Lanco Infra to boost capacity by 750MW at Kondapalli plant

Lanco Infra to boost capacity by 750MW at Kondapalli plant
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First Published: Tue, Sep 08 2009. 10 21 PM IST

Powering up: Lanco Infra chairman L.M. Rao says the expansion will take roughly Rs3.5 crore per megawatt. Bharath Sai / Mint
Powering up: Lanco Infra chairman L.M. Rao says the expansion will take roughly Rs3.5 crore per megawatt. Bharath Sai / Mint
Updated: Tue, Sep 08 2009. 10 21 PM IST
Hyderabad: Hyderabad-based Lanco Infratech Ltd is firming up plans to add 750MW of power generation capacity at its Kondapalli facility in Andhra Pradesh, as it lines up to receive more gas supplies from Reliance Industries Ltd’s Krishna-Godavari (KG) basin, chairman L.M. Rao said.
The expansion would cost around Rs2,625 crore, based on an estimated Rs3.5 crore per megawatt, Rao said over the phone on Tuesday.
Powering up: Lanco Infra chairman L.M. Rao says the expansion will take roughly Rs3.5 crore per megawatt. Bharath Sai / Mint
Lanco currently receives 1.6-1.65 million standard cu. m per day (mscmd) of gas for its Kondapalli facility from Reliance Industries Ltd, or RIL, India’s largest private explorer, which has projected an initial output of 40 mscmd from its D6 block in the KG basin.
Late August, the oil ministry approved additional temporary allocation of KG gas to three power plants, including about 3.7 mscmd to Lanco, to meet an electricity deficit in northern states reeling under drought, PTI reported.
The infrastructure firm has a capacity of 368MW at phase 1 of its Kondapalli gas-based power plant, operating at 94% of its load factor after it started receiving natural gas from RIL.
It will add another 366MW of capacity in two phases—233MW by end-September or early October and the balance 133MW by the last quarter of fiscal 2010, Rao said.
Once the proposed additional 750MW of capacity is added, the Kondapalli facility would have total power generation capacity of 1,484MW by the first half of 2012.
“The company has an EPC (engineering, procurement and construction) arm that enables speedy execution of power projects,” analysts Shankar K. and Abhishek Bhandari of Edelweiss Securities Ltd wrote in a note to clients on Tuesday after a recent meeting with Lanco’s management team.
“It also has a strategic tie-up with (Chinese) equipment manufacturer Dongfang Electric Corp. Ltd, which places it in a better position to execute its power projects vis-à-vis peers,” added the analysts, who have a “hold” recommendation on Lanco Infratech shares.
Rao said the company would finalize its capacity addition plan over the next two-three weeks based on gas allocation and other linkages for the project. Financial closure would take about six months.
“We expect the expansion project to take some 12-18 months from financial closure to take off on open-cycle mode, and some 24 months on combined-cycle mode,” he added.
In the open-cycle mode, hot gas is released into the atmosphere,?whereas?the combined-cycle technology uses heat recovery stream generators so the hot gas can be used again to generate power, improving efficiency by at least 50%.
The project’s debt-equity ratio would be 70:30 or 80:20 based on the negotiations with the lenders, he added.
In other words, the debt component of the project could go up to 80% or remain at 70%. If the lenders agree to extend more debt, Lanco would need to pump in relatively less equity.
Lanco Infratech has an operating power generation capacity of 511MW comprising two gas-based plants, two wind energy plants and one hydro power project, spread over Andhra Pradesh, Tamil Nadu, Karnataka and Himachal Pradesh.
“Another 300MW of coal-fired power capacity at Amarkantak in Chhattisgarh is currently under trial runs, taking the total operating capacity to some 820MW,” Rao said, excluding the capacity being added in phase 2 of the Kondapalli facility.
Lanco Infratech has at least 7,195MW of new generation capacity under various stages of execution, with secured off-take agreements and fuel linkages for half.
The company’s revenue surged 140% year-on-year to Rs2,479.1 crore in the June quarter, and profit increased 96% to Rs115.8 crore. Its power segment contributed 40.84% to the revenue, and the construction segment, 58.33%.
Lanco Infratech shares lost 0.23% to end Tuesday at Rs418.75 each on the Bombay Stock Exchange, on a day its benchmark Sensex index gained 0.67%, or 107.35 points, to close at 16,123.67 points.
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First Published: Tue, Sep 08 2009. 10 21 PM IST