New Delhi: Lanco Infratech Ltd, an Indian energy and construction company, is bidding to develop power projects in emerging markets including Bangladesh and Iraq as a scarcity of fuel to fire power plants is hindering development in its home market.
The company has bid to develop a 660 megawatt (MW) imported coal-based project in Chittagong, Bangladesh, to be run on a build, own and operate basis. Lanco Infratech is competing with Bangladeshi firms including Orion Group for the project that will require an investment of about Rs.3,300 crore.
“Fuel security and the health of distribution sector (in India) is a cause for worry,” chairman and managing director Lagadapati Madhusudhan Rao said at the launch of Lanco Infratech’s new brand identity on Wednesday. “We are looking at developing power projects in emerging markets... We have bid in some overseas projects and have qualified.”
Lanco Infratech, which reported sales of Rs 11,303 crore for the year ended 31 March, plans to have a total installed capacity of 15,000MW by 2015. Its current capacity is 3,300MW, while 6,000MW is under construction, being built at a cost of Rs 32,550 crore.
Lanco Infratech has also bid for an engineering procurement and construction contract to set up a 240MW gas-based project at Azab in Iraq valued at $81 million (Rs 362 crore).
“There is a huge requirement for power in Iraq. We are starting there,” said G. Venkatesh Babu, managing director at Lanco Infratech. Iraq has a power requirement of 15,000MW, compared with a generation capacity of 7,000MW.
India has a power generation capacity of 174,000MW and plans to add 100,000MW during the 12th Plan period (2012-17).
The bulk of this is coal-based, but shortage of the fuel has increased from four million tonnes (mt) in 2004-05 to 40 mt in 2010-11.
Lanco acquired the largest operational thermal coal mines in Western Australia, owned by Griffin Coal Mining Co. Pty Ltd, in December. Besides securing fuel supplies for its power plants in India, the acquisition gives Lanco an opportunity to set up imported coal-based projects overseas.
Lanco, which set up the international division six months ago, is also considering setting up power projects in Nigeria, Ghana, South Africa, Vietnam and the Philippines.
“We are looking at acquiring generation assets under the privatization initiative of the Nigerian government. We also plan to set up hydropower projects in Ghana,” said Arun Sen, chief executive officer at Lanco International.
Despite being rich in energy resources, Africa suffers from power shortages. Businesses have suffered power outages on “more than half the working days in the year”, said a report by lobby group Federation of Indian Chambers of Commerce and Industry.
Lanco Infratech is also planning to enter power generation equipment manufacturing, said Madhusudhan Rao.
Given India’s substantial power generation plans, the potential order book has created a lot of interest in setting up domestic equipment manufacturing capacity.
While state-owned Bharat Heavy Electricals Ltd (Bhel) is the dominant player in the sector, it has been facing competition from Chinese power generation equipment manufacturers such as Sepco Plc, Shanghai Electric Group Co. Ltd, Dongfang Electric Corp. and Harbin Power Equipment Co. Ltd, both in the domestic and overseas markets.
Recently, local joint ventures between Larsen and Toubro Ltd and Mitsubishi Heavy Industries Ltd; Toshiba Corp. of Japan and JSW Group; Ansaldo Caldaie SpA of Italy and Gammon India Ltd; Alstom SA of France and Bharat Forge Ltd; BGR Energy Systems Ltd and Hitachi Power Europe GmbH; and Thermax Ltd and Babcock and Wilcox Co. have set up base and are bidding for projects.