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Detailed Analysis Of Power Plant Equipments (Power Sector)


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Detailed Analysis of Power Plant Equipments (Power Sector)

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Detailed Analysis Of Power Plant Equipments (Power Sector)

  2. 2. ACKNOWLEDGEMENT The successful completion of any task would be incomplete without mentioning the names of the persons who helped to make it possible. I take this opportunity to express my gratitude in a few words to all those who helped me in the completion of this project. I convey my sincere thanks to Prof. R. Sathyanarayanan for giving this opportunity to have such a detailed study about Power Sector. I express my sincere thanks and deep sense of gratitude to my friends for giving timely advice in all the aspects for the success of this project work.
  3. 3. CONTENTS S. No. TITLES Page No. 1 Executive Summery 2 Introduction to Power Sector 3 Power Sector in India 4 Power Sector Impacts on Environment 5 Analysis of Power Sector Study of Selected Companies a) BHEL 6 b) GE c) ALSTOM 7 Conclusion
  4. 4. EXECUTIVE SUMMARY Availability of power is one of the important ingredients for industrial growth. It is an important infrastructure facility without which no industrial activity can be thought of in modern times. Increasing automation of Indian industries has created huge demand of power in India. This huge demand has resulted into demand supply gap in India in recent times. This report gives an extensive study of Power Sector. Analysis of the power sector by PORTER’s Five Force Model and through SWOT analysis gives the direction of the sector. Environmental impact of the sector is discussed. The PORTER’s five forces analysis, SWOT analysis are used to analyze the industry of power sector. The various analyses show that there has been a continuous growth in generation and consumption of power in India. World electricity generation rose at an average annual rate of 3.7% from 1971 to 2004, greater than the 2.1% growth in total primary energy supply. Total world consumption of marketed energy is projected to increase by 50 percent from 2005 to 2030. POWER SECTOR ANALYSIS 1|P age
  6. 6. The energy required to support our economies and lifestyles provides tremendous convenience and benefits. Energy consumption is reportedly higher in countries where less than 5 % of the population lives below the poverty line than it is in countries where most people live in poverty -- four times higher. For example, Americans make up less than 5 % of the world’s population yet consume 26 % of the world’s energy. World electricity generation rose at an average annual rate of 3.7% from 1971 to 2004, greater than the 2.1% growth in total primary energy supply. This increase was largely due to more electrical appliances, development of electrical heating in several developed countries and rural electrification programmes in developing countries. De-regulation in areas of the global energy markets has led to fierce competition. Now more than ever electricity has to be produced at a lower cost with many countries imposing ever tightening environmental legislation to reduce the impact power generation has on the environment. The enormous challenges are recognised in providing electricity as efficiently as possible and strive to develop technology to meet your needs. Collectively, developing countries use 30% of the world's energy, but with projected population and economic growth in those markets, energy demands are expected to rise 95 %. Overall global consumption is expected to rise 50 % from 2005 to 2030. World energy consumption is projected to expand by 50% from 2005 to 2030 in the IEO2008 reference case projection. Although high prices for oil and natural gas, which are expected to continue throughout the period, are likely to slow the growth of energy demand in the long term, world energy consumption is projected to continue increasing strongly as a result of robust economic growth and expanding populations in the world’s developing countries. Energy demand in the OECD economies is expected to grow slowly over the projection period, at an average annual rate of 0.7%, whereas energy consumption in the emerging economies of non-OECD countries is expected to expand by an average of 2.5 % per year. POWER SECTOR ANALYSIS 3|P age
  7. 7. China and India—the fastest growing non-OECD economies—will be key contributors to world energy consumption in the future. Over the past decades, their energy consumption as a share of total world energy use has increased significantly. In 1980, China and India together accounted for less than 8 % of the world’s total energy consumption. In 2005 their share had grown to 18 %. Even stronger growth is projected over the next 25 years, with their combined energy use more than doubling and their share increasing to one-quarter of world energy consumption in 2030 in the IEO2008 reference case. In contrast, the U.S. share of total world energy consumption is projected to contract from 22 % in 2005 to about 17 % in 2030. Energy consumption in other non-OECD regions also is expected to grow strongly from 2005 to 2030, with increases of around 60 % projected for the Middle East, Africa, and Central and South America. A smaller increase, about 36 %, is expected for non-OECD Europe and Eurasia (including Russia and the other former Soviet Republics), as substantial gains in energy efficiency result from the replacement of inefficient Soviet-era capital stock and population growth rates decline. POWER SECTOR - Current Scenario  2.4% of the overall world energy output  6th largest energy user, comprising about 3.3% of the overall global energy expenditure per year.  