Engineering firm Larsen and Toubro Ltd (L&T), that has been lobbying the Indian government to limit Chinese imports of power generation equipment, has started preliminary talks with China’s largest power generation equipment manufacturer, Dongfang Electric Corp. for joint participation in hydroelectric power projects.
The joint participation will involve Dongfang supplying turbine units and generators, with L&T doing the construction or so-called civil work.
Li Qi, in charge of Dongfang’s India office and its chief representative in India, confirmed the development. “We have started preliminary talks with L&T for joint cooperation for hydroelectric power project contracts. The arrangement can be looked at for overseas as well. The arrangement will be on a project-to-project basis.” Dongfang supplied the equipment for China’s Three Gorges Dam on the Yangtze river.
An L&T spokesperson declined comment.
L&T has a joint venture with Mitsubishi Heavy Industries Ltd (MHI) of Japan to manufacture power generation equipment for thermal power projects.
“L&T is purely being driven by business interest and hydro(power) is a large emerging space, specially as a large number of projects are getting to a stage, where orders are to be placed. There will be a significant cost advantage for L&T in hydro engineering, procurement and construction space, if they use Chinese equipment. Chinese equipment has been proven in Himalayan conditions and hence will be a good fit for L&T,” said Anish De, chief executive at Mercados Asia, an energy consulting firm.
India has a power generation capacity of 1,50,000 MW of which hydropower capacity accounts for around 32,000MW. Of the 78,577MW of generating capacity target by 2012, 16,553MW is expected to come from hydropower. Hydropower projects are more complex to build, and need specialized technology and design inputs.
Several power projects developers in India have placed orders for equipment from Chinese firms that include Dongfang, Shanghai Electric Power Co. Ltd and Harbin Power Equipment Co. Ltd. Of these, almost 40% are with Dongfang which manufactures equipment for large hydro power stations, thermal power stations and nuclear power stations and already has a service facility in India to provide support to the projects that it has supplied its equipment to.
In answer to a question about his firm’s plan to set up a manufacturing base in India, Li Qi said: “This is the next step. First we supply equipment. In the next step we set up the service facility. In future, we plan to set up manufacturing. We want a team here first, who knows this market.”
Dongfang’s plan comes at a time when the Chinese power firms are increasingly finding it difficult to do business in India and in the background of mounting tension between the two fastest growing economies. Some Chinese firms have complained of bias against them arising from so-called security issues and which prevents them from winning significant contracts here.