Power equipments: Some hope at last? - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Power equipments: Some hope at last?

Jun 5, 2008

As was reported recently, engineering and construction major, L&T has outbid power equipment heavyweight BHEL for Andhra Pradesh Generation Company's (APGenco) Krishnapatnam power project. The company has put in a bid of around Rs 15 bn for supplying turbine generator set to the 1,600 MW plant (2 units of 800 MW each) whereas BHEL's bid was around Rs 20 bn. The total cost of the project is Rs 84 bn (Rs 53 m per MW). The tender is for supply of turbine and generator set for the supercritical thermal power project, which was planned to be the first supercritical thermal project to be commissioned in India. Incidentally, APGenco had invited bids last year for which BHEL was the sole bidder and none of the other players showed any interest due to capacity constraints. Subsequently, the former cancelled the bidding process on the ground that it might end up paying a higher price to the latter. The company decided to go for re- tendering. This time, it decided to issue three separate tenders for supply of the boiler, turbine and balance-of-the plant (BoP, which includes all the engineering and supply of subsystems - excluding the turbine and generator - required for efficient operation of a power plant). This was in departure from its earlier strategy to award a turnkey contract to a single vendor for the project. The bids for turbine generator set were submitted on Tuesday, where L&T emerged as the winner.

India's first supercritical project
The Krishnapatnam project would be the first contract given to a non-BHEL domestic manufacturing company. We believe that it is a very significant development, which would kick-start L&T's power equipment manufacturing programme. Also, in a scenario where almost all the big power equipment players are booked for next 3-4 years, having one more manufacturer will help to keep the government's power capacity addition programme on track.

Why equipment supplies shortage?
Companies like Siemens are booked till FY12. BHEL's order book at the end of March 2008 was almost 3.5 times its full year FY08 sales, the highest ever. Also international suppliers like Dongfang and Shanghai Electric are booked for the next 2-3 years. They are also seeing the highest order book levels ever. There appears to be worldwide shortage in the generation equipment capacity. The demand for power equipment in China, India and other parts of Asia has raised the total demand for new equipments to about 120,000 MW per year. Also there is a replacement demand of about 40,000 to 50,000 MW per year. With the global capacity of power equipments at around 180,000 MW, manufacturers are likely to find their order books full at least in the medium-term.

As far as India is concerned, over the past two years, there have been talks of promoting one more equipment manufacturer besides BHEL, and L&T was chosen to be the one. The company is coming up with generation equipment capacity of 3,000 MW per year to start with, and has formed a joint venture with Mitsubishi Heavy Industries (Japan) for manufacturing of supercritical generation equipments (boilers, steam turbines and generators).

With BHEL also expanding capacity to 15,000 MW per year by 2009, there is hope that the country is likely to see some acceleration in the generation capacity addition. This will be a big positive for the overall power scenario.

Equitymaster requests your view! Post a comment on "Power equipments: Some hope at last?". Click here!

  

More Views on News

TEXMACO INFRA 2020-21 Annual Report Analysis (Annual Result Update)

Nov 15, 2021 | Updated on Nov 15, 2021

Here's an analysis of the annual report of TEXMACO INFRA for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of TEXMACO INFRA. Also includes updates on the valuation of TEXMACO INFRA.

SHANTHI GEARS 2020-21 Annual Report Analysis (Annual Result Update)

Nov 15, 2021 | Updated on Nov 15, 2021

Here's an analysis of the annual report of SHANTHI GEARS for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of SHANTHI GEARS. Also includes updates on the valuation of SHANTHI GEARS.

G R Infraprojects Makes a Bumper Listing on Bourses. Big Gains for IPO Investors (Views On News)

Jul 19, 2021

GR Infra shares were subscribed over 100 times in its IPO.

Infrastructure Boom Ahead. Here are 3 Ways to Play It... (Views On News)

Aug 24, 2021

India is expected to become the third largest construction market next year. For that, it needs huge investments.

G R Infraprojects IPO to Hit the Market on 7 July. All You Need to Know (Views On News)

Jul 1, 2021

G R Infraprojects' IPO will be an offer for sale of up to 11.5 m shares. There will not be any fresh issue of shares.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

How to Hit Rs 100 Crore Wealth in Your Lifetime (Equitymaster Wealth)

Nov 15, 2021

This is how you can achieve the ambitious goal of a net worth of Rs 100 crore.

Don't Sell these Stocks if the Market Falls (Profit Hunter)

Nov 17, 2021

These are the 3 types of stocks that you should not sell in a market crash.

MobiKwik IPO Opens for Subscription Soon. Key Things to Know Before Subscribing. (Views On News)

Nov 20, 2021

The Rs 19 bn issue is set to hit the market soon.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE CAPITAL GOODS


Nov 26, 2021 (Close)

S&P BSE CAPITAL GOODS 5-YR ANALYSIS

COMPARE COMPANY

MARKET STATS