Still waiting for recovery to invest in capacity expansion: Toshiba's Yoshiaki Inayama

Like most of the power equipment manufacturers, Toshiba's Yoshiaki Inayama also has no option but to wait and watch. In 2008, when the Japanese conglomerate decided to set up a plant in Chennai, it was for the first time they came out of Japan. He also told BT's Anilesh S. Mahajan that they can make steam turbine if India could revive its plans for nuclear power generation.

Q. Please share, how do you see the scenario, now that generation is increasing in the country? How is your business moving with it?

Inayama: Last year, the power generation was very low, so very few power projects were awarded. This year, NTPC and other state owned power generation companies, have started the procedure for new project bidding. TJPS has been participating in the several projects bidding and very recently, we were awarded a complete EPC project by UPRVUNL for a 660MW plant

The value of the contract is about Rs. 3,436 crore (approx. $520 million). Toshiba JSW will carry out engineering, procurement, construction (EPC) of the entire thermal power plant; including civil and boiler island package to be completed within 48 month from the contract award.

Talking about the source of power generation in India, around 60 per cent is coal based or thermal power generation. For India's economic growth, increasing the supply is very important, and for that, capacity expansion is the key. Toshiba identified India as a key strategic and decided to invest in India for setting up a manufacturing facility. So Toshiba entered a joint venture in 2008 with JSW for setting up a manufacturing facility in Chennai, which started manufacturing operation in February 2012.

As of now, we have received order for 3 projects from NTPC , and joint venture company of NTPC and Uttar Pradesh government, for manufacturing of steam turbine generator in Chennai factory. Toshiba JSW is aiming to become the number one engineering, manufacturing, procurement, construction and service (EMPCS) company in the Indian power sector. To do so, we have two bases, an engineering centre in Gurgaon, and a manufacturing facility in Chennai.
The Gurgaon Engineering centre is in-charge for EPC (engineering, procurement, and construction), which makes TJPS capable to provide full EPC and the manufacturing.

It is very important for power generation to achieve optimised efficiency not only for the new power plant but also proper maintenance of the existing power stations. That kind of services business is also very important. We are ready to provide that kind of solution by utilising Toshiba's technologies.

Q. How do you see the ecosystem evolving? In 5 to 7 years, there are hardly any private players coming up along with the thermal capacity addition. Most of the investment will be coming from the public sector investors, who too are cash struck. So how do see the situation panning out in the next 5-7 years? Where do you think that Toshiba JSW has a role to play?

Inayama: We have announced that we have a capacity expansion plan for Chennai factory and it is still on track. The existing capacity is 3 GW per year and we aim to expand it to 6 GW per year. Given the current scenario, we are still waiting for recovery to invest in capacity expansion. So the timing of the final investment has not been decided.

Q. So how much capacity is currently being utilised at the factory right now?

Inayama: Currently we have 3 GW capacity catering to the three orders received from India - STG island projects for NTPC for their 3 x 800 MW Kudgi Super Thermal Power project, 2 x 800 MW Darlipalli Super Thermal Power Project, 2 x 660 MW Meja Thermal Power project. 

Q. When are you expecting your first product delivery?

Inayama: The first dispatch of the turbine component - Low Pressure Turbine outside casing in beginning of 2013. After that, we have been continuously dispatching several components from Chennai factory. TJPS completed the delivery and installation of STG for Unit 1 Kudugi plant in November 2014.

Recently, TJPS dispatched first indigenously manufactured low pressure (LP) turbine rotor for Unit 2 of Kudgi 3X800MW super-critical thermal power station. This was the first large-scale LP turbine rotor, which has been manufactured, assembled and tested in Chennai, India. We imported the raw material from Japan, but machined, assembled and after that factory assembled and shipped from Chennai factory. This was the first 800 MW turbine rotor manufactured in India.

On July 31st, TJPS also completed the delivery and installation of a steam turbine and generator (STG) for Unit 1 of the Meja Supercritical Thermal Power Plant in India which is scheduled to commence operation in the autumn of 2016.

