A delay by Bharat Heavy Electricals Ltd, or Bhel, in meeting its order book commitments may cost the company severely as steel prices have escalated by 40% since the fixed price contracts were signed.
Since Bhel cannot pass on the rise in material costs to the consumer, the power equipment manufacturer has no option but to absorb the increase in input costs or mitigate part of it through a slew of cost control measures.
Heading north: A steel processing unit in Hisar, Haryana. Though steel price will stabilize as the government has introduced an export tax, it will hurt the profit margins of companies such as Bhel, analysts say. (Photo: Rajeev Dabral/Mint)Bhel has an annual steel requirement of 600,000 tonnes.
“The sharp rise in steel prices will affect 60% of our present order book. Most of the times we work on fixed price contracts. When we had signed these orders (in 2003), the steel prices were at Rs17,000 per tonne. Today they are at Rs24,000 per tonne. We being a PSU (public sector undertaking) there is no provision to change the contract provisions for us or our subcontractors,” said a company executive, who is close to the developments but did not wish to be identified.
The company with a manufacturing capacity of 10,000MW per annum has a present order book position of 31,923MW. Bhel posted a net profit of Rs2,815 crore on a revenue of Rs21,608 crore in 2007-08 and ended the year with an order book worth Rs50,265 crore.
The executive, however, maintained that the profit margins at the company may not impact in the short run due to various steps taken by Bhel, but if steel prices did not soften then it was bound to have a long-term impact on the company’s profits.
“With the steel prices remaining at the current levels and if the power generation equipment prices remain at Rs4 crore per MW, our margins will certainly come under pressure. We are trying to contain costs, cutting down the material requirement. In order to take care of sharp escalation in steel prices we have an agreement with steel manufacturers in the country, but it is only for a year,” the executive said.
However, analysts maintain that Bhel would take a hit even in the short term.
more at:
http://www.livemint.com/2008/05/04224119/Escalating-steel-prices-likely.html
Sunday, May 4, 2008
Friday, May 2, 2008
BHEL gets award from ICWAI
Bharat Heavy Electricals on Friday said it has won the 'ICWAI National Awards for Excellence in Cost Management 2007.'
The annual award is presented by the Instititute of Cost and Works Account of India (ICWAI) to corporate entities for excellence in cost, quality and delivery.
During the year, Bhel recorded the highest-ever turnover of Rs 21,608 crore, crossing the Rs 20,000 crore mark for the first time, the company said in a release.
The company aims to become a Rs 45,000-crore firm by 2011 -12 and has unveiled a 'Strategic Plan 2012' that would enable it to grow at an annual growth rate of 20 per cent.
Recently it joined hands with country's largest power producer NTPC Ltd to set up a joint venture to carry out engineering-procurement-construction (EPC) contracts for power Infrastructure projects as well as manufacture and supply of equipment in India and abroad.
source:
http://www.hindu.com/thehindu/holnus/006200805021524.htm
The annual award is presented by the Instititute of Cost and Works Account of India (ICWAI) to corporate entities for excellence in cost, quality and delivery.
During the year, Bhel recorded the highest-ever turnover of Rs 21,608 crore, crossing the Rs 20,000 crore mark for the first time, the company said in a release.
The company aims to become a Rs 45,000-crore firm by 2011 -12 and has unveiled a 'Strategic Plan 2012' that would enable it to grow at an annual growth rate of 20 per cent.
Recently it joined hands with country's largest power producer NTPC Ltd to set up a joint venture to carry out engineering-procurement-construction (EPC) contracts for power Infrastructure projects as well as manufacture and supply of equipment in India and abroad.
source:
http://www.hindu.com/thehindu/holnus/006200805021524.htm
Thursday, May 1, 2008
Bhel assured of contracts in central utilities
Bhel has been assured part of contracts for supplying ‘supercritical’ generation plants, of capacities ranging from 660 to 800 mw, as opposed to 250-500 mw, to Central generation utilities like NTPC and Damodar Valley Corporation.
NTPC will now go for bulk order for the first lot of 10 such plants. According to the guidelines approved by Prime Minister Manmohan Singh, NTPC will first offer an international competitive bidding for the equipment, in which Bhel will also participate.
