Though a majority these projects were initiated from 1992-93 onwards, they have not yet been able to achieve financial closure thanks to political, economic and social factors.

FI sources told The Financial Express that they held a meeting last Thursday at IDBI to review the performance. The meeting was attended by officials representating state-run Power Finance Corporation (PFC), Industrial Finance Corporation of India (IFCI), IDBI and Life Insurance Corporation of India (LIC). ICICI officials could not attend the meeting and thus it was unanimously decided to meet again shortly in a bid to continue the review.

FI sources said that after a thorough review of individual projects, a decision on suspension of financial commitments may be taken. However, these sources expressed their inability to give a time frame for arriving at such a decision.

The list of projects included Videocon Power Ltd., Tamil Nadu (coal based 1,050 MW, Rs.5,976 crore, ICICI), Bina Power Supply Co, Madhya Pradesh (coal, 578 MW, Rs. 2,630 Crore, ICICI), Rosa Power Supply Co., Uttar Pradesh (coal, 567 MW, Rs.2,906 crore, IDBI), GVK Goindwal Sahib, Punjab (coal, 562 MW, Rs. 2,902 crore, IDBI), BPL Power, Andhra Pradesh (coal, 520 MW, Rs.2,820 crore, ICICI), Reliance Power Ltd., Gujarat (Petcoke, 500 MW, Rs.2,724 crore, IDBI), Jayamkondam Power Pvt. Ltd., Tamil Nadu (Lignite, 500 MW, Rs. 2,782 crore, IDBI), Balagarh Power, West Bengal (coal, 500 MW, Rs. 2,516 crore, ICICI), Konaseema EPS Oakwell Power Ltd., Andhra Pradesh (gas, 467 MW, Rs.1,377 crore, IDBI), Gautami Power Ltd., Andhra Pradesh (gas, 455 MW, Rs.1,325 crore, IDBI), Reliance Patalganga, Baligarh Hydro Power, J&K (hydel, 450 MW, RS.3,810 crore, PFC), Maharashtra (naphtha, 447 MW, Rs.1,776 crore, IDBI), Maheshwar Hydel Power, Madhya Pradesh (hydel, 400 MW, Rs.2,254 crore, IFCI), Jaiprakash Power Ventures, Uttar Pradesh (hydel, 400 MW, Rs.1,800 crore, IDBI), Vemagiri Power, Andhra Pradesh (gas, 370 MW, Rs.1,298 crore, IDBI), Ispat Energy Ltd., Maharashtra (naphtha, 367 MW, Rs.1,470 crore, IFCI), Gujarat Mineral Development Corporation, Gujarat (lignite, 250 MW, Rs.1,395 crore, IDBI), GVK Jegurupadu Phase II, Andhra Pradesh (gas, 230 MW, Rs.760 crore, IDBI) and Gujarat State Energy Generation Limited, Gujarat (gas 156 MW, Rs.575 crore, IDBI).

It must be mentioned here that IDBI executive director R S Agarwal recently announced at a seminar that such a review would be launched and thereafter institutions could even cancel assistance in the coming months. Mr. Agarwal had also made it clear that IDBI, which has a total exposure of Rs.2,121 crore in the distressed Dabhol project, had already taken a decision not to provide finance to new independent power projects.

According to Mr. Agarwal, FIs have funded a whopping Rs.42,000 crore to 58 IPPs since the opening up of the power sector in 1992. However, he had stated that only 16 projects with a generating capacity of 5,000 MW had been able to commence generation. He had also declared that FIs had already suspended the financial assistance to 14 projects with a capacity of 6,000 Mw in view of the very slow progress in their implementation.

Mr. Agarwal was quite critical about the failure of Gujarat, Andhra Pradesh and Tamil Nadu governments to provide escrow cover despite repeated meetings and correspondence.

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NTPC to invest in new projects till reforms make way for pvt. sector   [19 December, 2001]

The National Thermal Power Corporation (NTPC) would be asked to step in to add required capacities if the private sector refuses to come forward due to its concerns over guaranteed payments.

Until the time, reforms make the investment environment in the power sector more conductive for the private sector, NTPC will invest in new projects, the Union power Minister, Mr. Suresh Prabhu, said addressing captains of industry at Baroda. As far as revenues of NTPC is concerned, a tripartite agreement, between the NTPC, the center and the State Electricity Boards would take care of their return on new investments, he said.

The Union power Ministry also has directed the State governments to float bonds to wipe out the accumulated past outstanding of their respective State Electricity Boards. The total outstanding of all the SEBs has been estimated at Rs.41,000 crore by the power Ministry.

The power Ministry has also instructed all the State Governments to sign a tripartite agreement, which will be signed between the National Thermal Power Corporation, the Central Government and the respective State Electricity Boards, to regularize the revenue streams in future.

Mr. Prabhu said that the States have been told to comply with the instructions and most of the State Governments have agreed. According to Mr. Prabhu, during the past fortnight, State Government of Punjab, UP, MP, Kerala, Tamil Nadu, Gujarat, Maharashtra, West Bengal, Delhi, Goa Rajasthan and Haryana have agreed to sign the agreement.

As per the agreement, NTPC will take care of the majority of the power generation requirements of the State Electricity Boards.

To make up for the past outstanding of NTPC and also to make all the State Electricity Boards free from their past debts, all the State Governments would issue new bonds which will be picked up by the NTPC against its past dues. Bonds will have a 15 years lock in period, but will return NTPC's funds, which have been blocked with SEBs for a long time.

The Power Ministry has written to all the State Governments last week regarding the proposal and is hopeful that it would be through within next two to three months. The ministry is hopeful to make all the SEBs debt free within next few months.

To make a proper base for assured stream of revenues, the Power Ministry has also decided to convert all the district level distribution centers into independent profit centers. In this regard, the Ministry has directed the respective SEBs to draw up a distribution map of each district in the State.

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NTPC’s Simhadri project all set to hum by end-January         [19 December, 2001]

Giving major thrust to the power position in the State, the first unit of 500 MW Simhadri Thermal Power project (STP), is more likely to commence generation of power by end of January 2002, which is two months ahead of the schedule.

