New Delhi: State-owned Bharat Heavy Electricals Ltd (Bhel) will partner private construction firms to build overseas hydropower projects and is in talks with companies including Patel Engineering Ltd.
“We are looking at getting EPC (engineering, procurement and construction) contracts overseas through this approach,” K. Ravi Kumar, chairman and managing director, Bhel, said. “While we will take care of the electro-mechanical work, the civil work will be done by our selected partner.”
“We have a tie-up with Bhel in India to execute projects in Andhra Pradesh on a similar model. It will be mutually beneficial to both the companies,” said Ashwin Parmar, deputy director, business development, Patel Engineering.
Looking up: K. Ravi Kumar, chairman and managing director, Bhel. Sanjit Das / Bloomberg
For starters, India’s largest power equipment maker is eyeing a $250 million (Rs1,198 crore) contract to build a 72MW project in Katande in the Democratic Republic of Congo.
Civil construction usually comprises 60% of the cost of a hydroelectric power plant and such a partnership would help Bhel share the project risk. Hydropower projects are more complex to build and need specialized technology and design than thermal power plants.
“Partnering with a contractor who has done civil work for a hydro project will help Bhel in the pre-qualification stage,” said Girish Solanki, a Mumbai-based research analyst at Angel Broking Ltd. “There is an immense opportunity in Africa to tap as there is a power shortage there.”
“This will be the first of the three project orders we are looking at in Congo. There are a few Indian firms that have shown interest in partnering with us, including Patel Engineering, for the Katande project,” said a Bhel executive who declined being named. “The Congo government also wants us to take up the 70MW Semlika project and partner in the Inga dam project.”
Other companies that work on hydroelectric projects in India include Jaiprakash Associates Ltd, Hindustan Construction Co. Ltd and Gammon India Ltd.
Bhel is looking abroad for contracts as it fears that its domestic market share may decline to 50% from the current 60% in five years due to increasing competition from local and foreign companies.
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.
Bhel posted a net profit of Rs3,039 crore on revenue of Rs27,505 crore in the fiscal year ended 31 March. It aims to become a $10 billion-plus firm by 2012. Bhel has an annual capacity of manufacturing power equipment that can produce 10,000MW of electricity. The company says it plans to raise this to 15,000MW a year by December.
Bhel’s stock on Thursday fell 3.06% to Rs2,090 at close on the Bombay Stock Exchange.