After last year’s weak order inflow for the power segment, L&T on Friday announced a large power contract win from THDC. This is L&T’s second power plant contract in this financial year, and the conglomerate is hopeful more power tenders will be finalised this year.
L&T-MHPS Boilers has bagged a large order from THDC India for the construction of 1,320 megawatt (Mw) power plant in Uttar Pradesh, Larsen & Toubro (L&T) said in a press statement on Friday. THDC is a joint venture of Centre and Uttar Pradesh government.
L&T-MHPS Boilers is a joint venture of L&T and Mitsubishi Hitachi Power Systems (MHPS) of Japan. The company did not disclose the value of the project, but said it was in the range of Rs 2,500 crore to Rs 5,000 crore.
“Last year, no big power projects were awarded, there was a big lull,” said Shailendra Roy, chief executive officer (CEO), managing director (MD) and whole-time director of L&T Power. Roy estimated orders for 10,000 Mw of thermal capacity should be finalised this financial year in order to meet the country’s future electricity demand.
This is the second power engineering, procurement and construction (EPC) project that L&T has won in the current financial year. In June, L&T informed the exchanges of winning a contract worth more than Rs 7,000 crore to construct a power plant in Bihar for SJVN.
“Competition has been very aggressive. However, competitors have realised unnecessary lowering price does not help,” Shailendra Roy, CEO & MD, L&T Power.
Commenting on the bidding seen for power contracts, Roy said: “Competition has been very aggressive. However, competitors have now realised unnecessary lowering price does not help.”
At present, L&T’s power order book stands at Rs 19,600 crore, of which Rs 1200 crore worth of order are from Bangladesh. As of June, L&T’s total order book was at Rs 2.94 trillion. In the quarter ended June, the power segment reported earnings before interest, taxation and depreciation (Ebitda) margins of 3.3 per cent, lower from 4.1 per cent reported in the same quarter a year ago. Net revenue from this business also fell 48 per cent to Rs 560 crore, from Rs 1,080 crore reported a year back.
“Revenue decline reflects low opening order book,” L&T said in its June quarter investor presentation.
The pick-up in power tendering activity is also reflective in the segment contribution to L&T’s overall order book. In the June quarter, power segment's contribution to L&T’s overall order book was at 4.4 percent, higher from 2.4 per cent in FY19.
The order win from THDC includes design, engineering, manufacture, supply, erection, and commissioning of steam generator and associated packages for THDC’s 2x660-Mw Khurja Super Thermal Power Project in Bulandshahar, Uttar Pradesh.
The completion period for the first unit of this project is 46 months.