Land and coal linkage issues spoil Areva party

Non-availability of land and coal linkages for power plants have impacted the country’s transmission and distribution (T&D) sector. Areva T&D, one of the leading T&D companies in the country, has received less number of orders from central and state utilities due to these issues. According to top company officials, Areva had a relatively poor year in 2010.

“Orders from central utilities have been delayed due to non-availability of land on time. The number of 765kV projects decided in 2010 is less than 50% of those in 2009,” said Rathin Basu, managing director, Areva T&D. He said the company also witnessed a flat movement in order flow from state utilities in 2010 compared with 2009.

Basu said while land and linkages were the primary problems, the T&D segment had also been hurt by low spending on infrastructure in the last two calendar years and aggressive pricing from Korean and Chinese transformer players.

“The T&D market realisation was lower in 2010 compared to 2009. This has created a strong price pressure in the last few quarters. Price correction is yet to be seen,” said Basu.

He expects market conditions to improve by the second half of the calendar year 2011, following the favourable policy initiatives spelled out in the budget for the infrastructure sector.

For the year ended December 2010, Areva’s operating income fell by 3% to Rs347.1 crore from Rs357.7 crore in 2009 as a result of a depressed market. Its profit after tax fell by 2.8% to Rs186.7 crore in 2010 from Rs192 crore the previous year.

Basu said the company’s efforts at ramping up greenfield sites, better execution of contracts and better cost control measures helped it post good quarterly numbers in Q4 ending December 2010 on a year-on-year basis.

For the quarter ended December 2010, Areva posted sales numbers of Rs1,318.8 crore, a jump of 15% y-o-y from Rs1,150.3 crore for the quarter ended December 2009. It posted a y-o-y jump of 29% in profit after tax for Q4 calendar year 2010 at Rs88.1 crore from Rs68.1 crore in Q4 calendar year 2009.