L&T makes ‘asset heavy’ exception for $1 billion green hydrogen play


Engineering conglomerate Larsen & Toubro (L&T) will explore green hydrogen prospects in India under the asset ownership model, a detour from its policy of staying asset-light, officials said.

For its entry in the green hydrogen segment, L&T has diverted from its usual strategy on two counts. One, it has opted for an asset ownership and operatorship model and second, it has decided to house all its green energy interests under a subsidiary. The two moves, company executives said, were aimed at addressing build-own-operate prospects that will allow the scope for financial partners at a later stage, if needed.

Last week, L&T formed a joint venture (JV) company named GH4India Private Limited, along with Indian Oil Corporation (IOC) and Renew, with an interest of 33.33 per cent each.

In its announcement, L&T said the JV is for the development of green hydrogen and its derivatives, production assets and associated renewable assets through any model of ownership and operatorship. L&T looks to sell green hydrogen and not just the equipment related to its manufacturing.

Derek M Shah, senior vice president and head, L&T Energy – green manufacturing and development, at L&T said: “L&T maintains its strategy of pursuing an asset-light approach.”

 “We also recognise the opportunities that exist in the energy transition journey. Green hydrogen is indeed one of the emerging opportunity areas for us to leverage our leadership position in the energy sector and expertise in manufacturing and EPC projects,” Shah explained.

GH4India will allow the company to address Build Own Operate (BOO) prospects in green hydrogen & derivatives space, “in a manner that does not return dilutive to L&T,” he said.

Top executives from L&T have earlier said the three partners combined will look to invest close to $3-4 billion over the next three to five years.

L&T moved to an asset light model more than a decade back, after investments under the asset ownership model in different infrastructure projects, yielded mixed results.

In 2014, L&T, along with Tata Steel, exited from the ownership of Dhamra port in Odisha, through a sale to Adani Ports and SEZ. Last financial year, L&T announced full exit from its road portfolio joint venture L&T Infrastructure Development Projects (IDPL).

As a solo venture, L&T is also building an electrolyser manufacturing facility in Hazira, Gujarat.

In July, L&T said its subsidiary L&T Energy Green Tech will act as a holding company, for creating a focused entity structure that will house multiple business portfolios of green energy, including electrolyser manufacturing.

This is a detour from L&T’s preferred model of creating business divisions for engineering, procurement and construction (EPC) opportunities in different segments.

R. Shankar Raman, whole-time director and chief financial officer of L&T said: “We wanted to do this in a separate special purpose vehicle to have the flexibility to scale up if required, including financial partnership, if it warrants.”


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