Speaking to visiting newsmen from Hyderabad, general manager of the project R C Srivastava said: “We are confident that the first unit of 500 MW be synchronized by end of January or early February 2002,” though originally it is scheduled to be operational by March next year. The project was originally conceived by the AP Government and later passed on to National Thermal Power Corporation (NTPC), which is a dedicated power generation unit of 1,000 MW of two 500 MW units, with an investment of Rs.3,650 crore. the project is financed with a debt equity ratio of 70:30, with Japan Bank of International Cooperation (JBIC) extending the loan component of 59 billion yen (approx. Rs.2,300 crore), JBIC has already released about Rs.1,200 crore in two installments while the third one is expected at any moment, Mr. Srivastava said.

NTPC has arranged the balance funds through internal accruals and market borrowings, with a view to complete the project as schedule, he added. Interestingly, the plant has already received first coal rake from Talcher Coal Fields in Orissa on December 12, 2001. The annual requirement of 5.04 million tons of coal is tied up with the Mahanadi fields, transported through merry-go-round rail line system.

While explaining about the project implementation, Mr. Srivastava said that the entire project is divided into 13 packages and awarded turnkey contracts to each of the major contractors, reducing the total number of packages, “This will enable the Corporation to monitor and identify the delays and plug the loopholes”, he said. For instance, BHEL was awarded main plant contract, which include design, manufacturing, engineering, civil construction, erection, testing and commissioning. In the earlier method, it will be divided into 45 to 48 packages, he said.

Besides captive power plant set up by NTPC for the benefit of Andhra Pradesh. For the first time in the history of NTPC, sea water is being used for cooling water.

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CESC's Balagarh project in trouble over funding         [ Dec.1 , 2001 ]

The RPG Group is reviewing its investment plans for the Balagarh project, even as it heads for trouble over the funding of the 2x250 MW thermal power project.

Although a separate company, Balagarh Power Company Ltd., was floated for implementing this project. CESC's tariff issue now seems set to derail things, the directors said in the 2000-01 annual report of CESC.

Commenting on the project status, the report admitted that progress has been adversely affected. The International Finance Corporation and the Asian Development Bank were set to extend loans for the project and also pick up equity.

However, CESC has been informed that the issue of approval by the IFC board would be taken up only after the main promoter/offtaker i.e. CESC received a satisfactory tariff revision and obtains waivers/consents from its existing lenders for the project.

Most of the approvals granted to the new power company, including the one by the Export and Import Bank of Korea (KEXIM) has expired after being extended only earlier this year. KEXIM was set to provide buyers credit against offshore supplies from Hanjung.

The price validity of the contract signed with Korea Heavy Industries and Construction Company Ltd. (Hanjung) too, has expired and commencement of renegotiations with the EPC contractor is conditional upon - once again - the tariff revision issue.

CESC, which has not had any increase in its power price since October 1998, was allowed a mere three per cent increase by the West Bengal Regulatory Commission last month. The management has expressed its disappointments over this.

However, the funding problems aside, the Balagarh project is also on the slow track on account of its long-term coal supply agreement (CSA) with the Eastern Coalfields Ltd, which has now become a sick company. The directors felt that the CSA signed with a BIFR-listed company may not be considered a bankable document for the purpose of raising finance. Discussions are now being held with officials of Coal India Ltd. as well as the Union Coal Ministry for finding a solution to this problem, according to sources.

It has been decided that development activities at the site would re-commence only after some progress in talks with lenders.

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Nuclear Power Corp. plans to borrow Rs.7,000 Cr.                            [ Dec.1 , 2001 ]

The Rs.4,200 crore Nuclear Power Corporation of India (NPCIL) is planning to borrowing as much as Rs.7,000 crore from the market for its new projects (cumulatively over 4000 Mwe). These projects are Rajasthan's 5&6 (2x220 Mwe), Kaiga 3&4 in Karnataka (2x220 Mwe), Kundankulam in Tamil Nadu (2x1000 Mwe). Mwe is used to denote the capacity of a power plant in the case of nuclear energy and is equivalent to a megawatt (MW).

"The projects are at various stages of civil works. These are funded by a debt-equity ratio of 2:1, against the traditional 1:1. There is an increasing need for raising debt from the market," said V K Chaturvedi, CMD of NPCIL. Falling interest rates, reduction in project gestation period and equipment costs, and mega power status to various NPCIL projects have reduced the project costs considerably. For instance, Kaiga's project cost has dropped from Rs.4,200 crore to Rs.3,100 crore. "We have received many tax waivers under the mega power status, including customs, sales and excise taxes, cumulatively worth over Rs.300 crore. The gestation period has been reduced from the earlier seven years to five years, and we are saving heavily interest during construction (IDC). Due to the ongoing recession, equipment prices have fallen drastically. All these have helped us bring down the project cost drastically," said Mr. Chaturvedi.

The cost of the power plant has come down to Rs.6.4 crore per Mwe, against the earlier cost of Rs.7.8 crore per Mwe. Though the initial capital expenditure is higher, actual cost of power is quite competitive on account of low cost of fuel. According to Mr. Chaturvedi, the cost of power produced in Kudankulam, for instance, would be Rs.3.08 per unit in 2007, and would remain the same till 2012. Cost of fuel (uranium) is pegged at 25 paise per unit.

The money saved from the Kaiga project is being put into Tarapur and Kudankulam projects. "We will not completely depend on governmental support. NPCIL, which is a AAA-rated company, will bank on internal accruals and market borrowings," said Mr. Chaturvedi. During the Prime Minister's recent visit to Russia, NPCIL signed an agreement with Astom Story Export of Russia to set up the Kudankulam project. Under the agreement, NPCIL will receive Rs.6,100 crore worth of equipment under supplier's credit, which it has to repay in 14 installments with 4 per cent interest. "We will pay it back in 5-6 years.

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NGO pegs Dabhol Power Project cost at Rs.1,500 cr                        [ Dec.1 , 2001 ]

The Prayas Energy Group, a research-oriented NGO, has pegged the cost of the Dabhol project at Rs.1,500 crore ($320 million). This figure contrasts sharply with the estimate of Rs.3,800 crore ($800 million) reported to be under consideration by Indian financial institutions.

