Major Power Outs See India's Maharashtra Sign for 12,500 MW IPP Power Projects by 2010, Plus 3,000 MW from State

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Researched by Industrialinfo.com (Industrial Information Resources Incorporated; Houston, Texas). When the government of the Indian state of Maharashtra formulated a strategy to move from its current power shortfall of 3,000-megawatts (MW) to 'zero load-shedding' by 2010, it met with an overwhelming response from eight private power companies who, in early April, signed Memoranda of Understanding (MoUs) to produce 12,500 MW of generating power in the next five years. At present, the state generates 14,000 MW, but, with the exception of Bombay, all cities and towns experience daily power cuts of three hours, and villages can go without power for half a day at a time.

The power projects, which could amount to a total of $12 billion invested over the period, include the following proposals : Essar (BOMBAY:910823) - 1,500 MW gas-fired at Ratnagiri, or a 1,000 MW coal-fed ; GMR -1,000 MW; Jindal (Bombay:530405) - 1,000 MW; (Bombay:500325) - gas-fed 3,000 MW at Nagothane and 1,000 MW coal-fed at Vidarbha; Spectrum -- 500 MW in Vidarbha; (Bombay:910902) - 500-MW expansion at Trombay and 1,000 MW at Vile in Raigad; Ispat/CIPCO -- 2,000 MW in Bhadrawati; (Bombay:500305) - 1,000 MW at Dolvi in Raigad.

Energy Minister Dilip Valse Patil said that with these additions, Maharashtra would become a power surplus exporting state, as it was estimated that, at current levels of generation, the deficit would be 7,700 MW in 2010. This is well covered by the extra 12,500 MW.

Chief Minister Vilas Rao Deshmukh said that the power purchases from these projects would be made on a competitive bidding process as laid down by the state regulatory body. The state will offer a basket of benefits and concessions to companies, including complete exemption from stamp duty and registration charges, and total exemption for tariffs on imported machinery in the initial setting up of the plant. The government has also promised clearances through a single window facility within 45 to 60 days and has also offered assistance in acquiring land and other infrastructure facilities.

The independent power producers (IPP's) will be required to sell 50% of power generated within the state. The balance may be sold to other states. They will have to submit a detailed project report within six months, reach financial closure within a year, and have projects operating within five years.

Having learned lessons from the Dabhol fiasco, the government has agreed to guarantee the 'buy back' of up to 2,000 MW, or 50%, for the first five years, but only after rates had been determined by open bidding.

Addressing the current situation at Dabhol, the Chief Minister said that the central government was working to get the 2,184 MW power plant working, and that it was a top priority, as it would be able to generate electricity within nine months. Days after he made these comments, the Indian cabinet approved a guarantee to domestic financial institutions to help settle the disputes over the $2.9 billion mothballed plant. Indian banks have already lent $1.3 billion, and overseas creditors $600 million. GE (NYSE:GE) (Fairfield, Connecticut) and Bechtel (San Francisco, California) own 86% of Dabhol Power Company, after buying Enron's stake. The project is facing $5.2 billion in legal claims from overseas shareholders and creditors. The latest reports coming out of India say that local lenders have agreed in principle to buy the debt from the foreign lenders, with a view to seeing the plant in operation in 2006. For related news item see - November 4, 2004 - GE and Bechtel Hang Tough as India's LNG Developments Hinge on Restart of 'Enron's' Dabhol Project.

The Chief Minister said that, in addition to the IPP projects, the Maharashtra State Electricity Board (MSEB) would add a further 3,000 MW in generating capacity by expanding its 1,040 MW gas-fed project at Uran and its 500 MW plant at Khaparkheda. Another 1,000 MW would come from the new project at Talegaon and two other new 250 MW projects at Parli and Paras.

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