Even as the power sector is mired in various issues in India that threaten the viability of several projects, neighbouring Bangladesh is emerging as a substantial opportunity for Indian engineering, procurement and construction (EPC) companies.
The country has embarked on an ambitious power development programme to build over 30,000 MW of power generation capacity over the next decade. Several of the proposed power projects towards this end — fuelled by gas, coal and nuclear energy — are under various stages of planning, development and tendering. Indian contractors are eyeing a slice of this opportunity. While Reliance Infrastructure in December 2017 won two contracts worth Rs 5,000 crore for a gas-based power plant and a liquefied natural gas (LNG) terminal, Larsen & Toubro has just commissioned two gas-based power projects. Shailendra Roy, MD & CEO, L&T Power, said the company is geared up to contribute further to Bangladesh’s power development programme. He said, “We are currently executing two more gas-based power projects in Bangladesh — 400 MW Bibiyana III Combined Cycle Power Project and 400 MW Bibiyana South Combined Cycle Power Project.”
An opportunity has also opened up for transmission companies, such as KEC International. The Mumbai-headquartered company has been present in Bangladesh since 1999 and is in the process of executing orders that would take the total business done in Bangladesh to about $200 million. Vimal Kejriwal, MD & CEO, KEC International, said a lot of work has started to flow from Bangladesh only recently. “We clearly see this as a large market and looking ahead, we easily expect to do business in excess of $100 million every year for the next few years, in contrast to the $200 million we have done over the last two decades. This includes power projects, as well as railways, as we are present in both segments.” However, the opportunity for Indian companies are limited to the EPC portion of the contracts. Vishwas Udgirkar, partner, Deloitte India, said the competition from Chinese companies is severe. He said, “In the power sector especially, where the equipment is coming in as part of the EPC contract, you cannot beat the Chinese contractors.”
“If it is a pure civil contract, the competition is relatively less and you can beat them, and Indian companies have built their capabilities in this area. In power sector manufacturing, India is not so competitive as we do not have big manufacturers of turbines, etc. Sometimes when contracts are given in packages, such as for equipment or for purely civil works, it works best for Indian firms.” Financing, a key concern in large projects, is not seen as a constraint in this case, as markets such as Bangladesh, Nepal, and Sri Lanka have been attracting interest from multilateral funding agencies. The likes of World Bank, Asian Development Bank (ADB) and Japanese International Cooperation Agency (JICA) are funding big infrastructure creation programmes in such markets. India also extended a $4.5-billion line of credit to Bangladesh in October 2017, offering to develop the country’s infrastructure and social sector.
Around 17 projects have already been identified under this line of credit. Most of these are power transmission lines, while railway lines, roads and highways, an airport and two gas-based power plants are also proposed, among other projects. Currently, Bangladesh has an installed capacity of close to 14,000 MW and it plans to commission at least another 6,000 MW by 2021. Of this proposed 6,000 MW, close to 3,000 MW will be made possible by public sector enterprises in Bangladesh. The remaining will be put up for international competitive bidding. Some demand for power will also be met through supplies via transmission lines from India.
Beyond 2021, Bangladesh plans to add another 12,000 MW, taking its total installed capacity to 32,000 MW. Till date, the Bangladesh government has issued letters of intent (LOI) for 33 projects. Most of these are small projects of 100-200 MW, which are a part of the first phase of the programme to achieve 20,000 MW by 2021. There are also about 13 large projects, mostly over 1,000 MW, that are under various stages of planning and/or bidding. These will be commissioned beyond 2021, as part of the second phase, to augment the capacity to 32,000 MW.