The NGO recently evaluated the project's worth following news reports about the Dabhol Power Company selling the stake of its three MNC promoters - Enron, General Electric and Bechtel - for about $800 million, after a 30 per cent discounting.

According to Prayas, if Enron is not willing to settle for a reasonable figure, the Indian financial institutions may come under pressure to absorb the difference to put a full stop to the endless rounds of controversy the project has been attracting. "This is evident in the proposals being discussed, envisaging that the FIs would buy the equity as a warehouse and sell it later. The loss would obviously be theirs," says Shantanu Dixit, one of the researchers for the group.

"Based on our analysis of the renegotiation committee's report of 1995, the affidavit by the then chief minister Manohar Joshi in August 1996 in the Bombay High Court, and the present financing structure of the project, it could be concluded that the fair cost of equity of the foreign promoters is not more than $320 million (Rs.1,500 crore)," he says.

This estimate is based on the assumption that DPC completes the project in the next six months, without any additional loans.

Giving a break-up of the estimate, a statement released by the Prayas mentions that in the detailed project report submitted to the Central Electricity Authority in 1993, Enron has claimed a capital cost of US $2,828 million. Following re-negotiations in 1996, the Shiv Sena-BJP government claimed this cost had been pared down to US $2,500 million. This is mentioned on Page 3 of the re-negotiation committee's report, which says that "Enron and DPC representatives have given their written consent" to this reduction.

But, by 1999, DPC's cumulative loans from India and foreign institutions were nearly $2,050 million. This implies that the total equity component of the project is only $450 million. Of this, the equity of Maharashtra State Electricity Board (MSEB) is $130 million. This brings the total equity put in by the foreign promoters to about $320 million.

The report points out that on several occasions, Enron has guaranteed completion of the project within the agreed cost. "Hence, any equity claim higher than this amount is unjustified and need not be entertained," it says.

"In other words, buying the foreign promoter's stake for a price more than $320 million would amount to a paying a premium to Enron and not discount," observes Mr. Dixit.

The report notes that just before the work on the project was suspended owing to the disputes between the MSEB and DPC. DPC had said the project cost had escalated and it would complete the project at the cost of $3,326 million. "This astonishing cost overrun of $826 million (or 33 per cent of the project cost) is unbelievable, and has to be the result of Enron's inefficiency," says Mr. Dixit.

It further hiked this figure to $3,690 million, citing cost overruns since the project was not completed as per schedule. This, despite the fact that a few months before the suspension of work, DPC had claimed that more than 90 per cent of the project was complete. It has now claimed additional costs of $360 million, that is 14 per cent cost overrun for completion of the project.

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FIs to lend Rs 14.37 billion to GMDC power project           [1 Nov., 2001]

According to an Economics Times report, the Gujarat Mineral Development Corporation’s (GMDC) 250 MW lignite power project in Kutch district is all set to achieve financial closure with a consortium of banks and FIs led by IDBI agreeing to lend Rs 14.37 billion to the project. At a time when financial institutions are shying away from committing funds to the power sector, IDBI-led consortium have committed a higher debt of Rs 14.37 billion to the project despite the fact that the total project cost is Rs 13.95 billion. GMDC is hopeful to achieve financial closure by the end of January and start commercial operations by March 2003. According to managing director GMDC, IDBI has agreed for an exposure of Rs 5 billion. Others like SBI and LIC have committed Rs 1.5 billion each. Among the banks, Central Bank of India and UCO Bank have agreed to sanction Rs 1 billion each. Apart from these five major FIs and banks, there are 14 other FIs and banks, which have agreed to lend collectively the total amount. The project has a debt-equity ratio of 80:20 and therefore it will need Rs 11.2 billion as debt.

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Nagarjuna group seeks partners for Mangalore power project  [Oct. 6, 2001]

The Nagarjuna group plans to include more equity partners for its 1,015 MW power project proposed to be set up near Mangalore.

Sources said that the group was prepared to consider a stake of up to 50 per cent and added that negotiations were at an advanced stage with a foreign company and domestic company. But it declined to name either of these companies involved, "These negotiations are at a crucial and sensitive juncture...so we are not in a position to reveal the names," they added.

Although the Nagarjuna group is not in a position to reveal the names, what is significant is that the CLP Power of Hong Kong which had acquired the 600 MW Phaguthan plant from PowerGen was also looking for more acquisitions in the country.

About three months ago, some of the senior executives of CLP Power had conveyed this to Business Line. However, CLP has not abandoned the greenfield project development. CLP Power along with the Tata Electric Companies is also the developer for another 1,013 MW project near Mangalore.

The negotiations between the Nagarjuna group and other equity investors comes after the project has passed one crucial hurdle with the Karnataka High Court giving its verdict in Nagarjuna's favour by striking down the state government's plea against providing any financial security packages, state government guarantees and deemed generation facilities.

In addition, the project promoters have already managed to clear the milestones of obtaining statutory clearances such as the techno economic clearance by the Central Electricity Authority (CEA) and environmental clearances.

The tentative financial package approved by the CEA is rurrently in the region of about $1.15 billion to be funded through a 70:30 debt equity ratio. Currently, the equity in the project is estimated at $102 million from Nagarjuna Fertilizers and another $41.88 million from a Hong-Kong based company, Fireseed Ltd.

The Engineering Procurement and Construction Contractors to the project (Alstom) and other foreign investors are expected to bring in another $248 million into the project by way of equity.

The remaining amount of approximately $808.12 million is to be in the form of debt financing, which includes a component of Rs.550 crore from domestic financial institutions.

The debt is currently estimated to have maturity profile averaging 11 years. But these costs are expected to be slightly lower, in view of the fall in equipment prices and lower global and domestic interest rates.

The project promoters have already tied up its fuel supply agreements with international energy traders, Glencore, Warkworth of South Africa. Further, efforts were also on for sourcing coal from China in a bid to bring tariffs down further, sources said.

Coal requirement for the project working at 80 per cent load factor is estimated to be in the region of a 1.5 million ton per annum assuming a calorific value of 3000 kilo cals per kg.

