India's DVC Scouting for Domestic Joint Venture Partners for Two Supercritical Thermal Power Projects

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Researched by Industrial Info Resources (Sugar Land, Texas)--Damodar Valley Corporation (DVC) (Kolkata, West Bengal) is in talks with power equipment supplier Bharat Heavy Electricals Limited (BSE:500103) (BHEL) (New Delhi) and coal-mining company Coal India limited (CIL) (Kolkata) to form a joint venture to set up two supercritical thermal power plants. DVC also intends to involve either Power Finance Corporation Limited (BSE:532810) (New Delhi) or Rural Electrification Corporation Limited (BSE:532955) (REC) (New Delhi) as equity partners in the joint venture.

DVC recently shelved plans to issue an initial public offering and instead decided to add about 3,000 megawatts (MW) of power generation capacity to its portfolio during the country's Twelfth Five-Year Plan (2012-17). The current talks involve a proposal to set up two 800-MW units with BHEL in Raghunathpur, West Bengal, and two 660-MW units with CIL in Kodarma, Jharkhand. According to the proposals under discussion, DVC and its joint venture partner will each hold a stake of 26% in the company, while a consortium of financial institutions headed by either REC or Power Finance Corporation will hold the remaining 48%.

The Chairman of BHEL, Ravi Kumar, has expressed the company's interest in partnering with DVC for the Raghunathpur project. DVC has yet to put forth a formal proposal regarding BHEL's participation, although there have been some discussions. Meanwhile, REC has signed a memorandum of understanding with DVC for the Raghunathpur project.

CIL's involvement in the Kodarma thermal power plant will ensure a continuous supply of coal for the project, while BHEL will get an opportunity to commercially install its indigenous 800-MW supercritical technology.

If BHEL is selected as the joint venture partner, the Raghunathpur plant will be the first commercial user of the firm's 800-MW unit. DVC has indicated that it is willing to share both the financial responsibilities as well as the technological risks of being the first user of an indigenously manufactured 800-MW unit. BHEL has the capability of manufacturing 660-MW, 800-MW, and 1,000-MW supercritical boilers, the 800-MW boiler being the most suitable for Indian coal. The use of supercritical technology ensures that a plant achieves a thermal efficiency of at least 45%, while a subcritical plant operates at an efficiency of only 30-38%.

According to DVC, the Indian government has already included the Kodarma project as part of its initiative to promote the use of supercritical technology in the power utility departments of the states. In pursuit of this initiative, India's largest power generation company, state-owned NTPC Limited (BSE:532555) (New Delhi), under the guidance and supervision of the Central Electricity Authority (New Delhi), is making preparations to float a global tender in an effort to identify appropriate 660-MW technologies for all such center-driven supercritical power projects.

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