Q. You said, you were waiting for recovery in India. But how do you see the larger market, the South Asian market or South East Asian market? I remember meeting your global CEO where he mentioned the bigger picture reaching out from Chennai. So what is the vision now?

Inayama: As you mentioned, Toshiba recognises India as not only an important market, but also as a strategic export and development base. We have intentions to export to Southeast Asian markets, the Middle East and African markets but the plans are yet to be finalised. 

Q. You know India is also moving towards renewable - solar, wind where government has come up with a target of 175 GW by 2020. How is Toshiba playing its bets here?

Inayama: I represent Toshiba's Thermal Business in India. So I cannot comment on solar business.

Q. But do you think the way India is moving towards renewable, will it directly impact the thermal expansion?

Inayama: Thinking about the environment and sustainability, expansion of renewable energy is very important, not only for India but globally too. But India being emerging country, a complete expansion of energy generation is very important - not only renewable, but efficient utilisation of thermal energy as well. Also, for curbing carbon emissions and optimal utilisation, maintaining efficiency of the existing power plants is very important. We see a business opportunity in this area to improve the efficiency. 

Q. So do you have the technology that increases the efficiency to curb carbon dioxide?

Inayama: Recently Indian coal thermal setup is shifting from subcritical to supercritical. So this ensures increase in efficiency in a thermal power station. This shift will be very good for India. Additionally, if the investments are made in supercritical in the initial stage, efficiency increasing can be done, but if the maintenance of the plants is poor, the efficiency goes down.

In Japan coal thermal plants, we maintain efficiency almost at the same level as the initial stage but efficiency of power projects in other countries rapidly decreases with time resulting in lower power generation. To maintain the same level of energy generation, the plant owners/operators need to increase the coal input resulting in higher carbon emissions.

This makes maintaining efficiency of power plants very critical.

Q. So how does Toshiba technology help in maintenance of efficiency?

Inayama: There are several ways of maintaining and improving efficiency. Most critical thing is periodic maintenance checks and services, and taking correcting steps wither through repair works or replacing worn-out components.
Toshiba Japan has that kind of technologies that TJPS can use and implement in India.

Also, older power plants are utilising the technology of their age/era. Over the time, improved technology has been developed to yield better efficiency. TJPS can upgrade critical turbine components like turbine rotating blades, rotary stationary blades etc. by changing them. Toshiba has the experience to successfully upgrade the existing power plants in many countries.

Q. India is also moving toward Combined Cycle (CC) to curtail carbon emissions. Do you have certain technologies in this area?

Inayama: Toshiba has successfully executed many CC projects especially in the US and Middle East. In India, Toshiba subsidiary company - Toshiba Power Systems, has successfully installed the CC systems in Andhra Pradesh.
So Toshiba has a very good experience in CC systems.

Q. What is the price difference between the initial investment for conventional way of power generation, and a combined cycle?

Inayama: Regarding initial investment, combined cycle project is cheaper than conventional one. However, running cost of combined cycle is higher than conventional one because fuel cost and maintenance cost of combined cycle are more expensive than conventional one. Therefore, total life cycles of two systems are not so much different.

Q. India is shifting its base load from thermal to nuclear. What are your thoughts on this?

Inayama: As you may know, Toshiba has a very good experience in executing nuclear power projects. Toshiba successfully commissioned a large number of nuclear plants in Japan. Also, Westinghouse is a Toshiba Group company, which too has very good experience. We are ready to show and provide nuclear solution for India. The TJPS Chennai factory was designed and developed to manufacture and provide nuclear steam turbine generator. If India is ready to invest in nuclear power, Toshiba is well equipped and ready to provide total EPC solutions.

Q. Only the reactor needs to be imported, and rest all can be manufactured here?

Inayama: We do not have a facility in India for manufacturing nuclear reactor. But we can manufacture the turbine generator for nuclear power plants at TJPS' Chennai factory

Q. Do you think if the coal based business moves towards nuclear, would it impact your company's business?

Inayama: As I mentioned earlier, TJPS can manufacture the nuclear steam turbine generator, and our engineering centre at Gurgaon can also provide such solutions. Training would be required from the Japanese engineers but we have the potential to tap into the nuclear market through TJPS.

