General Electric Co. landed a major gas-turbine contract with India’s Reliance Power on Monday, as U.S. and Indian officials scramble to sort out a recent law that threatens a landmark deal on nuclear energy.
GE, based in Fairfield, Conn., was tapped to supply $750 million of turbine equipment for a 2,400-megawatt expansion of the Samalkot power plant in India’s Andhra Pradesh state.
The award comes ahead of U.S. President Barack Obama’s visit to India early next month. U.S. and Indian officials are in intense discussions to salvage the nations’ historic civil nuclear-energy agreement, which was announced in 2005 but has run into friction over American suppliers’ concerns about a new law that could put them on the hook in the event of an accident—a liability they argue is typically borne by nuclear-plant operators.
The U.S. doesn’t want President Obama’s visit judged on the nuclear issue alone, and many expect the trip to yield as much as $12 billion of deals on products such as military jet engines, freight locomotives and reconnaissance aircraft from companies such as GE and Boeing Co.
American officials don’t expect President Obama to announce a big-ticket agreement like the nuclear deal. Instead, his visit Nov. 6-9 will “highlight the growth, strength and breadth of the U.S.-India relationship” and deepen and broaden that relationship beyond the civil nuclear deal, according to a senior U.S. government official.
GE Chief Executive Jeffrey Immelt has struggled to meet the company’s target of boosting sales in India to $8 billion annually by 2010, a goal he expressed in 2006. GE’s revenue in India fell to $1.6 billion last year from $2.1 billion a year earlier, even though GE Energy’s sales rose in that period. But GE is making a renewed push.
The conglomerate reorganized its management in the subcontinent last year and has signed several recent deals, including an October agreement to supply 99 F414 engines for India’s lightweight Tejas fighter jet. GE is now considering a contract to make the engines for 100 midsize fighter jets. In addition to aviation, health care and power generation represent large growth areas for GE. Westinghouse Electric Co. and GE are among the companies hoping to win business in an Indian buildup of nuclear power that some estimates place at a total of $150 billion.
India is the sixth-largest energy consumer in the world, with 162 gigawatts of installed power-generation capacity in 2009, compared with 874 gigawatts in China and 1,170 gigawatts in the U.S., according to Credit Suisse. But India’s power-generation growth will likely outpace the rest of the world for the next five years, Credit Suisse says.
J.P. Chalsani, CEO of Reliance Power, said the deal is the start of a “strategic long-term partnership” with GE. The plant’s combined-cycle approach will use exhaust from gas-turbine generators to produce steam, which will drive other turbines. It will be the largest combined-cycle project in India’s history, according to the companies.
India’s use of natural gas for power generation is likely to increase after the discovery of a large natural-gas deposit on the east side of the country in recent years. “There’s going to be power plants all along that pipeline,” said Ron Somers, head of the U.S. India Business Counsel in Washington. “Hundreds of billions of dollars’ worth.”
GE leads the global market for gas-fueled turbines and has a smaller presence in coal-fired power, which is currently the dominant power-generation method in India. Companies from Europe, China and the U.S. will be battling for contracts in India for gas, nuclear, wind and hydro power.
“It’s going to be a very competitive field,” said Madhu Vuppuluri, chief executive of Essar Americas Inc., the U.S. division of Indian conglomerate Essar Group, which has purchased GE turbines in the past. He said GE has had to recalibrate in India after initial success. Now, the company needs to be “aware of competition from elsewhere in the world. That was not the case 10 or 15 years ago.”
