Six Indian, International Energy Firms Submit EPC Service Bids for Dadri Power Project

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Researched by Industrial Info Resources (Sugar Land, Texas)--Reliance Power Limited (BSE:532939) (Mumbai) has received bids from six national and global energy companies to provide engineering, procurement and construction services for Reliance's 7,480-megawatt (MW) Dadri gas-fired power project. The bids were invited in early August, and the last date for submission is October 30. Companies have submitted bids despite issues regarding the supply of gas feed for the power project.

When it commences operations, the project is expected to be India's largest gas-powered project. According to project sources, Alstom SA (EPA:ALO) (Levallois-Perret, France), Siemens AG (NYSE:SI) (Munich, Germany), General Electric Company (NYSE:GE) (Fairfield, Connecticut), and Mitsubishi Corporation (TYO:8058) (Tokyo, Japan) are the international bidders. Domestic power engineering and equipment companies Bharat Heavy Electricals Limited (BSE:500103) (BHEL) (New Delhi) and Larsen & Toubro Limited (BSE:500510) (L&T) (Mumbai) also have submitted their bids for this project.

The bidders will have the option of bidding for the EPC services for:

• The entire project, including construction, installation, erection and commissioning of the power plant; allied infrastructure; and civil, mechanical and electrical work
• Erection, installation and commissioning of the power plant
• The complete gas turbine, steam turbine, and heat-recovery steam generator (HRSG) packages
• Gas turbine, steam turbine, or HRSG packages, separately.

Execution of the Dadri power project was stalled because of the split between the Reliance Group scions, Mukesh and Anil Ambani, in 2004. Subsequent to the split, Mukesh Ambani took control of Reliance Industries Limited (BSE:500325) (RIL) (Mumbai), while Anil Ambani established Reliance Power to develop the Dadri project. Anil Ambani established Reliance Natural Resources Limited (BSE:532709) (RNRL) (Mumbai) to undertake sourcing, procurement, supply and transportation of fuels. The Dadri power plant was delayed, as it faced hurdles relating to supply of gas feed from RIL-owned gas fields at the Krishna-Godavari basin. The Mumbai High Court directed RIL to sign an agreement with RNRL to supply 28 million metric standard cubic meters per day of natural gas to RNRL at $2.34 per million British thermal unit. RIL challenged and contested the order in India's Supreme Court, stating that the price was much lower than the government-approved rate of $4.2 per million British thermal unit. RNRL has submitted a petition, seeking court intervention to execute the order given by the Mumbai High Court. The Supreme Court hearing is expected to take place October 20.

In April this year, RIL commenced gas production at the KG basin in Andhra Pradesh. According to RIL officials, the facility's discovery-to-production time was a record six and a half years, while most global deep-water fields take around nine to 10 years after discovery to commence production. RIL has committed to eventually producing 80 million metric standard cubic meters per day of gas from these fields. Industry experts have observed that the potential for gas production at the KG fields, which is presently about 36 million metric standard cubic meters per day, could actually reach four times the committed value of 80 million metric standard cubic meters per day. On reaching optimal operations, the KG basin gas fields are expected to save $9 billion in annual oil imports for India.

Reliance Power is developing the Dadri power plant in two phases. The first phase of 3,600 MW will be built with four to five turbines, with an estimated investment of $2.56 billion. Reliance Power had initiated the bidding process for this project in 2005, but had to withdraw the tendering process due to the gas dispute.

Reliance Power is also developing three ultra-mega power projects of 4,000 MW each at Sasan, in Gujarat; Krishnapatnam, in Andhra Pradesh; and Tilaiya, in Jharkhand. The power projects under development, including the Dadri project, will take the company's total installed power generating capacity to 40,000 MW.

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