AIR CONDITIONING REPRESENTS 60% OF ELECTRICITY CONSUMPTION IN SAUDI HOMES

Saudi Arabia 2017 | GREEN ECONOMY | VIP INTERVIEW

TBY talks to Jameel bin Abdullah Al Molhem, MD of Shaker Group, on achievements over the past year, green technology, and near-zero-energy buildings.

What were some of Shaker Group's major achievements in 2016?

Our major achievement in 2016 was entering the B2B segment of the air-conditioning's (AC) market, of which we are a key player in both residential and commercial ACs. We have been building a platform with our partners from LG to enter the market for big chillers and variable refrigerant flow (VRF) technology. In 2016 Shaker Group won two major projects. One of them was for the district cooling system for the Riyadh Airport renovation of the old terminals and the royal terminal. The second project was providing the chillers for the new government ministries complex currently being built. These deals are worth around USD20 million and that was the start to our penetration of this segment. The big chillers make up about 30% of the market and we expect this segment to grow further. Another key achievement and focus for us is the Multi V product, which is an advanced product from LG using VRF technology. We have done a number of projects using Multi V. for example, the Hilton Double Tree Hotel and Majdoul Tower both in Riyadh, the largest installation of Multi V in the Middle East. The Multi V system is modular so one outdoor unit can replace eight to 16 indoor units. This technology is somewhere between conventional AC systems and chillers. It is a new technology where LG's product has superior performance compared to the competition. This business is almost doubling YoY, and we expect it to gain traction going forward. In this respect, Shaker Group is number one in terms of market share for residential ACs, and we have also grown our appliance business.

In what ways have you been accessing international partners, including LG, and representing them locally?

Shaker Group started operating in Saudi Arabia in 1950, and over the years, it has accomplished a strong distribution, after-sales, and relationship platform. When LG wanted to enter the Saudi Arabian market in 1995, it aimed to partner with a strong companion like Shaker Group, the key player here. LG set a high objective of being number one in the Saudi market within five years, and they succeeded. The company heritage and culture of Shaker Group is to add a great value. Today, we are present in 25 cities and have a very wide distribution network with our partners. We cover around 800 stores Kingdom-wide. We have our after-sales in around 30 locations. In 1995, we started our partnership with LG just in the AC segment and expanded from there. Now, for the 16th consecutive year, we are the number one player in the AC segment with market share of 29%. The estimated total value of the AC market in Saudi Arabia is around SAR6 billion, and 55% of that value is intended for the residential market due to the sheer size of the country. Then, in 2007 Shaker Group and LG moved to localize the industry, and we wanted to bring the “know-how” and production of AC systems into Saudi Arabia. So, we established LG-Shaker as a manufacturing joint venture with LG in 2007. At the beginning, we started with a small operation of around 150,000 AC units and now have much larger capacities. Today some 70% of the ACs we sell in Saudi Arabia are produced here under our joint venture, 51% is owned by LG and 49% by Shaker. LG-Shaker produces a wide range of products from window ACs to split, freestanding, and commercial units, as well as air purifiers.

Globally there is a strong push towards energy efficiency and green technology in the home appliances and electronics industry. How much of a focus does Shaker Group have at the group level to show that you are the green partner of choice in Saudi Arabia?

In 2013 the government introduced new energy efficiency regulations. In Saudi Arabia 60% of electricity consumption in homes is through ACs. Therefore, improving the technology can save a lot of money in terms of the need to build new power plants and burning oil to produce electricity. Shaker Group wanted to move in this regard and this is how our acquisition of Energy Management Services (EMS) in Dubai came about. We are a 70% shareholder in EMS, which is a company that has been working with energy efficiencies in the UAE since the 1990s. Our focus at Shaker Group is to bring this value proposition to the Saudi market and also align it with LG-Shaker's key focus of producing highly efficient energy products. We want to bring a total solution perspective to the business community here, including developers, real estate, and even government entities. Plus with EMS we can come in at different stages of projects. Potentially, our input can drop the electricity consumption for a building by between 30% and 50% and improve its cooling capacities. We are currently meeting with one of the big retail chains to advise them on energy efficiency solutions for their existing premises. A lot of companies in Saudi Arabia are looking for solutions to reduce their energy consumption now. Cooling systems are key to this because 60% of a commercial buildings' energy consumption is going into cooling. We offer total energy saving solutions for lighting, sensors, cooling, and so forth for these businesses.

Near-zero-energy buildings are not only about installing the right equipment, but also about the monitoring and maintenance of systems. How does your work fit into this segment?

With Vision 2030, the Saudi government is putting a lot of emphasis on electricity deregulation and opening up the grid and the delivery of electricity to different players. The government is also very serious about looking at and incentivizing non-conventional and green energy sources, whether solar or nuclear, as alternatives to oil, we can complement this by introducing the concept of near-zero energy consumption. In the future we can then progress to the concept of positive energy where you can actually sell energy back to the grid in the deregulated environment, for large developments like mega-malls or compounds, this opens up their ability to produce their own energy and turn waste into energy. We can offer this through our partnership with Lockheed Martin and EMS, which is key for us as it gives us access to their global and regional platforms and “know-how.” Currently, we are working with multiple key developers on numerous projects to give them these independent power sources.

What are your expectations for 2017?

In 2017, the visibility is brighter, and the government's budget is higher than in 2016. We expect this to trigger the stabilization of oil prices. The government's drive to establish PPPs will bring more activities and projects in 2017 in many different areas such as health and education that account for 40% of the government's budget. On the consumer level we expect stabilization and we will be capitalizing on the key energy efficiency offerings we have. LG is the first company to offer the full line of split and commercial ACs utilizing inverter compressors. This Dual Inverter technology in the Residential ACs will give up to 53% energy savings and up to 60% faster cooling as per the international TUV Laboratory's certified tests, with a better and healthier operating environment. In addition, we are offering 10 years warranty on the inverter compressor. Those advantages respond to today's requirements of the Saudi consumers in terms of energy saving consumption.

 

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