India's BHEL and Mahagenco to Develop 1,320-Megawatt Supercritical Thermal Power Plant

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Researched by Industrial Info Resources (Sugar Land, Texas)--India's state-run power equipment manufacturer Bharat Heavy Electricals Limited (BSE:500113) (BHEL) (New Delhi) has signed a memorandum of understanding with Maharashtra's energy utility company, Maharashtra State Power Generation Company Limited (Mahagenco) (Mumbai), to form a 50:50 joint venture that will build, own and operate a 1,320-megawatt (MW) coal-fired thermal power plant in the Latur district of Maharashtra. The stake of each company in the venture eventually will be reduced to 26%, and the balance stake of 48% will be offered to banks, financial institutions and other entities. According to K. Ravi Kumar, Chairman and Managing Director of BHEL, institutions such as Infrastructure Development Finance Company Limited (BSE:532659) (Chennai, Tamil Nadu), IFCI Limited (BSE:500106) (New Delhi), and State Bank of India (BSE:500112) (Mumbai) already have expressed interest in being involved in the project.

The first 660-MW unit of the supercritical power plant will be ready for commercial operations within four years of BHEL's receiving the equipment order. The second 660-MW unit will be set up within the following six months. BHEL will receive an order from the venture for developing the plant on a nominated basis. Land acquisition and other clearance procedures are expected to be completed soon, and project work is scheduled to begin within six months. BHEL plans to begin pre-engineering activities in advance. The company's manufacturing unit in Haridwar, Uttarakhand, would manufacture the turbine-generator units, while the manufacturing unit at Trichy in Tamil Nadu would manufacture the once-through supercritical boilers. Supercritical technology enhances the efficiency of the plant, is eco-friendly with minimal emissions, and consumes less coal. Consequently, the project also will qualify for carbon credits under the Clean Development Mechanism.

Under the terms of the memorandum of understanding, BHEL and Mahagenco also can set up a 1,500-MW gas-based power plant instead of a coal-based plant, if coal linkages are not available within the project timeframe. Ravi Kumar said that while a coal-based project would require an investment of $1.2 million per MW, a gas-based project would be less expensive at $900,000 per MW. The cost of the thermal plant does not include the cost of coal-mining operations. The total cost has been estimated at $1.4 billion to $1.5 billion. Again, while a thermal plant would require 5 million tons per year of coal for the planned capacity of 1,320 MW, a gas-based plant of similar size would require 6 million cubic meters per day of gas. Ravi Kumar said that the venture was considering the sourcing of coal from either Chhattisgarh or Mahanadi in Orissa, and soon would be applying for a coal mine. The venture also has applied to India's flagship natural gas company, state-run Gas Authority of India Limited (BSE:532155) (New Delhi), to evaluate the technical feasibility of procuring gas from the Krishna Godavari (KG) basin in Andhra Pradesh. To Latur's advantage, the gas pipeline from the KG basin goes through the district.

The state of Maharashtra will purchase all the power generated by the plant. Mahagenco currently has an installed power-generation capacity of about 10,000 MW. The firm plans to add about 3,000 MW of power-generating capacity by 2012, in addition to the proposed plant in Latur.

Under the terms of the memorandum of understanding, BHEL has the right to exit the project after commercial operations begin. The proposed venture is BHEL's third with a state power utility company. In the past, BHEL formed ventures with the states of Tamil Nadu and Karnataka, with a 26% stake in each venture. The respective ventures set up a 1,600-MW power plant at Udangudi in Tamil Nadu and two plants in Karnataka; an 800-MW plant at Yermarus; and a 1,600-MW power plant at Edlapur. Ravi Kumar said BHEL is expected to sign similar deals with the utility companies of Gujarat and Madhya Pradesh.

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