N-deal windfall: L&T eyes Rs 3,000 cr/yr orders over 15 yrs
Published on Friday, October 3rd, 2008 at 7:47 AMAuthor: admin (5507 Articles)
AM Naik, Chairman, Larsen & Toubro (L&T), feels the nuke deal stands to benefit Indian power companies. “The opportunity to the Indian industry is the order of magnitude of about Rs 2.5-3 lakh crore. When you divide that by 12-15 years, we are basically talking about Rs 15,000-20,000 crore per year. Of that, L&T is targeting roughly 25-30% of it per year. Let us say, Rs 3,000 crore roughly per year and more,†he says.
Here is a verbatim transcript of the exclusive interview with AM Naik on CNBC-TV18. Also watch the accompanying video.
Q: What is the opportunity for nuclear power in this country for L&T and the timeline since starting today? How long will it take for the first power plant to come up, thanks to this civil cooperation treaty?
A: There will be immediate relief for current projects, which are running at less than 50% capacity for not having got nuclear fuel. There will be about 2,500-3,000 megawatts (MW) extra power generation once the fuel is supplied. So we benefit for some plants right away and in the next six months to a year for the others.
Talking about the major nuclear programme that is being rumoured around as 40,000 MW, 10,000 MW is supposed to come from the heavy water-based power and 30,000 MW is supposed to come from other technologies.
The real issue is three-fold other than improving the utilisation of the existing power plant. One is that proper technology agreements have to be signed and that takes a long time because each one will try to protect its position. Then you need to locate at least three sides. There has been a lot of visits of all the three nuclear technology suppliers. These are, in this case, Westinghouse, General Electric, which is a boiling-water reactor and Areva (France). We need clarification on the role of Nuclear Power Corporation (NPC). Will they be involved in the overall programme management or will they act only as an owner in future? Though there will be a lot of activities in restructuring Nuclear Power Corporation.
Q: The other issue is the economics of nuclear power. The cost of setting up a nuclear power plant at least from the research preliminary research are twice than that of a conventional coal plant. The fix costs are high and therefore in the first few years nuclear power itself is going to be considerably more expensive than coal, which this country is abandon in. Is — considering that four-six years down the line, we are still not going to see too much deregulation in the state electricity boards — this power going to be much more expensive? Who is going to be interested in buying this power?
A: My information is a little different from what you have said because when heavy-water was produced by us from our own heavy-water plant, the NPC had very competitive rates of supplying electricity. Obviously the capital cost was much lower that time. But so as the capital cost of the thermal power and coal power has considerably increased from being Rs 3 crore per MW to Rs 6 crore per megawatt now with the current financing cost. The economics has considerably improved or worsened in both cases. So the relative gap is narrower than just merely what the capital cost suggests. My personal feeling is that nuclear power cost will be 1.7 times of that of current thermal power cost.
Q: We are talking much in the future now and we do not know what coal prices or financing cost will be then. But we have the Dabhol power plant and it is a clean energy plant. It is a gas fuel plant even though we have not been able to use that capacity in any sort of serious sense because the gas is difficult to get and it is difficult to get at the price at which the state electricity board wants to buy power. So when cheap coal-based power is available in the grid, most state electricity boards are inclined to buy that first and not anything else, do you really believe that addition of nuclear power to our grid will be successful when it comes to the consumption of power at viable cost?
A: First of all, coal is available only in the eastern part of India and very little in Karnataka i.e. Beradi. There’s little nickel lignite in Kutch with Gujarat, nobody else has got it. Therefore the cluster of power plants is coming up at the coal pithead level and nuclear will come up mostly in the west and the south where there is no fuel linkage available at the moment except for transporting it for 1,500 or 1,200 kilometres.
Q: What is the kind of opportunity L&T has identified in this entire space in terms of the thousands of crores of business that you can do when this sector finally opens up?
A: Let us look at 33,000 MW to be added, which they say will be added by 2020, or let’s even stretch it to 2025. I am taking seventeen years because two years anyway will go away in start-up. The nuclear power of 33,000 MW will roughly cost Rs 3,50,000-4,00,000 crore assuming that 25% import may take place of different components and technology. The opportunity to the Indian industry is the order of magnitude of about Rs 2.5-3 lakh crore. When you divide that by 12-15 years, we are basically talking about Rs 15,000-20,000 crore per year. Of that, L&T is targeting roughly 25-30% of it per year. Let us say, Rs 3,000 crore roughly per year and more.
Source : MoneyControl
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