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Reliance Industries (RIL), India's largest private sector company, is finalising a new alliance with engineering and project management partner Bechtel Corporation, as it prepares to enter the power sector.
A new memorandum of understanding (MoU) will be signed shortly between the two, which may eventually translate into a separate joint venture agreement, say people familiar with the developments. To begin with, the main focus of the MoU will be on engineering, procurement and construction (EPC)-related work for RIL's own power plants. But RIL officials say the scope may later expand to other large infrastructure projects, including ports.
Neither Reliance's spokesperson nor Bechtel's country head in India responded to Business Standard's queries for this article.
Reliance watchers see this as a revival of an old alliance that did not quite take off beyond the oil & gas and petrochemicals space. Under that, both companies had agreed to explore joint engineering-related work across the infrastructure spectrum. Power, they say, is an inevitable extension of this.
RIL has been planning to enter the power sector after a non-compete agreement between brothers Mukesh and Anil Ambani was scrapped in May. Under the new agreement between the two, RIL can enter all areas of business that ADAG has so far been operating in, except gas-based power plants until 2022.
At RIL's annual general meeting in June, RIL Chairman Mukesh Ambani had described the entry into the entire power value-chain as a "transformational initiative". "The power sector is a logical extension for us and we will bid for all the UMPPs (ultra mega power projects)," he said, referring to the government's programme to set up projects of 4,000 Mw capacity. "In the next few months, we will have a concrete investment programme," Ambani had specified then.
RIL has been looking to generate close to 20,000 Mw over the next five years, predominantly via greenfield projects. It takes an estimated Rs 6 crore of investment to generate 1 Mw of power.
RIL is expected to bid for the coal-fired UMPPs coming up in Chhattisgarh and Orissa.
The bid submission dates for them have been postponed from July to end November. Another power project in the west coast of Gujarat is also being conceptualised in the Jamnagar complex using a combination of imported coal and pet coke.
Several Indian private sector power players like Essar and ADAG have their own in-house EPC arms to execute large power plants. Then there are standalone engineering specialists like L&T, Bhel, Bharat Forge and Thermax, who either partially or entirely take up contracts to build these plants.
"The scale of work will be huge. So, it will be better if Reliance manages the entire ecosystem on their own for cost and time efficiencies. Bechtel has been a trusted vendor for RIL since the Jamnagar refinery expansion. So, it's logical that the two will work together again when RIL is firming up its plans in the sector," said a company official, requesting anonymity.
In a supercritical plant, other than the design and engineering construction, there are two main elements to the EPC contract: The boiler turbine contract and the balance of power or equipment contract. It's still not clear, however, whether the RIL-Bechtel duo will implement them by themselves or will involve other specialised vendors.
