BGR Energy to set up JV with Hitachi

BGR Energy to set up JV with Hitachi

Mumbai: BGR Energy Systems said it would set up two joint ventures with Japan’s Hitachi Ltd to make power equipment in India, with investment totalling about Rs4,400 crore ($956 million).

In a deal that would allow Hitachi to expand its presence in India’s growing power market, BGR Energy said it agreed with Hitachi Ltd to make energy-efficient, or “supercritical" steam turbines and generators.

BGR is also forming a separate JV with Hitachi Power Europe GmbH, a unit of Hitachi Ltd, to make energy efficient boilers in India, it said.

BGR Energy will hold 74% in the turbine JV, which will have a total investment of Rs3,000 crore. It will hold 70% in the boiler JV, with a total investment of Rs1,400 crore. The rest of the equity will be held by Hitachi firms.

“We believe this strategic alliance with Hitachi will ensure that we have a reliable and secured source of supply for BTGs (boiler, turbine-generator) to meet all our ... project requirements," BGR chairman B G Raghupathy said in a statement.

Global players are attracted to India’s power capacity growth plan, which aims to add 100,000 megawatts during 2012-17 to its current installed capacity of 166,366 MW, by partnering with local firms.

Global firms, including Japan’s Mitsubishi Heavy Industries and Toshiba Corp, France’s Alstom, US listed SPX Corp and McDermott’s unit Babcock & Wilcox have partnered with Indian companies such as L&T Power, JSW Energy, Bharat Forge and Thermax.

Analysts in Mumbai said the deal would pave the way for BGR to bid on huge orders. The largest Indian utility firm, NTPC, has invited bids for supplying boilers and turbines in what would be the biggest single order so far.

“Any impacts on (Hitachi’s) earnings (are) probably not going to be big, but it is a rational move for Hitachi to use BGR’s resources to expand into a market where it may lack expertise," Deutsche Securities analyst Takeo Miyamoto said in Tokyo.

In July, the Indian firm entered a technical collaboration pact with Hitachi to build supercritical steam turbines and generators.

Shares in BGR closed at Rs797.80, up 1.8%, after reaching a 52-week high of Rs814 following the news. Hitachi shares ended up 0.54% on the Tokyo Stock Exchange, which closed before the news.