India’s L&T opens a new facility in Dubai’s Jebel Ali
As far as the pursuit of projects for renewable energy is concerned, the most appropriate approach will depend on how much renewable power a government intends to install and the effort it is willing to expend to achieve it. In other words, there is not just a single solution for every country in the Gulf region, if we are to go by the words of high-level officials of an Indian-based engineering and construction company.
This could be the first company to receive the US Green Building Council’s gold certification in the electrical, automation and telecom sectors at the Jebel Ali Free Zone
Over the past 10 years, privately funded power and water projects have played an increasingly important role in helping utilities across the Gulf Co-operation Council states keep pace with rising demand. The global financial crisis, however, has seen the cost of debt rising, and banks have been embracing a risk-averse behaviour in their operations.
“Even though they are keen to support project finance deals for infrastructure schemes, it is for projects that have government-level guarantees in states with stable economies and a proven track-record of private-sector co-operation,” say RN Mukhija, President (Operations) and Board Member of Larsen & Toubro (L&T), and the company’s senior vice-president, SC Bhargava.
They believe that the renewables sector can still be developed using the structures currently in place. Gulf nations have many years of experience negotiating agreements for conventional independent power projects, or IPPs, which could provide a solid foundation for renewable energy projects.
Recently, the region made significant investments in renewable energy, and it is now home to some of the most ambitious schemes in the world, notes Mukhija and Bhargava. The latter is also the head of Electrical & Automation Operating Company within L&T’s Electrical & Electronic Division.
In Abu Dhabi, Masdar’s wide-ranging initiatives are starting to take shape. Through a series of projects, the company is attempting to create the world’s first carbon-neutral city and establish itself as a world centre for renewable-energy technologies.
In Saudi Arabia, the government has unveiled plans to build King Abdullah City for Nuclear and Renewable Energy, to be located in Riyadh. On a more modest scale, Yemen plans to develop a 60MW wind farm on the western coast whilst Jordan plans to build a 30-40MW wind farm at Al Kamshah in the north of the country.
SC Bhargava
Most governments in the region have launched the projects in conjunction with renewable energy production targets. Abu Dhabi is aiming to produce seven per cent of its power from renewable sources; Egypt has targeted 20% and, more ambitiously, Morocco aims to produce 42% of its energy using renewables.
The challenge facing the region’s governments is to decide how they will encourage developers to build renewable power schemes, say some L&T officials, who recently flew in to Dubai for the inauguration of the company’s new facility in Jebel Ali.
The existing method is to develop renewable power using project-specific power purchase agreements (PPAs) where a customised price is agreed for the renewable electricity from each project. The alternative is to adopt a universal framework that will apply to all future projects, such as a feed-in tariff, which is used in much of Europe and other parts of the world.
Feed-in tariffs typically give developers guaranteed access to the electricity distribution network, long-term power purchase contracts and prices for the electricity that are typically higher than those for traditional power. “Once the framework is in place, and provided that it is priced at the right level, it should quickly encourage the private sector to develop renewable projects,” observe Mukhija and Bhargava.
Setting its sights on the automation-driven business opportunities in oil and gas, power, water and infrastructure space in the GCC region, L&T has achieved revenues in the Gulf close to $1 billion for the financial year 2009 to 2010. “The newly inaugurated Jebel Ali facility,” they say, “is a significant step that would contribute to growing L&T’s electrical and automation business outside of India.”
At the opening ceremonies of L&T in Jebel Ali
L&T, a $9.8 billion conglomerate, has applied for the Green Building-Gold Certification for its Jebel Ali facility before the US Green Building Council and, if approved, will be the first company to receive the Gold Certification in the electrical, automation and telecom sectors at the Jebel Ali Free Zone Area. Listing in the Green Building category confirms that the company’s systems integration facility is designed and built for environment-compatibility and sustainable future, providing a healthy work environment and reducing operating costs by making it more energy-efficient.
“The Middle East continues to be a focus area for us, and we have enhanced our footprint in the GCC region with this new venture,” say the two officials. “Systems integration and in-house electrical equipment manufacturing capabilities contribute to offering total integrated solutions in automation, electrical and telecom space in the region. As a professionally managed Indian multinational, we are committed to total customer satisfaction.”
The company’s Electrical & Automation business has grown at a compound annual growth rate (CAGR) of 20% in terms of top line and 17% CAGR in terms of bottom line in the last five years in India. L&T proposes to grow this business more than twice its present size over the next five years. Besides systems integration, L&T addresses the building and infrastructure segments in the GCC with a comprehensive range of products and solutions in the electrical space. These are type-tested by international test authorities and approved by ministries and utilities.
Towards inorganic growth, L&T took over the Malaysian switchgear company, Tamco, in 2007 to offer a comprehensive range of medium-voltage switchgear in India and international markets. This deal gives an increased impetus to both technology acquisition and market access. With adequate focus on domestic and international markets, this business is expected to cross the $2-billion mark by 2015.
