India’s NTPC Looks to Middle East Finance and Chinese Suppliers to Give Edge in Power Project Bidding

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Researched by Industrial Info Resources (Sugar Land, Texas). India’s largest power generation utility, National Thermal Power Corporation (NTPC), with a current installed capacity of 27,404 MW, has announced a multi-pronged growth strategy which targets 75,000 MW of installed capacity by 2017. As part of the strategy, the company is inviting foreign equity participation for significant minority stakes in three power projects in South India.

The focus will be on investors from the Middle East where the power project stakes can be traded against gas supplies for projects which have a total investment value of $3.8 billion. NTPC has been experiencing problems with gas supplies for its projects. It is understood that the government would permit up to 49% of the projects to be taken by foreign interests. The three projects are the 1,950 MW gas fed expansion project in Kerala and two 1,000 MW coal fed projects to be built in Ennore and Cheyyur in Tamil Nadu.

The NTPC sent two roadshow teams to visit Oman, Saudi Arabia and UAE to present investment opportunities in the projects to high profile investors and banks. The Kayakulam project is estimated to cost $1.48 billion, the Ennore plant $1.13 billion and the Cheyyur plant $1.16 billion. All the projects are to be developed on a 70/30 debt/equity ratio.

NTPC is also looking at power plant opportunities including the national plan for nine mega power stations rated at 4,0000 MW and above and is considering sourcing equipment from Chinese suppliers to keep project costs down. The company has been using Bharat Heavy Electricals (BHEL) for equipment supply but was outbid on the first mega project to be released. For the Sasan project, the winner, Lanco Infratech, went to China’s Dong Fang Electric Corporation for equipment and quoted a benchmark tariff of Rs 1.19 per unit when NTPC quoted Rs 2.12 per unit of power generated.

Chinese suppliers are said to be trading off a supply surplus of up to 50,000 MW of power equipment in the domestic market and have adopted aggressive entry strategies in the Indian market which has been dominated by major western power companies and BHEL.

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