India's APGenco to Invest $16 Billion in 21 Power Projects

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Researched by Industrial Info Resources (Sugar Land, Texas)--Andhra Pradesh Power Generation Corporation Limited (APGenco) (Hyderabad, Andhra Pradesh) plans to develop 21 power plants with a combined generation capacity of 15,900 megawatts (MW) during the next five years. This ambitious plan would entail an investment of $16.38 billion. Of the 21 projects, 11 are in various stages of execution, while 10 are newly planned projects that the firm has embarked upon as directed by Y. S. Rajasekhara Reddy, Chief Minister of Andhra Pradesh.

The 11 ongoing projects, with a combined power generation capacity of 6,653 MW, are being developed with a total investment of $5.28 billion. Financial closure has already been attained for these projects, which will be completed in the next three years.

The 1,600-MW Sri Damodaram Sanjeevaiah thermal power plant in Krishnapatnam is being set up with an investment of $1.73 billion. The project will consist of two 800-MW units, scheduled for commissioning in June 2012 and December 2012. KfW Bankengruppe (Frankfurt, Germany) has sanctioned a loan of nearly $350 million for the project, while Power Finance Corporation Limited (BSE:532810) (PFC) (New Delhi) will provide the balance. The state government of Andhra Pradesh has also sanctioned an equity amount of $20 million for the project.

The 1,100-MW Kakatiya thermal power plant, with two units of 500 MW and 600 MW, is being set up in two phases. The first phase, requiring an investment of $606 million, is scheduled for commissioning in December 2009. The second phase, requiring an investment of $618 million, is scheduled for commissioning in March 2012. Rural Electrification Corporation Limited (BSE:RECLTD) (REC) (New Delhi) has sanctioned a term loan of $445 million for the first phase of the project, while the second phase will be funded by REC and PFC.

The fifth 210-MW unit of the Rayalaseema thermal power project is being set up at a cost of $223 million with funding from PFC. It is scheduled for commissioning in June 2010.

The 2,100-MW gas-based power station in Karimnagar is being developed with an investment of $1.13 billion with financial assistance from PFC and REC. The project comprises three units of 700 MW each that are scheduled for commissioning in September 2009, December 2009 and March 2010.

The 234-MW Priyardarshini Jurala hydroelectric project is being developed in a joint initiative with the state government of Karnataka. The project will consist of six units of 39 MW each. Three units have already been commissioned, while the fourth is scheduled to come on stream by September 2009, followed by the remaining two units, both scheduled for commissioning by April 2010. PFC has sanctioned a loan of nearly $90 million towards execution of project works. The cost of the project is estimated to be $112 million.

The fourth unit of the Pochampad hydroelectric power plant, which has a capacity of 9 MW, will be set up this month at a cost of $5.73 million. The fourth unit of the Kothagudem thermal power plant, with a capacity of 500 MW, will be set up by June 2010 at a cost of more than $450 million. Both of these projects are being funded by PFC.

The 240-MW Lower Jurala hydroelectric power plant is being developed at a cost of $185 million with financial assistance from PFC and REC. It will consist of six 40-MW units. The first unit is scheduled for commissioning by May 2011, followed by the remaining five units to be set up in phases until January 2013.

The 50-MW Nagarjunasagar tail pond dam powerhouse is being set up at an estimated cost of $95 million. The project will comprise two units of 25 MW each. The first unit is scheduled for commissioning in December 2010 and the second unit in March 2011. PFC has sanctioned a loan of $76 million toward execution of project works.

Early last month, the state government of Andhra Pradesh approved an investment of $8.19 billion for APGenco to set up 10,172 MW of new power generation capacity through development of coal-based, gas-based, hydroelectric and nuclear power plants. These projects include the 4,000-MW ultra-mega power project in Vodarevu that is estimated to cost $3.38 billion and the 900-MW hydropower project at Polavaram, estimated to cost $921 million.

The firm plans to raise funds for these projects in a debt-to-equity ratio of 4:1, with the debt component to be procured from domestic and international funding firms and the equity component to be met through internal accruals. According to D. Prabhakar Rao, Finance Director of APGenco, financial institutions are willing to lend 100% financial assistance for the firm's power projects. Rao also said that 100% debt component would not affect the economic feasibility of the power projects, as the firm is expected to earn a return on capital investment of 14% with tariff rates fixed accordingly. APGenco plans to generate internal accruals of about $409 million during the next five years. Profits obtained in the past five years have resulted in internal accruals of $205 million.

The state government of Andhra Pradesh had earlier approved an investment of $4.7 billion for setting up power projects with a combined generation capacity of 4,728 MW. APGenco has already secured finances and placed plant and equipment orders for these projects, which are scheduled for commissioning by the end of 2012 or early 2013.

According to APGenco's website, the firm has a total installed power generation capacity of 7,857.9 MW, with thermal power plants accounting for 3,882.5 MW, hydroelectric power plants accounting for 3,703.4 MW and wind power accounting for 2 MW. However, recent news reports indicate that the firm added 1,126 MW of power generation capacity in the month of June.

According to reports in early June, Andhra Pradesh was witnessing an annual power deficit of 1,200 MW. About 2,000 MW of generation capacity from gas-fired power plants was not being utilized because of an insufficient supply of gas, but with gas being sourced from fields operated by Reliance Industries Limited (BSE:500325) (Mumbai) in the Krishna-Godavari basin, these power plants are now operational. Andhra Pradesh currently has a total installed power generation capacity of 13,186 MW and a peak load consumption of 8,700 MW.

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