In case Bhel does not emerge as the winner, it will have to match the lowest price quoted by the winner for getting orders, the ratio of which has been defined as per the capacity of the plants.
The guidelines say NTPC will float bulk tenders for seven units of 660 mw each. The lowest bidder will get orders for four plants, while Bhel if it is not the winner will get orders for three plants at the winning price.
It also said NTPC will work on four units of 800 mw each at Dharipalli in Orissa and Damodar Valley Corporation on two plants of 800 mw at Kodarma in Jharkhand so that bids for them can be invited. Bhel has been assured two units if it is not the winner.
Bhel has also been asked to firm up its joint venture with the Tamil Nadu utility for two 800 mw plants in Udangudi and pursue its bids for two units of 800 mw for the Krishnapattanam ultra-mega power project in Andhra Pradesh. This is aimed at ramping up its capacity in the 800 mw range.
NTPC and Bhel have also been asked to finalise two turbine generators of 660 mw for the Barh project in Bihar.
All contracts will come with the rider that the supplier will have to set up manufacturing facilities in India. In cases where a manufacturer already has capacity here, it will have to ramp up in accordance with the work orders
source:
http://timesofindia.indiatimes.com/Business/India_Business/Bhel_assured_of_contracts_in_central_utilities/articleshow/3003141.cms
NTPC will now go for bulk order for the first lot of 10 such plants. According to the guidelines approved by Prime Minister Manmohan Singh, NTPC will first offer an international competitive bidding for the equipment, in which Bhel will also participate.
In case Bhel does not emerge as the winner, it will have to match the lowest price quoted by the winner for getting orders, the ratio of which has been defined as per the capacity of the plants.
The guidelines say NTPC will float bulk tenders for seven units of 660 mw each. The lowest bidder will get orders for four plants, while Bhel if it is not the winner will get orders for three plants at the winning price.
It also said NTPC will work on four units of 800 mw each at Dharipalli in Orissa and Damodar Valley Corporation on two plants of 800 mw at Kodarma in Jharkhand so that bids for them can be invited. Bhel has been assured two units if it is not the winner.
Bhel has also been asked to firm up its joint venture with the Tamil Nadu utility for two 800 mw plants in Udangudi and pursue its bids for two units of 800 mw for the Krishnapattanam ultra-mega power project in Andhra Pradesh. This is aimed at ramping up its capacity in the 800 mw range.
NTPC and Bhel have also been asked to finalise two turbine generators of 660 mw for the Barh project in Bihar.
All contracts will come with the rider that the supplier will have to set up manufacturing facilities in India. In cases where a manufacturer already has capacity here, it will have to ramp up in accordance with the work orders
source:
http://timesofindia.indiatimes.com/Business/India_Business/Bhel_assured_of_contracts_in_central_utilities/articleshow/3003141.cms
Wednesday, April 30, 2008
JPMorgan-20080204-BHEL
JP Morgan's document on BHEL is a must read
If you are intersted in tracking BHEL, visit:
http://www.scribd.com/full/2052395?access_key=key-rtgaim3o3tavbcvlrc
If you are intersted in tracking BHEL, visit:
http://www.scribd.com/full/2052395?access_key=key-rtgaim3o3tavbcvlrc
Tuesday, April 29, 2008
NTPC, Bhel JV to focus on Africa
The joint venture formalized on Tuesday by state-owned generation utility NTPC and heavy machine manufacturer Bhel for planning, designing and building power plants will raise domestic power equipment-making capacity and provide a vehicle to offer package deals for grabbing opportunities in Africa, West and South-East Asia.
The joint venture aims at investing Rs 5,000 crore in its operations and is targeting capacity to supply equipment for generating 5,000-6,000 mw. The investment will be made in the debt-equity ration of 70:30. The deal was signed in the presence of power minister Sushil Kumar Shinde and heavy industries minister Santosh Mohan Deb.
"This should have been done earlier," junior power minister Jairam Ramesh said debunking criticism that such ventures will dilute Bhel's domain expertise. "It will add a third player in the country after Bhel and L&T. Bhel's 15,000 mw and L&T's 4,000 mw capacities will remain. This venture will add another 5,000-6,000 mw...there will be more competition."
