Power cos seek mining partners to bid for 1,920-Mw project

A joint venture between the Maharashtra and Tamil Nadu governments for a pit-head power project, has been allotted the biggest coal block yet given for a project to be competitively bid.

The block, located in Raigarh district of Chhattisgarh, has reserves of 768 million tonnes. The coal block allotted for the Sasan ultra mega power project (in Madhya Pradesh) has around 750 mt.

The miner-cum-power developer who would win the project will have to put up a 1,920 Mw power project. Half the power produced can be sold on a merchant basis, while the other half should be sold to Maharashtra and Tamil Nadu state electricity boards. The extra coal from this mine has to be diverted back to the joint venture company.

Industry sources say the high technical qualification norms might not allow many companies to qualify. Bidders should have at least three years experience in mining 10 million tonnes in the past three years, either in India or abroad. Bidders who have been selected to develop a coal mine with geological reserves of 250 mt are also qualified.

Some power companies like Reliance Power, Indiabulls have experience in developing coal mines, as a part of pit-head projects. But many companies will have to scout for coal mining partners to jointly bid for this project. “We are looking to partner with Indonesian coal mining companies,” said an official who is planning to bid for the project.

Analysts say Indian power companies have traditionally never engaged in coal mining and, hence, most of them lack experience. “Indian power companies normally get coal either from Indonesia, trading companies or Coal India. Most of them do not have any experience in mining. But a few players have started entering the field now, like JSW Energy or Reliance Power,” said Rupesh Sankhe, analyst, Angel Broking.

The project criterion also demands that the bidder should have either implemented or have under implementation projects with a capital cost of at least Rs 10,000 crore or 2,000 Mw in the past seven years. Further, the company must have achieved financial closure of Rs 6,000 crore.

The project also has a unique financial requirement, that asks bidders to have Rs 400 crore in the form of fixed deposits, liquid mutual funds or fixed maturity plan investments. “These conditions are very tough. Other projects do not ask for these kind of conditions,” said another prospective bidder.

Analysts say while qualifications norms are tough, it is likely this project could generate a lot of interest, as the investment climate is very positive in the power sector. Many power companies have achieved financial closures of their projects and are ready to take on new commitments.

“Reliance Power has already achieved financial closures of two power projects, Lanco has tied-up for its near-term requirements, Tata Power has enough internal accruals, NTPC is sitting on a lot of cash; Adani Power has started operations in its Mundra power project,” said Sankhe.