The Trichy Complex of BHEL which comprise of the High Pressure Boiler Plant (HPBP) at Trichy, Seamless Steel Tube Plant (SSTP) at Trichy, Piping Centre at Chennai and Valves Plant at both Trichy and Govindwal (in Punjab) held a press conference on April 4, 2012 at Trichy, Tamil Nadu. Similarly the Ranipet complex which hosts the Boiler Auxiliary plant and overlooks the water business of BHEL held its press meet on April 5, 2012 at Vellor, Tamil Nadu. Likewise the Power Sector Southern Region (PSSR)of the company which overseas power project execution in four southern states as well as Orissa held its meet at Chennai on April 7, 2012.

The Trichy meet was addressed by A V Krishnan, Executive Director (Trichy Complex) but that of Vellor was addressed by Veeraraghavan, Executive Director (Ranipet) and that of Chennai was addressed by Anil Kumar Ghosh, CEO, PSSR. The key takeaways are:

Trichy Complex - Profitability to improve in FY13

Provisional sales turnover of BHEL's Trichy complex for the fiscal ended March 2012 stood at Rs 14600 crore, which translates into a growth of 17.8%. However the PBT on a higher base was lower by 4.1% to Rs 3120 crore. The PBT of FY2010-11 was escalated by about Rs 300 crore of one time impact due to change in policy related to provision of warranty obligation for earlier years. But for this the PBT would have grown by 5%.

Since the company and the country is going through technology transition (i.e. from subcritical to super critical) there is increase in shop production and despatch of supercritical orders which impacted the profit margin for FY12 in addition to higher material cost as well as price pressure due to heightened competition. Margin pressure on account of technology transition is a usual happening and this kind of pressure is earlier faced by the company when the country migrated to 500 MW subcritical sets. The pressure will ease gradually with technology absorption by the company. The unit expects the margin pressure on account of technology transition to ease to large extent this fiscal i.e. 2012-13 as the company has almost absorbed the technology.

Currently the company mastered/ got capability to design/engineer supercritical boilers to the extent of 100% without the help of Alstom. However on manufacturing, the company has to depend on Alstom to the extent of 30-40% since some components are still to be imported as the required quality raw material/ steel etc not available in India. In case of trouble shooting the capability of the company is yet to be tested. Once the first supercritical order of the company i.e. Barh project gets commissioned the company will get the opportunity to learn and it has to depend on Alstom till it masters that.

BHEL has already designed first indigenous 660 MW super critical boiler design without the aid of Alstom, the technology provider for the 3X660 MW Lalitpur project. Currently the company's capability is 100% iin case of 660 MW supercritical boiler. The supplies for Lalitpur project has already commenced. Already BHEL Trichy has successfully completed the conceptual design of an 800 MW advanced Ultra super critical steam generator and is working closely with IGCAR and NTPC to design, develop and build advanced Ultra Super Critical units as part of the National Technology Mission to reduce emissions.

PBT margin of Trichy Complex is expected to improve to over 24% in FY13 compared to about 21.4% in FY12.

Order backlog of Trichy Complex as end of March 2012 stand at Rs 28294 crore with order intake for 2011-12 being Rs 5456 crore.

Of the Boiler, Turbine & Generator (BTG) the TG segment is the one that is seeing aggressive pricing and pressure as the margin for that product is about 15% compared to already low margin of 8% for utility grade boilers. The price pressure is relatively lower for boilers compared to TGs. The aggressive pricing of newer players are driven by their entry strategy. Since the margin is already low at single digit in boiler, the prices are not expected to see steep fall.

On the other hand the margin of industrial boilers are around 15% and that is expected to see pressure.

The company sees strong export potential for boilers less than 60 MW with East Asia and South Africa turning more attractive. The company has already bagged orders in Indonesia, Belarus etc.

On domestic front the company also sees opportunity in coal washeries where the CFBC boilers of 80-100 MW will be more useful with washery rejects being the feedstock. The company has already made presentation to Coal India for putting up power plants for its proposed coal washeries on BOOT basis. Similarly non conventional energy i.e. biomass is also attractive.

Expansion of installed capacity of HPBP to 15000 MW from Rs 10000 MW in alignment with 20000 MW of power plant capacity per annum at corporate level has been completed. The 32000 MTPA greenfield power plant piping unit at Thirumayam, about 50 km away from Trichy has commenced operation and the formal commissioning of it will happen in April-May 2012. The modernisation of Valves plant is completed with all new major facilities getting commissioned.

The modernisation and expansion programme of SSTP is currently underway with the plant being temporarily closed. Under this M&E programme the capacity of SSTP will be doubled to 84000 MTPA. On completion and commencement of operation the SSTP plant will meet about 75% of the inhouse seamless steel tube requirement of the company. The M&E programme of SSTP is expected to be completed by November 2012. The company is expected to spend a capital expenditure of about Rs 150 crore in this regard.

Trichy complex is looking at nuclear reactor header, HRSGs in the nuclear segment.