The gross electricity production capability of Indian Power Sector is placed at around 111 GW. POWER SECTOR – Scope  Abundant coal reserves (enough to last at least 200 years).  Vast hydroelectric potential (150,000 MW).  Large pool of highly skilled technical personnel.  Impressive power development in absolute terms (comparable in size to those of Germany and UK).  Enabling framework for private investors. POWER SECTOR ANALYSIS 4|P age
  8. 8.  Potentially, one of the largest power markets in the world POWER SECTOR – Future  Exponential demand growth  Capacity Enhancement  Increased significance of the role of the private players and foreign investments  New strategies and reforms  Increased significance of renewable sources of energy POWER SECTOR ANALYSIS 5|P age
  10. 10. The process of electrification commenced in India almost with the developed world, in the 1880s, with the establishment of a small hydroelectric power station in Darjeeling. However, commercial production and distribution started in 1889, in Calcutta (now Kolkata). In the year 1947, the country had a power generating capacity of 1,362 MW. Generation and distribution of electrical power was carried out primarily by private utility companies such as Calcutta Electric. Power was available only in a few urban centers; rural areas and villages did not have electricity. After 1947, all new power generation, transmission and distribution in the rural sector and the urban centers (which was not served by private utilities) came under the purview of State and Central government agencies. State Electricity Boards (SEBs) were formed in all the states. Legal provisions to support and regulate the sector were put in place through the Indian Electricity Act, 1910. Shortly after independence, a second Act - The Electricity (Supply) Act, 1948 was formulated, paving the way for establishing Electricity Boards in the states of the Union. In 1960s and 70s, enormous impetus was given for the expansion of distribution of electricity in rural areas. It was thought by policy makers that as the private players were small and did not have required resources for the massive expansion drive, the production of power was reserved for the public sector in the Industrial Policy Resolution of 1956. Since then, almost all new investment in power generation, transmission and distribution has been made in the public sector. Most of the private players were bought out by state electricity boards. From the installed capacity of only 1,362mw in 1947, has increased to 97000 MW as on March 2000 which has since crossed 100,000 MW mark India has become sixth largest producer and consumer of electricity in the world equaling the capacities of UK and France combined. The number of consumers connected to the Indian power grid exceeds is 75 million. POWER SECTOR ANALYSIS 7|P age
  11. 11. India's power system today with its extensive regional grids maturing in to an integrated national grid, has millions of kilometres of T & D lines criss-crossing diverse topography of the country. However, the achievements of India's power sector growth looks phony on the face of huge gaps in supply and demand on one side and antediluvian generation and distribution system on the verge of collapse having plagued by inefficiencies, mismanagement, political interference and corruption for decades, on the other. Indian power sector is at the cross road today. A paradigm shift is in escapable- for better or may be for worse. World’s Energy Overview  35% of world energy need is supplied by crude oil, 25% by coal & 21% by gas.  Most of the reserve is concentrated in the Middle-east region.  World Primary Energy Sector growing at 2% India’s Energy Overview  India is the 5th largest energy consumer  India has vast potential in the Exploration Sector.  54% Coal, 32% Oil, 9% Natural Gas  Indian Primary Energy Sector growing at 5% POWER SECTOR ANALYSIS 8|P age
  12. 12. World India Energy Consumption (MTOE) 10224 376 Coal 27% 54% Oil 37% 32% Natural gas 24% 8% Nuclear 6% 1% Hydro 6% 5% Oil & Gas Imports (MTOE) 2467 98 (US$ 30 billion) Total Primary Energy 2.1% 4.8% Natural Gas 2.6% 6.8% POWER SECTOR ANALYSIS 9|P age
