India's L&T Secures $828.5 Million Power Equipment Contract for 1,320-Megawatt Nigrie Supercritical Thermal Power Project

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Researched by Industrial Info Resouces (Sugar Land, Texas)--Indian power engineering and equipment major Larsen & Toubro Limited (BSE:500510) (L&T) (Mumbai) secured a contract worth $828.5 million to deliver a boiler and steam turbine generator package for the 1,320-MW Nigrie supercritical thermal power plant being developed at Singrauli, Madhya Pradesh, by Jaypee Group (BSE:532532) (New Delhi). The power project, consisting of two units of 660 megawatts (MW) each, will be constructed and operated by Jaiprakash Power Ventures Limited (JPVL) (New Delhi), a fully owned subsidiary of Jaypee Group. The project is scheduled for commissioning in 2013, and will entail a total cost of about $1.65 billion.

The contract has been awarded to L&T-MHI Private Limited (Mumbai), a joint venture between L&T and Mitsubishi Heavy Industries Limited (TYO:7011) (MHI) (Tokyo, Japan). In 2007, L&T signed an agreement with MHI to set up two separate ventures to develop boilers and steam turbine generator units. The venture companies, L&T-MHI Boilers Private Limited (LMBPL) (Mumbai) and L&T-MHI Turbine Generators Private Limited (Mumbai), were established with L&T holding a 51% stake. MHI and Mitsubishi Electric Corporation (TYO:6503) (Tokyo, Japan) hold stakes of 39% and 10%, respectively, in this venture. LMBPL will undertake the delivery of the boiler package for the Nigrie project, while the steam turbine generator units will be designed and supplied by L&T.

L&T also has a long-standing venture agreement with Sargent & Lundy LLC (Chicago, Illinois), a power sector consulting company. Sargent & Lundy, one of the oldest energy consulting companies, provides technical and project management services to leading energy companies worldwide. Established in 1995, L&T-Sargent & Lundy Limited (Vadodara, Gujarat) works in the areas of power engineering consulting, design, and management of domestic and international power projects.

Globally, supercritical power plants are gaining popularity as environmentally friendly, cost-efficient and energy-efficient alternatives to conventional power projects. The technology uses very high temperatures and pressure to burn fuel. The use of coal in supercritical thermal power plants is much lower than the use in traditional power-generating facilities. This helps to reduce greenhouse gas emissions by 2.5 to 5%. The technology requires very advanced equipment and tenacious materials, which can work under pressure, and temperatures as high as 374.15 degrees Celsius (705.47 degrees Fahrenheit) and 22.12 mega Pascal. MHI has supplied supercritical technology-based equipment to about 70 projects in Japan.

L&T is also executing a supply contract for supercritical power plant equipment for the 1,600-MW project being developed at Krishnapatnam by Andhra Pradesh Power Generation Corporation (Hyderabad, Andhra Pradesh). L&T has identified the power sector as one of the primary growth drivers for the group. The company plans to provide equipment to set up 4,000 MW of power-generating capacity in the country by 2010. L&T also intends to invest $331.4 million on augmenting its production capability in foundry, critical piping, and coal pulverization.

L&T is bidding for the supply of the boiler and steam turbine generator package for the 1,980-MW thermal power plant being developed by Maharashtra Power Generation Company (Mumbai) at Koradi near Nagpur. Other bidders for the $2.46 billion project include Doosan Heavy Industries and Construction Company (SEO:034020) (Gyeongsahngnam-Do, South Korea), and Bharat Heavy Electricals Limited (BSE:500103) (BHEL) (New Delhi). The project will consist of three units of 650 MW each.

L&T is also strengthening its position in the nuclear power equipment sector. The company has signed a memorandum of understanding with Atomic Energy of Canada Limited (Mississauga, Ontario) for cooperation in developing the Advanced CANDU reactor, ACR 1000. L&T is also working with GE-Hitachi Nuclear Energy Incorporated (Wilmington, North Carolina) to develop boiling water reactors and advanced heavy water reactors. The firm is working with JSC Atomstroyexport (Moscow, Russia) in the development of the VVER 1000 series of reactors.

The $7 billion Jaypee Group, with interests in the real estate, construction and cement sectors, is focusing on investments in the Indian thermal power sector. Until recently, the company's focus had been mainly in the hydropower sector. Through its subsidiary, JPVL, the group intends to add 2,000 MW of power-generating capacity by the end of the Eleventh Five-Year Plan period, 2007-12. This will consist of hydropower and thermal power plants. By 2016, the total installed generating capacity of JPVL, which presently operates power plants with a total capacity of about 900 MW, is expected to reach 13,470 MW. The thermal power sector will have 60% of the new plants, while the others will be in the hydropower sector.

JPVL has developed the 400-MW Vishnuprayag hydropower project in Uttarkhand and the Baspa-II hydropower project in Himachal Pradesh. Both of these power plants are delivering a return on equity of 30 to 35%. Presently, construction is under way for the 450-MW Kyunshi-II and the 270-MW Umngot hydropower projects in Meghalaya. These projects are being developed as a joint venture with the state of Meghalaya. In Arunachal Pradesh, JPVL is building the 500-MW Hirong and the 2,700-MW Lower Siang hydropower projects. Both of these projects are expected to begin operations in 2015.

With the aim of diversifying to other sources of power, the company has formed a joint venture with Madhya Pradesh State Mining Corporation Limited (Bhopal, Madhya Pradesh). The venture will carry out mining, production and sale of coal from the Dongri Tal II and Amelia North coal blocks. The combined reserves of the two blocks are estimated to be about 250 million tons. Mining in the Amelia coal block, which has received all regulatory clearances, is expected to begin in December. These coal blocks also are expected to provide the necessary feed for the Nigrie supercritical power project.

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