India's BGR Energy Secures $487 Milion BOP Contract from Thermal Powertech for Supercritical Power Project at Krishnapatnam

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Researched by Industrial Info Resources (Sugar Land, Texas)--Engineering, procurement and construction company BGR Energy Systems Limited (BSE:532930) (Chennai, Tamil Nadu) has secured a $487 million balance-of-plant (BOP) contract from coal-focused power generator Thermal Powertech Corporation India Limited (TPCIL) (Hyderabad, Andhra Pradesh) for the latter's upcoming 1,320-megawatt (MW), supercritical, thermal power project at Krishnapatnam in Andhra Pradesh. TPCIL is a 51:49 joint venture between Gayatri Energy Ventures Private Limited (GEVL) (Hyderabad) and Sembcorp Utilities Pte Limited (Singapore), a wholly owned subsidiary of investment holding company SembCorp Industries Limited (SIN:U96) (Singapore). GEVL, in turn, is a wholly owned subsidiary of infrastructure company Gayathri Projects Limited (BSE:532767) (Hyderabad).

The BOP includes all the systems and structures that are not part of the core power-generating units, which include the gas turbine, steam turbine, waste-heat boiler and heat-recovery steam generator. The BOP contract includes the design, engineering, production, fabrication, assembly, transportation, erection and testing of equipment and civil works. The first 660-MW unit is scheduled to be commissioned by mid-2013, and the second unit will follow after three to four months.

The 1,320-MW power plant constitutes Phase I of the project, which in the future will be expanded a further 1,320 MW during Phase II. The power project includes India's largest coal-handling plant; a seawater-based reverse osmosis plant; and an intake water system for supplying the makeup water to the reverse osmosis plant.

The company achieved financial closure for the project in September 2010. The consortium that will fund about 75% of the $1.5 billion thermal power project is led by Rural Electrification Corporation Limited (New Delhi) and includes several domestic banks and financial institutions. The remaining 25% will be funded through equity.

About 1,408 acres of land, sufficient for both phases of the 2,640-MW project, have been acquired from the Andhra Pradesh Industrial Infrastructure Corporation Limited (Hyderabad). Construction at the site is under way and all necessary approvals have been obtained. Orders for all major equipment also have been placed.

While 70% of the coal required for the project will be sourced from Mahanadi Coal Fields Limited (Burla, Orissa), the remainder will be imported. MCL is a wholly owned subsidiary of Coal India Limited (Kolkata, West Bengal).

The TPCIL contract is BGR Energy's 16th BOP contract. The private sector company has completed and commissioned BOPs for two 500-MW projects. The next two 500-MW projects are almost complete and will be commissioned soon. Larsen & Toubro Limited (BSE:500510) (Mumbai) is another major Indian company moving on multiple BOP projects in the power sector.

In August 2010, BGR Energy signed two joint-venture agreements. The first is BGR Turbines Company Private Limited, a 74:26 joint venture with diversified Japanese business house Hitachi Limited (NYSE:HIT) (Tokyo, Japan), and the second is BGR Boilers Private Limited, a 70:30 joint venture with Hitachi subsidiary Hitachi Power Europe GmbH (Duisburg, Germany). BGR Energy has the higher stakes in both joint ventures. While the first venture aims to design, manufacture, install and commission supercritical turbines and generators for thermal power plants, the second will be involved with supercritical steam generators.

With the formation of the two joint ventures, BGR Energy follows Indian engineering majors Larsen and Toubro and Bharat Heavy Electrical Limited (BSE:500103) (New Delhi) as the third company capable of offering the Indian power industry with complete boiler, turbine and generator solutions. BGR Energy recently said that both the joint ventures have secured their positions as engineering, procurement and construction contractors capable of manufacturing supercritical equipment with capacities in the 660-MW, 800-MW and 1,000-MW ranges. Both joint ventures will set up their manufacturing units in Tamil Nadu and are scheduled to be operational from 2012.

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