Chennai: Engineering firm Shriram EPC Ltd, which also makes wind turbines, is planning to dilute 30-40% of equity in its Singaporean 50:50 joint venture Orient Green Power Pte Ltd, a top official said.
Orient Green is a venture between Shriram EPC (Singapore) Pte Ltd, a fully owned subsidiary of Shriram EPC, and Bessemer Venture Partners, a US-based venture capitalist.
Both partners will dilute equal equity to private investors and use the funds to set up a subsidiary called OGPL BV Europe to create and own renewable energy assets.
“The growth potential in the European market is huge and funds requirement would be large. Shriram EPC will not be able to raise so much of money (without diluting equity) for the European operations, but operational control will be with Shriram EPC,” T. Shivaraman, managing director and chief executive officer of Shriram EPC, said.
External source: Shriram EPC’s T. Shivaraman says the joint venture, Orient Green, may get most of its business from its Europe operations.
The company will issue additional shares before selling equity, a process it expects to complete in a few days, Shivaraman said, declining to discuss details of the amount the firm expects to raise and the identity of the investors.
Shriram EPC had invested some Rs40 crore in Orient Green—incorporated last year to build, own and operate alternative energy assets.
The company, however, said it was difficult to immediately estimate the investment that would go into OGPL BV Europe and would depend on the size of the projects clinched.
Elaborating on the potential of wind energy projects in the European market, Shivaraman said that a 50MW power project would cost some €100 million (Rs678 crore) and there is a market of 200-300MW projects. But the progress, he added, would depend on the amount that it is able to raise for the projects.
Shivaraman said more than 50% of Orient Green’s business and some 60-70% of the company’s value may come from its European operations. “But at this point of time, it is in an early stage,” he said.
The company is also looking at investment opportunities in other markets, including Thailand and Sri Lanka.
Separately, Shriram EPC has floated a European subsidiary called Shriram EPC Europe to undertake engineering, procurement and construction projects in the region. The firm would hold 80% stake and the remaining would be reserved for employees.
The European arm would primarily look at biomass-based power generation and later, wind power projects.
The subsidiary has been operational for three months now, Shivaraman said.
Shriram EPC plans to invest round €2 million in the next two years that would be financed through internal resources.
Meanwhile, the firm has started manufacturing gear-less wind turbines at its Chennai factory. The company recently formed a 49:51 joint venture with Dutch firm Leitwind BV, called Leitner Shriram Manufacturing Ltd (LSML), for this purpose.
LSML plans to manufacture 40 wind turbines by the end of the fiscal year that ends in March 2009, around 100-120 turbines during the next and reach its full capacity of 250 wind turbines a year by fiscal 2011.
During fiscal 2010, wind turbine manufacturing business is expected to add around Rs350-400 crore to Shriram EPC’s revenues and more than Rs750 crore in fiscal 2011, Shivaraman said.
Starting fiscal 2010, it is planning to export half of the wind turbines to overseas markets, primarily Europe. The company had revenues of Rs703.04 crore and a net profit of Rs35.02 crore on 31 March.
Shriram EPC’s shares closed at Rs236.40, down 0.67%, on Tuesday, on a day when the Bombay Stock Exchange’s benchmark Sensex rose 2.1% to end at 12,860.43 points.