India's Larsen & Toubro to Focus on Wind and Hydro Power

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Researched by Industrial Info Resources (Sugar Land, Texas)--Indian engineering and construction major Larsen & Toubro Limited (BSE:500510) (L&T) (Mumbai), which has so far been associated with the development of large thermal power plants, is going green by venturing into hydropower and wind power generation. The proposed projects are scheduled to be brought online within the next four to five years.

L&T will rely on wind power to address its captive requirements. The firm reportedly has drawn up a roadmap for developing wind power projects in the states of Tamil Nadu, Gujarat and Maharashtra, where its facilities are located. Additionally, the firm will invest about $1.7 billion to develop 700 to 800 megawatts (MW) of hydropower projects in Arunachal Pradesh, Himachal Pradesh and Uttarakhand.

In Tamil Nadu, the firm's infrastructure development subsidiary, Larsen & Toubro Infrastructure Development Projects Limited (Mumbai), recently awarded a contract valued at more than $11.3 million to leading wind turbine manufacturer, Suzlon Energy Limited (BSE:532667) (Pune, Maharashtra) to build, operate and maintain an 8.7-MW wind power project.

The project ill consist of three S82 turbines of 1.5 MW each, and two S88 units of 2.1 MW each. It is scheduled for completion and commissioning by March 30, 2010. Power generated will cater to the captive requirements of L&T's facilities in the state, under an energy wheeling agreement with Tamil Nadu Electricity Board (Chennai, Tamil Nadu).

In Gujarat and Maharashtra, L&T is scouting for favorable locations, based on high wind speeds, to develop similar wind power projects for captive use.

L&T wants to increase captive consumption of renewable energy, which will earn the firm tariff relief on an equivalent amount of energy sourced from the state grid. For every 1 MW of renewable power generation capacity installed by the firm, it would be eligible for tariff relief on an additional 1 MW of power procured from the state grid. Furthermore, the firm would be eligible to receive carbon credits under the United Nations Framework Convention on Climate Change, which can be traded as Certified Emission Reductions when approved.

In the hydropower sector, L&T is bidding for various projects in the hilly states of India, as well as in neighboring countries such as Bhutan and Nepal. In April 2009, the firm secured a contract worth about $270 million for construction of the dam package for the 1,200-MW Punatsangchhu-I hydroelectric project in Bhutan.

In India, L&T secured a contract to develop the 420-MW Reoli Dugli hydropower plant in the Chenab Valley of Himachal Pradesh after the original winner, Moser Baer Projects Private Limited (New Delhi), a subsidiary of Moser Baer India Limited (BSE:517140) (New Delhi), withdrew its bid. However, in November 2009, the state government cancelled the contract and decided to call for fresh bids based on a new hydropower policy that would entail procedural reforms in the process of bidding and allotment of power projects. L&T challenged this decision, and the Himachal Pradesh High Court has restrained the government from taking any action in this direction until further orders. L&T had earlier secured a contract to develop the 149-MW Sach-Khasi hydropower project, also in Chenab Valley, but this contract is reported to have been withdrawn following similar uncertainties on the part of the state government.

In November last year, it was reported that L&T had was engaged in preliminary talks with Chinese power generation equipment manufacturer Dongfang Electric Corporation Limited (SHA:600875) (Deyang, China) for joint participation in hydropower projects, both domestic and overseas. The collaboration will see Dongfang supplying power generating equipment and L&T undertaking construction and civil works, an arrangement that will enable L&T to derive significant cost advantages in project execution by using relatively inexpensive Chinese equipment, although the firm has been lobbying for curbs on imports of power generation equipment from China.

L&T also plans to develop about 5,000 MW of thermal power generation capacity based on supercritical technology. In November 2009, the firm secured an engineering, procurement and construction contract, valued at about $1.5 billion, from Maharashtra State Power Generation Company Limited (Mumbai) to supply three supercritical boiler-turbine-generator (BTG) sets of 660 MW each for the latter's 1,980-MW power project at Koradi near Nagpur, Maharashtra.

In August, L&T had secured a contract worth $866 million from Jaiprakash Power Ventures Limited (BSE:532627) (Shimla, Himachal Pradesh) to supply two supercritical BTG packages of 660 MW each for the latter's upcoming 1,320-MW Jaypee Nigrie super-thermal power project in Singrauli, Madhya Pradesh.

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