"This vehicle can now offer a package deal to countries in Africa and West Asia. Bhel already has some capacity in Africa and is eyeing more contracts." he said
source:
http://timesofindia.indiatimes.com/Business/India_Business/NTPC_Bhel_JV_to_focus_on_Africa/articleshow/2996854.cms
The joint venture aims at investing Rs 5,000 crore in its operations and is targeting capacity to supply equipment for generating 5,000-6,000 mw. The investment will be made in the debt-equity ration of 70:30. The deal was signed in the presence of power minister Sushil Kumar Shinde and heavy industries minister Santosh Mohan Deb.
"This should have been done earlier," junior power minister Jairam Ramesh said debunking criticism that such ventures will dilute Bhel's domain expertise. "It will add a third player in the country after Bhel and L&T. Bhel's 15,000 mw and L&T's 4,000 mw capacities will remain. This venture will add another 5,000-6,000 mw...there will be more competition."
"This vehicle can now offer a package deal to countries in Africa and West Asia. Bhel already has some capacity in Africa and is eyeing more contracts." he said
source:
http://timesofindia.indiatimes.com/Business/India_Business/NTPC_Bhel_JV_to_focus_on_Africa/articleshow/2996854.cms
BHEL plans to increase R&D expense to Rs 900 cr
Bharat Heavy Electricals Ltd (BHEL) has planned to raise its Research & Development (R&D) expense to Rs 900 crores by 2011-12, its Group General Manager, Dr A L Chandraker said on Tuesday.
The company has spent a record Rs 465 crores on R & D during FY 07-08 which was 83 per cent more than the previous year Rs 239 crores, he said.
Chandraker said that BHEL achieved a turnover of Rs 2936 crore through company wide commercialisation of products and systems developed through in house R & D which amounts to Rs 13.6 per cent of the total company's business.
BHEL has filed 175 patents and copyrights during the year enhancing the patents and copyrights to 664 which are in productive use in the company's business, he said.
Highlighting the achievements during the FY 2007-08, Chandrakar said that a new centre for intelligent machines and robotics (CIMAR) was established at the corporate R & D. Besides several programmes were initiated to accelerate development in nano-technology and ceramic filters, he added.
He informed that for the first time in the country BHEL has commissioned a gas fired spray pyrolysis system for pilot scale synthesis of nano materials at the R & D of Ceramic Technological Institute at Bangalore.
It has also developed a permanent compact 65KV magnet generator which is suitable as pilot exciter for 500 MW as well as contemporary 800 MW turbogenerator, he added.
Source
http://economictimes.indiatimes.com/News_by_Industry/BHEL_plans_to_increase_RD_expense_to_Rs_900_cr/articleshow/2996125.cms
The company has spent a record Rs 465 crores on R & D during FY 07-08 which was 83 per cent more than the previous year Rs 239 crores, he said.
Chandraker said that BHEL achieved a turnover of Rs 2936 crore through company wide commercialisation of products and systems developed through in house R & D which amounts to Rs 13.6 per cent of the total company's business.
BHEL has filed 175 patents and copyrights during the year enhancing the patents and copyrights to 664 which are in productive use in the company's business, he said.
Highlighting the achievements during the FY 2007-08, Chandrakar said that a new centre for intelligent machines and robotics (CIMAR) was established at the corporate R & D. Besides several programmes were initiated to accelerate development in nano-technology and ceramic filters, he added.
He informed that for the first time in the country BHEL has commissioned a gas fired spray pyrolysis system for pilot scale synthesis of nano materials at the R & D of Ceramic Technological Institute at Bangalore.
It has also developed a permanent compact 65KV magnet generator which is suitable as pilot exciter for 500 MW as well as contemporary 800 MW turbogenerator, he added.
Source
http://economictimes.indiatimes.com/News_by_Industry/BHEL_plans_to_increase_RD_expense_to_Rs_900_cr/articleshow/2996125.cms
Monday, April 28, 2008
NTPC-BHEL venture eyes equipment manufacturing
The new BHEL-NTPC joint venture could virtually create a brand new player in the equipment manufacturing space in the country.
