As governments around the world invest in power infrastructure, competition has become rife within this specialist construction sector. Mr V. Balasubramanian talks to Andrew Pelis about the strategy that has helped KEC International Ltd to make the most of the opportunity.
Recent years have seen a boom in international infrastructure investment. One of the areas to benefit most from government spending has been the power construction industry which has seen demand soar; and at the forefront of the power revolution has been KEC International Ltd.
The company, headquartered in Mumbai as part of the RPG Group, is very much regarded as a global entity. “Indeed, we are one of the top three companies in the world when it comes to building and constructing power transmission lines and towers; our focus is the engineering, procurement and construction of transmissions and power line construction, the construction of railway lines, telecoms towers, cables and water management,” states Mr V. Balasubramanian, vice president for International Projects.
Despite its global reach, KEC has its foundations firmly set in India. Originally founded as Kamani Engineering Corporation in 1945, by 1950 it had established a fabrication plant in Bombay, to help supply the Bhakra Nangal Dam project.
But it was in the 1960s when the company took its first significant steps towards its future destiny. “That was when the business moved into engineering and became the first Indian company to win a railway electrification order and was also awarded a full turnkey transmission line project in Sudan,” Balasubramanian explains.
By 1982 the company was increasing its successful power transmission business and became an attractive proposition for the global RPG Group. Upon completion of the acquisition the company was re-named KEC International and received the financial backing to invest in operational infrastructure.
“At the time of the takeover the company turnover was less than $30 million, today that figure is $900 million or Rs. 4000 crore,” says Balasubramanian. “We operate out of Mumbai and have three manufacturing sites based in Jaipur in Rajasthan, Nagpur in Maharashtra and Jabalpur in Madhya Pradesh. In these facilities, the company manufactures steel structures required for transmission and distribution lines, telecoms and railways infrastructure. Overall we have the largest production capacity in the world for tower manufacturing of about 150,000 million tonnes every year,” he continues.
The sites boast state-of-the-art equipment, with CNC lathe machines hooked up to computer controls, allowing Balasubramanian’s team greater automated control and improved efficiency as they build bespoke transmission towers on single assembly lines.
Roughly 4,000 of the 7,500-strong workforce are located at these three facilities, which have greatly benefited from constant investment: “As countries have invested in infrastructure we have consistently upgraded our own technology,” he says. “We have been operating CNC machinery for quite a while but there have been radical improvements and we are now able to operate CNC programmes from our design centre. There have been lots of improved processes which have created lots of optimisation.”
Each factory operates to ISO9001 standards and the specialist nature of KEC’s work and requirements means that it typically works with the same international suppliers and customers across each project. “We predominately work with global suppliers that meet the tender specifications and individual country requirements for projects—across each of the various competencies we have a list of three preferred global suppliers,” Balasubramanian describes.
Quality, safety and protecting the environment are three key concerns for the company, he adds. “We try to address these issues with our training. For example, on some projects very specialist skills are needed during the stringing process to lay wire between the transmission towers; and the number of skilled people is very limited. It is a risky job and requires skilled project managers.
“We have established our own training institute based in Nagpur, which ensures people are trained to work on projects around the globe,” he continues. “We also train our customers who are responsible for maintaining a site after installation and at any time we have up to 100 people training there. Our test bed at Nagpur is one of the best facilities in the world and can test a 1,200 KV tower.”
In addition to its vast investment in training, KEC has placed a lot of expenditure and reliance on its JD Edwards ERP system. The system was introduced around five years ago and the company is currently migrating processes to create a fully integrated platform, as Balasubramanian explains: “IT plays a critical role for us in all our disciplines, from design to manufacturing and construction. Our ERP system is our oracle and we are currently integrating our manufacturing, design and project management systems. I don’t measure our return in terms of money but can say that our ERP system has helped us to win tenders, to improve margins and to grow revenue.”
With investment in people, IT and equipment in place, KEC has built a platform able to cope with all the challenges the current environment can throw at it. “Operationally we are in a capital-intensive industry and capital is undoubtedly a challenge for any growth,” Balasubramanian admits. “The availability of manpower also creates difficulties at times and the logistics of transporting materials to locations in developing countries can sometimes produce problems. Over time we have also got used to the different approval requirements each government sets and communication is an important part of understanding the various processes.”
In spite of the vagaries of international business—which can also include laying down transmission lines in inhospitable terrain—KEC has emerged as a world leader, a company willing to take up the challenge and experiment. In fact, it is a preferred vendor when it comes to emergency restoration systems (ERS).
“We have always been prepared to work across country borders and to take on design challenges that other companies haven’t been able to accomplish,” Balasubramanian asserts. “This has given us an excellent reputation as we have expanded internationally over the past 20 years.”
Most of KEC’s contracts are with governments; and each one can last between 18 to 24 months at a value of up to $100 million. The company has recently won contracts in Georgia and Tunisia and has over 100 projects ongoing. “We currently operate in 65 countries—fifteen countries in Africa such as Nigeria, Ghana, Kenya, Mozambique and South Africa; CIS countries like Tajikistan and Kazakhstan; and other countries in South East Asia.
“In recent times there has been an international boom in infrastructure investment and we have seen a 70 per cent growth in demand for power in the Middle East recently, which has prompted us to build a fourth manufacturing site which will be located in Abu Dhabi through a JV over the next 18 months.” This new facility will be filled with the latest CNC technology; will produce another 30,000 million tonnes; and will create another 400 jobs, mainly for locals.
So what is in store for KEC looking forward? “There remains huge opportunity for investment in infrastructure and our aim is to double our turnover within the next three years,” says Balasubramanian. “We are looking to Latin America now and have also looked to broaden our own services by providing water management services. Acquisitions may also feature along with new markets, new technology and new design; but our focus will remain to ensure we are competitive on margins.” www.kecrpg.com
