Source - CNBC-TV18
ABB has bagged a INR 4000 crore order from Power Grid. Mr Bazmi Husain, country manager and MD, ABB spoke to CNBC-TV18 about the order and the way ahead for the company.
Below is the edited transcript.
Q - Take us through the order first. It’s a sizable order, but what are the revenue booking and execution timelines?
A - This really a very significant order. The size of that is as disclosed of INR 4000 crore. India has a lot of hydro power resources in the north east part of the country, but it’s the central part of the country is where there is a lot of the consumption. So there is a challenge of how you bring the power generated from renewable sources to the consumption areas.
In this particular case, it is about 1700 kilometers. With this order, what ABB will provide will be the means of carrying very large amounts of power and this is 6000 megawatts on a continuous basis. The system is designed for 8000 megawatts of power over such long distances, and that in a very efficient way.
Just to give you an idea of how efficient this system would be, compared to a solution which would be traditional solution of AC transmission, this would save 250 megawatts of power every year. That’s the kind of savings that’s going to be there by this efficient transmission method.
Q - By when does the execution start and by when do you see revenues flowing in on a quarterly basis on this order?
A - This project is scheduled for completion by 2015. So the execution starts now. Of course, as the project continues, the revenues would come in according to that.
Q - What does this take your total order book to now if you account for this order as well?
A - I am not going to give forward looking statements here, but for the first three quarters of this year, we have grown double-digit. We see now reason why that would slowdown.
Q - What kind of margin profile would this order come with because last quarter the investors were a bit disappointed that you reported EBITDA margins of under 3.5%? Is this order, the way you have priced it going to be significantly higher than the current margin profile that you are enjoying today?
A - This order will be good, at the same levels that we expect of orders that are there; and you can see what the global ABB margins are. Out of the INR 4000 crore of order for ABB group here, over INR 500 crore would be supplied out of India.
Q - What kind of competitive pressures are you seeing in the transmission and distribution space? How is ABB dealing with that?
A - Competition is not new; this has always been the case. In the last several years, if you look at competition in T&D sector, there has been a lot of competition coming out of China and Korea. We believe and we have demonstrated that our ability to react and to deal with these competitive pressures is better. Then our competition, since the beginning of this year, we have taken a number of significant steps. We announced at the end of last year that we will proceed with localizing 765 KV designs in India; we have rolled out the first equipment of that already. We have already now signed MoU for starting to develop 1200 KV solutions in India. So we are really ramping up our production units, our design and development capabilities…. So we feel very confident going forward with this.
Q - It’s good to see you get a large order from Power Grid because the whole power space has been plagued with bad news. What’s your experience with the state electricity boards at ABB?
A - When it comes to T&D sector, in India, some portions are central and some portions are state government. So we do see a lot of projects coming from the state sector as well. As you might recall, some months ago we announced an order in UP for transmission through a company called Isomax. So we will see orders flowing. From the transmission side, we see a very healthy order situation.
Q - There has been a trend of lot of the large MNCs opting to buyback stocks in India and even go in for delisting of the local listed stocks. Does ABB International have any such plans for the Indian stock or the Indian listed entity?
A - In October last year, the ABB Group increased their stake in the local company to 75%. That transaction was about a billion dollars. We have now no plans other than that at the moment.
