Sensing an opening in India’s growing thirst for power generation, General Electric Co. plans to manufacture steam turbines for power projects at a proposed new factory and has begun scouting for partners.
“We have already started discussions with the Indian companies,” said Pratyush Kumar, president and chief executive officer of GE Infrastructure, India. “I think this is a great opportunity.”
Though an established presence overseas in this sector, GE has never had a steam turbine manufacturing facility in India, having instead opted to act as a supplier. While Kumar declined to put a value on the capital investments needed for the project, industry experts believe that setting up a new facility of this scale will require an investment of around Rs2,250 crore. GE will make turbines for power plants of up to 1,000 megawatts. A greenfield venture of that nature could easily take four years to start manufacturing turbines.
GE’s newfound enthusiasm for manufacturing in India comes at a time when the government has been concerned about the ability of state-owned Bharat Heavy Electricals Ltd (Bhel), a virtual monopoly in this sector, to meet the country’s ambitious power-generation plans.
India has an installed power generation capacity of 1.28 lakh MW. Of the additional 41,110MW capacity that was envisaged to be created in the past five years, only 21,180MW has come online.
Part of the shortfall has been attributed to shortage of power-generation equipment in the country and the government has been considering extending incentives and guaranteed deals to companies interested in starting manufacturing operations here.
While GE actually has an arrangement with Bhel for providing gas turbines to power projects, Kumar says it is now looking elsewhere for partners in the steam-turbine project.
“We are looking at this opportunity outside of gas turbines,” he said. “We have transferred the technology to Bhel for gas turbines and have a very good partnership with them.”
Kumar insists that GE’s proposed move, which will eventually pit the company against Bhel, will not impact the existing arrangement.
But Bhel isn’t being too charitable. “We like competition,” says a senior executive of the company, who didn’t want to be named. “We will not participate with GE on steam turbines as we already have an arrangement with Siemens for this. I do not think they will be able to provide steam turbines at rates as competitive as ours.”
While gas turbines are used in power projects based on gas or naphtha as fuel, steam turbines are used in projects that use coal as fuel.
GE and Siemens Corp. are major rivals globally. And GE isn’t alone in wanting a piece of India’s power-equipment business. Several other players, including Mitsubishi Heavy Industries, Toshiba Corp., Hitachi, Doosan Heavy Industriesand Construction, Alstom and China’s Dong Fang have already expressed an interest in setting up power-generation equipment operations in the country.
Industry analysts welcomed the move. “India needs competition in the power-equipment manufacturing sector as it will lower costs for setting up power projects which, in turn, will result in lower power-generation tariffs,” said Shubhranshu Patnaik at accounting firm PricewaterhouseCoopers.
In a related development, GE’s Kumar said the company is already in talks with project developers working on ultra-mega power projects of 4,000MW each, being planned in the country over the next five years.
“We have been approached for super critical technology steam turbines with a unit size of 800MW,” he said.
GE Infrastructure, India, is a relatively small part of GE, having posted sales of $500 million in 2007. But it has ambitious plans to double sales in 2008 and believes it can shoot up to a $10 billion operation by the end of 2010. The company has an Indian presence in aviation, power, oil and gas, rail and water and process technologies.
Separately, GE Infrastructure is also set to enter the wagon-manufacturing market in India. GE Infrastructure, through its $145 million India Development Fund, is discussing a strategic partnership with Titagarh Wagons Ltd.
“It is an equity partnership and we will be supplying wagons for the Indian Railways,” said Kumar. “The financial deal will be sealed and then the work for the factory will start.”
The Kolkata-based wagon-maker confirmed that it has had conversations with GE. “They had come to us seeking wagons. However, we did not discuss any sale of stake in the company to GE,” said Titagarh’s managing director Umesh Chowdhary. He said the discussions had centred on supply of wagons, which GE plans to lease out.
K.P. Narayana Kumar contributed to this story.