NTPC- BHEL Joint Venture Forms Indian State Owned Integrated Power Monolith

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Researched by Industrial Info (Sugar Land, Texas)--India’s state-owned National Thermal Power Corporation (NTPC) has moved past official disquiet on its intentions to engage in the power-equipment-manufacturing sector by signing a memorandum of understanding with Bharat Heavy Electricals Limited (BHEL) to form a joint venture to carry out engineering, procurement and construction) activities in the power sector on ”mutually beneficial terms.” The 50/50 joint venture will rotate the position of Managing Director among senior officials of the two companies.

NTPC has a total operating capacity of 27,900 megawatts (MW) and has been looking for business synergies to expand its business activities. The company has developed world-class technology and skills in design, engineering, construction, project management, operations, maintenance, renovation and modernization of power projects. It supplies 29% of the country’s power generation from 20% of the national installed capacity. Developing as a major integrated power utility, NTPC has a targeted capacity of 75,000 MW-plus by 2017.

BHEL. India’s largest state-owned engineering and manufacturing company in the energy sector, has developed expertise and technology in manufacturing power plant equipment covering thermal, hydro, gas and nuclear turbine generators, transformers, capacitors, reactors, circuit breakers, switchgears and insulators. The company is also involved in the construction of captive power plants, industrial steam turbines, and industrial boilers, development of rolling stock and traction propulsion systems and technology for nonconventional and renewable sources of energy.

On paper, the synergies in the two companies’ joint venture are obvious, as is the motivation to raise the entry bar into the local market for foreign companies and technology — unless foreign companies strike agreements with NTPC-BHEL. But official and industry concerns have been expressed about the effect of the monolith on the market and the ability to deliver. BHEL is critically behind delivery dates on several power plant supply orders. Large-vision synergies sometimes lead to less-than-nimble management perspectives. Several major independent Indian companies, including Reliance Energy and Tata Power, are moving vigorously into the power-generation market with foreign associates that might counteract and stimulate the state-owned influence in the sector.

NTPC has awarded a $485 million contract for the supply and installation of steam generator and steam turbine packages for its 1,000 MW Vallur thermal power project at Ennore in Tamil Nadu to BHEL. The scope of the contract covers designing, engineering manufacturing, supply erection and commissioning of steam turbine generators, electrostatic precipitators, associated auxiliaries and controls and instrumentation system. BHEL claims to have outbid European equipment supplier for the contract.

Recently, BHEL has been awarded contracts for seven sets of 500 MW power units and has been awarded orders for the supply and installation of a total of 60 x 500 MW units of which 31 have been commissioned. For more information, view September 19, 2007, article - Facing Power Challenge India Looks at China’s Standardized Generation Model

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