How BHEL stands to gain from the power ministry’s new equipment advisory

How BHEL stands to gain from the power ministry’s new equipment advisory

There appear to be sunny days ahead for India’s largest power equipment manufacturer Bharat Heavy Electricals Ltd. (BHEL) which has been struggling with a broader slowdown in new orders for long. The power ministry has just extended an existing advisory that mandates state-run generators to insist on phased domestic manufacturing plan from supercritical equipment suppliers.

Experts say the new guideline on indigenous manufacturing of supercritical equipment that also includes doing away with the Deed of Joint Undertaking (DJU) in case certain conditions are met is a major positive for the domestic Boiler-Turbine-Generator (BTG) manufacturers. “This advisory will have a trickle down benefit on the profitability of BTG manufacturers with a lag of around 1.5-2.5 years as the order execution cycle for BHEL is 36-48 months,” Vivek Jain, Associate Director at research firm India Ratings told ETEnergyWorld. The Cental Electricity Authority (CEA), the power ministry’s technical planning wing, has extended the earlier advisory for three years through October 2018. The advisory is applicable only to central and state utilities and the private sector firms are free to choose from the BTG suppliers. Analysts say the private sector’s participation will remain muted since they have been hit the most owing to muted demand and lack of Power Purchase Agreements (PPAs).

Not surprisingly, the Plant Load Factor (PLF) of private sector coal-based plants has slumped to 56.3 per cent in the nine months ended December 2016 from 83.9 per cent in 2009-10. Therefore at a time when bulk of the fresh capacity orders will come from the central and state utilities, such an extension in the timelines is positive for BTG manufacturers, experts say.Read More…

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