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Power from CESC plant in Maharashtra finds no takers

CESC has managed to sign only one PPA with the state-owned distribution company of Tamil Nadu
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First Published: Fri, Jul 26 2013. 10 16 PM IST
CESC chairman Sanjiv Goenka. Photo: Indranil Bhoumik/Mint
CESC chairman Sanjiv Goenka. Photo: Indranil Bhoumik/Mint
The financial viability of CESC Ltd’s 600 megawatts (MW) Chandrapur power plant in Maharashtra is under a cloud as it cannot find takers for more than 100MW of electricity to be generated by it even two months before commissioning and hence cannot secure adequate fuel supplies from Coal India Ltd (CIL).
It has managed to sign only one so-called power purchase agreement (PPA) with the state-owned distribution company of Tamil Nadu for sale of 100MW at the administered tariff.
In the wake of the controversy over coal block allocation last year, the Union government has mandated that power producers cannot seek coal supplies from CIL, which sells the fuel at a significant discount to global prices, without signing PPAs.
This means CESC could be forced to import coal to feed its Chandrapur plant, which is being built at a cost of Rs.3,800 crore. But this would mean the plant won’t be able to recover operating costs for at least one year of operation, according to CESC chairman Sanjiv Goenka.
The government’s decision not to allow power producers to seek coal supplies from CIL was “unfair” on companies such as CESC because they had conceived several projects expecting to secure fuel from the state-owned miner. Financial calculations went awry because of the directive, Goenka said.
State-owned distribution companies not signing PPAs is a “major concern” for upcoming power generation units, said Arvind Mahajan, executive director at consulting firm KPMG. “It is the politics of buying power, not the lack of demand, that’s affecting the industry,” he added.
There is, however, no such concern about CESC’s upcoming unit at Haldia in West Bengal. The 600MW plant, which is being built at a cost of Rs.4,000 crore and is to be commissioned in late 2014, will sell power to CESC’s own consumers in Kolkata and its suburbs at administered tariff.
It could hence seek coal from CIL for its entire capacity whereas for the Chandrapur unit, supplies will be restricted to 100MW only, or as much power as it can sell at the administered tariff.
The Haldia unit will be profitable from day one, according to Goenka, “but there could be issues to resolve with our Chandrapur unit for at least one year”. For a long-term solution, CESC is looking to acquire coal mines in Indonesia, he added.
Meanwhile, on Friday, CESC, formerly a British company, severed its last link with London by obtaining shareholders’ approval to withdraw its shares from trading on the London Stock Exchange (LSE).
The company continues to have about 160 shareholders in the UK, Goenka said, but that didn’t justify the cost of remaining listed on the bourse. CESC’s shares have not been traded on the LSE for years, he added.
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First Published: Fri, Jul 26 2013. 10 16 PM IST
More Topics: CESC | power | Maharashtra | Sanjiv Goenka |
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