Despite the endless delays in power projects hurting the cashflows for EPC companies,
there is still optimism in the industry. SN Eachampati of Essar Projects (EPIL),
one of the fastest growing EPC companies in the country, shares an inside-the-ring
view of the power EPC business, and what EPIL is doing to overcome challenges
and tap opportunities.
How does the power EPC space look like today?
The EPC business in India is vibrant and competitive. If we look at the Eleventh
Five-year Plan, power plants with a capacity of around 57,000 MW have been commissioned
out of the targeted 62,000 MW, and out of this, a capacity addition of close
to 84 per cent has come from the thermal power sector. Over the last five years,
the average capacity addition in the thermal power sector has been around 10,000
MW.
The target for power sector in the Twelfth Five-year plan is even more ambitious, and has a target of more than 80,000 MW, more than 50 per cent of which is supposed to come from supercritical technology. This gives us a glimpse of the vast opportunities lying ahead. The government’s keen interest in generation and capacity addition, along with its de-licensing policy, has brought in numerous private developers, conglomerates and manufacturers to the EPC arena. On the other hand, the EPC industry is witnessing a slowdown in the face of a shortage of coal and lack of funds in flow.
We are betting big on an early resolution to this impasse. Power EPC is characterised by bright opportunities and tough competition; it’s time to equip ourselves with a robust organisational structure, more dynamic project management methods and technology collaborations.
Delays in completion of power projects have really impacted the EPC
business. How is EPIL coping with this?
Apart from industry-wide setbacks, the thermal power sector has been particularly
affected by coal scarcity, difficulties in obtaining environmental clearances
and closure of power purchase agreements. This has had a great impact on cashflow
and project completion.
As a strategic move, we have ventured into global markets to leverage our experience of executing mega power projects and gain a firm foothold in the open market. We are constantly monitoring and focusing on projects where environmental clearances and the PPA closure have been secured, and the probability of project kick-off is high. Our business development and project teams have been constantly pursuing all avenues to convert possible business opportunities into reality, as well as exploring untapped resources to the maximum.
EPIL already has a strong EPC presence in other industrial sectors, including oil and gas, minerals and metals, pipeline, and roads and jetties, and currently endeavouring to capture opportunities in the thermal power sector.
How is EPIL leveraging technology to ensure speedy completion of its
projects?
The share of super-critical technology in the thermal power sector is half for
the Twelfth Five-year Plan and full for the Thirteenth. The engineering and
global sourcing cells of EPIL have already orientated their resources in developing
design and supply competencies for supercritical power plants.
EPIL has a three-fold approach in the execution of projects at a rapid pace: project management excellence, sound execution techniques and long-term relationship with OEMs and technology providers. We have an organisation structure functioning with a top-down approach through an integrated IT platform of SAP-Primavera and in-house customised IT tools for complete project management. Use of dedicated IT tools like document management systems has freed up a huge float by cutting down on engineering and documentation time cycle. We have a vast and young fleet of high capacity lifting equipment like 600 MT cranes, strand jacks and tower cranes, which are instrumental in the faster erection of high-magnitude, high-altitude boiler, turbine BTG island.
Some other approaches, like the use of prefabricated RCC and structural building and components, maximising pre-assembly of structure equipment, preference for skid-mounted equipment have helped save time and cost of execution. We have set up supply relationships with OEMs to provide us with the latest designs and execution knowhow, and on-time deliveries. From BTG to ash handling, coal handling and other auxiliary systems, we have dedicated partners for supporting us with energy efficient and cost-effective solutions.
Do you use BIM systems for your projects?
Though we don’t use the standard BIM products available in the market,
the concept has duly been implemented in our EPC business through the use of
3D plant modelling software for the extraction of all engineering deliverables.
Time and cost dimensions are planned and controlled through other applications
like SAP, Primavera, which are configured to yield focused project management
results.
Irregular supply of critical power equipment usually results in project
delays. How does EPIL manage this?
The success of power projects completely revolves around the supply of power
equipment. They have the longest supply and installation times and also, during
BTG erection, the BTG island becomes almost impervious to the execution of other
auxiliary systems, like the bottom ash handling and coal conveyor systems. Hence,
any delay or non-sequential supply of power equipment, being on the critical
path, diminishes the chances of the project’s success.
As a proactive deterrent, we have strict schedule guidelines for sequential delivery inbuilt into the supply orders. This has indeed helped us to a great extent. However, as a contingency measure, we put in place adequate mobilisation strategies to decongest the BTG island and enhance the number of parallel paths for execution at multiple fronts. To name a few, we use tower cranes instead of mobile and crawler cranes, high-capacity boom placers and concrete pumps, and controlled material shifting from the lay-down area.
Locally manufactured or imported power equipment: which do you prefer?
Because of government policy, all of the world's major BTG equipment suppliers
are setting up manufacturing facilities in India. This will improve supply control
mechanisms, reduce logistics time and costs, and bring down prices due to a
reduction in taxes and duties. Moreover, customers can get a better bargain
in the delivery schedule. The non-applicability of UMPP and mega power project
benefits to imported items, which is currently under government consideration,
will render the cost in lieu of custom duties unaffordable. This natural inclination
towards home-grown power equipment is further buttressed by the initiatives
of state-owned BHEL to augment its manufacturing capacity to 20,000 MW a year.
However, the cost and time benefits of imported equipment over domestic products will be clearer once domestic manufacturers start rolling out their equipment. Time will be the best judge.
Availability of skilled resources is often cited as a major issue.
How is EPIL addressing this challenge?
Our strategy has always been focused on nurturing specific sub-contractors with
the continued support of long-term business. This has helped us retain them
and their skilled manpower. We have in place a sub-contractor management system
to monitor and record sub-contractors’ performance as well as their current
liabilities. This has resulted in minimum ‘No Business’ phase for
them. At times, retaining highly skilled people like Millwright fitters or IBR
welders through training and job rotations at different projects has been the
only option.
Even after these measures, there is attrition due to large project-based employment options across the country. To mitigate such cases, we also encourage induction of new subcontractors on a continuous basis and develop them with our working culture and provide on site training.