Planned capex of BHEL Trichy for 2012-13 is Rs 300 crore compared to Rs 239 crore incurred in 2011-12. Of the Rs 300 crore capex apart from Rs 150 crore planned to be invested in SSTP and Rs 20 crore in balance equipment for Tirumayam piping plant the balance are for balance equipment at Trichy.

Ranipet Complex – Emerged L1 in NTPC's ESP orders worth Rs 200 crore

The Boiler Auxiliary Unit of BHEL is majorly engaged in manufacture of Electro Static Precipitator, Air Preheaters (APH)and Fans. In addition the Ranipet complex also overseas the water business of BHEL. In case of water business the company has GE as its technical collaborator. Under an agreement where GE will supply critical components of water treatment plants such as Membranes etc with BHEL taking up engineering and project execution and commissioning.

BHEL has emerged as L1 (lowest bidder) for supply of Electro Static Precipitator (ESP) for the power plants of Solapur STPP (2X660MW) and Mouda II (2X660 MW) both developed by NTPC. Both these projects are located in Maharashtra and ESP will be supplied by BHEL's Ranipet unit. The two orders aggregate to value of about Rs 200 crore with the former being worth about Rs 90 crore and latter worth about Rs 110 crore.

The Solapur and Mouda II power projects are part of NTPC's Bulk tendering of 11 sets of BTG of 660 MW rating. Since the award of BTG order is delayed due to legal tussle, the award of ESP too has been delayed even though it is tendered out as a separate package. According to Veeraragavan, NTPC is yet to float tenders for rest of the projects that is part of the bulk tendering.

The unit has developed large size Air Pre Heater (APH) for 660 MW supercritical sets in house for the Lalitpur power project. Since the development is made in-house there is no payment of royalty to Alstom. Similarly the unit has established full scale performance testing facility for higher size fans at Ranipet and this is only second such facility available in Asia. The company has for the first time done performance testing of higher size fans for 660 MW super critical boilers.

The unit's focus in 2012-13 apart from strengthening and improving productivity in core areas is to enlarge the new business such as water treatment and pollution abatement business (i.e. Flue Gas Desulphurization) segment.

The demand for Flue Gas Desulphurization (FGD) Systems in the country is expected to increase as the country is increasingly embracing supercritical technology. Most supercritical coal fired power plants, waste incineration plants and other industrial process emit flue gases that contains sulphur dioxide which are harmful to the environment. About 95% of the pollutants in Flue gas can be removed by properly treating the flue gas before it is emitted into atmosphere. The FGD systems are the one that is used to treat the flue gas. Since the pollution norms are getting stringent and sulphur mandate tightened the demand for FGD systems are expected to surge.

On thumbrule basis the FGD systems will cost about Rs 0.5 crore per MW. It already has one project on hand i.e. NTPC's Bongaigaon project.

On water side the company has already commissioned two RO-DM plants at Bellary TPS (unit II) and Pragait power project at Bawana with the membranes supplied by technology partner with the engineering and project management capabilities of BHEL. The company has another 5-6 bids under pipeline and expected the order to kick in soon.

Even in power projects where BHEL is the EPC contractor the unit has to compete with other players for water orders.

The company has already floated Expression of Interest for technology partner for manufacture of WTG, which is likely to be manufactured at Ranipet.

The unit is poised to register a sales turnover of Rs 5000 crore in FY2012-13 and of which about Rs 100 crore is to come in from new business verticals of Water and FGD. The share of water in FY12 is about Rs 60-70 crore.

Power Sector Southern Region – Hopes that Udankudi JV TPS is still alive

Lower sales in FY12 is largely on account of slippage/delay in commissioning of handful of projects. The company expects sales of about Rs 1900 crore in FY2012-13.

Power capacity commissioned in 2011-12 by BHEL PSSR stood about 2300 MW compared to 1807.5 MW in 2010-11. But the same for 2012-13 is expected to be about 4249.5 MW out of the total capacity under execution of about 22596 MW. Of the total capacity under execution about 15970 MW is thermal project, 1522 MW is industrial and balance are Hydel and Nuclear.

Udankudi Power Project – Recently the TN Government cancelled the JV agreement stating tardy progress of this JV between BHEL & TNEB. However the company has written back to GoTN stating that going for fresh tender will further delay the commissioning of project beyond the deadline of Dec 2015 and is hopeful of getting the JV back on track.

Neyveli 2X500MW TPS I replacement project - The company didn't participate in the earlier tender of Neyveli Lignite Corporation for this project as the tender calls for beater mill technology to be used. But with the Ansaldo Caldaie India backing out, only two other European players, who do not have any experience in Indian lignite projects, are left in the fray. Thus the company expects fresh tender in this regard with modification in tenders which is suitable for the company.

As far as 2X800 MW Yeramaras power project and 1X800 MW Edlapur Power project at Karnataka are concerned the company has mandate for supply of BTG and Civil from Raichur Power Corporation(RPCL), the JV company between Karnataka Electricity Board and BHEL. RPCL has already placed the BoP order for this project with BHEL's Industrial Systems Group (ISG) at Bangalore, which is a leading player in integration of Coal Handling, Ash Handling plants and other Balance of Plant items. However ISG is yet to place the order for CHP, AHP, DM plants etc with respective vendors.