Photo: Mint (Mint)
Photo: Mint

Sravanthi Group plans to move gas-fired unit to Nigeria

Sravanthi has signed an in-principle agreement with a Nigeria-based Indian developer for a joint venture

New Delhi: Frustrated with its inability to obtain the gas needed to run power plants, Sravanthi Group plans to relocate one of its two 225 megawatts (MW) units in Uttarakhand all the way to distant Africa—Nigeria to be precise.

With its 1,800 crore, 450MW gas-based power project getting stalled, the company has signed an in-principle agreement with a Nigeria-based Indian developer for a joint venture to set up the plant in that country.

While the company will lose 100 crore as part of civil and structural construction costs, it hopes to recover this through electricity sales to power-starved Nigeria, said D.V. Rao, chairman and managing director of Sravanthi Group. He declined to name the Nigerian partner.

Of India’s installed power generation capacity of 225,133MW, 9% or 20,359.85MW is gas-based. The plant load factor of this capacity is just 24% because of lack of fuel. An additional capacity of 8,600MW is ready, but can’t be commissioned for the same reason.

This situation has come to pass due to declining production from Reliance Industries Ltd’s D6 block in the Krishna-Godavari basin, the country’s largest reservoir of the fuel.

Mint reported on 28 October about the restricted availability of gas in India forcing developers of stalled gas-based power projects to scout for locations in Africa where they could shift their plants. Since capital investment has already been made in setting up the projects, the developers are looking at ways and means to service the loans.

Despite being rich in energy resources, Africa suffers from a chronic power shortage. Nigeria, which has an electricity shortage, has implemented several measures to improve its power sector.

To attract investors to a privatization drive, it has offered an internal rate of return of 20% on a regulated tariff structure. The country has an installed generation capacity of 8,644MW, of which 6,905MW is government-owned.

Sravanthi Group invested 1,800 crore towards setting up the Uttarakhand project, of which 1,350 crore was the debt component. Of this debt component, 1,100 crore was released by the banks, due to which the equity portion was increased from 435 crore to 685 crore.

“The plant is ready, but there is no gas. We have an in-principle agreement. They (the Nigerian partner) are in the process of getting a licence to set up a 225MW power station. We have agreed to invest a part of the equity. They will hold the majority stake. They also have the option of us doing the engineering, procurement and construction of the project," said Rao.

“It will take six months for the transaction to be completed. We will retain the second unit here," he said.

India, the world’s fourth largest energy-consuming nation, imports 80% of its crude oil and 25% of its natural gas requirements. The country accounts for 4.4% of global energy consumption after the US, China and Russia. India’s energy demand is expected to more than double by 2035, from less than 700 million tonnes of oil equivalent (mtoe) to around 1,500 mtoe, according to the oil ministry’s estimates.

According to energy experts, gas will remain a preferred fuel globally.

“Natural gas will continue to increase its share of the global energy mix, growing at 2.4% per year between now and 2018," the International Energy Agency (IEA) said in its medium-term gas market report released on Thursday.

“Even though we have revised our growth estimates downwards, the ‘Golden Age’ of gas remains in full swing," said IEA executive director Maria van der Hoeven in a press note.