Chennai: As part of its plans to make India its global manufacturing hub, Areva T&D, part of French power major AREVA, has initiated plans to acquire Indian firms engaged in the manufacture of power transmission and distribution equipment, the company’s global CEO said.
This will be the first time that a global company will be making acquisitions in the Indian power equipment sector; the acquisitions will be made through Areva T&D’s wholly- owned Indian subsidiary Areva T&D India Ltd.
India’s total power transmission capacity is only around 16,500MW against a generation capacity of 135,006MW.
“India is a hub for us from where we can deliver technology, product and manpower to the rest of the world. Since the beginning of the year, we have announced almost every month a new acquisition, a strategic partnership somewhere in the world. It is true (that) in India we have not made any announcement so far, but we are considering opportunities and we are having discussions,” Philippe Guillemot, chief executive officer and chairman of Areva’s global T&D division said on the sidelines of a function, marking the beginning of the construction of the company’s manufacturing unit here.
He declined to elaborate on the specifics of the company’s acquisition strategy in the country.
Areva T&D’s manufacturing units in India have already become an attractive sourcing base for its global operations. The company’s Indian arm presently exports 9% of its manufacturing capacity and plans to increase this proportion to 14% by 2010.
Areva T&D India has eight manufacturing units and hopes to nearly double its turnover to Rs3,000 crore by 2010 from the current level of Rs1,658 crore. “Although we are growing everywhere in the world, the growth in Asia and India, in particular, are driving that growth. India is a country where we have the highest growth rate of 30% per annum in the world,” Guillemot added.
Areva T&D, according to company officials, has around 40% share in the Indian power transmission and distribution equipment market and competes with ABB Ltd, Siemens AG and General Electric Co. in India.
“India is a very important market for Areva both from the point of the opportunities it offers in the transmission and distribution space and also as a base for exports. It is not only cheaper to set up manufacturing base here, but also offers them a better quality of trained manpower. Since they are already present in this market, it is easy to scale up capacities here,” said Abhishek Puri, an analyst with ASK Securities.
Areva believes that with the amount of power generation planned in the country, transmission and distribution capacities need to be developed for moving this power from the point of generation to users around the country.
While India has a power generation capacity of 135,006MW, its total transmission capacity is only around 16,500MW.
This is not sufficient to handle the 78,570MW of additional generation capacity that the government plans to create over the next five years.
Another area for growth, according to Areva T&D executives, is developing solutions that will help reduce the aggregate transmission and distribution losses in the country, at present, in the range of 40%. The power ministry has a target of bringing down such losses to 15% by the end of 2012.