Based on the current international coal prices, the effective tariff is unlikely to exceed Rs.3 per unit in 2005 which is the estimated date of commissioning. If the boilers are fired using Chinese coal, power tariffs would come down further closer to about Rs.2.80 a unit, making it one of the most competitive power projects, sources said.

However, this tariff and the date of commissioning would depend on the final clearance by the State Cabinet. As per the court order, the State Government is expected to take a final decision soon.

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BSES project           [Oct. 6, 2001]

The Dabhol Power Project crisis in Maharashtra has led to yet another power project being axed. This one is a Mumbai-based power utility BSES' Rs.2000 crore project at Saphale.

Central Electricity Authority (CEA) has upheld the Maharashtra State Electricity Board's view that the 495 MW project is "not needed".

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BSES to commission AP project by Nov-end    [Oct. 6, 2001]

The 140-mw first unit of the natural gas-based BSES project, coming up near Peddapuram, is expected to be commissioned by the end of November. The Andhra Pradesh Government expects this and the conversion of Lnaco’s project to natural gas will Co’s project to natural gas will help ease the pressure on the demand-supply gap due to fall in hydel generation.

The Chief Minister, Mr. N. Chandrababu Naidu, who reviewed the power situation on Wednesday, directed AP Genco to expedite the overhauls of various thermal generating stations.

While unit 3, 6 and 8th unit of KTPS (Kothagudam Thermal Power Station) and unit 6 of VTPS (Vijaywada Thermal Power Station) are released for overhauling, the overhauls are planned to be expedited to bring in efficiencies. With the commissioning of the first 500 MW unit of NTPC Simhadri slated for February 2002 and the second 500 MW unit by June 2002, the State is expected to be self-sufficient in power. AP Transco will be able to provide reliable and quality supply, Mr. Naidu said.

The State Government and AP Transco are commited to provide 24 hours supply to the rural areas with the completion of the ongoing power projects.

However, this kharif season has been adversely affected due to unfavourable monsoon resulting in poor inflows into major reservoirs and consequent drop in power generation. The poor inflows have resulted in a short fall of 1,095 million units (MUs) of hydel generation up to September. The total shortfall in hydel power during the financial year is expected to be 2,500 MUs.

This was further compounded due to shutdown of the Lanco Power Project to facilitate conversion to natural gas. To tide over the present crisis, following shortage due to fall in hydel generation, the Government has initiated additional power purchase from Chhattisgarh and Gridco.

Widespread rains, of late, have brought cheer to both the administration as well as the farm community. This has also cut down the demand for power to about 120 MUs as against 145 MUs peak demand.

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Plan to cut Ennore LNG Power Project capacity   [Oct. 4, 2001] 

The Tamil Nadu Government and the promoters of the Ennore LNG terminal-cum-Power Project are examining the feasibility of scaling down the capacity of the power plant and making it a State-specific project.

This is because the project has not made much progress as it is still awaiting a suitable payment security mechanism from the Centre.

Although originally the Tamil Nadu Electricity Board (TNEB) was to be the sole buyer of power from the project, it was made a multi-State project because of the TNEB’s inability to provide an escrow cover and also because TNEB felt that it will not be able to absorb all the power generated by the project. The Power Trading Corporation (PTC) was then roped in to  buy power from the project and sell it to willing buyers.

Following this, the PTC began discussions with willing states, including Tamil Nadu, Karnataka and Madhya Pradesh. TNEB even signed an MoU with PTC to buy about 700 MW power from the project.

According to reliable sources, the project is stuck at this stage as the Centre is unable to come up with a payment security mechanism that satisfies the lenders, especially the international lenders, of the Ennore project. The Centre is also averse to getting into a counter-gaurantee situation after its experience with the Enron-promoted Dabhol Power Project.

According to sources, the Centre is examining the possibility of increasing the capital of PTC. The Corporation’s capital is likely to be Rs.1,500 crore but even here the Centre will be able to bring in only about Rs.500 crore and it wants financial institutions or Central sector power utilities to bring the additional funds.

Due to the deadlock, the project promoters proposed to the AIADMK Government, after it came to power, that the project’s size be reduced. The consortium is now waiting for the Government’s response to its proposal.

Instead of a 1,850 MW power plant to go with a 2.5 million tons per annum LNG terminal, the promoters – Dakshin Bharat Energy Consortium (DBEC) suggested that a 1,100 MW power plant be put up so that the TNEB could buy all the power. The payment security mechanism could come from the cash flows of the Electricity Board, which calls for a tariff revision.

The Government is looking into this proposal to see how scaling down the size will affect power tariff. The Government is keen that the project takes off as it feels that the surplus gas can be used for industrial purposes.

It may be recalled that the international competitive bid for the 2.5 million tons per annum LNG terminal and a 1,850 MW Power Project was bagged by the DBEC, which included the Aditya Birla group and CMS Energy as the lead developers, and Unocal, Woodside Petroleum and Siemens as the other partners.

The DBEC also floated a separate company to market the excess gas. The public sector, Madras Fertilizers Ltd., has expressed interest in buying the gas from the project.

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The Enron Effect: Essar drops Hazira power project      [Oct. 3, 2001]

Call it the Enron Effect. Fears about the cash-strapped Gujarat Electricity Board (GEB)’s inability to pay for power and difficulty in achieving financial closure in the wake of the Enron imbroglio have forced Essar Power (ESL) to shelve its 515-MW, Rs 2000-crore expansion project at Hazira in Gujarat. Essar already has a functioning 515-MW project in Gujarat.

Essar Power had already awarded and engineering procurement and construction (EPC) contract for the expansion project to Korea Heavy Industry Corporation. The contract has now been cancelled.

GEB had given EPL an in-principle approval to go ahead with the capacity addition project, which is LNG-fired, at the same site in Hazira where it operates its existing 515 me project. The fixed cost of the project was pegged at Rs 1.35 per unit in a two-part tariff, which is less than the existing fixed cost of Rs 1.50 per unit. “We have however decided to shelve the project under the new circumstances where Enron’s LNG-fired mega project has come to naught,” AK Srivastava, director and CEO of EPL, told ET.

