India's L&T Secures $1.47 Billion Equipment Contract for Koradi Supercritical Thermal Power Project

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Researched by Industrial Info Resources (Sugar Land, Texas)--L&T Power Limited, the power equipment and engineering, procurement and construction (EPC) services division of engineering major Larson & Toubro Limited (BSE:500510) (L&T) (Mumbai), has secured a $1.47 billion order to supply the boiler-turbine-generator (BTG) package for the 1,980-MW supercritical thermal power plant being developed by Maharashtra Power Generation Company Limited (MAHAGENCO) (Mumbai). The plant will be at Koradi near Nagpur. Company officials have indicated that with this contract, the total order book value of L&T Power has reached $3.41 billion.

The scope of the contract includes design; engineering; manufacture; delivery and commissioning of balance of plant equipment and BTG package; and execution of architectural and civil activities. Supercritical power plants, which use higher steam pressure and temperature compared to traditional thermal power plants, are emerging as fuel-effective and environmentally friendly options.

In January, L&T established a new entity, L&T Power Limited, to provide EPC services and focus on production of supercritical BTG equipment for power companies. In November 2007, L&T established a joint venture with Mitsubishi Heavy Industries Limited (TYO:7011) (MHI) (Tokyo, Japan) to manufacture and supply BTG packages. The venture is developing two production facilities at Hazira, Gujarat, to manufacture supercritical turbines, generators and boilers. Production is expected to commence in 2010. L&T Power's annual equipment manufacturing capacity stands at about 4,000 MW.

L&T earlier secured an $853 million contract from Jaiprakash Associates Limited (BSE:532532) (JAL) (New Delhi) to construct the Nigrie thermal power plant in Madhya Pradesh, with two units of 660 MW each, and a $426.5 million contract from GMR Energy (Bangalore, Karnataka) to develop a 1,600-MW power plant in Andhra Pradesh. The company is also optimistic of securing orders from NTPC Limited (BSE:532555) (New Delhi). NTPC is likely to invite bids for bulk tenders for five units of 800 MW each for projects in Jharkhand, Maharashtra, Uttar Pradesh and Bihar. The MAHAGENCO contract is considered to be the biggest contract secured by L&T Power this fiscal year.

For the July to September 2009 period, L&T reported a net profit of $123.6 million and revenue of $1.67 billion. As of September 30, 2009, L&T's order book value stood at $17.4 billion, a 30% increase on a year on year basis. About 38% of these orders came from the infrastructure sector, while 30% and 26% were procured in the hydrocarbons and power sectors, respectively.

YM Deosthalee, chief financial officer of L&T, has stated that the second half of this fiscal year will be better, as the market is stabilizing and growth is expected in oil and gas, infrastructure and power sectors. The company is also exploring opportunities in South Africa, Malaysia and Brazil. Deosthalee indicated that business divisions such as industrial machinery and products, which were impacted by the economic slowdown, are now showing signs of recovery. The group's financial services business had a combined asset base of $159.95 million at the beginning of the year. This is expected to reach $235 million to $256 million by end of this year. The company is confident that its business divisions, including financial services, will record growth if India maintains an annual growth rate of 6% to 8%.

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