percent of the total hydropower installations in Norway, and have been responsible for 160 out of Norway's total 200 underground hydropower stations.
In 1994, NOCON was transformed into a new stock company with Veidekke, Selmer and Norwegian Contractors as the owners. Statkraft is not interested in being one of the owners, but will retain a special cooperation agreement with NOCON. NOCON's aspiration is to engage in project development and project leadership in all kinds of construction projects around the world. On advisory services, the company is to cooperate with Norconsult and the Norwegian Geotechnical Institute on the marketing, planning and executing of international contracts. Other central partners for the new company will be Norwegian equipment suppliers and specialised contractors.
According to Nils Scwartz in NOCON, the company was by May 1994 not involved in any international hydropower projects.
Advisory Group of Norway (AGN) is a joint venture between Norconsult International, Selmer and Veidekke. The company was set up to work towards the Chinese market. AGN has been working continuously in China since 1984, when their first Chinese contract on consultancy services for the Lubuge hydropower project was signed. AGN has also been involved in the Yantan and Ertan hydropower projects (see chapter 6). In addition, the company has done a number of studies on other projects (AGN, 1993).
The NORCON program
Through the NORCON program, the cement industry is cooperating in a large scale effort to promote export of their services. The program was started in 1992 under the Norwegian Council of Technical and Scientific Research (NTNF), now a part of the Norwegian Research Council. During a three year period, 226 million Norwegian kroner (35 million US dollars) is to be spent on export market development for the Norwegian cement industry. The company hopes to increase Norwegian export from this sector by one billion kroner each year until the year 2000. Declining domestic markets provide the explanation for this major emphasis on export activities.
Norcem, Norwegian Contractors, Norconsult International, Veidekke and Kvaerner Energy are among the companies involved in the NORCON program.
The following fields of work are to be main priorities under the program: hydropower, off-shore activities, bridge construction, rehabilitation of cement works, high quality cement buildings and consultancy services. According to Sigmund Høstmælingen, leader of the NORCON program, the markets in Europe, former Eastern Europe, Southern Africa and Latin Amerika are the main focus of the program (Dagens Næringsliv, 1. 7. 1992).
"Statkraft shall be a leading Northern European Energy Corporation with special expertise in hydroelectric power" (Statkraft Annual Report, 1992)
Like other actors on the hydropower market in Norway, the state-owned power company Statkraft has experienced a marked domestic decline in activities, causing an increased interest in international activities to secure employment and maintain expertise. Statkraft is the major Norwegian power producer, and the second largest in the Nordic countries.
Operating independently abroad was not possible for Statkraft until 1991, when the Norwegian Energy Act was liberalised and the company was divided into Statkraft and Statnett. Statnett took over responsibility for the state-owned plants in the Norwegian national grid, while Statkraft was made into a production company (Golmio, 1992). In 1992, Statkraft was restructured to become a state-owned enterprise to be run on commercial principles. The company is 100 percent owned by the Norwegian state.
In 1992, Statkraft started to engage independently in the Third World. The company set up a separate agency to deal with foreign activities, which buys services from other departments of Statkraft and uses the company's expertise. Statkraft operates as contractor and owner of projects, and so collects tenders and orders equipment and services for the projects.
According to Ingvald Haga of Statkraft's international agency, the international activities are still in a trial phase, with the company involving itself only in a few projects. Haga offers this explanation as to why Statkraft is engaging in international activities: "We know how to do hydropower, and there are large undeveloped resources in the Third World. In Norway there is little business for us.". According to Haga, Southeast Asia is an area of high priority, as this region has large hydropower resources, great demand for power and high economic growth. Statkraft has also been studying some areas in Latin America, but has decided not to get involved in this region, at least not for the time being.
Statkraft is presently involved in projects in Nepal, Vietnam and Laos (see chapter 7). Statkraft has entered these projects on a purely commercial basis, and has received no support from NORAD. Thus, economic viability is essential if Statkraft is to engage in a project. This explains Statkraft's emphasis on Southeast Asia, as projects in this region are considered economically sound.
In addition to this, Statkraft is involved in many other parts of the world through Norconsult, of which Statkraft is a 5 percent stockholder. The company also participated in the establishment of NOCON.
Statkraft has earlier participated in aid-financed projects, in cooperation with NORAD and the Norwegian Water Resources and Energy Administration. This rather formalised cooperation was suspended in 1988 when Statkraft started getting involved abroad through the company Norpower.
Business provisions have become an increasingly important part of Norwegian development aid, equalling 9.8 percent of Norwegian bilateral aid in 1992. Disbursements through the business provisions have increased from barely one hundred million Norwegian kroner (15 million US dollars) in 1983, to 400 million in 1995.
The trade union at Kvaerner in Norway supported the Pehuenche indians in their fight against the dams on the Biobìo river in Chile, where Kvaerner has delivered the turbines. Rolf Utgård is secretary of the union at Kvaerner. He is of the opinion that the union can support the struggle against dams, even if Kvaerner is involved, and has strong opinions on development aid, among other things.
Table 13.1: Norwegian involvement in international hydropower development
|Consultants||Norconsult International||Consultancy services|
|Equipment producers||Kvaerner||Hydromechanical equipment (turbines)|
|ABB||Electronic equipment (generators, cables)|
|Veidekke||Construction of dams|
|Cement and concrete||Scancem International||Cement and concrete|
|Financiers||NORAD||Bilateral development aid projects|
|A.S. Eksportfinans||Export credits|
|The World Bank||Norwegian participation|
|Regional dev. banks||Cofinancing|
Source: Økonomisk Rapport (5-1991), ABB (1992/93).
The 1987 figures encompass the three companies Elektrisk Bureau, Asea Per Kure and NEBB.
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