×
Home Companies Industry Politics Money Opinion LoungeMultimedia Science Education Sports TechnologyConsumerSpecialsMint on Sunday
×

L&T to bring all power operations under single entity

L&T to bring all power operations under single entity
Comment E-mail Print Share
First Published: Thu, Apr 22 2010. 10 34 PM IST

Power play: L&T Power chief executive Ravi Uppal. Hemant Mishra/Mint
Power play: L&T Power chief executive Ravi Uppal. Hemant Mishra/Mint
Updated: Thu, Apr 22 2010. 10 34 PM IST
Mumbai: India’s largest engineering company by market value, Larsen and Toubro Ltd, or L&T, is restructuring its power business to merge its Rs4,000 crore switch gear operations with it.
The switchgear business is now part of the electrical business group that also manages a medical equipment and systems unit.
Ravi Uppal, chief executive and managing director of L&T Power Ltd, after a press meet on Tuesday to share the firm’s business plans, hinted at bringing the power business portfolio under one entity.
The restructuring will happen in the next few months and the endeavour would be to “bring all fragmented pieces of the power business together” and “realign businesses (at L&T) in a logical way”, he said.
Power play: L&T Power chief executive Ravi Uppal. Hemant Mishra/Mint
Uppal, the company’s senior-most lateral hire in recent years, has the L&T board’s mandate to build its super critical boiler and super critical turbine businesses.
Many L&T observers see Uppal as a likely successor of A.M. Naik, current chairman and managing director of L&T.
Uppal, a former ABB executive, quit the Swiss engineering firm’s global executive committee and moved from Zurich, Switzerland to Hazira, Gujarat to take charge of L&T Power, which houses two joint ventures with Japan’s Mitsubishi Heavy Industries for manufacturing high technology super critical boilers and turbines.
L&T MHI Turbine Generators Pvt. Ltd and L&T-MHI Boilers Pvt. Ltd manufacture and supply supercritical boilers and steam turbines and generators for large coal-based utilities.
L&T is also India’s largest manufacturer of low voltage switchgears. It entered the medium voltage segment by acquiring Malaysia’s Tamco Group in 2008.
“L&T Power has orders for super critical equipment...The company can augment its capacity from 4,000MW to 6,000MW when the orders pick up in two years,” said Shailesh Kanani, senior equity research analyst, Angel Broking Ltd.
According to him, the total engineering, procurement and construction (EPC) orders as of March were Rs1.02 trillion, of which Rs39,000 crore is for power equipment. “There is a lot of opportunity but in the long-term the clear threat for L&T will come from Chinese companies,” Kanani said.
“L&T Power is the first private company to get into this business and L&T’s execution skills and Mitsubishi’s technical expertise could actually take the company beyond the current leader Bhel (Bharat Heavy Electricals Ltd) in the long run,” said Madan Gopal, a power sector analyst at Centrum Broking Pvt. Ltd.
Gopal’s logic is: L&T can work at 11-12% margins while Bhel enjoys 18-19% margins and would be forced to compress it. He doesn’t see Chinese competition intensifying, especially if other domestic companies such as Bharat Forge Ltd and Toshiba-JSW Turbine and Generator Pvt. Ltd become more aggressive.
“In the next 15 years, an average of 25,000MW of equipment will be needed annually, and if everything goes according to projections then Indian companies may be able to service them,” Gopal said.
By May, L&T’s super critical boiler unit will be fully functional, and by August-September, its super critical turbine production will come on stream. The current capacity is 4,000MW, but Uppal says in two years it would be increased by 50% to 6,000MW.
Super critical boilers can take temperatures of up to 540 degree Celsius, and the latest technology can take it towards 630 degrees, making it “ultra super critical”.
“In India, there is no plant that offers 600 degrees and we want to offer it,” Uppal said.
For such high temperatures, special alloys are needed. That will push up the cost but the “operating efficiencies will go up” as it needs less of resources such as coal.
L&T Power is not unique in this space. Bhel has a tie-up with Siemens AG for super critical boilers, JSW Steel Ltd has a tie-up with Toshiba, and Alstom and Bharat Forge Ltd will compete in the same segment.
L&T and its peers stand to benefit as the government is taking a stand in favour of super critical technology, as demand for power in India rises. India added only 21,080MW of power in 2002-2007, about half its target.
The Planning Commission, in its mid-term review in March, said 62,374MW would be added by 2012. Following the government mandate, about 60% of the capacity for coal-fired generators will have to use super critical boilers and turbines. For the 12th Plan period, (2012-17), almost 95% of the new capacity will have to come from super critical steam boilers and turbines.
“L&T Power is well placed because of the healthy initial orders they have got...The challenge for the company will be to maintain its margins, keep costs in check and maintain a relationship with the power companies,” an analyst with a brokerage said.
satish.j@livemint.com
Comment E-mail Print Share
First Published: Thu, Apr 22 2010. 10 34 PM IST