India's BHEL to Supply Power Equipment to DB Power's 1,200-Megawatt Power Plant

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Researched by Industrial Info Resources (Sugar Land, Texas)--India's Bharat Heavy Electricals Limited (BSE:500103) (BHEL) (New Delhi) has secured a $592 million contract to supply power equipment for a 1,200-megawatt (MW) power project to be developed by DB Power Limited (Mumbai) in Chattisgarh. DB Power is a fully owned subsidiary of the Bhaskar Group (Noida, Uttar Pradesh). As part of the agreement, BHEL will engineer, design, manufacture, deliver and install steam turbines, generators, boilers and other plant packages for the coal-based power plant at Bardarbha, in the state's Jangjir district. The contract will include the supply of advanced instrumentation and control systems. The power plant is expected to begin operations by late 2011. DB Power also has been allocated a coal block with a reserve of 100 million tons.

Earlier, DB Power had announced its decision to build three power projects in Madhya Pradesh and Chattisgarh, with a combined capacity of 2,690 MW. Elaborating on the proposed investments in the power sector, DB Power Director Girish Agrawal said that the company intends to spend $2.14 billion on power projects. The mining plan and a request for land acquisition have been submitted. The power projects will require 800 to 900 acres of land in the two states. DB Power has signed power purchase agreements (PPA) with both state governments, whereby 37.5% of the power generated by these projects will be sold to the states. The investment will consist of 75% debt, and the remainder will be funded from internal accruals. The company also proposes to construct a middling and coal washery facility at Korba in Chattisgarh.

In 2009-10, BHEL, which is India's leading state-controlled power equipment producer, secured orders to deliver equipment with a combined capacity of 16,489 MW. Of this, contracts for 14,689 MW came from independent power producers (IPP). In a related development, the company signed 10-year agreement with General Electric Company (NYSE:GE) (Fairfield, Connecticut) to manufacture centrifugal compressors in India. The agreement was signed by BHEL with Nuovo Pignone SpA (Firenze, Italy), which is the Italian subsidiary of GE's Oil and Gas Division. The high efficiency compressors will be built at BHEL's facility at Hyderabad, in Andhra Pradesh, and supplied to customers in South Asia. Centrifugal compressors are used in the refining and petrochemicals sectors and in fuel transportation. Since 1986, BHEL has had an agreement with GE Energy (Atlanta, Georgia) to manufacture and sell gas turbines used in water and power sectors. During 1971-1992, BHEL had a similar agreement with Nuovo Pignone.

For the quarter ended June 30, 2010, BHEL recorded a 42% increase in net profit year on year at $145.33 million. While net sales grew 15.8%, BHEL's order book value during this period was $31.73 billion. BHEL has announced plans to increase its power equipment manufacturing capacity to 20,000 MW from the current 10,000 MW.

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