India's Adani Power to Develop 1,320-Megawatt Power Project in Madhya Pradesh

---

Adani Power Limited (BSE:533096) (Ahmedabad, Gujarat), a leading Indian private-sector power developer, has received a letter of intent from the state government of Madhya Pradesh to develop a 1,320-megawatt (MW) thermal power project at Chhindwara. Construction of the first 660-MW unit of the $1.14 billion power project will be completed within 42 months of the letter of intent.

The state government's Department of Energy will make recommendations to the federal government for allocation of coal blocks for the project. However, Adani Power will be required to submit applications to obtain the necessary clearances. The Madhya Pradesh government has assured full assistance to obtain statutory approvals from various departments.

The state government will provide infrastructure and land required for the project. The Madhya Pradesh State Electricity Board (MPSEB) (Jabalpur, Madhya Pradesh) is expected to transfer about 300 hectares of land to Adani Power. The Pench River has been identified as the water source for the power plant.

Adani Power will sell 10% of the net power generated at the Chhindwara to the state government at a variable cost. The state government will have the first right of purchase for up to 40% of the total electricity generated by the power plant for 20 years. The remainder of the power produced will be tied to medium- and long-term contracts.

Adani Power is emerging as one of India's fastest-growing private power companies. It is part of the $5 billion Adani Group (Ahmedabad), which has business interests spanning oil refining, power generation and transmission, gas distribution, ports and logistics.

Adani Power and its affiliates are developing several power plants in India. By 2020, the company plans to develop about 20,000 MW of power-generating capacity. The firm is developing about 13,200 MW of power projects, including the Chhindwara plant.

Some of the upcoming projects include the 3,300-MW thermal power plant at Tiroda in Maharashtra, the 1,320-MW thermal project at Kawai in Rajasthan, the 4,620-MW power plant at Mundra in Gujarat, and the 2,640-MW power project at Dahej in Gujarat.

The 4,620-MW Mundra project will be constructed in four phases, with 660 MW each in the first and second phase, 1,320 MW in the third stage, and 1,980 MW in the fourth stage. The first two units are likely to be commissioned by 2010-11.

The first of the two 660-MW units being developed at Mundra recently received Clean Development Mechanism (CDM) certification as part of United Nations Framework Convention on Climate Change (UNFCCC). The Mundra plant is the first worldwide to receive this certification for supercritical technology-based power projects.

Adani Power is also executing two transmission lines: the 500-kilovolt (kV) bipole High Voltage Direct Current (HVDC) transmission link, which connects Mundra with Haryana, and the 400-kV Direct Current (DC) line, which links Mundra and Dehgam, which also is in Gujarat.

In a related development, Adani Power's Tiroda power project in Maharashtra suffered a setback, when the Ministry for Environment and Forests refused to allocate the Lohara coal block for the project. Jairam Ramesh, the minister for Environment and Forests, refused to allocate this mine, as it is in the vicinity of the Tadoba Andhari tiger reserve. Ramesh indicated that an alternate coal block would be allocated for the power project.

According to recent media reports, Adani Power announced that it will not honor two 1,000 MW long-term power purchase agreements signed with Gujarat Urja Vikas Nigam Limited (GUVNL) (Vadodara, Gujarat). In 2006 and 2007, Adani Power signed agreements with GUVNL to provide electricity at US 6.2 cents per kilowatt-hour and US 5.1 per kilowatt-hour, respectively. Each contract was for a period of 25 years without price escalation.

Adani Power was hoping to receive coal feed from Chhattisgarh through Gujarat Mineral Development Corporation (BSE:532181) (Ahmedabad, Gujarat). However, the coal linkage did not materialize, and power generation at prices committed to GUVNL was not viable with imported coal. GUVNL has approached the Gujarat Electricity Regulatory Commission (GERC) (Ahmedabad) to resolve the issue.

View Project Report - 200001930

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy related markets. For more than 26 years, Industrial Info has provided plant and project spending opportunity databases, market forecasts, high resolution maps, and daily industry news.