Gas Turbine Slot Reservations: When the OEM Picks the Buyer

On August 6, Mitsubishi Heavy Industries reported a large-frame gas turbine backlog of 35 GW, up from roughly 23 GW a year earlier, with orders booked during the quarter scheduled for delivery between 2028 and 2030. The backlog number was not the significant part. The significant part was the accompanying comment from management that in the large-frame market, and particularly among core US utility customers, the company is being selective in the projects it contracts.

The same quarter produced the same picture elsewhere. GE Vernova closed the second quarter with 116 GW of gas power equipment backlog and slot reservation agreements, up from 100 GW three months earlier and 83 GW at the end of 2025, and is now taking reservations for 2031 delivery. Siemens Energy ended its fiscal third quarter on June 30 with a 69 GW gas turbine backlog and quoted lead times of three years or more. Three manufacturers hold effectively the entire large-frame market, and all three are now allocating capacity rather than selling it.

That inverts the procurement relationship. Most buyers have not adjusted their process to reflect it, and the process they are still running assumes a market that no longer exists.

What a slot reservation agreement actually is

A slot reservation agreement is not a purchase order and does not behave like one. It reserves a defined manufacturing slot for specified components, fixes a targeted ex-works delivery window, and requires a non-refundable reservation fee that is credited against the eventual supply contract if that contract is executed. It remains conditional on the buyer signing the full agreement by a defined Contract Date. If the buyer does not convert by that date for any reason other than OEM default, the manufacturer retains the fee and remarkets the slot.

The amounts are not nominal. GE Vernova is reported to require on the order of 20 percent of the turbine contract price before it will treat a commitment as a reservation. On a 300 million dollar equipment package for a two-unit combined cycle plant, that is roughly 60 million dollars committed before the technical specification is closed, frequently before EPC award, and often before the interconnection agreement is executed.

This changes where the decision sits inside the organisation. Reservation fees are paid from balance sheet or an equity bridge, well ahead of financial close, against a project that is still in development. The reservation is therefore a capital allocation decision wearing the clothing of a purchasing decision, and it is routinely approved through a purchasing workflow that was never designed to price forfeiture risk.

Three errors buyers are making right now

The first is negotiating the reservation as though it were a price negotiation. At reservation stage the price is largely provisional and index-linked, and the manufacturer has limited commercial reason to move on it when the order book is full. What is genuinely negotiable is everything on the calendar and in the conditions: the Contract Date itself, extension rights and what they cost, the technical change window and how late the configuration can still be adjusted, assignability of the reservation to a project company or a successor owner, and the treatment of the fee where conversion is prevented by a permitting or interconnection delay outside the buyer's control. Most buyers negotiate the number and accept the calendar. The calendar is what will actually cost them the money.

The second is reserving the turbine and nothing else. A turbine is one item in a plant. Heat recovery steam generators, steam turbines, generators, generator step-up transformers, high voltage switchgear, condensers, control systems and balance-of-plant piping each come from their own constrained factories with their own multi-year queues. A turbine slot secured for 2029 alongside a step-up transformer quoted at four years and switchgear that has not yet been specified does not produce a plant that can be energized in 2029. It produces an asset sitting on site accruing storage, preservation and insurance cost while the project waits for a component that was never given the same attention. The reserved date then becomes the most expensive date in the programme, because everything else is measured against it and nothing else was procured to meet it.

The third is underestimating what selectivity means in practice. When capacity is short, the manufacturer screens the buyer. Site control, gas supply arrangements, interconnection status, offtake or power purchase agreement credit quality, the identity and track record of the EPC contractor, any existing fleet relationship, and the assessed probability that the project converts at all. A buyer arriving with an incomplete development package is not competing on price. They are being ranked on execution credibility against other buyers for a fixed number of slots. Procurement teams who have spent entire careers running competitive tenders are discovering that the tender is now the weakest instrument in the room, because there is no competitive field to convene.

How we approach an allocated market

We treat a slot reservation as the opening move in a sequenced long-lead programme rather than as a standalone transaction, and that changes the order in which the work is done.

The dependent-equipment critical path is built backward from the reserved ex-works date before the reservation is signed, not after. Every item whose lead time exceeds the interval between reservation and required-on-site date is a parallel reservation decision made now, not a purchase to be handled later. In current conditions that list is longer than most buyers expect, and the step-up transformer is usually the first item on it.

The Contract Date is treated as the primary commercial term of the agreement. We model what has to be true on that date: permits issued, interconnection agreement executed, EPC contract signed, fuel supply arranged, financing committed. Where any of those is not credible on that timeline, the correct action is to negotiate the date or accept a later slot, not to pay the fee and manage the problem afterwards. A forfeited reservation is a total loss with nothing delivered against it.

The buyer-side qualification package is prepared with the same rigour normally reserved for qualifying a supplier. In an allocated market, documented development maturity is what secures the slot, and it needs to be assembled as evidence rather than asserted in a meeting. We also keep a documented alternative path, whether that is shorter-cycle aeroderivative or reciprocating engine capacity, refurbished units, or a phased capacity build. The alternative is not usually the preferred outcome. Its function is to price the risk of the primary path and to remove the pressure that produces bad reservation terms.

One further point applies to buyers outside North America. Allocation is global and the production lines are shared. A utility in the Gulf, West Africa or Southeast Asia is competing for the same slot as a hyperscale data center campus with a different cost of capital and a different tolerance for forfeiting a deposit. Regional procurement norms and approval cycles that assume a three-month evaluation period are not compatible with that competition.

The question worth asking before the fee is paid

The backlog figures will continue to be reported as a shortage story, and at the market level that is what they are. For a procurement team they describe something more specific and more actionable: a market where the binding commercial instrument is a conditional reservation carrying a forfeitable deposit and a hard conversion date, and where the variable that decides the outcome is whether the rest of the project can be made ready in time to use the slot that was bought.

The useful question at reservation stage is therefore not whether the price is right. It is whether the date is achievable, what evidence supports that, and what else has to be reserved alongside it in the same week. That work begins well before the fee is paid, and it is the part of the process that most organisations are still scheduling for afterwards.