New Delhi: Mumbai-based Essar Power Ltd, part of the Essar Group, plans to team up with Spain’s Union Fenosa SA to develop power projects by offering a minority stake in such projects to the Spanish power firm, said a person close to the matter.
Such an arrangement could help Essar in raising finance from the global market as Union Fenosa is a significant player overseas.
Expansion plan: Essar Power’s Hazira plant. The Mumbai-based firm aims to generate 6,000MW by 2012.
“Essar is planning for a joint venture with Union Fenosa for setting up thermal and hydroelectric projects. The framework memorandum of understanding has already been signed in December,” said this person who didn’t want to be identified. “They are looking at developing three-four projects jointly, including the 1,200MW imported coal-based power plant at Salaya in Gujarat,” he said.
While questions emailed to Union Fenosa remained unanswered, an Essar spokesperson said in an email response that “as a group, we keep looking at growth opportunities”.
“However, it is not our policy to comment on any specific proposal or project,” the spokesperson added.
The downturn in the global economy has hit the Indian energy sector and private developers are struggling to raise funds.
According to the power ministry, the government expects to face a Rs4.51 trillion funding shortfall in adding generating capacity during the 11th Plan. India has a power generation capacity of 147,000MW.
Mint had reported on 2 July that Union Fenosa plans to enter the Indian power generation sector and was looking at a capacity of 4,000MW. The Madrid-based company has an installed capacity of 11,120MW with 8.9 million customers.
Shubhranshu Patnaik, executive director at audit and consultancy firm PricewaterhouseCoopers, said, “Essar has tremendous experience that Union Fenosa would find attractive. The exact nature of the risk and responsibility sharing, depending upon the strength each party brings to the table, will determine the success of this approach.”
Essar Power aims to generate 6,000MW by 2012 and has five power plants with a combined capacity of 1,200MW. The group has a turnover of around $2.2 billion and is present in sectors such as steel, oil and gas, power, and shipping.
India allows 100% foreign direct investment in the power sector and the Electricity Act, 2003, has opened significant opportunities for private sector investments.
However, the only significant overseas entrants in the sector so far are utilities such as China Light and Power Ltd and US-based AES Corp.—through their subsidiary companies CLP Power India Pvt. Ltd and AES India, respectively.