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BGR-Hitachi venture to make turbines

Calcutta, Aug. 6: The BGR Energy group has inked two joint venture pacts with Hitachi to manufacture super critical steam turbines and generators in India at a cumulative investment of Rs 4,400 crore.

Hitachi has picked up a 26 per cent stake in BGR Turbines Company and 30 per cent in BGR Boilers to develop the facilities by 2012 in Tamil Nadu.

Another Japanese major, Toshiba Corporation, has inked an agreement with Sajjan Jindal’s JSW Steel to set up a turbine and generator unit near Chennai.

BGR and Hitachi will make turbines for 660, 800 and 1,000 mega watts, joining league with Bhel, L&T and Toshiba-JSW.

While Rs 3,000 crore will be invested in the boiler project, the rest Rs 1,400 crore will be used for turbines. The projects will be funded in a 70:30 debt-equity ratio.

A BGR official said the group would not need to raise fresh capital for the project. “We have a healthy cash balance and strong internal accruals,” he said.

Each plant will have capacity to manufacture five units of boilers and turbines every year. While the turbine company will employ 1,200 people, the boiler unit will take in around 2,100 people.

Commenting on the development, B.G. Raghupathy, chairman and managing director of BGR Energy Systems, said: “We are currently executing EPC (engineering, procurement and construction) contracts for three units of 600 mega watt and we believe that this strategic alliance with Hitachi will ensure that we have a reliable and secured source for BTGs (boiler, turbine-generator) to meet all our EPC project requirements.”

BGR Energy Systems, established in 1985, is one of India’s leading players in the power industry. It is the second-largest EPC contractor in this sector with an order book of Rs 10,320 crore by the end of the last fiscal.

BGR, which clocked Rs 3,069-crore turnover in 2009-10, manufactures 22 products for the power industry and exports to various countries.

The company’s stock reacted positively to the development, going up 1.84 per cent to Rs 797.8 in a flat Mumbai market.

Hitachi’s investment in the venture underlines the global interest in India’s potential in thermal power generation. It also points to the shift in the scale of power generation business from 250mw-300mw sizes to a super critical level of 660-1,000 mega watt. Most of the new projects being announced in India as well as in Bengal are looking at 660mw to 800mw units.

However, BGR and its peers would have to fight it out with Chinese companies who already have made inroads into the power equipment market through competitive pricing.

But there has also been complains about the performance of the Chinese boiler turbines and post sales service.

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