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BGR Energy Systems held a conference call on Aug 10, 2010 to discuss about its new JV with Hitachi for supercritical BTG. In the conference call the company is represented by V R Mahadevan, Director (Technologies), R Ramesh Kumar, Prestnt Corporate, P R Easwar Kumar, CFO.
Key takeaways of the conference Call
On Aug 6, 2010 the company (i.e. BGR Energy Systems) has signed two joint venture agreements with Hitachi Limited, Japan and Hitachi Power Europe GmbH, Germany, a Hitachi subsidiary. The first joint venture with Hitachi, Japan is for design, manufacture, installation and commissioning of supercritical steam turbines and generators for thermal power plants while the second joint venture with Hitachi Power Europe GmbH, Germany would be for supercritical steam generators for thermal power plants.
Both Hitachi (Japan) & Hitachi Power Europe have reference for 660 MW, 800 MW and 1000 MW supercritical thermal power plants. The JV will meet all the pre qualification requirement of NTPC including the boiler re-tender (for 11 units).
Aggregate investment for setting up boiler and turbine manufacturing facility is estimated at Rs 4400 crore. The facility will come up in Tamil Nadir and the company has identified three land parcels where it already has some lands and it will finalize one.
The equity infusion in these two companies by BGR Energy will be about Rs 960 crore.
BGR Boilers is the joint venture company (with Hitachi Power Europe GmbH) for the manufacture of boilers, where BGR Energy will hold 70% of the stake and the Hitachi Power Europe will hold 30% of the stake. The company's scope includes design, engineering, manufacture, erection/installation and commissioning. Total investment in this company is Rs 1400 crore. The plant will be coming up in Tamil Nadu and will employ about 2100 people and will have an installed capacity of 3000 MW to 5000 MW per annum or 5 units. Production will commence in December 2012.
BGR Turbines Company is the joint venture company for manufacturing of steam turbines, where BGR Energy will hold 74% of the equity and balance 26% by Hitachi of Japan. The JV will have its manufacturing facility in Tamil Nadu and will commence production in Dec 2012. The plant will have capacity to produce 5 units of 660/800/1000 MW or 3000-5000 MW per annum. The company will employ about 1200 employees and comes up at an estimated cost of Rs 3000 crore, which will be funded with 70% debt and 30% equity.
With the establishment of these two ventures, BGR Energy will be the third company in India (after BHEL and L&T) to able to offer the complete boiler, turbine-generator (BTG) solution to the Indian Power Industry.
The EBITDA margin (post royalty) will be around 17-18%.
Hitachi of Japan is one of the largest conglomerates in the world with approximately 360,000 employees worldwide with consolidated revenue of USD 96.4 billion for the year ended March 31, 2010.
Hitachi Power Europe GmbH based in Duisburg (Germany) is a subsidiary of Japan's Hitachi and is is one of the market and technology leaders. The energy plant constructor also supplies key components such as utility steam generators, environmental technology equipment and pulverizers. Has done 116 GW of power plants and has reference upto 1000 MW supercritical boilers. Its technology is from Deutch Babcock.
Two different JV one each for boiler and turbine is necessitated because the technology for turbine rest with Hitachi of Japan and steam generator is with Hitachi Power Europe. Unless we have JV with technology holder the JV will not pre-qualify for NTPC tenders.
Hitachi is committed and serious with Indian market and doing business through the JV with BGR. With 26-30% stake they have a say in the business. The bid mandates only valid technology tie-up and the JV will fulfil the condition.
The JV provides for exclusive technology for Indian market. No one can compete for Indian order with Hitachi Technology.
Cash at hand for BGR Energy is 1000 crore and of which about Rs 500 crore is towards margin money and thus the free cash is about Rs 500 crore.
Order finalisation is expected soon on the two EPC bids the company made in Rajasthan.
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