India's BHEL Seeks Partnerships with U.S., European Power Equipment Companies

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Researched by Industrial Info Resources (Sugar Land, Texas)--In a recent development, BHEL Limited (BSE:500103) (New Delhi), India's biggest power equipment manufacturer, announced plans to explore joint venture or acquisition opportunities with European and U.S.-based companies engaged in the manufacturing of ultra-supercritical or new-age transmission equipment.

Media reports indicate that BHEL is seeking partners to counter competition from Chinese power transmission firms. The proposed joint ventures or acquisitions are also expected to provide access to new markets and geographies. Chinese companies enjoy heavy federal subsidies that allow them to manufacture power equipment at much lower costs. Domestic players who have entered partnerships with international firms also are expected to be competition in this sector. A decision on the proposed investments is likely to be made shortly.

To strengthen its manufacturing and technical capabilities, BHEL has entered into joint ventures with several Indian companies. BHEL and Heavy Engineering Corporation (HEC) (Ranchi, Jharkand) signed a memorandum of understanding to set up a 50:50 partnership to manufacture forging and casting products. HEC will provide the plant, equipment and technology expertise for this venture. In 2008, BHEL signed an agreement with the state-operated Nuclear Power Corporation of India (NPCIL) (Mumbai) to jointly perform engineering, procurement and construction activities for nuclear power projects in India and in overseas markets. There are reports that transportation and infrastructure company Alstom S.A. (EPA:ALO) (Levallois-Perret, France) is involved in the discussions and may enter the venture as the third partner. The state-owned thermal power company NTPC Limited (BSE:532555) (New Delhi) and BHEL formed a 50:50 joint venture company, NTPC-BHEL Power Projects Limited, to manufacture and supply equipment for power plants.

BHEL also signed a memorandum of understanding with Kerala Electric and Allied Engineering Company (KEL) (Kochi, Kerala) to set up a joint venture company at Kasargod in Kerala. The joint venture will manufacture power equipment, including wind electric generators and induction motors of capacities of up to 600 kilowatts (kW) and 300 kW, respectively, for the renewable energy and transportation sectors. The company also entered into a 10-year, $48.7 million casting and forging products trade agreement with industrial engineering company Sheffield Forgemasters International (Sheffield, England).

BHEL caters to customers in the transmission, renewable energy, transportation, telecommunications and power generation sectors. The company has 14 production facilities, which manufacture equipment in 30 product categories. As of December 2009, BHEL's order book value from independent power producers stood at 11,200 MW. By 2012, BHEL's production capability, which is presently 15,000 MW, is expected to reach 20,000 MW. In the next five years, the company's production capability is likely to witness an annual growth of 20% to 25%. Analysts have observed that with a total net worth of $2.59 billion, BHEL is not likely to face any hurdles in funding future expansion projects.

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