Hyderabad: Nava Bharat Ventures Ltd will nearly double its power generation capacity in three years with two coal-fired plants of 150MW each as it increases its focus on the sector, attracted by high returns, a top company official said.
“The move is a part of our strategy to transform the company into a more stable power utility from an extremely volatile ferro alloys business model,” G.R.K. Prasad, director-finance and corporate affairs, said on Tuesday over the phone.
Nava Bharat expects to finalize plans for raising Rs1,386 crore towards costs for the two plants—one at Paloncha and the other at Dharmavaram—in about a month, he said.
Expansion plan: Nava Bharat Venture’s power plant in Andhra Pradesh. The firm has a total power generation capacity of 228MW.
About 70% of this sum would be raised through debt and the balance through internal accruals.
As on 31 March, the company had reserves of Rs1,156 crore on a paid-up equity of Rs15.22 crore.
The company plans to place orders for equipment by the end of October and commission both the plants by April 2012 to sell power in the open market—known as merchant power in industry terms.
Nava Bharat has a total power generation capacity of 228MW, including 94MW at Khargprasad in Orissa, 114MW at Paloncha in Khammam district and 20MW at Dharmavaram in the East Godavari district of Andhra Pradesh.
It is adding 64MW capacity at its Orissa plant at a cost of about Rs300 crore. The additional capacity is likely to go on stream by the fourth quarter of 2010-11.
India currently has a total power generation capacity of 150,000MW and had planned to add 78,577MW in the 11th Plan (2007-2012).
Union power secretary H.S. Brahma told Mint on 8 September that India would miss that target by almost a quarter due to a shortage of fuels such as coal and gas to fire the plants.
Nava Bharat sells most of the power generated at its plants in the open market, except for a small portion that it uses to produce ferro alloys. It expects to sell power at a base price of Rs4 a unit and at an average Rs5 a unit over the next four to five years. The company now sells power to state-owned utilities at Rs3 a unit.
In 2008-09, it had an average realization of Rs5.12 a unit, with open market trading fetching Rs5.87 a unit on average, said Amit Golchha, an analyst with Mumbai-based equity research firm Emkay Global Financial Services Ltd.
Nava Bharat “has been one of the significant beneficiaries of the merchant power boom in the country”, said Golchha. Emkay doesn’t have a rating on the company.
To take advantage of this, Nava Bharat increased merchant power production and significantly reduced captive consumption by reducing its production of ferro alloys due to low realizations.
The firm will lower production of ferro alloys to about 40,000 tonnes in 2009-10, using only about one-fifth of its total capacity of 190,000 tonnes a year, said Prasad.
As for the new power plants, it expects to run one of them on imported coal and the other on domestic coal. It needs about 1.3 million tonnes (mt) of imported coal a year to run a 150MW unit.
Nava Bharat acquired a 75% stake in a coal mine in Indonesia, with reserves of about 10 mt, in January for $18 million (around Rs87 crore).
“Another mine of the same company is estimated to fetch 10 more million tonnes in a year or so and we will invest $20 million to have 75% holding in it as well,” said Prasad.
The first coal mine in Indonesia is set to start production from January.
Nava Bharat shares gained 0.77% on Tuesday to close at Rs366.65 on the Bombay Stock Exchange. The benchmark Sensex index gained 0.9% to end at 16,886.43 points.