GVK to takeover Coal -Fired Power Units to aggressively change its expansion plan for more than 7500 MW

GVK to Acquire Coal-Fired Power Units

Company looks to ramp up its power generation capacity to over 7,500 MW over the next five years

CR SUKUMAR HYDERABAD 

Close on the heels of Australia’s Hancock Coal acquisition for $1.26 billion, marking one of the largest overseas buyout by an Indian infrastructure firm, GVK group will soon buy coal-fired power generation facilities in the Indian market, said group chairman GV Krishna Reddy. Through the Hancock Coal acquisition, GVK Power and Infrastructure (GVK PIL), the only listed entity in the group, has secured 20 million tonne of coal supplies a year that support a power generation capacity of 7,500 MW. However, the company currently has 540 MW of coal-fired power facility under construction and has firmed up plans to ramp it up further to 1,320 MW.

Reddy said GVK PIL will now expand its coal-fired power generation capacity aggressively to over 7,500 MW over the next five years to take advantage of the fuel supply arrangements it has secured through Australian coal mines. Saying that the company is identifying locations to set up greenfield coal power projects using the imported coal, Reddy added that the company will look at acquiring power projects under development to save time in obtaining clearances. “There are many projects available which have all the clearances, but have no fuel linkages. We would like to take over and implement such power projects,” he told ET. This is not the first time that GVK PIL is looking at acquiring power projects in the domestic market. In 2008, it had planned to acquire a stake in two coal-fired power firms — in Maharashtra and Chhattisgarh— with a cumulative capacity of 1,800 MW. The company dropped the plans owing to unfavourable fuel linkages despite completing a due diligence. There are at least 20,000 MW of coal-fired power generation capacities under implementation in Andhra Pradesh alone in Srikakulam and Nellore, which could not take off owing to several issues, including fuel linkages.

“We are currently busy with the Australian project for another month or so and will then look at acquiring thermal power projects in the domestic market,” said Reddy, while refusing to throw light on the geographical location of the facilities the company will consider for acquisitions.

At present, GVK PIL has three operational gas-based power projects with a capacity of 901 MW and seven projects with a cumulative capacity of 3,530 MW under various stages of construction and development.

According to an investor presentation by the company in August, power constituted 73% of GVK PIL’s total portfolio by asset size in terms of project cost, while airports accounted for 15%, roads 9%, coal mines 2% and oil and gas 1%. Within the power portfolio, thermal power constituted 9%, while hydro power dominates with 38%, followed by gasbased projects at 26%.

GVK PIL, which did not bid aggressively for the ultra mega power projects in the domestic market finding the power tariffs unattractive and returns unviable, will now look at setting up mega power projects on merchant basis that can run on the Australian coal, said Reddy.

Meanwhile, the company has decided to defer expansion of its gasbased power projects owing to uncertainty over gas supplies from Reliance Industries’ KG basin. The existing gas-based power projects have suffered a fall in plant load factor during June quarter. After paying the advances for the plant and equipment for expansion, the company now prefers to go slow on the expansion, said Reddy. “We don’t want to go ahead with the expansion and get into problems.”

Source: ET