Power Today |
 
Advertise Here [728 W x 90 H pixels]
Generation | August 2013

Uncertainty over fuel issue will keep private players cautious

Shrunk domestic market, where biddings are aggressive, the pressure on margin is inevitable, says S N Roy, Whole-time Director & Member of Board (Corporate Affairs and Power), L&T. He also talks about company's strategy and future plan for domestic and international markets, in an interaction with Pradeep Pandey.

The last one and half years were not good for power companies. Being a large entity with huge capacity base of about 5,000 MW in BTG, how did you adapt to the situation? The capital goods sector is facing huge challenges and L&T Power is no exception. We are all hoping to spot some green shoots, but customers are in hesitant mode as far as decision-making is concerned, which is the market sentiment now. Projects have not been shelved as such, discussions are on but there is uncertainty. In a scenario marked by fewer opportunities, we have started looking at newer possibilities like catering to the market for standalone ESPs, HRSGs, critical piping, etc. In a sluggish market, we have focused on reducing the cost of production and project schedule in order to benefit the customer. Our emphasis was also on rapid indigenisation of technology and component manufacturing, and today with over 90 per cent of the total power generation EPC value coming from our in-house capabilities, we have better control on costs and schedules.

How much was the capacity utilisation in the year ended March 2013?
The capacity utilisation ranged from 50 to 70 per cent in the year ended March 2013. This was mainly because most of our projects are in the advanced stages of implementation.

There was a slowdown in order bookings by the power companies last year. How do you see this year going ahead?
This year we are hopeful of getting around two BTG orders, which will improve our capacity utilisation. More and more power utilities are realising the advantages of awarding orders on EPC basis, like in the case of Rajasthan Rajya Vidyut Utpadan Nigam Ltd. We are now fully geared to execute these projects on EPC basis with capability covering boilers, turbines and full Balance of Plant.

Our manufacturing facilities are primarily intended for domestic market. As we have rapidly adapted to the Mitsubishi Heavy Industries (MHI) manufacturing technology and quality requirements, we are also using our manufacturing facility for international orders. We have received export orders from MHI. We also hope to bag contracts on standalone ESPs, HRSGs and critical piping, both in the domestic and international markets.

However, in a shrunk domestic market where biddings are aggressive, the pressure on margin is inevitable. But, some competitors who followed an aggressive pricing strategy have been forced to pull back as the strategy turned unsustainable.

L&T secured an order worth about Rs 5,700 crore in April from Rajasthan Rajya Vidyut Utpadan Nigam Ltd, which was one of the largest orders won by any company this year so far. Do you think big orders can only be expected from state-run companies?
Given the adverse market condition and uncertainty over availability of fuel, coal or gas, it is quite likely that private sector companies will wait and watch cautiously before committing any huge investment in the power sector. They want assurance on return on investment, and for that business environment needs to be conducive where cost and risk of doing business are not the deterrent factors. So, in this context, state-run companies are in a position to decide on placing big orders.

What is your order book size at present?
Our order book is around Rs 17,000 crore as on June 30, 2013. At present, we are executing orders for 10 supercritical boilers and 12 turbines. We are also executing Balance of Plant packages for a state utility and a company in the private sector, and a full EPC for a gas-based project of a state utility.

Are you bidding for overseas power projects?
We are actively prospecting for gas-based power projects in the international markets like Oman, Malaysia, Bangladesh, etc. Besides, we are also getting overseas enquiries for orders of standalone equipment such as HRSGs, critical piping, etc.

So what would be your strategy for bidding projects over there - are you bidding independently or through other vehicles?
We are bidding independently for EPC contracts for gas-based power projects abroad. We also bid for equipment supplies to other EPC contractors or OEMs.

What are your plans for capacity expansion?
At present our capacity is 5,000 MW. This can be scaled up to 6,000 MW with minimal investment. However, capacity expansion is dependent on the business environment and order bookings.

How are your JVs with MHI functioning in the international market? The scope of our JVs with Mitsubishi Heavy Industries for turbine and boiler on supercritical technology is limited to India only. So we cannot bid for overseas job. However, MHI may source equipment from our JVs for overseas market.

Apart from your JVs with MHI, how was the performance of your other JVs such as with Howden, L&T-S&L, etc?
L&T-Sargent & Lundy, engaged mainly in basic and detailed engineering, field engineering and commissioning assistance, is currently executing several in-house and third-party projects in India. Other projects under execution include those in Saudi Arabia, Kuwait, UAE, Kazakhstan and Panama. The 4,000-MW CCPP project in Saudi Arabia is the largest in the world. The JV is also expecting orders for projects in Africa and Malaysia.

Besides in-house orders from L&T-MHI Boilers for air pre-heaters and fans, the JV with Howden is currently executing orders for supply of fans to a project in India and air pre-heaters for another domestic project. The JV also has orders for supply of air pre-heater spares. The orders for spares have been bagged against stiff competition from established players in the market.

L&T Power
L&T Power is an independent company of Larsen & Toubro, a $13.5-billion technology, engineering, construction, manufacturing and financial services conglomerate, with global operations. L&T Power provides a wide range of solutions, including turnkey solutions, steam turbines, supercritical boilers, supercritical turbine generators, power block auxiliaries, HRSGs, other critical systems, engineering services, and construction and erection services. The company has partnerships with Howden Group, Mitsubishi Heavy Industries, Mitsubishi Electric Corporation, Sargent & Lundy LLC, Clyde Bergemann EEC Inc, and CMI, Belgium & CMI-EPTI. L&T Power has also won several awards and accreditations, including the most coveted CIO 100 award in early August 2011. The company has nearly 2,000 employees spread across geographies.

Post your comment
Name:  
Email:    
Comments:  
Verification Code:   Change Image

 

Posted Comment
1 .     Yogesh Says:
17 Oct 2016
I wish to start pvc / pp electric wire unit in Delhi. What kind of information I can get if I subscribe for your magazine

2 .     Sarfaraj Bilakhiya Says:
20 Sep 2016
Pls invite me all auction in gujarat

3 .     k.natarajan Says:
20 Jun 2016
we are doing business developing for solar power ,thermal power , customer supporting and we have 45 mw splar power on hand needs investors..... thanks lot pls call +910842559230 +919842753550


Advertise Here [728 W x 90 H pixels]