India's Neyveli Lignite to Invest $8.2 Billion on Capacity Expansion by 2017

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Researched by Industrial Info Resources (Sugar Land, Texas)--India's primary lignite mining company, Neyveli Lignite Corporation (BSE:513683) (NLC) (Kilpauk, Chennai), has announced plans to invest about $8.2 billion on power generation and mining capacity augmentation by 2017. The plan also includes development of power projects using other fuel feed. Of the proposed investment, $2.04 billion has already been spent on ongoing projects. NLC, which has financial reserves of $1.14 billion, is expected to fund the balance investment through borrowings and internal accruals.

By 2010, the ongoing capacity enhancement projects will take the mining capacity to 30.6 million tons per year from the present 25 million tons per year. The installed power generation capacity is set to increase from 2,490 megawatts (MW) to 3,240 MW during this period. The ongoing projects consist of a new 2.1 million ton-per-year mine and a 250-MW power plant in Barsingsar, Rajasthan. The projects also involve capacity augmentation of the mine and power plant in Neyveli by 4.5 million tons and 500 MW, respectively.

The company has planned the development of several power plants and mines to boost its power generation capacity to 14,740 MW and mining capability to 79.7 million tons per year by 2017. This includes lignite-based power plants in Neyveli and Jayakondam, and coal-fired power projects in Madhya Pradesh, Jharkhand, Tamil Nadu and Uttar Pradesh. Coal mining and power plants in Orissa and Gujarat are also being proposed.

The company board has also approved NLC's strategy to enter the renewable energy sector. A 50-MW windfarm in Tuticorin, Tamil Nadu, has been cleared. The capacity of this wind power project, which is being developed as a power source for the proposed 1,000-MW power plant in Tuticorin, will be increased to 200 MW in the future. For this project, 30 windmills are likely to be purchased. NLC is also in talks with the Uttarakhand government to set up a 1,000-MW hydropower project. Plans to enter the nuclear power sector are also being discussed. NLC has additionally commenced work on a 1,000-MW coal-fired power plant, built in partnership with Tamil Nadu Electricity Board (Chennai) at a cost of about $1 billion. The project is likely to be commissioned by 2012-13. Future plans also include setting up lignite-fired power plants in Bithnok and Hadla in Rajasthan, and Valia in Gujarat.

Lignite, one of the lowest grades of coal, consists of 20-25% oxygen, 5% hydrogen, 65-70% carbon, and traces of nitrogen and sulfur. The average calorific value of this fuel is approximately 2,400 kilocalories per kilogram. This free-burning fuel provides quick and full combustion and is low on fly ash. India has about 38.93 billion tons of proven lignite reserves, with the southern states of Pondicherry and Tamil Nadu accounting for 31.74 billion tons. NLC has been implementing state-of-the-art technologies in power generation that will not only improve fuel efficiency and enhance electricity generated for its power plants, but also be environmentally sustainable.

As part of this initiative, NLC is developing India's biggest power plant based on circulating fluidized bed combustion technology. In this process, solid fuels are suspended in a fluid bed, i.e. a mixture of sand and hot air along with sulfur-absorbing materials such as dolomite or limestone. This technology burns fuel at a temperature of 1400-1700 degrees Fahrenheit, which is much lower than the threshold heat required for the formation of nitrogen oxide. The process therefore prevents the production and emission of nitrogen oxide. Also, the tumbling and mixing action of this process brings the gases in contact with sulfur-absorbers, thus reducing sulfur emissions by almost 95%. The advantage of this clean-coal technology is that fuel of any grade, including biomass, low-grade coal, waste plastics and sludge, can be used. The high combustion process is also considered to be low-maintenance.

In a related development, the Indian government has expressed interest in divesting its stake in public sector companies like NLC. On receiving the directive for the central government, which owns a 93.5% stake, NLC has worked out a multimillion dollar divestment plan. But the state government of Tamil Nadu has opposed this decision, expressing concern about the central government's decision to generate revenues by offloading shares in public sector companies and the impact of the proposed divestment in NLC on the labor force. The central government has clarified that it was considering offloading only a 10% stake in NLC, which would amount to about $409.2 million under the current market prices. Employment and welfare of the workers would not be affected since the central government is not contemplating privatizing this profit-making public sector enterprise. As of March 31, 2009, NLC, which recorded a turnover $686.4 million, posted a profit of $163.6 million.

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