Bhel faces hurdles in securing new Iraq, Libya contracts

Bhel faces hurdles in securing new Iraq, Libya contracts
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First Published: Wed, May 27 2009. 10 42 PM IST
Updated: Wed, May 27 2009. 10 42 PM IST
Plans by state-owned power equipment maker Bharat Heavy Electricals Ltd (Bhel) to secure new contracts in Iraq and Libya have run into trouble because multinational technology providers such as Alstom SA and General Electric Co. (GE) are not ready to assist it in commissioning any project in these countries over security concerns.
“While we need commissioning assistance in setting up projects, companies such as Alstom and GE only want to remain as suppliers (due to security concerns),” said K. Ravi Kumar, chairman and managing director, Bhel.
Bhel already has a presence in Iraq and Libya. It has successfully undertaken contracts in Iraq such as the 250MW Rumailla project which involved the supply, supervision, engineering and construction of gas turbines, generators and auxiliaries as part of the United Nations oil-for-food programme. It has also supplied a gas-turbine based power plant to the 500MW Sulaymaniyah project in Kurdistan.
In Libya, it has set up the 600MW Western Mountain project and another 300MW project as part of its extension.
Questions emailed to Alstom SA on Monday and GE on Tuesday remained unanswered. These firms are world leaders in power generation equipment manufacturing technology. They have tie-ups with Bhel for manufacturing so-called supercritical boilers and gas turbines.
While Iraq still remains a flash point in West Asia with US troops battling insurgents, Libya—which has the largest hydrocarbon reserves in Africa and is also a member of the Organization of Petroleum Exporting Countries—has faced sanctions due to its record of supporting terrorist groups.
With a host of reconstruction projects coming up in Iraq, Bhel was hopeful of getting contracts in one of the world’s largest oil producing countries.
Libya, which is estimated to have around 100 billion barrels of oil reserves—accounting for 40% of Africa’s reserves—has a huge market for power generation. “Without help in commissioning a project, it gets very difficult to set them up on our own,” Kumar added.
Of Bhel’s order book position of Rs1.25 trillion, global orders account for around Rs7,500 crore. West Asia, Africa and Central Asia are the primary international markets for Bhel, which plans to raise exports to Rs10,300 crore by 2012. “International orders form a small percentage of Bhel’s order book. It is not a significant worry. But going forward, with the domestic order flow likely to decline from the present levels, if the international orders also decline then it makes a difference of 3-4% in the order flow,” said Madanagopal R., an equity research analyst at Mumbai-based Centrum Broking Pvt. Ltd, who tracks Bhel.
Bhel has a Rs10,000 crore cash surplus. The firm posted a net profit of Rs3,039 crore on revenue of Rs27,505 crore in fiscal 2009. It aims to become a $10 billion-plus firm by 2012.
Shares of Bhel rose 4.28% to Rs2078.20 at the close of trading on the Bombay Stock Exchange on Wednesday. The Sensex was up 3.83% at 14,109.64 points.
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First Published: Wed, May 27 2009. 10 42 PM IST