New Delhi: Reliance Power Ltd, part of the Reliance-Anil Dhirubhai Ambani Group, said it may reconsider entering the shipping business because of the current economic slowdown.
“As of today we have firm offers on the table. However, there has been a downturn in the shipping market. We need to take a final view on this,” Reliance Power’s chief executive officer, J.P. Chalasani said in the national capital on Thursday. He was speaking to reporters after receiving the so-called letter of intent from the government to build the 4,000MW Tilaiya power project in Jharkhand.
The company, which had bought stakes in overseas coal mines, wanted to enter the shipping business to start selling coal in India.
It had planned to invest around $1 billion (Rs4,870 crore) to buy large cargo ships to carry the coal to India for its power projects, as reported by Mint on 23 April.
On the company’s coal trading plans, Chalasani said: “It is very much on our radar and the coal for it will be supplied from our Indonesian coal blocks.”
He added the company’s Indonesian mines will also supply coal to its Krishnapatnam project in Andhra Pradesh, which will have an installed capacity of 4,000MW.
Reliance Power is also in talks with state-run Bharat Heavy Electricals Ltd, Larsen and Toubro Ltd and some Chinese, South Korean and Japanese companies for equipment for the Krishnapatnam project.
It has already secured stakes in coal blocks in Indonesia that have estimated reserves of 2 billion tonnes. The size of the market for imported coal to produce electricity in India is around 20 million tonnes a year and is expected to double by 2012 as more coal-fired power plants become operational.
Reliance Power will complete all three 4,000MW power projects awarded to it on schedule and is seeking loans to fund them, Chalasani said. The company will need Rs60,000 crore to build the three plants and plans to borrow 75% of it, he said.
The firm, which is yet to start producing power, has a project portfolio of 32,200MW.
The ruling United Progressive Alliance envisages building several large power plants, each with a capacity of 4,000MW and costing between Rs16,000 crore and Rs20,000 crore. To encourage private sector firms bid for these projects, the government sets up a company for each project, acquires land, identifies and allots coal mines in some cases to ensure fuel supply, and then, transfers this company to the successful bidder.
Besides awarding the Tilaiya, Krishnapatnam and Sasan, Madhya Pradesh, projects to Reliance Power, the government has awarded the Mundra project in Gujarat to Tata Power Ltd.
Reliance Power expects to complete raising funds for the Sasan plant by the end of this month and for the Krishnapatnam project by the end of June, Chalasani said. It plans to raise funds for the Tilaiya project in the financial year starting March.
“We have received term loan sanctions from banks and institutions for over Rs11,500 crore (more than 80% of debt required) for Sasan...and the balance funding will be tied up by end of this month. Krishnapatnam...project is being appraised by domestic and international banks and institutions,” a company spokesperson had told Mint earlier in an emailed response.
Even though the financial environment is not conducive, Reliance Power shouldn’t have a problem in raising funds for the next three to four years, said Girish Solanki, a Mumbai-based analyst at Angel Broking Ltd, who has a “neutral” rating on the company’s shares.
Bloomberg contributed to the story.