U.S.-Soviet Deal Gives New Spark to Hydropower : Energy: Refurbishing is making the United States’ 140 large dams more efficient. When the job is completed, the nation will have up to 40% more hydro-generated capacity.

Magnetek, the Los Angeles-based electrical equipment maker, wrote a new chapter in U.S.-Soviet joint ventures a few months ago with the startling announcement that it would sell Soviet turbines and generators to American operators of hydroelectric dams.

The agreement with two Soviet companies marked the first time that a major U.S.-Soviet deal would focus on products for the U.S.--rather than the Soviet--market. Although it knew that there was risk in hooking up with Soviet companies at a time of acute political instability in the Soviet Union, MagneTek thought the potential for profit was worth the uncertainty.

Its deal with Electrosila and Leningradsky Metallichesky illustrates the lengths to which U.S. firms will go to cash in on a lucrative second wave in the development of U.S. hydroelectric power.

The first wave was the construction of most of America’s huge dams between 1920 and 1970; the second involves replacing the innards of the dams--the huge turbines and generators that produce hydroelectricity--with modern, more efficient models.

The operators of most of the nation’s 140 large dams--the Interior Department’s Bureau of Reclamation and the Army Corps of Engineers--are contracting out the replacement work to such companies as MagneTek, General Electric, Westinghouse, Switzerland’s Asea Brown Boveri and Germany’s Siemens.

This decade alone, replacement of turbines and rebuilding of generators at dams in the United States will produce hundreds of millions of dollars in revenue for the companies involved, analysts say. The worldwide market for replacing turbines and generators of all kinds is estimated at $70 billion during the 1990s.

Although replacing a turbine or rebuilding a generator lacks the drama of the opening of a new Hoover, Grand Coulee or Bonneville Dam, the turbine/generator renewal program will have nearly as big an impact on U.S. hydroelectric generating capacity.

By the time the program is completed early in the 21st Century, the United States will have up to 40% more dam-generated capacity than the 27,000 megawatts available when refurbishing began in the late 1970s.

The program will keep hydroelectric power’s share of overall U.S. electricity generation at about 13%. Hydropower accounted for 35% of the country’s power in 1940, but in succeeding decades the United States began running out of places to build large dams. Utilities met the soaring demand for electricity after 1960 by building coal, oil, natural gas and nuclear-fired plants.

Squeezing additional capacity out of dams and other existing generating facilities will be important to the economy in the 1990s, analysts say, because construction of power plants of all kinds is leveling off while demand for electricity continues to rise.

Put off by the huge costs and the political and environmental headaches involved, many utilities plan to wait until late in the decade--when the need for new capacity becomes critical--before investing in additional plants.

Additional hydroelectric capacity will help the Los Angeles area get through peak demand periods until the new, non-hydro generating facilities go on line, said Malcolm Preece, a vice president at Asea Brown Boveri.

Larry Makovich, an economist at the research firm DRI/McGraw-Hill in Lexington, Mass., said replacing turbines at hydroelectric plants and rebuilding generators at hydro, coal, oil and natural gas plants will add 3,000 megawatts of generating capacity during 1991. That is nearly half the 7,000 megawatts that new-plant construction will add.

One of the beauties of refurbishing, Makovich said, is the cost. “For coal, oil and gas-fired plants, the cost is . . . a third of what a new plant would be,” he said. With hydro, “you’re probably avoiding 80%” of the cost.

MagneTek, which came out of nowhere in the past decade to become a billion-dollar player in the energy equipment business, is the leader in rebuilding U.S. power plant generators--with 45% of the market.

But none of the company’s 48 plants worldwide manufactures the huge hydro turbines that General Electric, Asea Brown Boveri and others do.

To offer a full range of hydropower refurbishing services, MagneTek signed an agreement with the Soviet companies in July. The Soviets are providing it with turbines and a line of very large generators that MagneTek is marketing in Canada as well as the United States.

The venture has already landed its first contract--a $3.6-million agreement to install a Soviet-built turbine and generator system at a Tacoma (Wash.) Public Utility District dam.

Although there are questions these days about the quality of many Soviet products, MagneTek Chief Executive Frank Perna Jr. said Soviet turbines and hydro generators are among the world’s best. With dozens of large, untapped rivers, that nation made hydropower a priority in the 1930s and 1940s.

Turbine blades are located in water-flow openings in a dam known as penstocks. As a turbine spins, it in turn revolves a metal shaft connected to a generator, which produces the electricity. Problems arise when turbines become brittle and crack after decades of use. So they are being replaced with models that have more efficient designs and are made of longer-lasting materials.

Ben Conley, marketing manager of General Electric’s Apparatus Service department in Denver, said the company uses computers to design turbines that can extract the maximum amount of energy from the water spilling through the penstocks. Today’s turbines, he said, are made of more durable stainless steel instead of the combination of regular steel and stainless that was used in the past.

Unlike turbines, though, generators are more economical to rebuild rather than to replace. This is because some generator parts wear out in a few decades while others last much longer. The rebuilding process involves replacing copper coils through which electricity flows and substituting a special mica-based insulation for the original asbestos.

The mica-based insulation is crucial to the additional capacity in rebuilt generators, MagneTek spokesman Bob Murray said, because it provides for better transfer of the heat generated by electricity creation. The cooler a generator runs, the more efficient it is.

“Forty years seems to be the magic number” in turbine and generator longevity, Murray said. Thus, replacement of the power-making equipment in many dams built in the 1930s began in the late 1970s and early 1980s.

Michael Roluti, Denver-based power program manager for the Bureau of Reclamation, said refurbishing work at the giant Hoover Dam near Las Vegas, which opened in 1936, began in 1982 and is continuing. When it is finished, Hoover will have 57% more generating capacity.

One of the largest increases in capacity has been at Shasta Dam in Northern California, which can generate 67% more electricity than before it was refurbished.

Typically, several electrical equipment companies are involved in replacement work at a large dam, partly because some companies have more expertise in portions of the work than others, an industry source said.

The $250-million refurbishing of all of the Bureau of Reclamation’s 52 dams, which began in 1978, will end about 1995. At that point, the bureau, which operates hydro projects in the 17 Western states, will have increased its generating capacity 50% to 16,000 megawatts an hour.

One thousand megawatts is enough electricity to power a city of 750,000 for an hour.

The Army Corps of Engineers, with 74 dams the nation’s largest hydropower operator, has a refurbishing program that will extend into the next century.

MagneTek’s Columbus, Ohio-based National Electric Coil division, which the Justice Department forced Asea Brown Boveri to sell for antitrust reasons in 1990, has refurbished generators at dozens of dams, including Bonneville on the Oregon-Washington border, Glen Canyon in Arizona and Grand Coulee in Washington.

Still, generator and motor rebuilding accounted for only a tenth of the company’s sales last year--$100 million out of a total of $1 billion.

The company, which went public in 1989, is now the country’s No. 1 maker of lighting ballasts--small transformers that provide current to fluorescent and other gas-filled lights. It also is the leading maker of medium-power transformers and ranks No. 3 in electric motor sales.

MagneTek went on an acquisition binge after it was created in the leveraged buyout of the Magnetics group of Litton Industries in 1986 to broaden its base in the electric equipment manufacturing and service business.

A recent Shearson Lehman Bros. analysis noted that MagneTek’s main weakness is the huge debt from its acquisitions--$391 million as of June 30.

While acknowledging that the company has more debt than it would like, Murray noted that it has solid cash flow--$53 million in 1990--and is moving aggressively to pare the debt down.