In what might be the first such partnership in the country, India’s largest oil-refiner, the state-owned Indian Oil Corp. Ltd (IOC), and Tata Power Co. Ltd will soon form a joint venture (JV) to set up a 1,000MW power project at Mirthapur in Orissa.
“While Tata Power will have a majority stake of 74%, the balance will be held by us. The project will have an initial capacity of 500MW, which will be later ramped up to 1,000MW. Tata Power will also do the operation and maintenance work for the project,” said OIC director for planning and business?development B.M. Bansal.
A Tata Power spokesperson declined comment, citing the silent period before the declaration of the firm’s third quarter results on Tuesday. The project may require an investment of around Rs4,000 crore.
The JV will guarantee power supply to IOC’s Paradip refinery and sell the surplus power to the grid at a profit. The JV is also significant in view of IOC’s attempt to reduce risks both in terms of investment and commissioning a project.
Analysts say though such arrangements are common between firms that are part of the same group, this will be the first time that two separate business entities operating in diverse sectors are joining hands to set up a power plant.
A New Delhi-based power sector analyst who did not wish to be identified said: “It’s a fairly significant and a logical move for IOC... Even with the coal linkage the power generated from the project will be 60% cheaper than grid power. Getting a captive coal block will reduce the generation costs further. The arrangement will also give Tata Power a merchant power project. Having IOC as a partner will also make getting a captive coal block easier.”
“The JV is in the process of finalization along with the debt to equity ratio for the project. While the project presently has coal linkages, we will also be trying to get coal blocks for captive power generation purpose,” Bansal added.
IOC plans to spend Rs30,000 crore on its greenfield Paradip refinery, which will add 15 million tonnes per annum (mtpa) to its capacity. IOC wants to expand its capacity from 60.2mtpa of crude to 76.7mtpa.