The company decided to put the project on the backburner even before approaching any financial institutions. EPL officials said Indian financial institutions have turned wary of funding any power project with the IDBI-led consortium now saddled with the 2,184 mw Dabhol project. The FIs, especially IDBI, are currently busy scouting for a buyer for the Dabhol project in which they have a huge exposure. ESL had recently approached the IDBI led financial institutions to restructure its debt payments. FIs are yet to take a decision on the same.

Sources said Gujarat is currently facing considerable load shedding. However, GEB usually exempts cities like Ahmedabad, Gandhinagar and Baroda from black-outs, and subjects small towns and villages in the state to load shedding.

“GEB has paid all outstandings to us. At present, it buys most of the 300-MW from the existing Essar plant,” said an official. The Ruias, promoters of EPL, first conceived the power project as a captive unit for its steel plant in Hazira but, later, established it as an independent power project (IPP) when the power sector was liberalised

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Hyundai keen on power plant in Jharkhand                       [Sept. 28, 2001]

The Korean firm Hyundai Heavy Industries (HHI) has offered to set up a diesel power plant at Dumka in Jharkhand. Mr. Lalchand Mahto, the Jharkhand Energy Minister, told Business Line that HHI had offered to set up a 120 MW diesel power plant on a turnkey basis at a cost of $99.49 million.

He said that a team from his department would visit Chennai where HHI has set up a similar plant at Basin Bridge. The 200 MW Chennai plant - set up as an independent power producer (IPP) two years ago - despite the fact that it had been running well, there have been problems over costing (the final cost is yet to be approved), according to power sector sources in Chennai.

He said despite being the second most populous State and one endowed with an abundance of natural resources, Bihar had not priortised power generation, which is why the State has only an installed capacity of 1,500 MW.

This translated into a meager 15 watts per capita capacity against a national average of 100 watts.

However, after reorganization of the State into Bihar and Jharkhand, "a program has been drawn up to increase capacity by harnessing Jharkhand's thermal and hydel generation potential" The state also has a substantial geo-thermal potential.

Currently, Jharkhand has two thermal power plants (at Patratu and Tenughat) with a total capacity of 1,260 MW. Besides, there is the 130 MW hydel project at Sikkidiri.

However, apart from Tenughat, the other two plants are very old and generate only around 330 MW.

There were plans to renovate these plants and by the 11th Five Year Plan, to double the capacity, he said. The state would encourage the private sector in the spheres of generation as well as distribution, he said. A role for the private sector in the distribution of power in the industrial areas of Jamshedpur and Dhanbad as well as the State capital was being contemplated.

Captive power generation by industrial units would also be encouraged and permission of the SEB would not be required. On power sector reforms, he said the State had already signed an MoU with the Union Power Ministry.

Under this arrangement, the JSEB would start operating on a profit center concept, 100 per cent metering would be introduced, and T&D losses would be reduced from 43 per cent to 20 per cent in three year's time.

Further, rural electrification would be completed by 2007 and the Jharkhand State Electricity Regulatory Commission would also be set up, he added.

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TNEB signs purchase pact with NTPC                                  [15 Sept., 2001]

The Tamil Nadu Electricity Board (TNEB) has entered into a power purchase agreement with the National Thermal Power Corporation (NTPC) to purchase 118 MW power from the additional 500 MW unit proposed at the Ramagundam Super Thermal Power Station (RSTPS) in Andhra Pradesh.

The additional unit is expected to commence power generation by 2005-2006. the tariff is to be fixed by the Central Electricity Regulatory Commission, the release said.

The existing capacity at the Ramagundam plant is 2100 MW of which Tamil Nadu’s share is 470 MW. The NTPC, a Union Government undertaking, supplies seven per cent of TNEB’s daily requirement of power, the release said.

According to a press release from the NTPC, the RSTPS is being expanded to 2600 MW at an approved cost of Rs.1,780.99 crore with a debt equity ratio of 70:30.

The coal source for this unit will be Korba Coal Fields, Bilaspur, Chhattisgarh. Power from the additional capacity has also been allocated to other states, including Andhra Pradesh (146 MW), Karnataka (87 MW), Kerala (61 MW), Pondicherry (13 MW), and 75 MW is yet to be allocated, the NTPC release said.

Tamil Nadu’s allocation from NTPC plants is ow 1235 MW. The existing allocations include 470 MW from Ramagundam Stage I and II, 106 MW from NTPC stations in the Eastern region and 541 MW from Talcher Stage II expected to be commissioned by November 2003.

The RSTPS is the mainstay for the southern grid supplying power to Tamil Nadu, Andhra Pradesh, Karnataka, Kerala, Goa and Pondicherry, the release said

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Karnataka relaxes terms for Dakshin Bharat power                       [15 Sept., 2001]

The Karnataka Government has tentatively agreed to treat foreign exchange depreciation as a pass through item for fixing power tariff for purchases from the Dakshin Bharat Energy Consortium (DBEC), at Ennore.

But in doing so, the State Government would be deviating its own power policy guidelines finalized early this year, as part of the purchases from the independent power producers, had indicated that tariff escalation would be limited to just 5 per cent each year and exchange rate fluctuation would not be treated as pass through item. Treating exchange rate fluctuation as a pass through item implies that the impact of rupee depreciation would be passed on to power tariff to protect the return on equity and the project lenders interests.

It was only last week that Karnataka Power Transmission Corporation Ltd. (KPCL) had signed the Memorandum of Understanding with the Power Trading Corporation for offtake of 300 MW of power from the 1800 MW capacity DBEC liquefied natural gas plant at Ennore. This project is jointly promoted by the Aditya Birla Group, Grasim Industries, Unocal, CMS Energy, Woodside of Australia and Siemens, who are also incidentally likely to be the equipment supplier. Grasim and CMS are expected to have a 26 per cent stake each in the Project.

But although the State Government has agreed to provide exchange rate depreciation in tariff, it has disallowed any similar mechanism for a 170 MW barge-mounted project promoted by Smith Cogeneration. This is despite the fact that in inviting such projects through the competitive bidding route, the State Government had committed to providing against foreign exchange fluctuation.

