The Toshiba-JSW joint venture requires about 4 lakh square meters to develop facilities and will jointly invest about $250 million (about Rs 1050 crore) in plant and manufacturing equipment. The joint venture, to be established by June 2008, will manufacture and market mid- to large-sized steam turbines and generators ranging in size from 500-megawatts (MW) to 1,000 MW.
The new company will have an initial capitalization of $50 million (Rs 210 crore) and Toshiba will have a majority stake of 75 per cent. JSW Eenergy will have 20 per cent stake and the remaining 5 per cent will be given to its group company JSW Steel. The manufacturing operations are expected to start in September 2009.
"This alliance is aimed at giving us an advantage in the Indian energy sector and is aimed at responding to expanding electricity demand in tandem with India's economic growth," said S S Rao, joint managing director and chief executive officer (CEO), JSW Energy.
Toshiba Yuzo Kato, managing director of Toshiba India, had told Business Standard a few weeks ago that the company was talking to multiple Indian companies for its entry into power generation equipment manufacturing business in India. Toshiba India targets revenues of over Rs 4000 crore from India by 2015, of which 'significant' revenues will come from the power and industrial sector, he had said.
India plans to add over 78,000 MW of capacity within the next five years. The domestic power generation equipment market is expected to see demand growth of 15,000-16,000 MW a year for the next decade, according to the11th (2007-2012) and 12th (2012-2017) Five-Year National Electricity Plans published by the Indian government.
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Engineering major Larsen & Tubro, which earlier held discussions with Toshiba, has already formed a joint venture with Mitsubishi Heavy Industries for its foray into power equipment manufacturing segment. The Anil Dhirubhai Ambani Group (ADAG) is also planning its foray into manufacturing of power equipments. The public sector Bharat Heavy Electricals Limited (BHEL) is the only leading domestic manufacturer of boilers, turbines and generators and is planning to increasing its capacity to 20,000 MW by 2012.
The Central Government is also planning to mandate domestic manufacturing a pre-condition for allowing foreign power equipment companies to supply their products in India, mainly to ward of competition from Chinese power equipment manufacturers.
Keihin Operations, Toshiba's power equipment production facility in Yokohama, Japan, will offer the required technical support for the manufacturing process in the beginning. The JV aims to have a manufacturing capacity of 3,000 MW a year, said a press release.
"This investment is a significant step for Toshiba, one that will give us a firm foothold in the rapidly growing Indian market for thermal power generation," said Atsuhiko Izumi, Executive Vice President of Toshiba's Power Systems Company.
Toshiba has already established a strong presence in the Indian market, and in August 2007, won a major contract to supply five large super-critical steam turbines and generators to Tata Power, India's largest private power sector utility.
The $76 billion Toshiba Corporation is one of the world's leading providers of steam turbines and generators, with over 1800 units installed in over 40 countries worldwide.
JSW Energy Limited, which has filed for an initial public offer, is working on power solutions in the states of Karnataka, Maharashtra, Rajasthan and Himachal Pradesh. The Company has 3,670 MW of generating capacity in the operational or construction phase, besides proposed power projects with a combined installed capacity of 9,600 MW. It is also exploring opportunities in power transmission and distribution business, power trading and generation of energy through non-conventional energy sources.