Change in the Management Board of our portfolio company TES VSETIN – after 6 years as Chief Executive Officer, Manfred Lerch is transitioning to the Supervisory Board. In his new role, he will focus on strategic initiatives to guide the company’s long-term vision.

Simultaneously, we are pleased to announce that the company’s Chief Sales Officer, Tomas Pavlica, is assuming the position of Chief Executive Officer and Chairman of the Board of Directors. Tomas Pavlica has been a part of TES VSETIN for 20 years, and we are confident that he will excel in leading the company.

While expressing our gratitude to Manfred Lerch for his excellent cooperation, we invite you to a brief interview in which he sheds light on the specifics of the industry in which TES VSETIN operates, the nature of Polish-Czech cooperation, and the transaction conducted last year with Avallon MBO.

The industry in which you manufacture your machinery has recently undergone significant changes, such as in the field of “green” transformations. How has this process impacted TES’s business? Has it presented a new opportunity or threat to your company?

In economics, we refer to the Kondratiev cycle, which signifies the economy’s development in waves. TES was established in 1919, a period that witnessed the founding of several electric machine-producing firms.  Electricity was originally utilized to ease our lives, replacing steam power and powering household devices like toasters, coffee machines and lighting. Today, however, we face a different challenge, with the need to tackle carbon dioxide emissions. Consequently, electric energy is being employed to replace sources that generate carbon emissions such as household heating systems, automotive engines, and transport systems.

From that perspective, I believe TES is in the perfect position within the market as it aligns with the direction of the industry’s future. At this stage, one may ponder the most efficient method of electricity generation, with two options available.  Firstly, one can install photovoltaics on roofs, using the sun’s rays to produce electrical energy. Secondly, an electric generator must be powered by a specific mechanism, such as wind, water, steam or a diesel engine. TES produces electric generators, possessing the technology and machinery to generate energy. In TES we offer “tailor-made machines” for which the demand is quite high in the market, yet, despite our efforts to standardize, they cannot be catalogued for quick purchase. Only opon receiving a customer’s specification, do we proceed to finalize the desired product accordingly.

To what extent do the Czech and Polish energy markets differ, and in what specific areas?  

Although we carried out some projects in Poland in the past, we currently do not have any ongoing transactions directly with Polish customers. However, there can be indirect supplies to the Polish market as our company collaborates with system integrators, providing them with our generator or the complete unit that can be installed in any place worldwide. In that respect we work with customers in many countries and thus have project installations in Poland as well.

Could you tell us how exactly TES operates and what its specializations are?

TES operates in 3 divisions; the largest being the production of components, which accounts for approximately 60% of our business. Component refers to everything required to construct an electric machine, which can be ordered and manufactured. It can also include fully assembled modules. On the other hand, we have what we refer to as the “systems and solutions” business – we manufacture and supply complete electrical machines according to the customer’s specifications, but with our own design and the work of our engineers. This accounts for about 30% of our business activity and it also includes a small branch known as the “automation business,” where we provide test stands specifically for vehicles or fully automated production lines. Finally, the third area of our business comprises all of our services related to customer support and the maintenance of our products.

Do you observe any dominant trend in the end use of your components?

When a client comes to us and requests only a component, we are not always informed about the intended application – it can be intended for use in both conventional and renewable energies. Many of our clients are based in the Czech Republic, whilst numerous larger German or international companies that we collaborate with only have subsidiaries here. It is of course different when we ourselves design and produce electric machines following customer specifications. In 2021, renewable energy supplies constituted only 14%, whereas conventional energy components accounted for 43%. Consequently, over 50% of our business pertains to energy solutions. Since we are in a project business with our electric machines, this split will change from year to year.

What are TES’s primary markets at present?  Are there any areas you would like to expand into?

During the COVID pandemic, spanning two or three years, certain complications arose. Travel restrictions and the inability to hold on site project discussions with clients resulted in a downturn.  The subsequent shortage and increased prices of materials only compounded the issue, prompting our clients to wait for prices to decrease. However, we are now observing an upswing in project volume for the upcoming business year.

Additionally, it is worth noting that constructing big dams is restricted in many parts of the world, but in the small hydro market the demand is still growing. One of our main markets currently lies in Norway, which has abundant water resources leading to a high demand for hydropower units. We also conduct operations in other countries such as Finland, Canada, the United States, and of course the Czech Republic. There are still opportunities to construct medium or small-scale hydropower projects that require machinery of the size we manufacture – up to 30 MW machines that can be transported by lorry.

Nonetheless, we also undertake nuclear energy initiatives. To this end, we have developed a prototype nuclear fusion experiment unit for a Czech university. We consider our creation a masterpiece – a complex structure built from various components. Nuclear fusion experiments demand stable high voltage whilst withstanding extreme temperatures. We designed a large generator weighing about 20 tons that meets these requirements. This project serves as evidence of our technical expertise.

We currently see a growing trend in Europe, except Germany, towards constructing new nuclear power plants and revitalizing existing ones over the past few years. We have already produced and delivered the first machines that can do that. They have undergone an intensive certification process and required to provide solid training for our staff, but we are now prepared to engage in high-tech business of this nature.

What changed in the company after Avallon’s (Genesis’s) entry? How do you evaluate this process? 

Both of our investors made it clear right from the start that they intended to maintain our existing strategy, thus we did not have to modify it; we could simply pursue our business plans. It is highly encouraging that our associates display a keen interest in our operations and seek to fathom their workings. We hold monthly meetings to report on our progress, with detailed step-by-step explanations. In addition, we maintain frequent communication through regular calls. This ensures that our investors are always fully informed and aware of the decision-making process.  Furthermore, this approach generates a healthy level of productive competition within our team, as we strive towards a common goal. It’s like in a football team during a match – we want everyone in our team to win.