Q. Where do you think the coal generation story went wrong?

Inayama: Several areas, first like you said the financial issue, also the coal supply, then the environmental clearance, and also the land acquisition. These are just some of the issues that have delayed the capacity expansion for thermal power generation.

Tariff is very important for the power generation company. If the tariff is decided without considering the input fuel cost fluctuation, that will impact the power generation company. For increasing the power supply, some consideration should be taken for tariff ratio.

Q. We have seen a 5-7 years of mess of power deals in India. How you do structure your deals to put safeguards in place so that even if the deal goes abrupt, your investment would be safe?

Inayama: We have a long standing relationship with our customers and fortunately, we have not witnessed any financial issue.

There is Japan Bank for International Cooperation (JBIC) that offers financial support to Japanese companies. They have been providing some financial support in form of local buyer's credit to NTPC.

JBIC provide financial support to the supplier who buys Japanese based products which ensures that our investments are secure.

Q. Do you think a similar exercise is also possible with private players?

Inayama: In my view, it may be a little difficult for private players to secure financial support from JBIC, but the judgement would be based on case to case basis.

Q. You may have taken this advantage that Hitachi could not take. What are your views on this?

Inayama: I cannot be certain about JBIC's support to other Japanese companies.

Q. When we see how Chinese companies did their business where Shanghai's local government financed power plants and in return Shanghai Electric supplied the equipments. But most of the plants, the equipment turned faulty to the extent that the order book for all big league Chinese companies have dried up now. What do you think the Japanese companies did right to drive business in India?

Inayama: Many Japanese companies including Toshiba have realised India as a very important country, not just as a market but as a manufacturing and export hub as well. India is an emerging country with a very large population. The location of the sub-continent also plays an important role as it is situated in the middle of the emerging countries world map. Indian government too have been promoting investment in India. Recently, the Modi government announced a very important initiative - 'Make in India', but Toshiba realised the strategic importance of India market and started investing in India and started manufacturing in India, even before the campaign broke out.

As you are aware, CEA (Central Electricity Authority) has issued a guideline for PMP (Phases Manufacturing Program) to many power generation companies in India. The PMP requires investment in India to have a manufacturing capacity. So it is very important for foreign companies to decide about making investment in India. So far, Chinese companies have not yet decided to invest in India which limits the number of projects that they can participate in.

Also, if you compare Chinese companies to Japanese companies like Toshiba, or European and American companies, these companies have their own technology developed and optimised in-house for number of years. Whereas, Chinese companies started manufacturing products based on borrowed technologies.
So while the initial investment by IPPs may be less expensive but in the longer run, the entire cost of operating the plant adds up as maintenance of plants is also important for IPP companies to efficiently run the power plant. So IPP companies need to think about the Lifecycle investment on the power plant project rather than the initial investment. So it is better to choose companies like Toshiba who have manufacturing base in India and a long lineage of innovative products and solutions for optimise efficiency from power plant projects.

Q. So how much investments have you already made in this company?

Inayama: For Chennai factory, more than 800 crore rupees have been invested so far.

Q. For your expansion, how much more money do you plan to invest?

Inayama: I cannot state the exact figures right now. It will be based on a number of factors that will determine the next phase of investment in TJPS.

Q. So this 800 crore, is it invested by Toshiba or joint investment? How much did Toshiba invest in the JV?

Inayama: This is a consolidated investment in TJPS. 75 per cent of share is with Toshiba Group 75 per cent, JSW Energy 22 per cent, JSW Steel 3 per cent. But we cannot disclose the exact details of JV.

Q. So what does JSW bring to the table? Why did you choose to partner with JSW?

We are expecting some order from JSW Energy. JSW recently acquired an existing power plant but has not yet decided for investment in a new project.

We need a good partner for making inroads in India. This was the first time Toshiba invested in manufacturing facility outside of Japan for power sector. So choosing the right partner was paramount and we identified that JSW resonates similar business values and ethics as Toshiba.