Hyderabad: GVK Power and Infrastructure Ltd plans to revive two power projects that have been lying idle on account of paucity of natural gas supplies, using diesel and naphtha. The plants will more than quadruple the company’s power generation capacity to 900MW.
The 220MW second phase of the Jegurupadu power project has been mothballed since January 2006 and the 464MW Gautami power plant since September of the same year because of non-availability of natural gas from the Krishna- Godavari basin in the Bay of Bengal, in spite of supply agreements with gas supplier GAIL (India) Ltd.
“We don’t want to wait any more for natural gas. We want to run both the power projects, which are currently lying idle, on alternative fuel as there have been requests from state governments such as Maharashtra, which are prepared to buy power at a higher tariff,” GVK Group chairman G.V. Krishna Reddy said.
The company has decided to shift the first phase of the Jegurupadu project—near Rajamundhry, 490km northeast of Hyderabad—which currently runs on natural gas, to naphtha. The natural gas entitlement of the first phase will be directed to the second phase. “This is because Jegurupadu Phase-II has higher efficiency and we can produce more cost-effectively using natural gas,” Reddy said. The second phase will use approximately 7.5% less fuel to produce the same amount of power.
The Gautami plant, which is about 510km northeast of the Andhra Pradesh state capital, will be run on diesel.
GVK is in the final stage of negotiations with Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd for supply of naphtha and diesel to Jegurupadu-I and Gautami, said GVK’s group chief financial officer, A. Issac George.
An analyst was apprehensive over the costs of the alternative fuels in the project. “Both diesel and naphtha are more expensive than natural gas. The viability of Jegurupadu and Gautami plant on alternative fuels depends on how effectively the differential in cost in fuels will be managed,” said Nitin A. Khandkar, senior vice-president of research at Keynote Capitals.
The tariff, as a result of the change of fuels used in the projects, will be determined by a committee comprising of members of power distribution firms, GVK and an independent expert from the global fuel market, the company said in a regulatory filing last year.
“In the event of the committee determining a price lower than the actual price of alternative fuel paid by us, such difference in the price could have an adverse affect on our results,” GVK said in its initial share sale prospectus in February 2006.