We are one of the largest providers of highly engineered thermal solutions
for process industries. For 61 years, we have served a diverse base of thousands
of customers around the world in attractive and growing markets, including energy,
chemical processing and power generation. We are a global leader and one of
the few thermal solutions providers with a global footprint and a full suite
of products (heating cables, tubing bundles and control systems) and services
(design optimization, engineering, installation and maintenance services) required
to deliver comprehensive solutions to complex projects. We serve our customers
locally through a global network of sales and service professionals and distributors
in more than 30 countries and through our four manufacturing facilities on three
continents. These global capabilities and longstanding relationships with some
of the largest multinational energy, chemical processing, power and engineering,
procurement and construction, or "EPC", companies in the world have
enabled us to diversify our revenue streams and opportunistically access high
growth markets worldwide.
Our thermal solutions, also referred to as heat tracing, provide an external
heat source to pipes, vessels and instruments for the purposes of freeze protection,
temperature and flow maintenance, environmental monitoring, and surface snow
and ice melting. Customers typically purchase our products when constructing
a new facility, which we refer to as Greenfield projects, or when performing
maintenance, repair and operations on a facility's existing heat-traced pipes
or upgrading or expanding a current facility, which we refer to collectively
as "MRO/UE". A large processing facility may require our thermal solutions
for a majority of its pipes, with the largest facilities containing hundreds
of thousands of feet of heat-tracing cable and thousands of control points.
Our products are low in cost relative to the total cost of a typical processing
facility, but critical to the safe and profitable operation of the facility.
These facilities are often complex, with numerous classified areas that are
inherently hazardous and where product safety concerns are paramount. We believe
that our strong brand and established reputation for safety, reliability and
customer service are critical contributors to our customers' purchasing decisions.
Our customers' need for MRO/UE solutions provides us with an attractive recurring
revenue stream. Customers typically use the incumbent heat tracing provider
for MRO/UE projects to avoid complications and compatibility problems associated
with switching providers. We typically begin to realize meaningful MRO/UE revenue
from new Greenfield installations one to three years after completion of the
project as customers begin to remove and replace our products during routine
and preventative maintenance on in-line mechanical equipment, such as pipes
and valves. As a result, our growth has been driven by new facility construction,
as well as by servicing our continually growing base of solutions installed
around the world, which we refer to as our installed base.
The major end markets that drive demand for heat tracing include energy, chemical
processing and power generation. We believe that there are attractive near-to
medium-term trends in each of these end markets. In addition, we believe that
the growth rate of the electric heat tracing market is accelerating as end-users
continue to favor electric-based heat tracing solutions over steam-based heat
tracing solutions for new installations.
Energy. Heat tracing is used to facilitate the processing, transportation and
freeze protection of energy products in both upstream and downstream oil and
gas applications. In order to meet growing demand and offset natural declines
in existing oil and gas production, a significant increase in capital expenditures
in upstream infrastructure will be required, with a particular focus on reservoirs
that are in harsher climates, are deeper or have other complex characteristics
that magnify the need for heat tracing. A&M estimated in 2012 that the oil
and gas end market accounted for approximately 67% of the total market for electric
heat tracing in 2012, or approximately $800 million.
Chemical Processing. Heat tracing is required for temperature maintenance and
freeze protection in a variety of chemical processing applications. Factors
that may impact heat tracing demand in chemicals end markets include the rapid
industrialization of the developing world, a shift in base chemical processing
operations to low-cost feedstock regions, a transition of Western chemical processing
activities from commodity products to specialty products and environmental compliance.
Power Generation. Heat tracing is required in high-temperature processes, freeze
protection and environmental regulation compliance in coal and gas facilities
and for safety injection systems in nuclear facilities. An important driver
of demand for heat tracing solutions for power generation is increasing demand
for electricity worldwide.
Continuing selection of electric-based heat tracing solutions over steam-based
solutions. Beginning in the 1960s, electric heat tracing products entered the
market as an alternative to steam heat tracing products. While steam-based products
are still used today for heavy oil, chemical and processing applications, electric-based
products generally offer greater cost savings and operating efficiencies. As
a consequence, Greenfield projects commissioned in recent years are increasingly
designed to incorporate electric heat tracing.
