XL Telecom has entered into a JV with SDEM TEGA a part of the ST group of Spain for execution of engineering, procurement and construction (EPC) contract for the upcoming up 500 megawatt solar power project in the next 12 to 24 months in India.
XL Telecom enters into a JV with Spain-based SDEM TEGA
….Q: Can you take us through what exactly is the monetary commitment for XL Telecom in this JV?
A: The proposed JV is purely for execution of engineering, procurement and construction (EPC) contract for the upcoming up 500 megawatt solar power project in the next 12 to 24 months in India. Initially, we don’t see any huge capital infusion into the company because the panels and other portion of it goes directly from XL Telecom to the prospective bidder. The EPC portion comes from this JV and there is not much capital infusion—depending upon the number of contracts we get, we may need the working capital requirements for thisjoint venture.
…..So what kind of revenues are you expecting for this JV in FY11?
A: Our target is basically about 20% of the market share of this 500 megawatt in these two years. So in two years time, we should be looking about anywhere about USD 300 million to USD 400 million. The Indian market opportunity, taking Central Electricity Regulatory Commission (CERC) calculations of Rs 18 crores plus per project cost, it is about USD 2 billion for this first 500 megawatts. So even if I take 20%market share , because there is no other EPC existing contract at today, whereas SDEM TEGA is already an established European player and we want to bring their engineering and experience.
XL seems to be targeting the companies that have applied under the JNNSM for the first phase. However, most of these players specially the serious project developers have signed up with technology partners or are in advanced negotiations and it will be interesting to see how much of the EPC business XL Telecom is able to win in this domain where there is a lot of developer risk including first time risk.