CUSTOMER HIGHLIGHT: Doosan Heavy close to signing $1.75 bn power plant deal in India

South Korea’s Doosan Heavy Industries & Construction Co. is expected to win a 2 trillion won ($1.75 billion) order to build two mega thermal power plants in India next month.

According to multiple sources from the investment bank industry on Thursday, Doosan Heavy is expected to sign a letter of intent next month for a contract with India’s state government of Uttar Pradesh to build two 1,300 megawatt coal-fired thermal power plants. Doosan Heavy is known to have taken the lead in the bidding race for the mega power plant project against Bharat Heavy Electricals Limited (BHEL), a state-owned engineering and manufacturing company in India.

The deal is estimated to be worth between 2 trillion won and 2.5 trillion won, which would account for more than half of 3.8 trillion won worth of total overseas orders Doosan Heavy has received so far this year. Doosan Heavy and the state government are said to be in the last stages of talks to settle the price.

An unnamed official from the investment bank industry said Doosan Heavy aims to embark on the construction of the power plants after signing the letter of intent in November and to complete the plants in 2021.

The Korean company expects power demand in India to grow steadily under the government led by Prime Minister Narendra Modi who has been promoting various policies to boost the country’s manufacturing sector under the so-called Make in India initiative. Doosan Heavy expects the country would need to build thermal power plants that could generate about 18-gigawatt power in total every year until 2020 to meet rising electricity demand.

If the deal is signed as planned, Doosan Group would be able to end the group-wide restructuring that has been carried out to ease liquidity woes amid a slowdown in the global economy earlier than expected, industry observers said. The conglomerate’s core unit Doosan Heavy has played a crucial role in preventing financial health from worsening by bagging a number of big orders, industry observers noted.

This year alone, Doosan Heavy has won eight large overseas orders including those to build a complex cycle power plant in Saudi Arabia, a coal-fired thermal power plant in the Philippines and Vietnam, a desalination plant in Kuwait and Iran, and an energy storage facility in the United States.

Once the latest deal to build two thermal power plants in India is confirmed, Doosan Heavy’s accumulated volume of annual orders is estimated to reach 6 trillion won, and even up to 9 trillion won when adding long-term maintenance and repair work for contractors.

Doosan Heavy has set an annual target to obtain 11.4 trillion won worth of orders this year including one to build nuclear reactors in southeastern city of Gyeongju in Korea. A series of recent earthquakes in the area, however, have prompted safety concerns over building nuclear reactors, leaving the company with uncertainty as to whether it will be able to finalize its contract with the Korean government without delay to build Shin Hanul 3 and 4 reactors.

Amber HallComment