Indian Oil Corporation Awards $734 Million Captive Power Project to BHEL

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Researched by Industrial Info Resources (Sugar Land, Texas)--In a recent announcement, India's state-owned power equipment manufacturing company Bharat Heavy Electricals Limited (BSE:500103) (BHEL) (New Delhi) said that it has been awarded a $734 million turnkey contract by India's national oil company Indian Oil Corporation Limited (BSE:530965) (IOC) (Mumbai) to set up a 376-megawatt (MW) captive power plant at IOC's upcoming 15 million-ton-per-year refinery at Paradip, in Orissa. The refinery is scheduled to be commissioned in November 2012.

The scope of work outlined by the terms of the contract includes the design, engineering, manufacture, supply, erection and commissioning of the power plant. The associated civil works of the energy-efficient and environmentally friendly power plant are included in the contract. This is the largest-value single order received by BHEL for a captive power plant. BHEL's techno-economic superiority led to the selection of the company.

BHEL's Power Sector -- Southern Region will perform the civil works, erection, and commissioning of the power plant. The equipment for the plant will be supplied by BHEL's production units at Bhopal, Hyderabad, Jhansi, Ranipet, Trichy, and the electronics division of the Bangalore unit. The gas turbine-based, combined-cycle power project is to be commissioned in November 2012, and effectively will meet the process steam and power requirements of the refinery.

In December 2008, IOC formed a 26:74 joint venture company with integrated power company Tata Power Company Limited (BSE:500400) (Mumbai), to set up a 1,000-MW captive power plant at the Paradip refinery. Under the terms of the agreement, IOC was committed to utilizing at least 51% of the thermal power generated, while the surplus could be traded by the joint venture company. A portion of the power generated was set to be supplied to the refinery, while another portion will be sold to the state grid. A percentage of the power also was likely to be supplied to the proposed steel project of the Tata Group (Mumbai) in Orissa and to other industries near Paradip. However, the project could not be implemented for various reasons, some of which include problems in securing coal linkages, delays in obtaining environmental clearances, and problems in acquiring land. The project was put on the backburner for a certain period, but in September 2009, IOC announced that it would no longer pursue the joint venture project and instead would set up a captive power plant of lower capacity at the refinery complex and supply the excess power to the grid. IOC even raised questions about Tata Power's interest in the project, but Tata Power did not comment on that issue. The new BHEL contract is an outcome of that situation.

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