bharat heavy electricals ltd. · bharat heavy electricals ltd. ... power plant equipment...

Bharat Heavy Electricals Ltd. Environment & Strategy Overview

JM Financial India Conference Mumbai

12th Nov 2013

at

Environment & Strategy Overview

Our Credentials A US$ 9 billion Engineering & Manufacturing

enterprise of its kind in India

A ‘Maharatna’ company and a Major Integrated Power Plant Equipment Manufacturer in the World

Profit Making Company since 1971-72

Consistent Dividend Paying Company for over thirty years (FY 1976-77 onwards)

References in over 75 countries

Installed base of more than 1,30,000 MW

17 Manufacturing Units + 1 Subsidiaries + 6 JVs + Infrastructure to deal with 150+ project sites

2


We are Single Source with Multiple Solutions for Infrastructure & Industrial Sectors.

Power Industry Oil & Gas

Transmission Transportation Renewable

3


We are Indian CPSE with GOI’s holding of 67.72%.

( As on 30th Sept 2013)

President of India

67.72%

FIIs 15.25%

MFs, FI, Banks 4.94%

Insurance Cos. 7.01%

Bodies Corp 1.25%

Individuals 3.39%

Others 0.44%

4


Despite challenging economic environment, we have registered good growth ….

21,401 28,033

34,154

43,337 49,510 50,156

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Turnover (Rs Crore)

21% CAGR

5


Despite challenging economic environment, we have registered good growth ….

2,859 3,138

4,311

6,011 7,040 6,615

15% 12% 13% 15% 15% 14%

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Net Profit (Rs Crore) Profit Margin

Profitability

24% CAGR

6


While maintaining leadership in Indian market

Order Inflows (Rs Crore)

50,270 59,678 59,037 60,507

22,096 31,650 48%

63%

45%

61%

33%

67%

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Order Inflows PS Market Share

Total Order Book as on 30.09.13: Rs 1,02,380 crore

* Due to bulk tender where distribution was pre-decided

*

7


… Resulting in enhanced performance in project execution

7,150

4,182 5,578

7,666

9,270 10,340

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Commissioning/ Synchronization (MW)

8


Performance H1 FY2013-14

Rs Crore Up to Sept 2013 Up to Sept 2012 % Change

Turnover 15,987 19,750 ↓ 19%

Net Profit 921 2,195 ↓ 58%

Order received 4,470 8,717 ---

Orders book total 1,02,380 1,22,300 ---

Projects Comm/ Sync (MW) 4,764 3,505 ---

9

Rs Crore


Today, BHEL is facing challenges from several fronts.

Uncertainties in Global economy

Transportation of Heavy & ODC consignments

Rising Competition

Disturbances in target export

markets

Indian Power Sector in stagnation

Critical Raw Materials, BoP

Vendors, Skill deficit

Slowing Indian Economy

Slackness in large Infrastructure Projects

10


But, there are huge market opportunities. India can not grow more than 8% without focus on power sector.

147220

306425

575

778

735

1097

1524

2118

2886

3880

2008-09 2011-12 2016-17 2021-22 2026-27 2031-32

Generation Capacity (GW)

Electricity Generation (bln KWh)

State of Indian Power Sector

Generation Capacity 226 GW (59% Coal)

Per capita consumption of electricity

879.22 kWh Less than 1/3 of world average

AT&C Losses 26.15%

Demand- Supply deficit 8-9%

Peak demand-supply deficit

13-14%

Avg cost of electricity 378 paisa/ unit

Realization 301 paisa/ unit (80%)

Integrated Energy Policy 2006, Planning Commission

@ 8% GDP growth

Source: CEA Monthly Report June 2013

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Practically every 2 houses out of 3 in India are supplied power generated from BHEL sets

Installed capacity- Utility* 2,01,036 MW (31.03.13)

Generation- Utility** 838 bn Units (2012-13)

BHEL 66% Others

34%

BHEL 57%

Others 43%

… and we are placed well to harness these opportunities

*Coal, Gas & CCP, Diesel, Nuclear & Hydro ** Coal, Nuclear & Hydro

• 500 MW thermal sets - consistent availability of more than 90% for the last six years. • 170 coal based sets achieved OA higher than 90%. • 167 BHEL supplied coal based sets clocked uninterrupted operation of more than 90 days during the

year out of which, 53 sets ran twice continuously for more than 90 days and 29 sets ran continuously for more than 200 days.

• Trombay 5 (500 MW) and Singrauli 5 (200 MW) clocked uninterrupted operation throughout the year.

