L&T to set up power plant, may float SPV

T&D business entry likely too

Engineering major Larsen & Toubro Ltd (L&T) is entering the power generation business by setting up a 400 mw plant at Uttaran near Surat in Gujarat.

The investment is expected to be Rs 1,200 crore.

A M Naik, chairman and managing director of L&T, told Business Standard here on Wednesday that the company would also enter into the power transmission and distribution business once the Uttaran plant achieves financial closure by January 2006.

"We have intimated the government of Gujarat about the plan. It would be L&T's first power plant even though we have working on a host of power generation projects offering equipment and services," Naik said.

He added that the company is also working with corporates for the development of grid-linked large power projects.

"Down the road, we aim to enter into the transmission business too," Naik said.

Work for the power plant would be kicked off shortly. L&T's ECC division will handle most of the construction activities required for setting up the power plant. The company could also launch a special purpose vehicle (SPV) to handle its new business activities.

"Once the Uttaran plant achieves financial closure, which is expected to happen in a year's time from now, we would start focussing on the power transmission and distribution business. These are emerging sectors in India and it makes sense for us to be present there."

Naik said L&T would also consider the option of setting up power plants elsewhere in the country after commissioning of the Gujarat plant.

At present, the company offer engineering, procurement and construction consultancy for power generation projects which include thermal cycle equipment, low tension control & protection switchgear, critical steam service and other valves and also construction and erection services.

Among equipment, it offers complete condensing & feed heating systems, turbo-generator components for large steam turbines and hydroturbines.

L&T also offers total power project development solutions including new project identification, negotiating key agreements, obtaining clearances and achieving strategic objectives of entry into the power sector.

"If we can do all these for others, don't you think that we are strategically ready for handling power business?" Naik asked.

Naik said L&T has also signed a memorandum of understanding (MoU) with the Gujarat government on Wednesday to set up an engineering campus in Vadodara for training more than 1,000 persons.

The centre would start operating from May 1 while L&T's existing engineering facility at Hazira near Surat would be expanded further to accommodate larger reactor making facilities for the first time in India. This would generate about 800 jobs.

"We are targeting the generation of at least 3,500 jobs through our Hazira and Vadodara facilities and the expanded Hazira facility would be operational by March, 2006," he said.