Mumbai: Reliance Power Ltd (RPL), part of the Reliance-Anil Dhirubhai Ambani Group (R-Adag), plans to build power plants in Ethiopia through a deal with the local government as part of its effort to grow its presence outside India.
The deal is a so-called tolling arrangement, where the Ethiopian government will supply gas to power projects set up by RPL, which will generate electricity for the government in return for a fee (or toll). If the deal goes through, it will mark RPL’s first entry into the power generation business outside India.
“We have been invited by the Ethiopian government to set up gas-based power projects there. We are working on the proposal,” said an RPL executive, who did not wish to be identified.
Ethiopia has one of the worst records in terms of access to electricity. Less than half its urban population, and only around 1% of its rural population has access to power.
Quid pro quo:India’s biggest power generator NTPC has a similar deal with the Nigerian government.
RPL could also consider building plants for the Ethiopian government in return for gas that it can use to fuel its plants elsewhere. Natural gas is an in-demand fuel all over the world. India’s largest power generation firm NTPC Ltd has a similar deal with the Nigerian government.
“A lot of companies are looking overseas for securing gas supplies. This is an attempt by RPL for supply diversification and risk mitigation,” said Anish De, chief executive officer at Mercados Asia, an energy consulting firm.
RPL has plans to set up power projects having a total capacity of 28,200MW in India that may involve an investment of Rs1.10 trillion. Of this, at least one-third, or 10,280MW, will have to use gas as a fuel.
However, the commissioning of this entire capacity is based on an ongoing court case between Reliance Natural Resources Ltd (RNRL), an R-Adag firm, and Reliance Industries Ltd (RIL), a company controlled by Anil Ambani’s estranged elder brother Mukesh Ambani. At stake is the price at which RNRL, which negotiates fuel supply contracts for its and RPL’s associate Reliance Energy Ltd (REL), will get gas from RIL.
India needs around 180 million standard cubic metres of gas per day (mscmd), of which it imports 99mscmd.
RPL has also crossed one hurdle (or pre-qualified) in its bid to build an integrated power and water desalination project in Bahrain.
“In Bahrain, we have pre-qualified for setting up a 1,200MW and a 60 million litres per day of water desalination project, the price bids for which will open on 4 June. The project may require an investment of $1 billion (about Rs4,000 crore),” said the RPL executive. RPL is competing with firms from the UK, Japan, Korea, Belgium, Singapore and Malaysia for this project.
Tolling is emerging as a preferred way to do business both in India and elsewhere.
An arrangement similar to the one RPL is considering with the Ethiopian government has also been worked out by power trading firm PTC India Ltd and Hyderabad-based generation firms Simhapuri Energy Pvt. Ltd and Meenakshi Energy Pvt. Ltd for coal-based generation, as reported by Mint on 9 February.