Long term service agreements (LTSAs) are often an attractive asset management strategy for power producing owner-operators. On the surface, LTSAs appear to be the less risky option for owner-operators when it comes to forecasting annual P&L for field repairs. However, the actual cost of maintaining and repairing field assets by owner-operators or others may be far less than the price of LTSAs offered by suppliers or service providers.
The implementation of a successful LTSA requires careful preparation, detailed analysis and understanding of the technology risk profiles of the turbines in an owner-operator’s fleet. In certain situations, an LTSA can be the best option for cost-effective O&M because of high failure risk exposure within the owner-operator’s field turbines’ components and subcomponents. If an owner-operator knows the failure risks of their assets before the end of the warranty period, they can make a more informed decision on the right maintenance strategy going forward.
In some cases, there are performance guarantees and standards for which the owner may desire changes to the scope of work over time, because corporate initiatives change based on market dynamics, shareholder pressures, and financial outlook.