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BHEL supplied power plant equipment exhibit world class performance.

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* Average performance of thermal sets during 2007-2011; Source: North American Electric Reliability Council (NERC); 2013

84.73%

68.98%

10.41% 4.89%

86.80% 85.78%

6.56% 6.64%

Operating Availability

(OA)

Plant Load Factor (PLF)

Planned Maintenance

Forced Outages

due to Equip.

85.73%

62.80%

9.74% 4.51%

88.97% 80.16%

6.15% 4.89%

Operating Availability

(OA)

Plant Load Factor (PLF)

Planned Maintenance

Forced Outages

due to Equip.

Performance of 400-599 MW Sets* Performance of 200-299 MW Sets*

NERC member countries (North America, Canada, Europe part) BHEL Sets


Recent study* by CEA testifies our performance.

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Specific Fuel Consumption (ml/kWh)

Operating Load Factor (OLF)

Total Outages

Design Turbine Cycle Heat Rate (THR) of 300 MW sets

(kcal/kWh)

Design Turbine Cycle Heat Rate (THR) of 600 MW sets

(kcal/kWh)

1910

1893

1954

1922

2719

2527

Operating Heat Rate (OHR) (kcal/kWh)

• Study covers 12480 MW (36 units) BHEL sets and 8220 MW (22 units) Chinese sets

• THR and OHR are on like to like basis (BHEL sets of 250 MW and 500 MW while Chinese sets of 300 MW and 600 MW). Also Chinese power plants uses feed heating from High Pressure Turbine while BHEL does not.

• OLF and Total Outages percentages are of those plants which uses Indian Coal only and excludes plants who remained shut for very long time during study.

• SFC comparison is of those plants which uses Indian Coal.

* Analysis of Chinese equipment vis-à-vis Indian(BHEL) Equipment, Central Electricity Authority, New Delhi India, May 2013

BHEL Equipment Chinese Equipment

71.6%

57.2%

3.06

6.13

18.7%

23.5%


As a result, we are market leader in Indian Power Sector.

Chinese Comp, 18496,

34%

Other Foreign Comp,

8227, 15%

BHEL, 25385,

46%

Other Indian Comp,

2856, 5%

XI Plan 2007-12 (54,964 MW)* XII Plan 2012-17 (1,42,603 MW)

Chinese Comp, 42155,

30%

Other Foreign Comp,

10670, 7%

BHEL, 66067,

46%

Other Indian Comp, 23711,

17%

*Actual Achievement

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Our Industry Sector Business: diverse, slated to grow

Transmission 7-9%

Transportation 3-5%

Captive Power Plants & other Industrial Products 12-15%

Transmission

• Transformers • Switchgear • Indl. Control Gear / Control Panels • Capacitors • Insulators • HVDC/ Transmission Projects etc

Transportation

• Traction machines • Traction Control gears • IGBT Propulsion system • DESL, AC Locos / DG Sets / etc

Captive Power Plants & other Industrial Products

• CPP - Indl. TG / Boiler Sets • Industrial Machines • Compressors • Oil Field Equipment, Valves etc

FY 2012-13

FY 2011-12

FY 2010-11

Contribution to total Turnover: 22-28%

Renewable & others

• Solar • Water

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We are focusing on ‘6-Point Agenda’ to meet Strategic Plan 2017 targets.

1

2

3

4

5

Engineering &

Technology

6 ▪ Timely investments

-Planned & scalable ▪ Inorganic Growth

▪ Supply Chain Agility

▪ Skill Enhancement

▪ Effective Site Management & Information Systems

▪ Operations Improvement – Lean, DTC, PSM • Global Sourcing, Indigenization

▪ Upgrade Product Range in Thermal, Gas & Hydro Generation

▪ Nuclear Power, Transmission, Transportation, Renewable Energy, Water

▪ Investment in R&D ▪ Absorption of Supercritical

Technology ▪ Fast-track Technology &

Product Development for IGCC, 765/ 1200 kV Transmission ,etc.

▪ Performance & Potential alignment of new inductees with Company’s Challenges

▪ Leadership Development ▪ Technical/ Functional Competency

Development

Engineering &

Technology

Capability Enhancement

Accelerated Project

Execution Diversification

BHEL

Product Cost

Competitiveness & Quality

People Development

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Innovation is our key focus area to steer future growth.

175 213 263 303

351 385

FY08 FY09 FY10 FY11 FY12 FY13

Filing of Patents & Copy Rights (Nos.)

