SHANGHAI Indian billionaire Anil Ambani's Reliance Power inked an $8.3 billion deal with China's Shanghai Electric Group, a contract which both firms touted as the single largest business contract between the two nations.
Shanghai Electric will supply 36 coal-fired thermal power generation units to Reliance over three years, underscoring India's hunger for electricity as the nation looks to fix the frequent blackouts that have impeded economic growth.
India, which has one of the world's lowest power consumption per capita, has set an ambitious target of lifting its generation capacity to 100,000 megawatts during 2012-17 and plans to spend $1 trillion on infrastructure during the period.
"We see a potential for a gamut of co-operation between the two countries," Anil Ambani, chairman of Reliance ADA Group, told reporters at a signing ceremony in Shanghai on Thursday.
"India has vast needs for power and has one of the lowest power consumption rate per capita with no reliable steady source of power across the country," Ambani said.
Including previous orders, Reliance said it has signed around $10 billion worth of purchase orders with Shanghai Electric, adding it also signed memorandums of understanding with four major Chinese banks to cover the financing.
Shanghai Electric said it was also looking to set up a manufacturing facility in India as part of a strategy of expanding in India's fast-growing power market.
Zheng Jianhua, president of Shanghai Electric Power Generation Group, said the group was also in discussions with Reliance to supply equipment for other power sources, including nuclear and wind.
Shares in Reliance Power fell 2.4 percent by 1302 GMT, while Shanghai Electric, which has a market value of $17 billion, rose as much a 7.4 percent before closing up 0.2 percent.
Supplies for power equipment and the telecom sector are two fields which Chinese companies have made major breakthroughs in the Indian market over the past few years, prompting some Indian businesses to voice competition concerns.
According to media reports, India's Association of Chamber of Commerce last year urged the government to levy an import duty on Chinese power equipment and accused the Chinese firms of offering very low prices under government subsidies.
Asked if the latest purchase from China would cause further discontent among Indian power equipment makers, Ambani said the rapid construction of power plants across the country meant most Indian firms already have their order books full.
"The scale of construction we're wanting to achieve is only possible with global outsourcing," said the 51-year-old Ambani, who arrived in Shanghai via his private jet.
Anil and his older brother Mukesh are among India's richest businessmen. They split a business empire inherited from their father Dhirubhai Ambani five years ago after disagreeing over ownership.
Shanghai Electric and Reliance Infrastructure already have a close working relationship. The two set up a $3 billion joint venture in 2008 to manufacture turbines and generators in India.
Shanghai Electric said in an earlier statement the deal will bring as much as $600 million in annual sales each year, or about 6 to 7 percent of its total revenue for 2009.
(Editing by David Holmes)