Private firms vye for stake in NTPC BHEL venture

According to Economic Times, ICICI Ventures, L&T and IL&FS are in the race to acquire a 51% stake in NTPC-BHEL Power Projects.
Mr K Ravi Kumar, CMD of BHEL has said that NBPPL is yet to take a final decision.
According to the business plan of NBPPL, it will be investing Rs 6000 crores funded through a 70:30 D/E ratio.

Crompton Greaves makes US acquistion

Crompton Greaves has acquired US-based MSE Group for $16m. MSE Group is into the business of constructing HV electric power systems. View positive.

NTPC dreams big

NTPC plans to invest c.$40bn over the next five years on the following expansion plans,

Hydro sector – plans for 9000 MW by 2017; 2471 MW under implementation
LPG business
Power trading – already existing with TCS
Acquisition of overseas coal and gas assets – signed agreement with Nigeria
Nuclear – 2000 MW by 2018

NHPC to assess carbon credit revenue

NHPC Ltd. has initiated the process to appoint a consultant to assess the total carbon credit revenue generation potential of the company. The company recently bagged the host country approval for carbon credit for two of its smaller projects – the 45 MW Nimoo Bazgo and the 44 MW Chutak hydroelectric stations in J&K. NHPC's draft RHP is yet to receive final approval from the SEBI.

Spinoffs from nuclear deal: Who could benefit?

NSG’s green flag to the import of nuclear material by India may help improve the load factors of existing nuclear plants, as well as may provide a huge boost for the country to set up more nuclear reactors to meet the country’s power deficit. It spells clear business opportunity for several engineering and infrastructure companies, over the medium term.

Apart from sourcing of raw materials such as uranium from foreign countries, setting up of nuclear power plants would broadly involve supply of key equipments such as the nuclear reactor, boiler, turbine generator (BTG) and other components such as pumps, valves, pipes and tubes. Providing the electrical, mechanical and other integration work, also known as Balance of Plant (BOP) is another key component of a power generation plant. Civil structuring, which takes up as much as 30% of the project cost also requires specialised skills given the safety requirements.

In the equipment category, while foreign players such as Areva or GE would be the key providers of nuclear reactors, companies such as BHEL and L&T (which is in talks with foreign players for equipment manufacturing) could be major beneficiaries from BTG order flows. Here again, the likes of Mitsubishi Heavy Industries, Areva, GE and Toshiba’s arm could be global competitors in the BTG segment.

Areas such as forging or supply of other equipments may however leave more room for purely Indian players. Players such as Kirloskar Brothers have already received a good portion of the orders from NPCIL for supply of pumps. L&T has also been in talks with NPCIL for a joint venture for forgings, given the shortage in this segment even on an international level.

The civil and BOP works could also provide enhanced opportunities for Indian companies given their prior qualification. In the civil structuring space, Indian players such as Hindustan Construction, L&T and Gammon India have proven execution skills for specialised civil works.

It, however, needs to be kept in mind that the opportunity arising from the deal would not convert into near term revenues for any of the players, given the long lead time required for the manufacture of equipments and construction.

India may allow pvt cos in nuclear: Pachauri

Bloomberg has quoted Mr. Rajendra Pachauri that India may allow private cos to enter into the nuclear generation and that the government may unveil a policy after next year’s elections.
Separately, NPCIL has started a preliminary dialogue with U.S. companies for nuclear co-operation, according to a government release.

GMR Energy bets on nuclear biz

GMR is planning to invest Rs. 100b to generate up to 3,000 MW of nuclear capacity in the next 5-7 years. The company is reported to be in talks with equipment and fuel suppliers in France, U.S. and Korea. GMR is also reported to be scouting for coal mines in Indonesia, Australia and Africa for its coal plants. We believe that GMR is still only a fringe player in the power generation sector and we would like the company to establish firm thermal capacities before turning to nuclear. GMR Energy’s listing would be an interesting watch.

GVK power may list power business

There has been news on the wires that GVK Power is planning to sell 20% of its holding in electricity business for capacity expansion and that the company may later list the business in India. We would like to wait for further details. GVK Group is primarily into infrastructure business in India and does not seem to have expansion plans as big as others in the electricity business.

ABB growth to be moderate, trading at premium: Macquaire Research

Macquarie Research has initiated coverage on ABB India with an ‘underperformer’ rating reasoning that it is already trading at a significant premium to peers.

The brokerage house expects moderate growth of ~26% over 2008-2010 and multiples to fall. ABB has built-in price escalation clauses in its contracts and has also hedged key raw materials such as copper, it mentioned in a note to clients.

Adani Power IPO received SEBI nod

Adani Power’s IPO has received SEBI approval. The co is likely to offer ~26.7 crores shares garnering Rs. 5800 crores (Rs 217 per share?).