463

690

829

982

1199

1248

FY08

FY09

FY10

FY11

FY12

FY13

R&D Expenditure (Rs Cr)

2719 5570 6723 7809

9832 9643

FY08 FY09 FY10 FY11 FY12 FY13

Turnover from in-house developed products (Rs Cr)

2.5%

~20%

2170

Today our R&D focus is globally recognized (CII-Thompson Reuters Innovation Award 2010) Forbes ranks BHEL at No.9 in list of World's 100 Most Innovative Companies (July 2011) 145 Mission & Technology Plans with over 1500 R&D projects identified for establishing self sufficiency in the

areas of UHV Transmission, Transportation, Ultra Super Critical Plants, Renewable energy, IGCC, Water etc.

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We are developing strong capabilities in Product Development & Engineering.

270/300/525/600/700 MW sub-critical sets introduced

Advance Class Gas Turbines tech in place

765 & 1200 KV UHVAC Transformer, Reactor developed

IGCC development

Transportation-IGBT technology developed for Loco & ACEMU

Sole supplier in world for 420 kN/320 kN porcelain insulators for ±800 kV HVDC lines

Products Development Supercritical Technology with Technology tie-ups

with Alstom (Boiler), Siemens (TG) & MHI (Pumps)

Rapid technology absorption in partnerships with customers

Supercritical Orders’ basket 24 TGs and 27 SGs:

2X660 MW NTPC Barh (SG & TG) 3X660 MW Prayagraj PGCL, Bara (SG & TG) 2X800 MW APPDCL Krishnapatnam (SG) 2X800 MW RPCL Yermarus (BTG) 1X800 MW RPCL Edlapur (BTG) 1X700 MW KPCL Bellary (EPC) 2x660 MW NTPC Mauda (SG & TG) 3x660 MW Bajaj Hindustan, Lalitpur (BTG) 2x660 MW DVC, Raghunathpur (TG) 2x660 MW DB Power, Singrauli (BTG) 3x660 MW NTPC Nabinagar(SG) 2x660 MW OPGC, IB Valley, Banharpalli (BTG) 2x660 MW RRVUNL Suratgarh (EPC) 2X800 MW NTPC Gadarwara (TG)

Supercritical Domain

We are slated to play a key role in RDD&D in India's first coal fired Advanced Ultra Supercritical (AUSC) power plant in association with Indira Gandhi Centre for Atomic Research (IGCAR) and NTPC.

AUSC: 5% more efficiency; 12% savings in coal; Less GHG emissions

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Our scale is another competitive advantage.

Acquired BHPV Vizag as 100% subsidiary in 2008. Slated to enhance our capabilities in design, fabrication, supply and erection of custom built process plant equipments. Turnaround in 2010-11. Merged with BHEL in Aug 2013 wef Oct 2011.

BHEL Electrical Machines Ltd. (JVC between BHEL & KEL (Kasargod)/ GoK) for manufacturing of products for Railways and Industries. Strategic move to enhance our presence in Transportation, Industrial and Renewable Energy Sectors.

15000 MW

20000 MW

March 2010 March 2012

Inorganic Growth

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New manufacturing plant operationalized:

Power Plant Piping Unit, Thirumayam

High Pressure Boiler Plant - Unit II, Trichy

Setting up the greenfield Power Equipment Fabrication Plant at Bhandara, Maharashtra

Manufacturing Capacity Expansion New Manufacturing Plants


Various initiatives are being taken to enhance pace of execution.

Skill enhancement at ITIs in JV/PPP mode: Kabiguru (WB), Latur (Mah), Bajpur (UP), Peramvalur (TN), Khandwa & Khaknar (MP), Haridwar (Uttranchal) …

Leveraging WRI Trichy to train high pressure welders

Extensive training to Act Apprentices & Customers

Lateral/ Campus/ Special/ FTA Recruitment

Retired Specialists as Consultants, Re-Employment

Bridging Skill Deficit

Central monitoring system for PG test: 58 PG test (TG, SG & ESP) during 2012-13

Deploying additional Tools & Plants like heavy cranes suitable for erection of sets up to 800 MW.

Cranes available in PS (>=75 MT): 129 nos

Strand Jacks: 2 nos

Induction Heating Machines in PS: 294 nos

Site Capability Enhancement

21


Various initiatives are being taken to enhance pace of execution.