  14. 14. The need for electricity – for productive purposes and for extending home electrification – far outstrips supply in India. Electricity generation has several impacts on the environment, depending on the choice of technologies. While the evaluation of specific power plants would necessitate the assessment of site and plant-specific issues, in general, one can consider source-specific local, regional, and global impacts. LOCAL IMPACTS Large power sources can affect their surroundings through impacts such as air pollution, submergence of land and waste accumulation, excessive resource use and disruption of human activity. The impacts of coal-based thermal plants are particularly important in a study of India, as these plants currently provide the largest generating capacity in India, and about 80% of the actual generation. Electricity generation consumed 67% of India’s coal use, in 2002; further, India’s coal consumption is projected to grow 2.2% annually between 2002 and 2025 (EIA, 2005). Most of the existing thermal power plants in India use the traditional pulverized coal combustion technology. As a result, they have to contend with gaseous emissions including carbon dioxide, nitrogen oxides, carbon monoxide, sulphur dioxide, mercury and particulate matter. Coal-burning thermal power plants in India are responsible for about 40% of the country’s SO2 and 41% of its CO2 in 2000. Coal- plant emissions far outweigh those from other fossil-fuel plants contributing to acid rain, and air pollution and the consequent adverse effects on health. When based on locally mined coal, the associated problems of mining accidents and land degradation are serious. In some areas, the use of high ash coal results in disposal problems, although ash does have productive uses such as brick-making. However, with the alternative fossil-fuel options, oil- and gas-based plants, too, issues of waste disposal and possible drilling and pipeline accidents have to be considered. The water use by some thermal plants constitutes a more serious POWER SECTOR ANALYSIS 11 | P a g e
  15. 15. problem; Indian thermal power plants reportedly use 88% of the country’s industrial water supply (DTE, 2003). Temperature increases and pollution of receiving water bodies through inadequately treated effluents have also to be dealt with. Although based on a clean and renewable source, large hydroelectric plants are not impact free. Large dams can cause submergence of human settlements and natural forests, adversely affecting or even destroying people’s livelihoods, particularly traditional lifestyles, and also terrestrial ecosystems. However, the magnitude of these impacts varies with the location and the height of the dams constructed. With nuclear power plants, radiation hazards (not only through accidents), and disposal of radioactive spent fuel must also be contended with. Thus far, no country is sure of safe and permanent waste disposal. And, while clean in terms of carbon- emissions, both ends of the nuclear fuel cycle – uranium mining and nuclear waste – have harmful environmental impacts, if not very carefully managed. However, environmental impact costs are not easily quantifiable. Pollution-induced health impacts are underestimated when economically disadvantaged people do not obtain medical treatment; similarly, disruption costs of displaced communities could be inestimable. REGIONAL IMPACTS Regional pollution issues, for example the issue of acid rain and sulphur deposition, have received attention in Northeast Asia. While the magnitude of coal-fired power plants' contribution may be disputed, particularly during winter and spring, when dominant high pressure systems sweep accumulated pollutants off the landmass toward the eastern ocean mass. GLOBAL IMPACTS The Indian power sectors contribute about 52% of the carbon emissions in the country. Due to the magnitude of its electricity generation, China’s total carbon emissions are over three times those from India and even on a per capita basis are over 2½ times. However, as emissions per capita are low by international standards (EIA, 2003), and developing countries are not required to adopt greenhouse gas POWER SECTOR ANALYSIS 12 | P a g e
  16. 16. (GHG) reduction targets under the Kyoto protocol (in effect from February 16, 2005), global issues currently remain less important than local impacts. POWER SECTOR ANALYSIS 13 | P a g e
  18. 18. PORTER’S FIVE FORCE MODEL: The model of pure competition implies that risk-adjusted rates of return should be constant across firms and industries. However, numerous economic studies have affirmed that different industries can sustain different levels of profitability; part of this difference is explained by industry structure. Porter’s model is based on the insight that a corporate strategy should meet the opportunities and threats in the organizations external environment. Especially, competitive strategy should base on and understanding of industry structures and the way they change. Supply Many projects have been planned but due to slow regulatory environment, the supply is far lesser than demand. Currently, India needs to double its generation. Many projects have been planned but due to slow regulatory environment, the supply is far lesser than demand. Currently, India needs to double its generation capacity to meet the potential demand. Demand The long-term average demand growth rate is 6%. Barriers to Entry Barriers to entry are high, as entering this business requires heavy investment initially. The other barriers are fuel linkages, payment guarantees from State Governments, Retail distribution licensed, etc. Bargaining Power to Suppliers Not very high as Government controls tariff structure. However, this may change the future. Bargaining Power of Customers Bargaining power of retail customers is low, as power is in short supply. However, Government is a big buyer and payment by Government can be more erratic. POWER SECTOR ANALYSIS 15 | P a g e