The parent co (Adani Enterprises) currently holds ~86.45% stake in the company, which will be diluted to 74% post IPO. According to Money Control, this price is at a substantial premium to its valuation.

Adani Group looking for more coal blocks in Indonesia

The Adani Group is in an advanced stage of negotiation to acquire more captive thermal coal blocks in Indonesia, according to Business Line. Indonesia is a preferred destination due to its proximity to India resulting into lower freight cost and voyage time. Adani have already ordered two cape-size vessels, which are due for delivery in 2009-end, to ferry coal from Indonesia.

LT lobbies with Govt to twist rules

L&T is lobbying with GoI to insert a clause in bidding rules for power generation equipments that that at least 51% of equity should be held by a domestic company, the Mint has reported. This is aimed at eliminating competitors such as the JVs between Alstom-Bharat Forge, Toshiba-JSW, AnsaldoCaldaie- GB Engineering etc where the foreign players hold majority stakes whereas L&T holds majority stake in their venture. Such lobbying is possible in India because of lack of clarity in policy matters. We prefer to remain on the sidelines and watch the proceedings with keen interest.

NTPC-BHEL JV attracts PE funding

ICICI Ventures and IL&FS are likely to pick up 50 per cent stake in the NTPC-BHEL Power Projects. Company officials are going to meet the two agencies on September 10 to finalize the deal. PE interest is a testimony to the rock-solid fundamentals of the power generation equipment sector in the country.

Suzlon to go on top gear for REPower takeover

Suzlon is moving ahead of schedule to consolidate its takeover of REPower, in order to speed the transfer of technology, according to the Wall Street Journal.
So far, Suzlon has been unable to draw on REpower's technology because of a strict German corporate law which requires foreign investors taking over German companies to reach a so-called domination agreement involving involves getting 75% of shareholders on board and making a tender offer to buy out minority shareholders. The newspaper said that Suzlon has agreed tom abide by this rule. In the light of complaints regarding the quality of its wind turbines, we view this move as a extremely positive for Suzlon.

NTPC-BHEL aims at Rs 10k cr topline

NTPC BHEL Power Projects Pvt Ltd. expects to earn Rs 10,000 crore per annum by the year 2015, and Rs 20,000 crore per annum by 2020. The JV expects to have a capacity of 5,000 MW of capacity. While BHEL specializes in manufacturing of primary generation equipment, the JV wil focus on ‘Balance of Plant’ equipment. The JV is expected to commission the first order by January.

BHEL to set up JV with BEL for solar venture

Bharat Electronics (BEL) and BHEL are going to set up a JV to set up a polycrystalline silicon manufacturing unit in Bangalore. According to news reports from The Business Line, an investment of over Rs 1000 crore would be required for the project.

BHEL chugging ahead on loco plant: ET

BHEL is reported to have evinced interest in setting up a greenfield project for manufacturing locomotives in India. It has already initiated talks with Alstom, Bombardier Transportation GmbH, Siemens and General Electric for forming a JV with an investment of Rs 1,000 crores with BHEL enjoying a 51% stake.

BHEL has decided to bid for the tender floated by Indian Railways to procure 660 electric locomotives, at an estimated cost of Rs 25,000 crore, apart from tying up with a foreign locomotive manufacturer to set up a factory in Madhepura in eastern Bihar.

The company already has a 50 engine capacity plant in Jhansi for manufature of diesel and electricity locomotives. They are also keenly looking at acquiring a Europe-based locomotive manufacturing firm.

Citi initiates coverage on Areva T&D with 'hold' rating

Citigroup has initiated coverage on Areva T&D India with a ‘hold’ recommendation and a target price of Rs 1,809. According to the brokerage house, Areva T&D’s EPS has witnessed a CAGR of 117% over CY04-07 and expanded return on equity (RoE) from 11.4% to 46.5%, aided by a focus on higher-margin national grid/selected orders for the Accelerated Power Development and Reform Programme (APDRP) and growth off a lower base.

Areva T&D India’s EPS is expected to witness a CAGR of 32% over CY07-10E, versus that of ABB at 25%, with higher RoEs of ~40% versus ABB at ~30%. According to an article in the Economic Times, Areva T&D India has edged past ABB in the power T&D business in India.

BHEL in talks with Toshiba for transformer technology

BHEL is reported to be in talks with Toshiba for new technology in high capacity transformers and gas insulated sub-stations. It is too early to comment on the news and we would like to wait till the details are spelt out.

BHEL 'forges' JV with HEC

BHEL and Heavy Engineering Corporation (HEC) will sign a MoU for a JV on September 6, enabiling BHEL to use HEC's foundry forges plant. Big positive for BHEL as it would complement itw own efforts to increase capacity.