Besides, Smith Cogen had sought only a single part tariff without any payment security mechanism. On the other hand, the State Government has tentatively assured the Power Trading Corporation (PTC) with whom it has signed the MoU for a two part tariff. Further a payment security mechanism for the project also be evolved, the sources said, in line with the demands of the project lenders. This security mechanism would be necessary as a fall back mechanism, though the State Government is reluctant to call such an arrangement as an escrow account.

The sources said that the State Government’s consent for creation of a payment security mechanism or a fall back option is in view of the attractive tariff. According to preliminary estimates, the fuel cost for Ennore is expected to be fixed for 20 years at $3.7 per million British thermal units (mbtu). This translates into about $192 per tone (assuming a conversion factor of 51.7 mbtu per tone). DBEC’s LNG requirements to be sourced from Ras Gas of Oman is likely to be in the region of 2.5 million cubic meters or 1.15 million tones per annum for a PLF of 85 per cent.

The DBEC’s offer of 300 MW to Karnataka is on the basis of a 85 per cent plant load factor. This would imply an annual availability of approximately 2600 Million Units from 2005 or about 7.2 million units per day. The advantage from this project is that the effective tariff has been claimed to be Rs.3.40 per unit in the first year at current exchange rates. This is significantly lower tariff than some of the liquid fuel suppliers of the State, which are currently over Rs.4.50 a unit. However, the DBEC tariff is significantly higher than the original estimated quote of Rs.1.90 per unit, it had made in its initial offer last year.

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New lease of life for power project                                           [14 Sept., 2001]

The 1980-MW super thermal power project here was given a second lease of life today with great fanfare at a function dominated by NDA functionaries, though internal bickering clouded the function.

The foundation stone for the Rs.7,200 crore project to be set up by the National Thermal Power Corporation was first laid by the Prime Minister, Mr. Atal Bihari Vajpayee, in March 1999 ahead of the Lok Sabha elections, the process was recreated with the Union Power Minister, Mr. Suresh Prabhu, laying the foundation stone of the Project Site Office. Ironically, he himself described the function as the "real" launching of the project which had remained on the backburner for well over two-and-a-half years. The NDA leaders are apparently paying special attention to the projects and schemes they had launched during the Lok Sabha elections.

If it was in the Railway Minister, Mr. Nitish Kumar's constituency that today's function was held, a couple of days earlier the NDA leaders were busy inaugurating two national highways.

While the reason for the urgency is best known to them, the fact remains that these leaders are already assuming political postures, forming in the process their own groups, for the time being within the NDA.

Absent from today's function were three Union Ministers - Mr. Ram Vilas Paswan, Mr. Sharad Yadav and Mr. Digvijay Singh - who are reportedly coming closer.

The surprise of the day was actor-turned-MP, Mr. Shatrughan Sinha, who is believed to be upset at non-inclusion in the Union Council of Ministers.

He did not conceal his emotions over the lukewarm accord given to him vis-à-vis today's function, but added that he turned up despite the lack of a proper invitation, in the interest of the State and the issue of its development. Mr. Sinha, however, did not comment on his being excluded from the Union Cabinet and said he was not one to question the wisdom of the Prime Minister not his opinion about him and his capabilities.

He added that he was not one to accept a job in the fourth or fifth reshuffle. Mr. Prabhu while assuring speedy completion of the project - the first unit of 660 MW will be commissioned in 2006 - also assured that a high-level delegation would be sent within a month to find a way to streamline the generation distribution and transmission of power in the state and improving the power situation in the state capital.

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CPCL expects grant for power project report                [12 Sept., 2001]

Chennai Petroleum Corporation Ltd. (CPCL) expects to get a grant of Rs.4-5 crore from the US Trade and Development Agency for preparing a detailed project report on the power project using refinery residue as fuel.

The CPCL Chairman and Managing Director, Mr. S. Rammohan, told newspersons after the company's annual general meeting, that the grant was likely to be approved in the next two months.

Only after the DPR was ready could CPCL go to the Tamil Nadu Electricity Board for discussions on the power purchase agreement, he said.

Mr. Rammohan said that Texaco and Shell were the two companies that had technology for converting refinery residue into gas using integrated gasification combined cycle (IGCC) technology for firing the power plant, CPCL planned to set up a 500 MW power plant near its Manali refinery at an estimated cost of Rs.2,837 crore.

The Chairman told shareholders that CPCL was holding discussions with Neyveli Lignite Corporation (NLC) and National Thermal Power Corporation (NTPC) for an equity stake in the power project. The structure of the joint venture was under review.

Later, he told newspersons that the joint venture partner was likely to take 26 per cent stake in the venture.

Mr. Rammohan said that CPCL had achieved a saving of Rs.58 crore up to July 2001 thanks to the Excellence in Competitive Performance (ECPP) program, for which it was being assisted by Solomon Associates Inc, US. The savings on an annualized basis would be about Rs.95 crore.

The program, which started in June 2002 and was scheduled to end in January 2002, was meant to help CPCL in different areas including operating practices, lube quality, refinery fuel and loss, and crude sources.

To shareholders' queries, Mr. Rammohan justified the Rs.2,360 crore that CPCL would be investing in its three million tones per annum expansion at Manali. CPCL would have to spend nearly Rs.1,000 crore to improve the quality of its products. This investment, without an expansion in capacity, would only hit the company's margins, he added.

He said CPCL was looking at the possibility of setting up a desalination plant to meet its water requirements. CPCL shut down its refinery-I operations for more than 20 days in July and August because of water shortage.

Responding to shareholder's questions, Mr. Rammohan said there was no talk at present of merging CPCL with Indian Oil Corporation, which bought over the Government of India's stake of 51.8 per cent in CPCL. The IOC also did not intend to buy out the shares held by the employees in the company, he said.

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Vandrevala rising at Tata Power                                             [7 Sept., 2001]

The Tata group is putting in place a well-oiled succession plan at Tata Power. Firdose Vandrevala, deputy managing director of Tata Steel, will take over in a similar capacity at Tata Power from November 1.

