India's GEMAC Energy and China's SEPCO-III Sign Agreement to Build Power Project in Tamil Nadu

---

Researched by Industrial Info Resources (Sugar Land, Texas)--Indian private-sector power developer GEMAC Energy Limited (GEL) (Chennai, Tamil Nadu) has announced a partnership with Shandong Electric Power Construction Corporation III (SEPCO-III) (Shandong, China) to set up 1,320-megawatt (MW) coal-fired, supercritical power project with an investment of about $1.32 billion near Sirkazhi, in Tamil Nadu's Nagapattinam district. The project, to be developed with a debt-equity ratio of 75:25, will be spread over 800 acres of land.

Sources say that GEL, which earlier acquired nearly 4,000 acres of land, is exploring opportunities for strategic alliances to construct and operate power plants. The first 660-MW unit at Sirkazhi is expected to begin operations in three years. The entire project will be ready for commercial operations in five years. GEL is also planning a 10 million-liter-per-day water desalination project at the site to address internal water needs.

According to Kishore Arcot, the chief executive officer of GEL, SEPCO-III has also expressed willingness to invest in the project. As per the agreement, the companies will provide engineering, procurement and construction (EPC) services to other energy project developers in the country. Arcot also indicated that supercritical power equipment, including turbines, generators and boilers, would be sourced by SEPCO-III from Chinese manufacturers.

GEL, which is part of the GEMAC Group (Chennai, Tamil Nadu), was established in December 2009 to undertake construction of power plants, consultancy services, EPC projects, and operations and maintenance services. SEPCO-III is a leading global EPC contractor engaged in the large-scale construction of energy projects. The company has a strong presence in India and is undertaking EPC activities for the 2,400-MW power project being developed by Sterlite Energy Limited (SEL) (Mumbai) at Jharasuguda in Orissa, and the Mundra power project for Adani Enterprises (BSE:512599) (Ahmedabad) in Gujarat.

In a related development, there have been queries raised about violation of intellectual property rights (IPR) in relation to Chinese companies selling power plant equipment to Indian power developers. Concerns also have been expressed about SEPCO-III sourcing supercritical power plant equipment from China. According to experts, Chinese power equipment producers use supercritical power technology developed by international energy equipment majors, including Siemens AG (NYSE:SI) (Munich, Germany) and Alstom S.A. (EPA:ALO) (Levallois-Perret, France). However, SEPCO-III officials claim that several Chinese manufacturers have developed supercritical power equipment indigenously.

In February, concerned about the quality of Chinese power equipment and supplies, the Prime Minister's Office issued a directive to the Power Ministry to develop an action plan to take care of spare parts and servicing of plants that use Chinese technology and equipment. There are concerns relating to the ability of power plants built with Chinese equipment to handle wear and tear and high-ash coal. Presently, India is constructing nearly 35,000 MW of new electricity-generating capacity with Chinese equipment and infrastructure. In the 11th Five-Year Plan (2007-12), power projects with a combined capacity of about 21,519 MW that are in various stages of construction are using Chinese technology and equipment.

Orders have been placed with Chinese power equipment manufacturers for an additional 14,000 MW of generating capacity for projects in the 12th Five-Year Plan (2012-17). Sources say that several Chinese power equipment producers, including Dongfang Electric Corporation (SHA:600875) (Chengdu, China), SEPCO-III, Harbin Power Equipment Company Limited (HKG:1133) (Harbin, China) and Shanghai Electric Power Company Limited (SHA:600021) (Shanghai, China) have secured orders in India. There are reports of a 300-MW power plant at Sagardighi, developed by The West Bengal Power Development Corporation Limited (Kolkata, West Bengal), with turbines supplied by Dongfang Electric Corporation, and a 540-MW captive power project by Bharat Auminium Company Limited (BALCO) (New Delhi) with assistance from SEPCO (Shandong, China), are facing operating problems.

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.