  19. 19. Competition Not high currently. The Electricity Act, 2003 will encourage investments, thereby increasing competition. SWOT ANALYSIS STRENGHTS AND OPPORTUNITIES OF POWER SECTOR:  Well established and vast transmission and distribution network.  Highly qualified engineering and technical personnel.  Regulatory framework is further facilitated with enactment of Electricity Bill, 2003.  The Electricity Bill, 2003 holds promises for the power sector and certainly for the consumer by way of competition reliability and rationalized tariff structure.  Emergence of strong and globally comparable central utilities (NTPC, POWERGRID).  India has substantial non-conventional energy resource base and technologies to meet growing power requirements by tapping this energy. WEAKNESSES AND THREATS TO POWER SECTOR:  Poor infrastructure has led to heavy T&D losses. Old and poor transmission and distribution network has led to frequent power outages and poor quality of power  Lack of proper metering and theft has led to large scale losses. Only 51% of the power generated is billed and only 41% is realized  Moreover, Government provides power to agricultural sector at subsidized rates and also free of cost in some states. All these factors have resulted in financial disorder of the State Electricity Boards (SEBs).  Restoration of SEBs financial health and improvement in their operating performance continues to be a critical issue. The Government of India has signed a Memorandum of Understanding (MOU) with various states reflecting the joint commitment of centre and states to undertake reforms in a time bound manner  Poor return to utilities, which affect their profitability and capacity to make further investments POWER SECTOR ANALYSIS 16 | P a g e
  20. 20.  Increasing gap between unit cost of supply & revenue, approximately Rs 1.10/ unit  Managerial and financial inefficiencies in state sector utilities have adversely affected capacity addition and systems improvement  Non-availability of quality coal may hamper thermal plants’ efficiency in power generation  Inability of SEBs to raise funds, as most of the SEBs is on the verge of bankruptcy due to poor operational performance. Adding to the problems, SEBs need huge money to measure up competition from efficient private players  The major risk of privatizing a critical sector like power is the precedence of commercial over public interest. Some of these interests that will take a back seat include development of environment friendly generation and provision of electricity for rural areas. The new Electricity Act does not provide any specific financial incentives for private players to address public issues  The SBEs which are right now holding 60% of total installed capacity, will be hit adversely by some provisions of the new electricity act such as delicensing of generation and open access for IPPs and CPPs, there by such units will take away the most lucrative customers (like industrial and commercial users) from the SEBs. This will not only affect SEB’s but also the entire power sector for near term. POWER SECTOR ANALYSIS 17 | P a g e
  22. 22. Bharat Heavy Electricals Limited Bharat Heavy Electricals Limited (BHEL) was set up in 1959 by the Government of India with the objective of creating indigenous manufacturing base for power plant equipments. Today, BHEL is the 12th largest company in the world in Power Plant Equipments manufacturing and the largest in India. The company has the ability to manufacture the entire range of power plant equipment and has one of the largest capacities of power plant equipment in the world. This enables the company to bid for large power projects. BHEL's cost-competitiveness vis-a-vis international competition in the power sector can be attributed to the factors like fully depreciated manufacturing facilities, lower labour and freight costs and economies of scale. Apart from being the lowest cost producer, BHEL also possesses the infrastructure that can supply power equipment for 4,000 MW of generating capacity annually. The company operates through 14 plants and 9 service centers. The major inhibiting factor for the growth of BHEL in the past has been lack of access to large fund base. The company is a candidate for disinvestment as the Central Government has decided to offload atleast 20% of its stake towards a strategic partner. This could help the company in the long run as the strategic partnership could bring in benefits like access to new technologies and capital. The business of BHEL is focused essentially on two broad segments, viz. Power Equipment, accounting for 60% of revenue, and, Industrial Equipment, and accounting for the rest. Earlier the company was focused on the Power Equipment only. However, in order to reduce the dependence on power utility providers (SEBs), the company widened its focus area and hence product base. BHEL is now manufacturing equipments for industrial users, railways and several other industries including telecommunications, metallurgical and process industry. BHEL's forte is coal-based Thermal Power Plants. BHEL's products, services and projects are exported to over 52 countries including United States and New Zealand. BHEL's market share in the coal-based thermal power plant segment is 75%, 65% in nuclear-based thermal plants, 50% in hydro-based thermal power POWER SECTOR ANALYSIS 19 | P a g e
