India's BHEL Looks to Secure $2.2 Billion Orders from NTPC for Supercritical Power

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Researched by Industrial Info Resources (Sugar Land, Texas)--India's largest public-sector engineering equipment company, Bharat Heavy Electricals Limited (BSE:500103) (BHEL) (New Delhi), is seeking to secure supercritical power plant technology and equipment contracts worth an estimated $2.2 billion from NTPC Limited (BSE:532555) (New Delhi), formerly known as National Thermal Power Corporation Limited. NTPC has invited bids for supply of equipment for five projects with a combined power generating capacity of 7,200 megawatts (MW). The equipment will include boilers, turbines, generators and other allied components.

Alstom SA (EPA:ALO) (Levallois-Perret, France); Larsen & Toubro Limited (BOM:500510) (L&T) (Mumbai, India), a consortium of Toshiba Corporation (TYO:6502) (Tokyo, Japan) and JSW Steel Limited (BSE:500228) (Mumbai); and another consortium between GB Engineering Enterprises (Tiruchirapalli, Chennai) and Ansaldo Energia SpA (Genoa, Italy) are expected to participate in the bidding process. The chairman of BHEL, K Ravi Kumar, has stated that the company, which is confident of securing a part of the orders, is also willing to match the lowest bid received by NTPC. He indicated that the cost of power equipment was about $619,300 per MW.

Last month, the Indian government cleared NTPC's proposal to build supercritical power projects in the country and allowed the company to invite tenders for 11 power generating units of 660 MW each. The bulk order is proposed to be utilized for NTPC's $8.25 billion phase-wise development of supercritical power projects in the country. Globally, supercritical power plants are gaining popularity as energy efficient and environmentally friendly alternatives to traditional coal-based power plants. NTPC's supercritical power plants, expected to be commissioned by 2017, also will operate on coal but consume less fuel, thereby reducing greenhouse gas emissions.

The 11 supercritical power equipment units will be utilized by NTPC to set up the following power plants:

• Two units each at the Sholapur and Mauda power plants in Maharashtra
• Three units at the Nabinagar project with Bihar State Electricity Board (BSEB) (Patna, Bihar)
• Two units at the Meja power plant, in association with Uttar Pradesh Rajya Vidyut Utpadan Nigam Limited (UPRVUNL) (Noida, Uttar Pradesh)
• Two units at the Kodarma-II plant in Jharkhand with Damodar Valley Corporation (DVC) (Kolkata, West Bengal)

BHEL, which has a market value of about $22 billion, is optimistic about closing orders worth $2.5 billion over the next six weeks. Presently, the company has orders worth $26.6 billion, of which contracts valued at $3.096 billion have been formally signed. BHEL is also expecting power equipment demand to spur due to increasing private sector investments in the Indian power sector. By March 2010, the company hopes to receive $11.35 billion worth of orders, excluding NTPC's supercritical equipment contracts. BHEL, which is 68% government controlled, is expecting to increase revenues by 25% this fiscal year.

BHEL is looking to expand power equipment production capacity in order to meet growing demand. By March 2010, the firm plans to increase its manufacturing capability of boiler-turbine-generator equipment from 10,000 MW to 15,000 MW. The company already has invested $248 million on augmentation programs and is expected to spend another $248 million during 2009-10 on expansion initiatives.

With competition from private sector players in India and international companies, BHEL expects its market share in the power equipment sector to slide by 10% to 55%. The company is therefore exploring other business opportunities as well. There are plans to aggressively tap the renewable energy segment, as well as the power distribution and transmission sector. By 2012, BHEL expects to generate 30% of its revenues from new business segments.

BHEL's expansion plans also will fall in line with India's need to add new power-generating capacity at an annual rate of at least 10% to 12%. These plans also call for upgrades and efficiency enhancement in operations of existing facilities. India plans to increase its generating capability by 100,000 MW during the 12th five-year plan period, 2012-17, to achieve a target economic growth of 8% to 10%.

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