The new venture, christened NTPC-BHEL Power Projects Pvt Ltd., is likely to aim at setting up greenfield facilities with an annual capacity for manufacturing generation sets totalling 5,000-MW by 2012.
The venture could set up manufacturing base across three possible sites — Visakhapatnam for boilers, Pune for turbines and a possible site in West Bengal for balance-of-plant equipment, according to Government sources.
“BHEL is set to take over Visakhapatnam-based Bharat Heavy Plate and Vessels Ltd. and hence that could be the logical location for making boilers.
The engineering hub of Pune could well be the location for manufacturing turbines while possible sites in West Bengal are being considered for setting up a facility for balance-of-plant equipment, including coal handling plants,” a Government source involved in the exercise said.
The venture, which is set to be launched on Tuesday, is scheduled to take a final call on the locations in the due course.
Having been initially envisaged with the specific mandate to take up engineering, procurement and construction (EPC) contracts in India and abroad, the venture plans to spend up to Rs 10,000 crore through a combination of debt and equity for kicking off equipment manufacturing operations. The EPC mandate for the new venture includes plant engineering, project management, quality insurance, quality control, procurement, logistics, site management, erection and commissioning services.
“NTPC Ltd. and BHEL intend to work jointly to complement their respective strengths through formation of the JV.
“Considering the large capacity addition plan in the country during the Eleventh and Twelfth Five Year Plans, there is a need to expand the domestic power equipment manufacturing capability as well as to strengthen the related manufacturing activities including Balance of Plant etc.
“NTPC Ltd. and BHEL intend to leverage their respective strengths and synergies to set up manufacturing facilities of energy related equipments for generation of power and also for taking up EPC of power plants and other infrastructure projects,” an official said.
Hitherto, NTPC, as a generation utility, and BHEL, as an EPC contractor, have worked together on several domestic projects earlier, though without a formal partnership in place.
BHEL has designed and manufactured equipment that accounts for about 70 per cent of NTPC’s current installed capacity.
Source;
http://www.thehindubusinessline.com/2008/04/29/stories/2008042950260300.htm
The new venture, christened NTPC-BHEL Power Projects Pvt Ltd., is likely to aim at setting up greenfield facilities with an annual capacity for manufacturing generation sets totalling 5,000-MW by 2012.
The venture could set up manufacturing base across three possible sites — Visakhapatnam for boilers, Pune for turbines and a possible site in West Bengal for balance-of-plant equipment, according to Government sources.
“BHEL is set to take over Visakhapatnam-based Bharat Heavy Plate and Vessels Ltd. and hence that could be the logical location for making boilers.
The engineering hub of Pune could well be the location for manufacturing turbines while possible sites in West Bengal are being considered for setting up a facility for balance-of-plant equipment, including coal handling plants,” a Government source involved in the exercise said.
The venture, which is set to be launched on Tuesday, is scheduled to take a final call on the locations in the due course.
Having been initially envisaged with the specific mandate to take up engineering, procurement and construction (EPC) contracts in India and abroad, the venture plans to spend up to Rs 10,000 crore through a combination of debt and equity for kicking off equipment manufacturing operations. The EPC mandate for the new venture includes plant engineering, project management, quality insurance, quality control, procurement, logistics, site management, erection and commissioning services.
“NTPC Ltd. and BHEL intend to work jointly to complement their respective strengths through formation of the JV.
“Considering the large capacity addition plan in the country during the Eleventh and Twelfth Five Year Plans, there is a need to expand the domestic power equipment manufacturing capability as well as to strengthen the related manufacturing activities including Balance of Plant etc.
“NTPC Ltd. and BHEL intend to leverage their respective strengths and synergies to set up manufacturing facilities of energy related equipments for generation of power and also for taking up EPC of power plants and other infrastructure projects,” an official said.
Hitherto, NTPC, as a generation utility, and BHEL, as an EPC contractor, have worked together on several domestic projects earlier, though without a formal partnership in place.
BHEL has designed and manufactured equipment that accounts for about 70 per cent of NTPC’s current installed capacity.
Source;
http://www.thehindubusinessline.com/2008/04/29/stories/2008042950260300.htm
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