Vandrevala is set to take charge as managing director from Adi Engineer, who will retire on August 31 next year. A M Sahni, the other executive director at Tata Power, is laying down office on October 31 paving the way for Vandrevala's appointment. Tata Power is however yet to fill in the position of finance head which fell vacant last year when executive director C R Vevaina resigned. General Manager Rumi Kanga is currently overseeing the finance function. Vandrevala's new role follows two similar moves:' at Voltas, where Ashok Soni was made deputy managing director, and at Titan where Bhaskar Bhatt was elevated to the same position.

Soni and Bhatt are to take over the managing director's job from Nawshir Khurody and Xerxes Desai, respectively. Both Desai and Khurody will retire later this fiscal. Vandrevala's term will be initially for five years and the company is planning to seek shareholders nod for the move at the next annual general meeting, the Tata Group has said in a press release. Vandrevala had joined Tata Steel in 1972 and has held various senior positions before being elevated to his current assignment.

Tata Power is emerging as a key company in the Tata group and has graduated from a mere power company to being the group's energy arm. It has tied up with TotalFina Elf of France to set up an LNG terminal and power plant, and also has a wholly-owned oil exploration arm.

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Dabhol lenders ask NTPC, GAIL to take over project                 [7 Sept., 2001]

Local lenders to Dabhol and some of the other concerned parties have jointly proposed that National Thermal Power Corporation (NTPC) and Gas Authority of India (GAIL) must step in to take over the project. The lenders, open to certain concessions like lower interest and reschedulement, have finalized a structure to offer the power plant to NTPC and the liquefied natural gas (LNG) facility at Dabhol to GAIL.

The  issues were discussed at length on Wednesday and would be considered at a meeting with the Finance Ministry on Friday. The proposal is being made by the special committee comprising the financial institutions, central agencies like CEA and concerned ministries. 

Domestic lenders, who are finding warehousing Enron’s stake a financial strenuous proposal, are suggesting this as an alternative.

The gist of the committee’s report is that NTPC and GAIL should step in. this would definitely help the FIs release necessary funds required to complete the project. Over US$250 mn along is required to make the plant LNG compatible; considering other expenses and the interest during construction the cost could be close to Rs.3000 crore.

The FI committee, headed by the lead arranger IDBI, has already zeroed in on this option. It is, however, yet to discuss these options with the public sector giants –NTPC and GAIL. FI sources said even though NTPC had earlier refused to takeover DPC, it would be again approached to save the day.

The panel has also detailed the possible offtake routes and the avenues through which the tariff can be lowered to an affordable level. Besides asking for certain approvals and concessions from the central Government like giving DPC a mega Power Project status, they have also sought a Government cover on the additional loans that would be disbursed for Dabhol.

The lenders have sounded out some of the business houses and other power companies who could be interested in DPC. But till now, there has been no positive response. Enron, which owns 65 per cent in Dabhol, is desperately looking for an exit option. The US power giant has written to the central Government detailing a roadmap in this connection.

The Madhav Godbole committee had discussed with many State Electricity Boards (SEBs) who were interested in picking up the DPC power. “They have demanded an unrealistic tariff while their cumulative demand was less than 1000 mega watt (MW). If NTPC steps in, the pain of Maharashtra State Electricity Board (MSEB) or DPC signing various power purchase agreements (PPAs) could be saved,” said a senior FI official.  

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General Electric plans to review power investments in India       [7 Sept., 2001]

Global conglomerate General Electric (GE) has decided to review its investments in its power ventures in India.

Industry sources familiar with the development said the US major has decided to reroute its investments earmarked for India to other developing countries due to lack of clarity in the power policy and delay in achieving financial closure of power projects.

As part of its rethinking on power investments in the country, General Electric has informed the AV Birla group about its decision to not to go ahead with the Engineering and Procurement Contract (EPC) of the Rs.2,060 crore 500 MW Rosa Power Project in Uttar Pradesh.

Industry sources familiar with the development said, “GE is not keen on selling their turbines in India as also to undertake engineering and procurement contracts due to delay in achieving financial closure of power projects.

The public relations agency in Mumbai handling the General Electric account said that General Electric officials were unavailable for their comments.

GE holds 10 per cent stake in the Enron Power Corporation promoted 615 MW Dabhol Power Project in Maharashtra. The company is planning to encash its investments when the US major sells its 65 per cent stake.

The delay in achieving financial closure coupled with lack of commitment from the State Electricity Board to undertake reforms has taken its toll on several multinationals who have decided to pull out of power projects in the country. Among them include the US utility major Eastern Generation pulling out of the Kondapalli Power Project, National Power from Videocon-promoted Power Project in Tamil Nadu, AES Power of the US has recently stated that it is reviewing its 49 per cent interest in Orissa Power Corporation.

AV Birla officials said in view of GE’s decision against taking up the engineering and procurement contract, the group has decided to scout for a new EPC contractor. In this regard the company has initiated talks with Bharat Heavy Electricals Limited (Bhel) and ABB Alsthom.

However, the officials said they have decided against ceding equity in the project to EPC contractor which is the normal practice followed in a Power Project. As part of the commitment to any Power Project, the EPC contractor is offered a minority equity in the project.

Engineering and procurement contract of any Power Project involves 65 per cent of the project cost including supplying of turbines for running the project.

AV Birla Group has decided to undertake the operations and maintenance contract in house, industry sources said. The group is close to achieving the financial closure by tieing up the funds from the financial institutions and banks.

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Andhra Power Project in trouble                                              [6 Sept., 2001]

The first fast track power generation project in private sector in Andhra Pradesh has run into serious difficulties with the private promoters of the project now demanding double the cost per unit agreed upon when envisaged in 1991 and the audit report raising serious doubts about the claims of the promoters Spectrum Power Generation Ltd. having spent the amount they claim.

If the Spectrum claims are accepted Andhra Pradesh may have to buy power from this gas generated power plant of 200 MW based in Kakinada at the rate of RS.4.50 per unit as against the agreed rate of RS.2.13 per unit, when it was envisaged.

That is because the SPGL claims that against the original projected cost of Rs.500 crore they had to spend  Rs.981,61,41,000, which is almost double the cost earlier estimated.

