India's BGR Energy Systems and Orissa Government to Build 1,320-Megawatt Thermal Power Plant

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Researched by Industrial Info Resources (Sugar Land, Texas)--Indian power equipment producer BGR Energy Systems Limited (BSE:532930) (Chennai, Tamil Nadu) has signed a memorandum of understanding with the state government of Orissa to build a 1,320-megawatt (MW) thermal power project with an investment of about $1.42 billion. The power project will be at Bhapur, in the state's Nayagarh district. A special purpose vehicle will be set up to supervise and implement the project. The power project, which will employ about 1,200 people, is expected to spur economic development in the region.

The state government will expedite processes relating to regulatory approvals, water supply, coal linkages, and land allocation for the project. Orissa will receive 12% to 14% of the power generated from the project at variable cost. The tariff will be determined by the Orissa Electricity Regulatory Commission (OERC) (Bhubaneshwar, Orissa). Under the terms of the agreement, BGR Energy can sell the surplus power to third parties in Orissa or outside the state.

In 1985, B.G. Raghupathy, promoter of BGR Energy Systems, established the company as a joint venture with GEA Energietechnik GmbH (Bochum, Germany). In 1993, the promoter and his family members bought full stake in the company. The company's business interests span six business divisions: infrastructure; captive power projects; electrical projects; oil and gas; power projects; and environmental engineering. In a related development, BGR Energy secured a $22.5 million fiber-optic cabling contract from Power Grid Corporation of India Limited (BSE:532898) (PGCIL) (Gurgaon, Haryana).

In a bid to bridge the electricity demand and supply gap, the Orissa government is encouraging independent energy producers to build power plants in the state. Recently, the government signed a memorandum of understanding with five power producers, which includes BGR Energy Systems, to add 4,800 MW to the state's power generating capacity. The combined investment in these projects, approved by High Level Clearance Authority (HLCA), is estimated to be about $5.26 billion. The other approved projects are:

• A $1.83 billion, 1,320-MW plant to be developed by Adhunik Power and Natural Resources (Kolkata, West Bengal) at Birmaharajpur in Sonepar district
• A $12.47 million, 120-MW project to be developed by Vijaya Ferro and Power Limited (Vijayawada, Andhra Pradesh) at Kesinga in Kalahandi district
• A $1.81 billion, 1,980-MW thermal power plant to be developed by JR Powergen Private Limited (Hyderabad, Andhra Pradesh) at Kishorenagar in Angul district
• A $67.33 million, 60-MW project to be developed by Maa Durga Thermal Power Company Limited (Cuttack, Orissa) at Tangi in Cuttack District

The five projects, which will provide employment to nearly 22,325 people, are estimated to require about 4,360 acres of land. The project developers will follow the state government's policy of employing locals. Maa Durga Thermal Power and Vijaya Ferro and Power will draw water from the Birupa River and the Tel River, respectively. Other projects will receive water supply from the Mahanadi River. The five projects will help Orissa increase its power generating capacity from 26,300 MW to 31,100 MW. With assistance from these projects, the core economy and agriculture of the state is expected to grow 10% and 20%, respectively. Earlier, HLCA cleared 21 memoranda of understanding for power projects, which are likely to add 26,300 MW to the state's power generating capability. About 15 of the 21 approved projects are on track.

The state government has urged power developers to use clean power-generating technology, reduce greenhouse gas emissions, and improve fuel efficiency in the sector. Orissa is also seeking development of allied infrastructure units, like cement and brick manufacturing facilities, around the power plants, which will help efficiently manage fly ash. The state government's decision to support clean energy projects is in line with the federal government's policy to slowly phase out traditional coal-fired plants.

Recently, India's Ministry of Power announced that companies developing supercritical power plants (SCPPs) would receive coal linkage allocation on priority, in comparison to conventional coal-fired power plant promoters. H.S. Brahma, the secretary for the Ministry of Power, said that incentives would be provided to encourage companies to construct SCPPs.

The SCPP technology is emerging as a popular choice worldwide for electricity generation. The technology provides higher levels of fuel efficiency and is environmentally friendly. While a traditional coal-fired power plant has fuel efficiency of about 32%, a SCPP can provide fuel efficiency of more than 45%. SCPPs also assists in reducing fuel costs and greenhouse gas emissions, and requires less coal feed per megawatt-hour.

Presently, India has a power generating capacity of 155,859 MW. By March 2012, India is expected to add 61,000 MW of new generating capacity against the target of 78,000 MW. The country is constructing 38 SCPPs, of which some projects will be commissioned during the 11th Five-Year Plan period (2007-12). About 60% of the SCPPs will begin operations during the 12th Five-Year Plan period (2012-17). All coal-fired power plants developed during the 13th Five-Year Plan period (2017-22) will be based on SCPP technology.

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