In the backdrop of challenges that thermal power sector faces in India and globally, Chennai-based BGR Energy Systems, an engineering, procurement and construction (EPC) company, has started diversifying into adjacent business sectors such as transmission & distribution, transport infrastructure, civil construction and oil & gas.
The company has initiated a number of initiatives and engaged an international consulting firm to advise it on growth strategy, identify critical need for shift from current business segments, BGR Energy said in a note to shareholders in the latest annual report.
However, the company would continue to be significant market player in thermal generation sector, being selective in order-booking and would leverage its competencies in focusing and seeking orders from nuclear power projects which are expected to witness capacity addition of 20 GW.
In capital goods and manufacturing businesses, the company has taken steps to expand the geographical market reach in international markets and has also identified key opportunities for expanding its product portfolio. These strategies enabled the company to address market opportunities of over Rs 10 lakh crore and with special focus on Rs 2.5-lakh-crore markets over the next three years, it said.
Explaining the rationale behind the shift in business strategies, BGR Energy said that given the emphasis on renewable energy and a stagnating economy, the capacity utilisation of the thermal power plants is hovering 50-52%. In addition, the decreasing price trend of renewable energy generation discovered through the reverse auctions by the power ministry last year has ensured the idling or lower capacity utilisation of many thermal plants due to their higher cost of generation.
The capacity addition in the thermal power sector in the last two years has been nearly half of the capacity added in the renewable energy sector and this trend is expected to continue in the near future, the company said.
The annual demand for electricity, which also had reduced in the last three years owing to reduced off-take of energy by the manufacturing sector caused by the sustained low demand and recession, witnessed a lower plant load factor of the most operating thermal plants. This and the increasing emphasis on installation of green power has stalled expansion plans of coal-based power projects across the country. With global shift towards green power, the world is slowly seeing a distinct shift towards cleaner sources of power generation from the conventional fossil or coal-based power which was the dominant source of energy the world over.
The shift towards renewable sources of energy has also witnessed a gradual alignment of the financial lending agencies across the globe towards renewables over conventional fossil based power projects. This phenomenon has also affected India as can be seen from the decreasing levels of lending by these financial institutions reluctance to the thermal power sector, BGR Energy said.