Two Ultra-Mega Power Projects Worth $8 Billion Could Bail Out Indian Manufacturers

---

Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--With orders for power generating equipment in India's domestic market in short supply, engineering companies with idle manufacturing capacity, such as Larsen & Toubro (OTC:LTOUF) (Mumbai) and Thermax (BSE:500411) (Pune, India), are hoping that the government's revival of two ultra-mega power projects (UMPPs) will provide work. The manufacturing units have been set up to supply power to project equipment, with major investments from the companies.

The two UMPPs at Bedabahal in Orissa and Cheyyur in Tamil Nadu each have a design capacity of 4,000 megawatts (MW). Under the bidding conditions, it is mandatory for developers to have manufacturing units in India, whether they are local, foreign or joint ventures.

Core equipment for each plant, including boilers and turbine generators, will be worth about $4 billion. The contracts are scheduled to be awarded in February 2014 by the state's Power Finance Corporation.

Competition for the $8 billion contract total will be fierce, as each project will enable a manufacturer to run at full capacity for about two years. With no incoming orders, equipment makers could suffer losses of more than $150 million per year.

Joint ventures are likely to be among the front runners, with combinations such as L&T and Mitsubishi Heavy Industries (OTC:MHVYF) (Tokyo, Japan); JSW Energy (Mumbai) and Toshiba Corporation (OTC:TOSYY) (Tokyo); Bharat Forge (Pune) and Alstom S.A.(OTC:AOMFF) (Paris, France); and Thermax and Babcock and Wilcox Company (NYSE:BWC) (Charlotte, North Carolina).

Over the last two years, orders for core equipment have dried up as projects have stalled or been cancelled due to the availability of fuel, financing, approvals or land acquisition.

View Project Report - 89001537 300030289

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and nine international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.