L&T likely wins largest-ever order from Dutch firm in big Europe push

The order win could also lend the company credibility in the lucrative European market, where it has limited presence, with most of its international business today coming from the West Asia.

Offshore energy

The contract is for the development of high-voltage direct current (HVDC) converter stations that would integrate offshore wind energy projects to the European grid, L&T said in a statement on Wednesday. The project will be delivered in collaboration with Hitachi Energy, which will provide the equipment. L&T will handle the engineering, procurement, and construction (EPC) aspects.

L&T has been nominated by TenneT to replace Petrofac, a leading British engineering firm, which was delivering the marquee project with Hitachi. TenneT terminated Petrofac’s contract due to its inability to meet contractual obligations amid financial woes. Petrofac filed for bankruptcy on Tuesday after losing the contract.

L&T did not disclose the value of the contract, but two analysts tracking the sector said that the project, to deliver six HVDC projects of 6 gigawatts each, could run upwards of ₹30,000 crore.

“This opens up a new international opportunity for L&T with a prospective market size of ₹300-350 billion over 5-6 years,” analysts at Phillip Capital India said in a note on Wednesday. “Importantly, it also places L&T in the global league of EPC players, where it is seen in the same bracket as McDermott and SembCorp.”

Explaining the math to arrive at the estimated project value, the Phillip Capital analysts noted that the total Hitachi-Petrofac contract was for $8.4 billion, of which an estimated 55-60% would be the cost of equipment from Hitachi. The rest would be EPC work for L&T, which implies an indicative prospect of ₹30,000-35,000 crore over 5-6 years.

This is the largest-ever singular contract for L&T, analysts said.

The company did not respond to Mint’s queries over the value of the contract or if it was indeed its largest-ever.

TenneT is developing 14 HVDC offshore grid connection systems with a transmission capacity of 2 gigawatts each to connect offshore wind farms to the European grid. The project, costing $33 billion, is planned to be completed by 2032. The project, with standardized specifications, has been awarded to four consortia: General Electric and McDermott; Siemens Energy and Dragados; General Electric and SembCorp.; and now Hitachi Energy and L&T.