Ramesh Chandak, MD and CEO, KEC, in conversation with R Srinivasan explains what it means to be a global EPC operator.
The Rs 4,000 crore company recently won three orders worth Rs 379 crore of which two are from PowerGrid in the transmission segment and one from NMDC in the balance of plant segment. Last year, it acquired SAE Towers, making it the largest steel lattice tower manufacturer in the world. The company MD and CEO spoke of the SAE acquisition and the power sector. Excerpts of the interview:
The company won orders from Kazakhstan Electricity Grid Operating Company (KEGOC)—the biggest-ever order in the substation segment. What technological features ensure that you score over local and other international competitors in the CIS region?
The company has received two orders from KEGOC for the execution, including rehabilitation, of total 38 substations spread across the North-East and South of Kazakhstan. The first order is for 21 substations of voltage levels of 1,150 kV, 500 kV and 220 kV. The second order is for 17 substations of voltage levels 500 kV, 220 kV and 110 kV. The orders have been received in consortium with a local company.
This has been possible due to the use of latest state-of-the-art equipment, engineering and design coupled with utilisation of local resources. The company has experience of working in extreme environment and in particular in Kazakhstan besides being well conversant with the local laws, policies and adept at using the local facilities for execution. These factors have worked in favour of the company in this order.
In view of your experience—from the transmission line project in Sudan (1968) to the latest Kazakhstan Electricity Grid Operating Company (KEGOC) project—what challenges and opportunities do you foresee in construction (like sourcing of raw material), to erection and installation of transmission lines and towers?
Our company is one of the oldest and largest EPC companies operating globally. To become a global leader, we paid attention to all the aspects right from manufacturing, project management, engineering and design to enable the creation of world class products. Being a large globally operating player, we enjoy economies of scale in sourcing of materials. The company has developed a wide network of suppliers worldwide which enables us to get products at reduced costs and increased efficiencies. In terms of technology, we deploy the most modern methods of tower erection through mechanisation, helicopter stringing, tower erection using cranes, automation in foundation, use of pre-cast foundations, etc. Thus, over the years, the company has kept pace with technology and has been in the forefront to implement them.
To what extent has the SAE acquisition improved the company’s profitability?
SAE Towers is headquartered in Houston, Texas, and is a leading manufacturer of steel lattice transmission towers in the Americas with an annual production capacity of 100,000 metric tonne (mt). (Monterrey, Mexico—35,000 mt and Belo Horizonte, Brazil—65,000 mt). The company also manufactures steel poles for electrical transmission as well as related hardware.
The acquisition of SAE Towers will strengthen our company’s global leadership position in the large and growing markets of North America and Latin America. SAE Towers has a significant presence in geographic areas which are of substantial interest to KEC. The transmission and distribution spend in these regions are currently rapidly increasing. SAE Towers is well positioned to capitalise on these long-term growth opportunities. The acquisition will be EPS accretive to our company from the first year (FY 2010-11) itself. It is expected that there will be a 15 per cent increase in the company's bottom lines, post the acquisition of SAE. The joint bidding for the project by SAE and our company has resulted in getting more price-competitive bids which will improve our order intake in the coming months.
The company has operations in over 20 countries. What are the policies and latest technological advances in practice there, that we could do well to emulate?
Our company has the distinction of having operated in more than 45 countries worldwide in different terrains, different voltages, different climates and different geographical locations because we have an extremely capable survey department, highly talented and experienced engineering and design team and an experienced team of engineers and technicians for tower erection. Our company uses heavy duty cranes and advanced methods involving helicopters. We have sophisticated tension stringing machines, mobile cranes, telescopic cranes, batching plants and use concrete mixtures to complete projects within stringent time frames.
Understanding and adapting to the terrain and working around it has been our speciality. In the deserts of Abu Dhabi, Dubai, Iraq and Sharjah special pile foundations are used for the loose sandy soil. In the dense forests of Sumatra, towers were designed to ensure minimal damage to the environment. The 400 kV transmission line in South Africa had transmission lines with cross rope suspension and were supported by Guyes and stringing was done with the help of helicopters. We have developed narrow-based towers, which were specially designed for hilly regions like Lebanon and similarly designed five different types of towers for the Tehri Meerut 800 kV transmission line in the hilly regions. The 500 kV transmission project in Kazakhstan required customised designs for seven earthquake zones in the region.
The company has consolidated its presence in the South African region by re-entering Zambia and securing another order from South Africa. It also re-entered far East Asia after a decade by securing an order from Philippines. What sets your company apart?
Our company is the largest transmission tower company operating globally. It is the only company to have manufacturing in three countries, ie, India, Brazil and Mexico. Over the years, our company has developed an understanding of cultures, nuances of countries, Right of Way (ROW) issues, local labour laws, operational issues, consultancy in projects and good relations with suppliers across the globe. Our company has the distinction of being one of the few companies operating in more than 20 countries at any given point in time. This knowledge and ability to handle such scale of operations definitely gives us an advantage over our competitors.
