BGR mulls folding in power projects of group firm

BGR Energy Systems, the Chennai-based power engineering, procurement & construction (EPC) firm, is considering bringing its group company’s power projects under its fold, said chairman & managing director BG Raghupathy.

BGR Power, in which BGR Energy does not have a stake, is controlled by the promoter family and is developing two projects, both 2X660 mw, in Cuddalore, Tamil Nadu and Bhapur, Orissa.

“When we go for financial closure for the Orissa project later this year we’ll decide whether to keep both the projects in BGR Power or move them to BGR Energy,” Raghupathy told DNA Money on Tuesday. He did not divulge more details on moving the projects to BGR Energy but said the public hearing for acquisition of 900 acre for the Bhapur plant has been held and that the process should be completed in three months.

“We are paying Rs2 lakh per acre. After the acquisition, we will apply for coal linkage. I guess the coal will be from near Dhenkanal (Orissa),” he said, adding that financial closure for the Rs6,300 crore project will take 5-6 months after allocation of coal.

The Cuddalore project, which has been hanging fire for a decade-and-a-half, will also be fast-tracked next year, Raghupathy said.

“The government has ordered the removal of the gas pipeline running through the power plant site in 2012. We have the equity ready for the project.”

The company has a power purchase agreement with the Tamil Nadu Electricity Board (TNEB) for the project.

Asked of BGR’s long-term capacity addition plans, Raghupathy said it will first look to get the two projects off the ground.

Most of BGR’s projects are in the power balance of plant (BoP) space. BoP includes everything in a power plant other than the boiler turbine generator (BTG) package. BGR has a joint venture with Japanese major Hitachi to make boilers and turbines. The facilities are coming up near Chennai at a cost of Rs4,400 crore. The plants will have an annual capacity of 4,000 mw.

BGR Energy has orders worth Rs8,000 crore, a drop of 23% from March 2010. Last fiscal, the company bagged just Rs4,700 crore worth of projects compared to its estimation of Rs12,000-15,000 crore.

“Things will change in the next six months. We are bidding for Rs60,000 crore worth of orders,” Raghupathy said.

According to a May 31 report by Tata Securities, order inflows have become a concern for BGR since the company has bagged just one large order in the last six quarters.

“Though BGR has bid for many projects, huge delays in securing coal projects and securing environmental clearances reduce its chance of bagging large orders in the segment,” analysts Jayesh Sundar and Nikit Shah wrote in the report.

For the year ended March, BGR’s net profit rose 60% to Rs323.04 crore on a 55% jump in net sales to Rs4,750 crore. However, in January-March, net profit fell 9% to Rs98.35 crore.