India's CESC to Develop 2,000 MW of Power Plants

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Researched by Industrial Info Resources (Sugar Land, Texas)--CESC Limited (BSE:500084) (Kolkata, West Bengal), a flagship company of RPG Group (Mumbai), will invest approximately $1.6 billion for two merchant power plants in the eastern states of Jharkhand and Orissa. Each plant will have a power generation capacity of 1,000 megawatts (MW). One of the plants, a coal-fired facility, will be located in Dumka in Jharkhand, while the other plant will be constructed in the Dhenkanal district of Orissa. The Dumka power plant is expected to be commissioned by 2011-12, followed by the Dhenkanal project, which is scheduled for commissioning by 2012-13. CESC has already started to acquire land for both projects.

In December last year, CESC faced stiff opposition from villagers in Jharkhand regarding land acquisition. CESC had identified 700 acres of land in the Kathikund block to develop the Dumka merchant power project. The company had also made a payment of $1.1 million to the district authority toward purchase and transfer of 53 acres of government land, 42 acres of forestland and 328 acres of private land. The Dumka power plant has received approval for a coal linkage of 110 million tons from the Mahuagarhi coal block. Jharkhand State Electricity Board (Palamu, Jharkhand) is expected to purchase 25% of the power generated by the Dumka power plant.

The Orissa merchant power plant at Dhenkanal will require about 1,200 acres of land, for which CESC has submitted a request to Orissa Industrial Infrastructure Development Corporation (Bhubaneswar, Orissa). The company has also applied for a mining license, as it does not have a captive coal block in the state. The firm recently announced that it would achieve financial closure for the Dhenkanal project by the end of 2010. The delay in financial closure has been caused by the non-allocation of a coal block. CESC had applied for a coal linkage in December of last year and expects to receive approval for a 4.53 million-ton coal block soon. Water supply for the power plant from the Brahmani River has already been sanctioned. CESC has completed and submitted the Environmental Impact Assessment and is also finalizing the engineering, procurement and construction contract for the power plant.

Merchant power projects are funded and developed by private investors with the purpose of selling the electricity generated at the power plant in the open, wholesale competitive energy market. Unlike conventional tariff-based power plants, merchant power plants are not bound to long-term power purchase agreements with buyers and are not committed to a specified group of consumers. The project developer handles all expenses related to the operations and maintenance of the power plant.

CESC is a leading power generation and transmission utility in Kolkata and the neighboring areas. The company has four thermal power plants--the Southern, Budge Budge, Titagarh and New Cossipore power stations. CESC commenced power generation in 1899 and operated India's first thermal power plant in Kolkata. CESC is part of the RPG Group, which has business interests in entertainment, information technology, retail, telecom and power. CESC is also developing the 600-MW Haldia power project at a cost of $545 million, for which land acquisition has been completed. The company has also invested approximately $209.5 million for capacity augmentation of the existing facility in Budge Budge by 250 MW. The total cost of the project is estimated to be about $251 million. CESC aims to have achieved a total installed power generation capacity of 4,150 MW by 2013. The company's current installed capacity from its four generating stations is approximately 975 MW.

India's Ministry of Power is encouraging the development of merchant power plants to assist in meeting the country's growing industrial and domestic energy demand. India's power deficit from April 2008 to March 2009 was 11%, with the peak load deficit at 13%. Although India's power generation capacity increased by 3,453.7 MW during this period, the new capacity addition was 68.8% below the target of 11,061 MW. During the 2009-10 fiscal year, the country's power generation capacity is expected to increase by 7,730 MW after the commissioning of new projects. India's currently installed power generation capacity is about 147,400 MW, of which hydropower accounts for 35,648 MW, thermal power contributes 93,392 MW, and the remainder comes from renewable and other energy sources.

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