Hyderabad-based Lanco Infratech Ltd’s plans to set up two power projects in Indonesia, each with a capacity of 200MW, have suffered a setback with the government of the South-East Asian nation calling for a rebid for these projects, citing “limited number” of participants.
“The Indonesian government has called for a re-bid as there were only two bidders for the project, including us,” Lanco Group chairman L. Madhusudhan Rao said on the phone. Some power firms that were in the fray initially, later opted out.
Take two: Lanco Group chairman L. Madhusudhan Rao says that the Indonesian government has called for a rebid as there were only two bidders for the project, one of which was the Lanco Group. Photo: K. Sudheer / Mint
Experts in the business attribute the power companies’ interest in setting up projects in Indonesia to the availability of coal reserves in the country, but add that policy changes in the country have proved a dampener.
“This is not the first time this has happened in Indonesia. Unfortunately, it is a country where policy stability in infrastructure has been very poor. This is the reason why there is a lack of faith among investors in public-private partnership projects. It will take at least another nine months for the bids to take place,” said Anish De, chief executive officer at Mercados Asia, an energy consulting firm.
Lanco had planned to invest around $400 million in the two coal-based power projects. One of them is located in Bali and the other to the south of Sumatra. The projects will have so-called coal linkages from near-by mines (coal will be transported to them).
Lanco is among other Indian firms such as Tata Power Ltd and NTPC Ltd that have plans to set up power plants in Indonesia, which is expanding its generation capacity in a bid to tackle a power shortage as reported by Mint on 7 April 2007.
Though Lanco has not been very successful in its overseas ventures, it has been scouting for locations in Thailand, Vietnam and Indonesia for setting up power projects.
It has previously lost out in efforts to acquire global energy firm Globeleq’s assets in Egypt, Bangladesh and Sri Lanka.
Lanco Infratech, which had revenues of Rs1,647 crore in 2007-08, has business interests in construction, real estate, roads, power and airports. Currently, Lanco Infratech has 11 subsidiaries in power generation, executing projects with a total capacity of around 7,300MW.