The largest of its kind in the world tower testing station, costing over Rs 40 crore, at Butibori, Nagpur, using supervisory control and data acquisition (SCADA) and Process Field Bus (Profibus) automation was inaugurated in 2010. Elaborate on its advantages and what prevents others from acquiring this testing facility?
Ours is the first company in the country to have established the largest tower testing station in Butibori, Nagpur. The two 1,200 kV towers have been successfully tested for 400 kV D/C tower upgradation to 1,200 kV of the Wardha-Aurangabad line. These towers with X-arms and an end-to-end dimension of 70 metre stand at a height of about 56 metre. The tower testing station has a capability of testing towers up to 35x35 metre base dimensions, 100 metre high, uplift of 1,200 tonne and with voltage ratings up to 1,200 kV. It has state-of-the-art facilities using SCADA winches with variable frequency drives, touch-screen control panel and online video recording.
Given the fact that Right of Way (RoW) is a major issue in the transmission segment, utilities are using bulk power high capacity lines of HVDV, 765 kV and more recently looking at 1,200 kV lines. Having a state-of-the-art tower testing station for utilisation of the business is our requirement and for that, cost is not an impediment. Also, given the scale of operations, effective utilisation of the tower testing stations is not an issue. On the other hand, competitors may not have the scale of operations to fully utilise such a high voltage tower testing station.
KEC has executed projects in difficult terrain (like deserts, mountains, snow fields, zones, dense forests and rivers) and extreme climatic conditions. What additional features are incorporated in such areas and conditions to ensure optimum efficiency?
Transmission tower design is linked to the variation in climate called the climate zone. Our company has developed prototypes for all types of climatic conditions, having the distinction of having worked in all types of difficult terrain, be it snow, seas, hilly terrains, etc. We have designed and tested for extreme conditions. The company has the advantage of working in overseas locations across continents and being aware of the technical excellence expected for executing such projects.
Power generation is the largest sector for GHG emissions and India’s emissions have grown at approximately three per cent annually. What should be done to alleviate the same?
In respect of the transmission and distribution (T&D) segment, T&D losses are one of the major issues in the sector. With most of the utilities in India facing heavy losses, this results in more power required to be generated which translates to higher green house gas emission, given the fact that more than 50 per cent generation is fossil fuel-based generation.
The growth story of India is based on a GDP growth of nine to 10 per cent pa, which requires more power availability across the regions both in rural and urban areas. Already India faces a peak deficit of around 10 per cent and many villages in India are still not electrified. With the 12th Plan talking of 100,000 MW additions in generation, there are concerns for GHG emissions.
There have been a number of initiatives taken in terms of high towers with lower base to conserve ROW, high voltage and multi-circuit transmission lines, R-APDRP for distribution, development of UMPPs, use of supercritical technology in generation and a focus on renewables through the National Solar Mission, etc. These efforts need to be continued on a long-term basis to alleviate the issue in the power sector.
The company has 4,000 employees. The current annualised attrition stands at around 16 per cent. Demand for skilled labour from local players as well as MNCs, coupled with the increased opportunities in Indian industry has resulted in higher attrition. There has also been a trend of decrease in the supply of skilled labour in the industry as well.
A survey done by “Ascent Employment Index’ (2009-2010) stated one of the top three gainers (in absolute numbers was engineering). Job function wise, one of the top five categories in demand in 2010 was engineering. Growth in level-wise positions in the middle management showed maximum demand in terms of absolute numbers in 2010. The studies indicate that attrition is here to stay and companies need to continuously make efforts to retain talent.
HR policies have been continuously evolving in the last few years and based on the needs, it will continue to evolve and change. Our policies are employee-friendly and support retention. We at present are also focusing on retaining ‘critical talent’ and creating and nurturing a robust talent pipeline. Being a company with a globally spread workforce, it is a business need to focus on HR, especially in the area of expat management and international compensation. However, the success mantra is “Think globally and hire locally’, it brings a shift towards policies which encourage hiring of local people in order to have a more inclusive workforce.
KEC is one of the leading players in the infrastructure engineering, procurement and construction space. Established in 1945, today it is a Rs 4,000 crore turnover flagship company of the RPG Group. It has a significant presence in power transmission and distribution, design services, cable and tower manufacturing and construction of turnkey infrastructure projects and has powered infrastructure development in over 45 countries. It has the distinction of being the largest transmission tower company operating globally. SAE Towers, one of the worldÊs largest producers of steel lattice towers for high-voltage power transmission, and incorporated in the US, Mexico and Brazil, was acquired by KEC International in September 2010. This acquisition created the largest steel lattice tower manufacturer in the world with approximately 300,000 tonnes of annual production capacity.