  24. 24. 5 Forces Model  Rivalry among competitors o ALSTOM, Mitsubishi o Creating competitive advantages to gain bigger market share  Acquisitions, mergers and joint-ventures in other countries  Technological Improvements  Potential of New Entrants o BGR Energy (1985) o Competitive Price o Many orders are captured in recent times o Existing tactic in the market will not help in the current scenario  Suppliers o Materials, parts, components, other resources o Suppliers are well diversified across the globe o Prompt delivery by Suppliers are ensured by BHEL  Substitutes o Has many substitutes that might pose a threat o Has less diversification with sectors, so that concentrated focusing on the respective sector avoids chance of getting substituted o Eg. Power Sector Equipments, Industry Equipments o Has a order book worth thousands of crores POWER SECTOR ANALYSIS 21 | P a g e
  25. 25.  Buyers o Wide Customer base in India and in all parts of the world o With excellent customer satisfaction the order are booked for the next two years (Information from the employee) SWOT Analysis: Strengths:  The company has 180 products under 30 major product groups that cater to the needs of the core sector like power, industry, transmission, transportation, defence, telecommunications and oil business.  BHEL's ability to acquire modern technology and make it suitable to Indian conditions has been an exceptional strength of the company.  Strong relationship with NTPC is the strength, as NTPC is planning a capacity expansion of Rs. 52 bn and based on the past, 85% of NTPC projects have been bagged by BHEL. The company also enjoys purchase price preference. Weaknesses:  PSU status is a big weakness for BHEL as it is subject to their rules and regulations and is forced to carry a huge amount of labor force, which it is not able to retrench.  The company offers very stringent credit facilities to the customers and this is a weakness when compared in the face of rising competition. On the other hand their customers in the power segment, SEBs, have a huge amount of receivables standing against their name in the company's balance sheet. This is a major weakness for the company.  The company is vertically integrated, which could have been avoided by outsourcing its components for power generation and transmission. This could have reduced the cost. POWER SECTOR ANALYSIS 22 | P a g e
  26. 26. Opportunities:  The power sector reforms are expected to pick up in the near future in India, which would directly benefit BHEL.  Increase in defence budget will increase the topline for the company.  NTPC is planning additional capacities to the tune of 2,800 MW, at a cost of Rs 52 bn. BHEL could benefit a lot as it has happened in the past that significant portion of the project of NTPC is handled by BHEL. Nearly 85% of the NTPC projects were assigned to BHEL only.  The business of modernization and renovations of power plants is expected to grow in India.  The disinvestment plans of the government would bring in new resources and experience into the company.  Joint Venture with Siemens in the name of Powerplant Performance Improvement Ltd. (PPIL), is a major strength for the company. This tie-up will be beneficial as there is a lot of scope for business. During FY00 the PPIL received orders worth Rs. 320 crore. Threats:  The global trend of consolidation has already resulted in a fall in turnover of the company and this will prove to be a major threat in the years to come as well.  The company is dependent on NTPC to a great extent.  Recently, the government has permitted the import of second hand capital goods that are 10 years old without the need for a license. This move will definitely increase competitive pressures for BHEL. POWER SECTOR ANALYSIS 23 | P a g e
  27. 27. GENERAL ELECTRIC Introduction:  It all started with the flicker of a light bulb and soon enough GE was off and running… o In 1890, Thomas Alva Edison established the Edison General Electric Company in Menlo Park, New Jersey o At the same time Charles A. Coffin was growing his business, The Thompson Company o It was increasingly difficult for Edison and Coffin to remain competitive based their own technologies  Headquarters o Fairfield, Connecticut  Number of Employees o Over 315,000  Locations o Over 160 Countries  Symbol on Stock Exchange o GE  Number of Shareholders o 4 Million GE is imagination at work- - a diversified technology, media, and financial services company focused on solving some of the world’s toughest problems. With products and services ranging from aircraft engineering, power generation, water processing and security technology to medical imaging, business and consumer POWER SECTOR ANALYSIS 24 | P a g e
