The Hindu Business Line : L&T may be well placed to capture new orders

Larsen & Toubro’s announcement of a second tie-up with Mitsubishi Heavy Industries (MHI) of Japan is an indication that the company is keen on providing a one-stop solution provider for power plants in India. L&T has entered into a joint venture with MHI for setting up a manufacturing facility to supply supercritical steam turbine and generator facility in India.

Investment

The proposed venture (the shareholding of which is not known) will entail an investment of Rs 880 crore and will have products catering to plant capacities ranging from 500-1000 MW. The facility is expected to commence operation from the later part of financial year 2008-09.

Earlier this year, the company had tied up with the same partner for a super critical boiler plant, also expected to become operational during the same period as its new plant. Once both the above plants go on stream, L&T would be able to provide an integrated product (boilers, steam turbine and generators) that would be the key component to energy efficient coal-based power plants. Such an integrated solution was, so far, locally offered only by BHEL.

Keen on production

The key point to be noted here is that L&T has indicated commencement of production by late 2008-09. If so, given BHEL’s mounting order book and capacity constraints, L&T may be well placed to capture new orders for projects that require quick delivery.

Lack of local equipment makers in this space has led to power plants looking at Chinese and Korean equipment players as options.

Given L&T’s established presence and Mitsubishi’ strength in power solutions, Indian power companies may favourably view this new venture by L&T.

Reports that L&T is one of the bidders for the Krishnapatnam Ultra Mega Power Projects, also reveals a new aspect to this venture.

Any success in bidding for the UMPP may help kick-start the equipment venture as a backward integration measure.

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