Strategies of a Power generation equipment manufacturing company – Current scenario

Any strategy adopted by a company has to take into account the economic environment in which it operates. The global macroeconomic environment now appears healthy with a growth rate of around 5% during last 3 years and may moderate somewhat during 2008. Growth is expected to remain strong among emerging markets and developing countries. These trends have been driving the demand for capital goods.

The Indian economy continues on its robust growth trajectory, which began some 3 years ago and the buoyancy in the domestic economy makes about optimistic long term prospects. The acceleration in growth is currently being driven by the continued momentum in the services and manufacturing sectors. However, there are areas of some concern. Interest rates have moved up and there has been an appreciation of the rupee. Government has been taking steps to contain inflation. Despite these concerns, Indian economy is expected to maintain its growth momentum as high priority is being accorded to the development of infrastructure including power sector in the country and capacity additions in generation coupled with distribution reforms and rural electrification are the focus areas. These developments in both global and domestic markets have been providing significant opportunities for Power generation equipment manufacturing companies.

Let us illustrate the example of a company group in India that is BHEL. In 2006-2007, BHEL commissioned 7,863 MW of power plant equipment comprising 4,791 MW utility and captive sets in the country and 1,332 MW in overseas markets. In addition, 1,740 MW was also added to the national grid by erecting and commissioning non BHEL sets, including part supplies.

A major technical achievement was the re-commencing of 740 MW Gas-based Ratnagiri Block which had been inoperative.

The country is planning to add 78,000MW in the XI plan and over 85,000 MW in the XII Plan period. This means average capacity additions of around 15,000 to 17,000 MW per annum during these two plan periods. Higher rating thermal sets with super critical parameters, ultra high voltage transmission systems, advance class gas turbines and higher rating nuclear power plans are planned to be introduced during the XI plan and beyond. Capacity creation in future would demand up gradation to higher range equipment, faster capacity augmentation and shorter cycle times with better project execution cycles. Power Sector in the country has been a witness to several reforms oriented to improving the investment climate in the sector.
Main plant equipments manufactured by companies like BHEL constitute only about 50% of the total power plant and the rest includes balance of plant equipment. There has to be commensurate expansion of capacities in the country for other plant items by the Indian industry. Growing demand for large power capacity additions in the country would warrant that the Power Plant Equipment manufacturing Industry should gear up to the challenge and meet the requirements of the country.

BHEL’s strategy is to increase its size of operations supported by phased manufacturing capacity expansion where the 10,000 MW p.a. will be completed by Dec’07. Additionally the manpower is also being ramped up in a commensurate and timely manner. In order to meet the surge in demand and manufacturing load, critical machines are being operated round the clock on three shift operations. The company has also taken broad steps like shift in operational focus from Product to Project and implementation of effective Project Management Systems with necessary organizational infrastructure

The Company has tied up Technology for higher rating (up to 1000 MW) steam generator sets (Boilers) based on superficial technology, with M/s Alstom, France and M/s Siemens AG Germany for Steam Turbine Generator sets. Necessary initiatives are being put in place to gain from the emerging opportunities in Transmission & Transportation business segments.

The issue of Global Climatic Change is attracting the attention of everybody as it affects all parts of society. Many responsible companies have made it as a part of their strategy and are continuously engaged in efforts to remain in step with contemporary technology trends in the international arena keeping in view the need to conserve natural resources and improve the global environment.

Manufacturing Solar Photo Voltaics, hydro electric energy equipments, hydrogen energy technologies especially in the area of Fuel Cells can be some of the measures that can be developed and some of the equipment manufacturing companies are already on the path of advanced technology and continuous improvement.

Indian Power Sector is going to be leveraged for Spares & Services business which Power sector companies see as the next growth strategy for the company to enhance the revenue from this segment.