  28. 28. financing, media content and advance materials, GE serves customers in more than 100 countries and employs more than 3,00,000 people worldwide. GE is focused on growth and is committed to achieving worldwide leadership in each of its business. The company is organized into six market focused group. GE infrastructure, GE commercial financial services, GE industrial, NBC universal, GE health care and GE consumer finance. This structure is aimed at expanding the company’s growth capability and positioning the company for sustained growth. Commitment: GE is committed to serving the communities where we do business, providing our customers with innovative, high-quality products and services and protecting the health of our workers and our environment. Integrity GE’s reputation for honest and reliable business conduct, built by so many people over so many decades, is tested and proved in each business transaction they make. Environment, Health & Safety They are committed to keeping our workers safe on the job and ensuring compliance with environmental regulations. Quality GE employees embrace Six Sigma's customer-focused, data-driven philosophy and apply it to everything they do. POWER SECTOR ANALYSIS 25 | P a g e
  29. 29. GE in POWER SECTOR: GE energy business supplies a full spectrum of power plant solution, ranging from fossil fuel technology to renewable energy, to suit customer specific requirements. Offering includes equipment-only packages, engineered packages or total turnkey projects. GE technology gas and steam turbine, hydro turbine, wind turbine and nuclear units account for more than 10% of India’s power generation installed capacity. With more than 200 customers in the Indian subcontinent, GE’s energy business also offers an array of transmission and distribution product and services, as well as condition monitoring products and services, optimization services, energy rentals, aero derivative technology, wind energy, gas fuelled reciprocating engines, hydro power, solar technologies and nuclear energy GE is Organized along 11 Businesses POWER SECTOR ANALYSIS 26 | P a g e
  30. 30. 5 Forces Model  Rivalry among competitors o ALSTOM and Siemens, in particular o Creating competitive advantages to gain bigger market share  Acquisitions, mergers and joint-ventures  Battle for innovation and technological improvements  Potential of New Entrants o Adaptac (1981) and Adept Technology (1983) o Late bloomers, but slowly gaining market share o Does not pose too much of a threat to GE, ALSTOM or Siemens for now o Tough for new entrants to pinch a sizable chunk of market share from GE, ALSTOM or Siemens  Suppliers o Materials, parts, components, other resources o Vertically integrated (GE Advanced Plastics, GE Consumer and Industrial Manufacturing) o Has to be aware of suppliers that might integrate forward  Substitutes o Has many substitutes that might pose a threat o Very well-diversified which means that GE is spreading the risk of failure in every market o Eg. GE’s NBC-Universal’s substitute are pirated VCD’s or DVD’s POWER SECTOR ANALYSIS 27 | P a g e
  31. 31.  Buyers o Similar to its substitutes, GE has a broad line of buyers, ranging from consumers to large corporations o Eg. GE Healthcare’s buyers are hospitals and pharmacies. SWOT Analysis  Strengths o Global strength and recognition  5th in Fortune 500 list, operating in more than 160 countries o Excellent management  Proven leadership and business model  Confident investors – raising capital o Diverse product range  Long Term (GE Aircraft engines)  Short Term (GE Lighting, Plastics, NBC)  Financial Services (contributes to 40% of GE’s revenue)  Spreading the risk of failure in every market and not just one o Better service o Better technology  Weaknesses o Company size/ acquisition restriction  Eg. GE’s planned acquisition of Honeywell International specializing in aerospace products, was rejected by the EU POWER SECTOR ANALYSIS 28 | P a g e
  32. 32. o Energy Segment  Underperforming, no signs of near future recovery o Flexibility  Large and diverse businesses might overstretch the company and reduce reaction times to shifts in targeted markets o Higher prices  Opportunities o Research and Development  Immense capital allows GE to contribute a lot to R&D for product development and improvement o Increased geographic growth  Global expansion = more opportunities (Eg. China) o Merger between NBC and Vivendi  Further opportunities in the media business o Improved customer services  Adopted a new customer focus initiative  Threats o Exposure to global economy  Economy slowdown would affect GE, since 40% of the revenue is generated overseas  Exposed to currency fluctuations o Intense scrutiny after Enron  More transparency and disclosure; skeptical investors POWER SECTOR ANALYSIS 29 | P a g e
  33. 33.  Public image of all large companies suffered o Competition  Constant change in technology heats up competition  Very diverse:- tough to be the best in all industry o Changing market trends & Demand POWER SECTOR ANALYSIS 30 | P a g e
