Press Meet      
          BGR Energy
NTPC bulk order will be catered to by mix of imports from Japan and manufactured locally


BGR Energy held a press meet on Sep 16, 2011 on the company emerging L1 for steam turbine generation package in the 9X800 MW bulk tender of NTPC. The meeting was addressed by B G Raghupathy, Chairman & Managing Director of the company along with his top management team.

Key takeaways of the meet

The company has emerged as the L1 for all nine units of super critical steam generators in 9X800 MW bulk tendering of NTPC, competing against other qualifiers i.e. BHEL, L&T Mitsubishi, Bharat Forge-Alstom and JSW Toshiba. But as per the tender conditions NTPC will award either five or four units of supercritical steam turbines generators to the L1 bidder depending on the two projects the L1 chooses.

Of the four sites for which the bulk tender is called by NTPC are 2X800 MW Lara STPS in Chattisgarh, 2X800 MW Darlipali STPS in Orissa, 2X800 MW Gajmara STPS and 3X800 MW Kudgi STPS. The choice of sites to be made in consultation with NTPC and the company is likely to go for Kudgi and Gajmara STPS projects as they have better connectivity to sea ports. So the company will end up supplying 5 units and the balance will be equally shared by JSW Toshiba, the L2 and BHEL, being public sector company as required by the Govt norms.

Normally NTPC will release LoA within 3 months time of opening of price bid and hence the company expects Letter of Award in another 1-3 months.

The value of contract for this STG island project is about Rs 3600 crore. The per MW cost of turbine order works out to Rs 94 lakh and it may go up to Rs 1 crore per MW after factoring in other adjustment factors.

Of the total order value about 45% is of turbine balance of plant and balance is for supply of five numbers of turbine and generators. Commissioning of first turbine has to be made with in 42 months from date of LoA and next turbine would be two months thereafter.

The contract provides for price variation clause and foreign exchange variation clause.

Since the first shop of JV turbine manufacturing unit is expected to commence operation only by Jan 2013, majority of the turbines for NTPC contracts are expected to come only from Hitachi Japan. First two turbines are expected to be completely imported from Hitachi, Japan but for the latter ones a mix of imports from Hitachi, Japan and components manufactured by JV company i.e. BGR Turbines Company will be used. BGR energy is expected to contribute with systems manufactured by it along with the turbine island BoP part.

Of the 45% of turbine island BoP, the bought out component will be about 20%. The bought out items will be such as pumps etc.

Contribution to revenue by this large NTPC order is expected only by end of FY13 or 20 months from date of LoA.

Current Demand supply scenario is the reason for aggressive bidding. If the demand supply scenario improves with order for every one the price might get stabilised.

The turbine facility to have a workshop spread over 12 lakh sft and boiler facility about 7 lakh sft. The capacity of the JV companies for boiler and turbine will be about 5000 MW each. The cost of boiler unit is Rs 1400 crore and that of turbine unit is Rs 3000 crore. As of now the order has been placed for long lead machines and site levelling has commenced on the land acquired. The acquisition of balance land required is under progress.

The company expects the RJVUNL order to materialize in Oct 2011. As far as the Orissa order is concerned the price bids are expected to be submitted by Oct 2011.

Order book excluding the bulk NTPC order is Rs 6500 crore and including that it swells little over Rs 10000 crore.

Conference Call      
          BGR Energy Systems
Sales for FY12 will be Rs 4850 crore


BGR Energy Systems held a conference call on Nov 15, 2011. In the conference call, the company was represented by Sankaralingam, MD and the top management of the company.

Key takeaways of the call

Revenue for the quarter was lower by 32% to Rs 771.51 crore. But the operating margin expanded by 260 bps to 14.3% which has minimized the damage of lower sales growth at operating profits level with operating profit degrew by 17% to Rs 110.20 crore. However strained largely by higher interest cost the PBT was down by 35% to Rs 76.06 crore and the PAT was eventually lower by 34% to Rs51.35 crore gained by 150 bps fall in tax rate to 32.5% on yoy basis.

Capital goods contributed about Rs 91 crore to topline compared to about Rs 55 crore in the corresponding previous period. Revenue mix in terms of EPC: BoP for the quarter stood at 55% for EPC and 45% for BoP.

Fall in revenue for the quarter was largely on account of delay in material inspection and clearance on the client side as well as approval issues in Engineering & Design. This forced majority of the revenue to slip to Q3FY12/H2FY12.

Better margin is on account of change in revenue/product mix. The contribution of high margin BoP and capital goods supply were higher for the quarter compared to corresponding previous period where the share of EPC is dominant. Greater contribution from BoP projects of Chandrapur and Malwa has boosted the margin.

Order book as end of Sep 2011 stood at Rs 7270 crore of which capital goods order amounting Rs 1120 crore.

Expects to close the current fiscal with a revenue of Rs 4850 crore. EBITDA margin of 12-13% and PAT margin of 6.5% is to be sustained.

Having clocked a revenue of about Rs 1500 crore in H1FY12 the company expects a revenue of about Rs 3350 crore in H2FY12 and of which about Rs 1000-1300 crore to happen in Q3FY12 and about Rs 2000 crore in Q4FY12.

Debt is up only on account of higher receivables. The Drs days are about 150 days. Some payments are struck with certification issues and are being sorted out. Similarly the retention money as end of Sep 2011 stood at Rs 1300 crore (Rs 1000 crore as end of March 2011) and of which that pertain to completed project is about Rs 300 crore with balance being towards on going projects. The company expects the retention money from completed projects such as Kakatiya and Vijayawada to come in by March 2012 or Q1FY13 facilitating cut in Working Capital cycle. Currently the WC cycle is more than the normal 90-120 days due to receivables getting delayed.

Investment commitment in Hitachi JV is about Rs 250 crore for FY12 and of which the company has invested about Rs 205 crore so far. FY12-13 commitment is about another Rs 300 crore.

Mettur project is in commissioning phase. As far as Kalisindh is concerned, synchronization of unit 1 is by March 2012 and second unit by Sep 2012. As far as kothakudam project the TG set test is on.

The company has recognized about 95% of the revenue in Kakatiya, about 90% in mettur, Malwa about 30%.

Expects LoA from NTPC for 5X900 TG sets by November/Dec 2011.

Orissa Order under tendering is about Rs 6000 crore together for both BTG package as well as BoP package.