Reliance Energy Proposes Mammoth 12,000 Megawatt Coal-Fired Power Plant in India

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Researched by Industrialinfo.com (Industrial Information Resources Incorporated; Houston, Texas). A 2004 inventory of coal reserves in India, carried out systematically to a depth of 1,200 meters, showed proven reserves of 91.631 billion tons, indicated reserves of 116.174 billion tons, and inferred reserves of a further 37.888 billion tons. This gives a total coal resource base of 245.693 billion tons and an increase of 17.5 % in coal reserves since 1999.

The size of this resource base indicates India as the world's third largest coal producer, after China and the U.S., and backs the late May 2005 announcement by Reliance Energy (Bombay, India) that it plans to build a mammoth 12,000 MW thermal power plant at Hirma, in the Jharsuguda district of Orissa state, which has 14.614 billion tons of proven coal reserves and a total of 60.988 billion tons, when indicated and inferred reserves are included in the reserve figures.

This will be the world's largest coal-based power plant in one location, claims Anil Ambani, Chief Executive of Reliance Energy. Industry sources say that a thermal power station of this size would need a coal feed of approximately 40 million tons per year when fully operational.

Satish Seth, Reliance Energy's Executive Vice-Chairman, presented the $11 billion project to the Orissa government and said that the power plant would be constructed in phases, with the first phase consisting of six x 660 MW units, at a cost of $3.8 billion. Power from the plant would feed demand in Orissa, and surplus power would be sold to other states, including Haryana, Gujurat, Madhya Pradesh, Punjab, and Rajasthan

The project presented appears to be a revival of RE's former proposal to construct a 4,000 MW power plant at Hirma, which was submitted to the state government in the mid-1990s. RE had been joined by Consolidated Electric Power Asia (CEPA) (Hong Kong). Delays in the finalization of power purchase agreements with different states caused CEPA to withdraw form the project. Mirant (OTC:MIRKQ ) (Atlanta, Georgia) also drew back from interest in the project in 2001, citing inability to secure customers and no assurance on getting paid for power sold.

Seth said that now the business scenario had changed. With the New Electricity Policy and the upgrade of the Indian power transmission system, it would be far easier to transmit and sell power generated at the new plant. The Electricity Act 2003 allows provisions for power companies to secure assurance on payments from consumers. For related news item see August 24, 2004 - India's New Electricity Bill and Multi-Billion Dollar Project Schedule Set Power Industry for Investment Boom Through 2020.

Although Seth said that RE was, at present, 'alone' in the project, the announcement has caused significant investor interest and has pushed the profile of RE on the Bombay Stock Exchange.

RE has strong presence in Orissa through its three electricity distribution companies: Nesco, Wesco, and South. Making an entry into power generation operations in the state will bring synergy to RE's operations.

The Orissa Energy Minister, Surya Narayan Patra, said that the government would examine the proposal and that negotiations were in a 'preliminary stage.'

This summer India's power sector is expected to experience shortages. The average national shortage in off peak hours is expected to be about 7.3% and 12% during peak hours. India's current total available generating capacity is approaching 130,000 MW.

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