Vendor Base Expansion

~1900 new Vendors added in 2012-13 & Vendor base >20,000 Developing BoP vendors: 40 (2008-09) + 84 (2009-10) + 42 (2010-11) Procurement Office established in Shanghai, China

AMA Advanced Manufacturing Action for long lead items

TCA Technology Collaboration Agreement with Sheffield Forgemasters UK for large size forgings (up to 1000 MW)

Technology Collaboration Agreement with MHI Japan for FGD

IT e-Procurement , Reverse Auction (~36%)

Rate Contracts

Long term Rate Contracts for Steel, Copper, CRGO, Transformer Oil (contribution to total purchase ~25%)

Outsourcing Enhanced thrust is being given for outsourcing of low tech/ non-core manufacturing

ACF ‘Away Center Fabrication’ adopted by Trichy & Ranipet Units

22


Our Diversification Strategies: Expanding our Offerings in New Growth Areas

Highest rating SPV Power Plant orders of 10 MW each from NTPC for Unchahar and Talcher.

Commissioned 5 MW grid-connected Solar Photo Voltaic (SPV) Plant for KPCL at Mandya, Karnataka

MoU signed with Govt. of Maharashtra to consider the possibility of setting up an integrated facility for the manufacturing of Solar Photo Voltaic systems.

Joint Working Arrangement with Abengoa Spain for Concentrated Solar Power Plant (CSP)

23



MoU signed with Indian Railways for setting up a green field coach factory for Mainline Electric Multiple Unit (MEMU).

Participation with global majors in the tender for setting up a factory for Electric Loco factory at Madhepura and Diesel Loco factory at Marhowra respectively.

Catering to RDSO's requirement for conversion of existing DC EMUs to 25 kV AC EMUs, BHEL has successfully type tested a 1200 kVA AC EMU transformer which matches the dimensions of the conventional AC EMU transformer with a 20% enhanced output.

Orders for State-of-the-art propulsion equipment for 6000 HP Electric Locomotives and 1400 HP AC EMUs (IGBT based) under execution

Executing an order for 200 numbers of 5,000 HP 25 kV AC Mainline Electric Locomotives (Type WAG -7) for Indian Railways.

24



Manufacturing Associate Agreement with GE India Industrial Private Limited (GEIIPL), for Water Treatment Equipment.

BHEL will be able to provide more cost-effective membrane-based water treatment systems for power plants and industrial sector for all type of input water like sea water, brackish water and waste water.

765 kV Transformers & Reactors orders received from Megha Engineering and Infrastructure Ltd. for Western UP Transmission System upgradation, and BIDCO for the upcoming 3x660 MW Lalitpur TPS.

To improve the stability and reliability of power systems, BHEL has developed and manufactured a 3-Phase, 315 MVA, 400 kV class, Phase Shifting Transformer with state-of-the-art features. It will be installed at APGENCO Kothagudem.

India’s first and highest rating indigenously developed 1200 kV class Transformer successfully test charged to cater to 1200 kV UHVAC Transmission Systems

25



Steam generators for new rating 700 MWe Nuclear sets

Tripartite JV with NPCIL & Alstom in process for conventional island of Nuclear Projects for 700 MWe & above

MoU with GE-Hitachi for cooperation in Nuclear island equipment for Power plants to be set up by NPCIL

Order secured from NPCIL for TG package for 2x700MWe for RAPP 7&8

Order for supply & Installation of Control and Instrumentation for Turbine Island Secondary Cycle System for 2x700 MW Kakrapar project in Gujarat.

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“ Five years after the global financial crisis, the economy and the industry are still reeling under the crisis of confidence in India as well as in the world. We too are affected by this crisis but we are not allowing the crisis go waste. Your company is building new competitive advantages by experimenting new ideas and methods rapidly, frequently, and economically—not only with products and services but also with business models, processes, and strategies. While we may have to go through some pains in short term, I have absolutely no doubt that your company’s inherent technology strength, highly committed manpower, manufacturing prowess and innovation ecosystem will enable us to recapture the growth once Indian economy moves to another growth trajectory in near

future.” B Prasada Rao

Chairman & Managing Director 49th AGM, Sept 20, 2013

27

AA:PLD:56::111113

Thank you!

Powering Progress… …Brightening Lives

Cautionary Statement: Statements in this “presentation” describing the company’s objectives, estimates, expectations or predictions may be “forward looking statements” within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the company’s operations include global and Indian demand supply conditions, finished goods prices, cyclical demand and pricing in the company’s principal markets, changes in government regulations, tax regimes, economic developments within India and the countries within which the company conducts business and other factors such as litigation and labour negotiations. The company assumes no responsibility to publicly amend, modify or revise any forward looking statement, on the basis of any subsequent development, information or events, or otherwise.

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