BackConsultant lists options to revive Dabhol power project
To revive Ratnagiri Gas and Power's Dabhol project, consultant Deloitte Touche Tohmatsu has presented a plan
Premium
New Delhi: To revive Ratnagiri Gas and Power Pvt. Ltd, consultant Deloitte Touche Tohmatsu India Pvt. Ltd has presented a plan that includes options such as the Dabhol project be paid the minimum amount for sustenance from Maharashtra, people familiar with the development said.
The beneficiary from the beleaguered project—Maharashtra State Electricity Distribution Co. Ltd—may pay an amount equivalent to the current year’s debt servicing and meet the expenditure towards operations and maintenance of the 1,940 megawatt (MW) project, the consultant has suggested.
The other options suggested by Deloitte include conversion of debt into equity by lenders or fund infusion by the promoters. Cash-strapped Ratnagiri has a debt of around ₹ 8,500 crore, with an outstanding debt service obligation of ₹ 837.94 crore for the current financial year.
State-run NTPC Ltd and GAIL (India) Ltd own 32.86% each in the utility, the Maharashtra government has a 17.41% stake, and the rest is owned by banks and financial institutions such as IDBI Bank Ltd, State Bank of India, ICICI Bank Ltd and Canara Bank. NTPC had warned its parent, the power ministry, that its investment in Ratnagiri will likely have to be written-off—a significant loss of money and face.
“A revival plan has to be formulated to save the project. Some suggestions has been made by Dabhol. It is for the stakeholders to sit together and finalize the way ahead. We have sent the report to the stakeholders for comment," a Ratnagiri official said, requesting anonymity. “We have gone back to the same situation post Enron."
Ratnagiri, earlier known as Dabhol Power Co., was conceived in the 1990s and originally promoted by the now-bankrupt US energy, commodities and services firm Enron Corp. The asset was transferred to the government in mid-2005, and the project was fully commissioned on 31 March 2010.
“The stakeholders have been made aware of Deloitte’s suggestions," said an NTPC executive, who also declined to be named.
A third person aware of the development confirmed the contours of the suggestions made by Deloitte, which was roped in work out a new business plan for the ill-fated project.
Ratnagiri was dipping into its insurance reserves to service ₹ 139.12 crore in September dues to its debtors to avoid being classed as a non-performing asset, Mint reported on 31 December.
“There are several options. Of course, the first one is to get money from the Maharashtra government," said the Ratnagiri official cited earlier. “Then comes the need for securing more gas followed by working out the affordability of the gas in the form of subsidies. There are some plans in the works."
The Dabhol plant requires 9.7 million standard cu. m per day (mscmd) of gas, but has been allocated 8.5 mscmd by a panel of ministers, of which it receives only 0.9 mscmd. Various plans were drawn for the revival of the project, including leasing out the terminal to earn user charges, but they were dropped. Also, according to Ratnagiri, Maharashtra’s electricity distributor owes it ₹ 1,112 crore in electricity dues, which the latter denies.
“Till affordable gas is made available and the plant becomes viable, any suggestion that involves dipping into the pocket of consumers is unworkable," said Ajoy Mehta, managing director of the state’s power distributor.
This comes in the backdrop of the Union government considering a bailout package for gas-based power plants that includes ensuring that cash-strapped state power distribution companies continue to buy electricity from them after a scheduled increase in price of the fuel kicks in on 1 April, making available power from plants that are idling for want of the fuel, and a new repayment plan for a few other idle power plants.
The distributor is expected to pay full fixed cost for power capacity allocated to it, which it has disputed and stopped payments after April 2013, a Ratnagir spokesperson said.
As a temporary solution, Ratnagiri expects the state power distributor to pay at least the amount essential for debt servicing and keeping the company afloat, which faces the prospects of an asset downgrade, the spokesperson said.
The Centre’s plan, which also aims to revive the Dabhol plant as one part of the revival package, is meant for 6,996.5MW projects that were allotted gas from Reliance Industries Ltd’s D6 block in the Krishna-Godavari basin. To prevent the Dabhol project from becoming a defunct asset, all additional gas from the New Exploration Licensing Policy blocks in the next fiscal year, expected to be to the tune of 3.95 mscmd, is to be allocated to Ratnagiri. In addition, all these power plants have been allowed to procure imported liquefied natural gas and sell power directly to buyers at higher prices. The plan also envisages these plants receiving new loans from Power Finance Corp. Ltd.
A Deloitte spokesperson declined to comment. Queries emailed to the spokespersons of NTPC and GAIL on 14 February remained unanswered.
“We are studying all the options," a GAIL executive said, requesting anonymity. “The way out for the project is more availability of gas."
The government has been working on a slew of measures to bring relief to gas-fuelled projects, including the so-called peaking power policy expected to provide for up to five-year contracts and a pass-through of fuel price increases to help these projects become economically viable.
India has a power generation capacity of 233,930MW, of which 18,964MW is fuelled by gas. For these projects to operate at a plant load factor—a measure of average capacity utilization—of 70%, a supply of 71.7 mscmd of gas is required. However, the total gas supply available to these projects was 26.13 mscmd, resulting in a load factor of 25.6%.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
