Lanco Infratech Ltd has become the latest to join the rush among Indian firms to set up power plants in Indonesia, which is expanding its generation capacity in a bid to tackle a power shortage. The Hyderabad-based company joins Tata Power Ltd and NTPC Ltd, India’s largest power-generation firm, both of which have articulated their intent to set up power plants in the Southeast Asian nation.
The Indian company hopes to set up two projects, each with a capacity to generate 200MW in that country, according to Lanco Group chairman L. Madhusudhan Rao. Lanco expects to invest $400 million (Rs1,720 crore) in these coal-based projects. One project is in Bali and the other to the south of Sumatra. “We have qualified as one of the lead bidders and the request for qualification (RFQ) process is already over. The request for proposal (RFP) process will be over in the next two months,” Rao added.
However, competition for the Indonesian project is intense. Lanco is competing with Korean and Malaysian power firms for the projects. The projects will have coal linkages from the mines (coal will be transported to them) and are not coal pit head projects (ones located by the coal mines).
Kuljit Singh, a partner at audit firm Ernst & Young attributed the power companies’ interest in setting up projects in Indonesia to the availability of coal reserves and the local government’s focus on building generating capacity.
Indian power generation firms are eyeing opportunities in Indonesia as the country is facing a power shortage. Tata Power recently acquired a 30% stake in two coal mining units and a trading company from Indonesia’s PT Bumi Resources for Rs4,740 crore and is scouting for power generation opportunities in the country.
“It makes sense for companies to set up power projects in Indonesia as the structuring of power project is very good in the country; this makes the projects very bankable,” added Singh. His reference is to the way power projects are designed financially, a process that includes both raising finances for the project and arriving with supply or selling arrangements with customers.
Lanco’s foray comes on the back of its failed bid to acquire global energy firm Globeleq’s assets in Egypt, Bangladesh and Sri Lanka. “We’re looking at the Asian markets of Thailand, Vietnam and Indonesia for setting up power projects,” said Rao.
Lanco’s Indonesian plans come at a time when its plans to develop the 4,000MW ultra mega power project at Sasan in Madhya Pradesh have come under intense scrutiny.
The company won the bid to develop the project along with Globeleq’s Singapore arm. Subsequently, Globeleq decided to sell some of its assets, including the Singapore arm. This was acquired by Lanco and Jindal Steel & Power Ltd.
Companies that lost the bid to develop the Sasan project then protested, claiming that Globaleq’s exit had changed the contours of the winning consortium, thereby disqualifying Lanco.
The issue is currently being considered by an expert panel headed by HDFC Ltd chairman Deepak Parekh.
Lanco estimates that it closed 2006-07 with a revenue of around Rs1,700 crore.