  34. 34. ALSTOM Alstom is a large French multinational conglomerate which holds interests in the power generation and transport markets. According to the company website, in the years 2007-'08 Alstom had annual sales of over €16.9 billion, and employed more than 81,500 people in 70 countries. Alstom's headquarters are located in Levallois-Perret, near Paris. Its current CEO is Patrick Kron. Alstom is a world leader in hydroelectric power generation; in conventional islands for nuclear power plants; and in environmental control systems. It is also a producer of very high speed trains and of high speed trains, being the manufacturer of the AGV, TGV, and Eurostar series, as well as of Citadis trams. Alstom is also present in the urban transport market, and is behind regional train models, signalling infrastructure equipment, and a number of associated services. POWER GENERATION Alstom power activities include the design, manufacturing, services and supply of products and systems for the power generation sector and industrial markets. The group covers all energy sources - gas, coal, nuclear, hydro, wind. Alstom supplies and maintains all components of a power plant and provides complete turnkey solutions. During the financial year 2007/08, Alstom Power sales amounted to 11.4 billion euros. Products  Boilers  Steam turbines, gas turbines  Turbo generators and generators  Air quality control systems  Monitoring and control systems for power plants Turnkey solutions  Gas-fired power plants  Coal-fired (steam) power plants  Conventional islands for nuclear power plants POWER SECTOR ANALYSIS 31 | P a g e
  35. 35.  Hydroelectric power plants  Wind farms Services  Product retrofitting  Maintenance and services  Refurbishment of existing plants FIVE FORCE ANALYSIS Strengths • Strong parental support gives ALSTOM a clear edge in integrated power and hydroelectric projects. • Strong order backlog (Rs30 bn+, >2.4XFY07 revenues) imparts earnings visibility. • Strong references in India provide a definite advantage to ALSTOM for future projects. • ALSTOM is one of the few players to execute hi-end power projects in India. Weaknesses • ALSTOM has a longer execution cycle (Hydro projects >5 years, gas projects 2- 2.5 yrs & steam > 4 years) • ALSTOM’s hydro projects carry various risks including on environmental issues over which ALSTOM has no control. • ALSTOM operates in a cyclical industry where business volumes are dependent upon government plans. Opportunities • 11th & 12th Plans comprise 72%+ (coal & lignite) capacity addition in 660/800 Mw unit size. • Huge capex in generation (11th plan envisages 157% more than what was achieved in the 10th plan). Threats • Competition with the likes of BHEL remains a key threat for ALSTOM. • Problems with fuel (like gas) could lead to cancellation / delays in planned projects. POWER SECTOR ANALYSIS 32 | P a g e
  36. 36. Porter’s Five Force analysis The Intensity of Competitive Rivalry The number of players in the power sector it comes to providing fully integrated service are few but the intensity of competitive rivalry can be termed as medium as there is sufficient scope available in the industry for all the existing players. Bargaining Power of Suppliers As the requirement of equipments are growing exponentially, the supply of Power Equipments can be met by Importing or from the domestic suppliers. So the bargaining power of the Supplier is medium enough to tackle in the current scenario. Bargaining Power of Buyers In today’s world customer is the king. The power sector has to be developed at a much rapid pace to cope up with the development activities which are in progress. So that the bargaining power of the Buyer is more when compared to other sectors. The Threat of Substitute Product As renewable power generation for the world the threat of substitute product is low. Wind power projects are also the most preferred bearing in mind the large coastline, which we posses. The Threat of New Entrants As the power sector are highly capital intensive and involves large amount of commitment in terms of capital , assets and work- force the threat of new entrants is low . As only those organizations which have the required capabilities and are willing to take the risk of entering a sector which can be seen as still developing will enter the market. New entrants such as BGR Energy Systems pose threat to their Indian Operations. POWER SECTOR ANALYSIS 33 | P a g e
  37. 37. CONCLUSION: India possesses a vast opportunity to grow in the field of power generation, transmission, and distribution. The target of over 150,000 MW of Hydel power generation is yet to be achieved. By the year 2012, India requires an additional 100,000 MW of generation capacity. A huge capital investment is required to meet this target. This has welcomed numerous power generation, transmission, and distribution companies across the globe to establish their operations in the country under the famous PPP (public- private partnership) programmes. The power sector is still experiencing a large demand-supply gap. This has called for an effective consideration of some of strategic initiatives. There are strong opportunities in transmission network ventures - additional 60,000 circuit kilometres of transmission network is expected by 2012 with a total investment opportunity of about US$ 200 billion. POWER SECTOR ANALYSIS 34 | P a g e