L&T to foray into power

Engineering and construction giant Larsen & Toubro (L&T) is planning to foray into power generation.

The company's initial plan is to produce hydel power. It has already made bids for three small hydropower projects in Himachal Pradesh.

K V Rangaswamy, senior vice-president and member of the board of directors, L&T, said, "We have made bids for three projects in HP on a BOT (build, operate and transfer) basis with the intention of running the plant ourselves, post-construction. Starting next year, we will be actively bidding for more such projects."

Initially, L&T intends to start with smaller projects of up to 250 megawatt (mw). "As our experience grows, we plan to handle bigger projects. Ideally, we would consider any project that offers a 20-22 per cent return on equity," he said.

As part of the 11th plan, the government has targeted 51,000 mw of power from hydroelectric projects, with a majority of the projects slated for the upper riperian states of the north-eastern region.

Rangaswamy said while bidding the company would also take into consideration the location of the project, preferring easier and better connected states such as HP, at least initially. L&T also plans to build townships in project areas.

Commenting on the move, Rangaswamy said, "We have been contractors for quite a few hydel projects. We see this as a move in the right direction, though we are behind other construction companies that entered power generation some time back. Earlier, we were not interested in getting into power generation, as the gestation period for the projects was as long as seven-eight years. But now with the government pushing power sector reforms and encouraging private players, the gestation period for power plants has come down to four-five years. We expect that to come down further to two-three years in the next few years."

The construction major is believed to have initiated talks with Patel Engineering to form a joint venture to bid for small hydropower projects in various states.

On the construction front, L&T already has several hydel projects on hand, including one each in Nepal and Bhutan. It is also the contractor for the 2,000 mw Subansiri project in Arunachal Pradesh.

And last week, it won the contract for the 520 mw Parbati project in HP. It also has a joint venture with Hindustan Construction Co for a 900 mw project.