Karnataka Shops Around to Help Solve Acute Power Crisis

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Researched by Industrial Info Resources (Sugar Land, Texas)--GMR Energy Limited (GEL), a subsidiary of GMR Infrastructure Limited¬ (BSE:532754) (Bangalore, Karnataka), has signed a contract with the Bangalore Electricity Supply Company Limited (BESCOM) (Bangalore) under which GEL will supply 200 megawatts (MW) of power on a round-the-clock basis to BESCOM from November 11, 2008, to January 31, 2009. The company has not disclosed the price of the power being sold.

Following the signing of the contract, GEL has made bids to continue supplying power to BESCOM after the expiry of the current contract. GEL has also made bids for fresh contracts from February 2009 with the Maharashtra State Electricity Distribution Company Limited (Mumbai, Maharashtra) and other state electricity boards. From November 4 to November 15, 2008, GEL supplied 200 MW to the Rajasthan State Electricity Board (Jaipur, Rajasthan) on a round-the-clock basis.

GEL's barge-mounted 220-MW power plant located in Mangalore, Karnataka, had been supplying power to Karnataka since June 2001. The plant has been nonoperational since June of this year, when its seven-year power purchase agreement with the state government expired. Among other contracts, GMR Power Corporation Private Limited has been supplying power to the Tamil Nadu State Electricity Board (Chennai, Tamil Nadu) from its 200-MW power plant based on low-sulfur heavy stock. The plant is located in Chennai and was commissioned in 1998. The plant has been operating at full capacity over the last three months and the company has clocked a plant load factor of 82% in the current financial year.

Karnataka has been facing a severe power shortage over the past two months, with consumers subject to frequent power cuts. The installed power generation capacity of the state is 8,500 MW, and it is facing a shortfall of 1,700 MW per day. Karnataka has undertaken several measures in an effort to meet the growing demand. A portion of the shortfall is expected to be met by the state-run 500-MW Bellary Thermal Power Station. The plant has been operating below capacity and generating only 350 MW so far. Operational capacity is expected to be enhanced to 100% by the end of this month. Another source of power is the 1,470-MW Raichur Thermal Power Station. All seven units of this station are going to resume supplying power to the state grid, while an eighth unit of 250-MW is currently being set up and is scheduled to be commissioned by the end of 2009.

Other than the 200 MW purchased from GMR, Karnataka has also purchased 50 MW from Jindal Power Limited (Noida, Uttar Pradesh) and 250 MW from the country's central power grid. Earlier this year, the state government signed a memorandum of understanding with the state government of Chhattisgarh to set up a 1,200-MW thermal power project in Chhattisgarh. The project is expected to be commissioned in 2012 and Karnataka hopes to purchase a portion of the power generated at a low cost. The state is currently setting up a 4,000-MW thermal power plant at Kudgi in Bijapur, Karnataka. The state is expecting the NTPC Limited (BSE:532555) (New Delhi) to set up a 2,000-MW thermal power plant in the same region.

In the state's continuing effort to solve the energy crisis, the Karnataka government has also decided to purchase 220 MW of power from private sugar factories. The factories were producing about 300-MW each day and selling 80 MW to the state. The remaining power was being sold to other buyers. The state has now decided to purchase the entire amount at a much higher cost than the current purchase price. In fact, the government of Karnataka has been spending about $1.8 million a day during the last few months to purchase 10 million units of power daily from various government and private sources.

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