However the audit report as well as the Industrial Development Bank on India which has extended it a loan of Rs.250 crores has doubted the claims of the company and the audit report has cited instances which show serious discrepancies and irregularities amounting to what they described as 'misutilization of funds."

The tragedy is that this project was originally awarded to the National Thermal Power Corporation (NTPC) and the NTPC had offered to launch this project at a cost of only Rs.400 crores. Yet in 1992 the Power Ministry fired by its urge to go in for large scale privatization came up with the brilliant idea of handling over this project to the private sector. That is when the NTPC had already acquired 1,250 acres of land, and had secured the necessary clearance from the Ministry of forests and environment as also completed the formalities with the State and the Central Government. The NTPC has tied up the ADB loan at a nominal interest rate. But then a promoter's agreement was entered into in June 1992 between the NTPC, Spectrum Technologies USA and NRI company based in the US and promoted by one Dr. A V Mohan Rao as also Jaya Foods Limited a small Rs. two crore Vermicelli company owned by Mr. Krishna Rao. It was decided then that 90 per cent holding will be owned by the SPGL and 10 per cent by NTPC because the NTPC had already spent over Rs.5 crore on the project and done all the spade work. The decision to hand it over to the private sector was taken ostensibly to put this power generation projects on fast track. Yet it has taken full seven years for the project to be commissioned. And additionally with both partners of the company namely Dr. A V Mohan Rao and Mr. Krishna Rao having fallen out it is currently under multiple litigations, in different courts extending from AP high court to Delhi high court to the Supreme Court. The audit report prepared by S B Billimora and company has cited "infirmities" in the methodology.

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Bhel bags NTPC Ramagundam power contract                             [25 Aug, 2001]

Bharat Heavy Electricals Limited (Bhel) has bagged yet another contract from the National Thermal Power Corporation (NTPC) for setting up a 500 MW unit at Ramagundam super thermal power station (STPS) in Andhra Pradesh.

The contract, valued at Rs.1,106 crore, has been awarded to Bhel under international competitive bidding (ICB) norms for the stage III expansion of NTPC’s Ramagundam STPS. The project is targeted for commissioning by fiscal 2004-05 within a tight schedule of 42 months.

Bhel’s scope of work for the project, according to the company’s press release, envisages design, engineering, manufacture, supply, erection, testing and commissioning of a steam and turbine generator set of 500 MW along with associated auxiliaries and control instrumentation system.

Significantly, the Ramagundam order has come close on the heels of NTPC’s Rihand project (2x500 MW) contract. With the commissioning of the 500 MW set under stage III, the total generating capacity of Ramagundam STPS will stand enhanced to 2,600 MW.

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NHPC projects in Bhutan                                                            [21 Aug, 2001]

National Hydroelectric Power Corporation has successfully synchronized two generating units of 15 MW each of 60 MW Kurichu hydroelectric project in Bhutan to the Indian Power Grid at Salakati in Assam on August 13 and 15 respectively. The power generated from the project is being supplied to the north eastern/eastern grid through 132 kV single circuit, 200 km long Kurichu-Gelephu transmission line in Bhutan.

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Shree Cement to set up power plant                                 [21 Aug, 2001]

The Rs.560 crore Shree Cement, part of BG Bangur, is setting up a captive power plant with a capacity of 36 megawatt has a total investment of Rs.120 crore. Speaking to the ET, HM Bangur, joint managing director, Shree Cement said, "The power plant will be partially financed through thermal accruals and partially through institutional borrowings. We expect to pump in roughly Rs.35 crore from internal accruals."

Mr. Bangur said the balance amount of Rs.85 crore will be raised through debentures. The company has already received  assurance from financial institutions like Industrial Development Bank of India and ICICI who have agreed to subscribe to Rs.85 crore worth of debentures. The final deal including the terms and conditions will be finalized only after credit rating agency CARE declares the ratings. The company is also in talks with a turnkey project contractor to thrash out the nitty gritty of the deal.

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Bhel bags Rs.540 cr. supply contract [20 Aug, 2001]

Bharat Heavy Electricals Limited (Bhel) has been awarded the electro-mechanical equipment supply order at a cost of Rs.540 crore for the Maheshwar hydel project.

Shree Maheshwar Hydel Power Corporation is setting up a 40x10 MW Power Project on Narmada river at Maheshwar in West Nimar at a cost of Rs.2,254 crore for which ABB-Alstom is hydro-mechanical contractor while Sew Constructions and Prasad & Company are the civil contractors, according to latest report on Madhya Pradesh by the Centre for Monitoring Indian Economy.

The company issued a letter of intent (LoI) to Bhel for the electro-mechanical equipment supply order it said, adding that the order would consist of supplying turbine, generator and transformer equipment.

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APERC for reworking PPA with BPL [20 Aug, 2001]

The Andhra Pradesh Electricity Regulatory Commission (APERC) has directed the Transmission Corporation of Andhra Pradesh (APTransco) to renegotiate certain aspects of the later’s power purchase agreement (PPA) with the Rs.2,800 crore, 2 x 260 MW, BPL Ramagundam Power Project.

The Commission wants APTransco to renegotiate the following points which have a bearing on the ultimate tariff:

• Raising the threshold limit of plant load factor (PLF) to a reasonable level of about 80 per cent;

• Non-payment of any incentive on deemed generation above the threshold i.e., the incentive would be payable only on actual generation above the threshold limit of PLF;

• The feasibility of converting BPL’s dollar distribution in the equity into Indian rupees as on the commercial date of operation for all purposes; and

• The possibility of reducing the interest rate spreads which are very high

• The eration above the threshold limit of PLF;

• The feasibility of converting BPL’s dollar distribution in the equity into Indian rupees as on the commercial date of operation for all purposes; and

• The possibility of reducing the interest rate spreads which are very high

• The eration above the threshold limit of PLF;

• The feasibility of converting BPL’s dollar distribution in the equity into Indian rupees as on the commercial date of operation for all purposes; and

• The possibility of reducing the interest rate spreads which are very high

The APERC press release said that it had examined the proposal of APTransco from the point of view of demand (need for the project), observance of the power purchase procedures and reasonableness of the indicative tariff from the point of view of the consumer.