Hyderabad/New Delhi: Infrastructure company, Lanco Infratech Ltd, whose winning bid for the ultra mega power project (UMPP) was cancelled by the government, plans to set up its largest power generation capacity unit at Baban, Orissa, in an attempt to meet growing demand for power in an economy that is expanding at more than 9% a year.
The plant will have a capacity of 2,640MW and will require an investment of around Rs11,000 crore, said Lagadapati Madhusudhan Rao, chairman of the Lanco Group. It will have four units of 660MW each. “We are setting up this coal-fired power project in Orissa under a special purpose vehicle (SPV), Lanco Baban Power Plant Ltd,” added Rao.
Lanco Group chairman Lagadapati Madhusudhan Rao
Power projects are capital intensive, and companies usually set up SPVs to raise money more effectively.
Of the 2,640MW, 25% will be sold to Orissa and the balance will be sold to other buyers through tenders. The company also plans to keep a certain portion for merchant power, Rao said. Merchant power is the term used by power companies to describe power sold in the spot market (as opposed to that sold through long-term contracts).
The company claims to have lined up nearly 75% of its fuel supply arrangements in the form of captive coal and coal linkages. While coal for 1,000MW capacity would come from Rampia coal blocks, near Baban, which was allotted recently by the government, another 660MW will come from Coal India Ltd (CIL).
“We have applied to the Union ministry of coal for additional coal for the balance power capacity. We are expecting financial closure for the project by early 2009,” said Rao.
Lanco Infratech currently operates two gas-based power projects of 488MW capacity and has eight projects under development with a cumulative capacity of 2,275MW. It recently announced plans to expand generating capacity at its existing projects at the cost of Rs 4,300 crore.
“We have drawn up plans to have at least 15,000MW of operating capacity, contributing around Rs30,000 crore of revenues, by 2015,” Rao said.
Lanco Infratech has two divisions, power and construction. The former accounts for 43% of revenues and the latter 57%.
“Things are changing for them (Lanco). Our outlook for the company is robust. With a couple of their projects taking off, things will stabilize for them. These new projects will also help the company in its bids for new UMPPs,” said Hitul Gutka, an analyst at Mumbai-based India Infoline Ltd. Gutka’s reference is to the fact that having a few more power projects under its belt will improve Lanco’s case when it bids for more ultra mega power projects.
Lanco’s was the winning bid to develop the UMPP at Sasan, but the company’s partner in the bid Globeleq, sold its stake in the consortium back to Lanco and another losing bidder, Jindal Steel. The bid was disqualified by a government committee on 25 July for violating the original terms of the deal. Lanco now plans to develop the Tilaiya UMPP and has submitted its application for the same.
Lanco is also looking overseas and plans to set up a 200MW power plant in Indonesia, which is expanding its generation capacity in a bid to tackle a power shortage. The company is also evaluating opportunities in gas, wind, solar, coal, hydropower sectors and is hopeful of finalizing its plans shortly. For the wind power segments, it is studying markets in Europe and the US.
Lanco Infratech ended the three months to September with revenues of Rs646.7 crore and a net profit of Rs60.9 crore. On Wednesday, shares of the company closed at Rs487.10 each on the Bombay Stock Exchange, on a day when the exchange’s benchmark index fell 0.99% to 18,938.87. The shares registered their 52-week high of Rs510 on 20 November.