BGR Energy Systems to enter joint venture with Japanese firm Hitachi Ltd for manufacture of power equipment in India

In an announcement Friday, BRG Energy systems said it plans to establish two joint ventures with Hitachi Ltd for the manufacture of power equipment in India. The Friday pronouncement said BGR Energy Systems and the Japanese firm will go into joint ventures at an investment of $956 million, about Rs 44 billion. Reports over the deal had emerged early last week indicating that BGR would be making the announcement on Friday.

The deal is expected to grant Hitachi added presence in India’s growing power market. On its part though, BGR said it had gone into the deal in order to manufacture energy efficient steam turbines and generators to bolster in Indian business. However, BGR also revealed that it will be establishing a different joint venture with the Japanese firm’s European arm, Hitachi Power Europe GmbH for the manufacture of energy efficient boilers in India.

In the joint venture, BGR Energy will control 74% in the turbine and a further 70% in the boiler joint venture. The remainder of the stakes in the two joint ventures will be held by the Japanese firm, BGR said. India’s power industry has been the centre of attraction for a number of international players seeking to capitalize on the country’s power capacity growth plans.

The Indian government is planning to grow its capacity by the addition of 100,000 megawatts during 2012-2017 to its existing capacity of 166,366 megawatts through partnerships with domestic Indian firms. Partnerships existing currently between Indian firms and foreign major players include Mitsubishi Heavy Industries and Toshiba Corp from Japan, Alstom from France and SPX Corp and McDermott’s unit Babcock &amp. Indian companies in such JV’s include L &amp, T Power, JSW Energy, Bharat Forge and Thermax.

BGR Energy Systems had earlier gone into a technical collaboration agreement with the Japanese firm for the construction of supercritical steam turbines and generators. BGR shares traded at 810 rupees with the announcement, marking an increase of 3.4% after peaking at 814 rupees after the announcement, the highest in two weeks. On its part, the Japanese firm’s shares closed 0.54% on the Tokyo Stock Exchange, before the announcement was made.

The first JV with Hitachi Ltd, 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, is for supercritical steam generators for thermal power plants, a company statement said.

8 Aug 2010