R-Power hastens development of its mines in Indonesia to meet production schedule at its imported coal-based UMPP at Krishnapatnam

Reliance Power is hastening development of its mines in Indonesia to meet the production schedule at its imported coal-based ultra mega power project at Krishnapatnam.Reliance Power’s subsidiary, Reliance Coal Resources (RCRPL), acquired three coal mines in Indonesia in May 2008. The mines are estimated to have reserves of two billion tonnes and annual production capacity of around 25 million tonnes.The company is building railway infrastructure to transport coal from the mines, which are in South Sumatra, to the port.

“Drilling is on and land acquisition for railway lines has started,” said a top official of Reliance Power. The company has given a mining order to North Amercian Coal Corporation, the technical partner it is already working with to develop the captive coal mine of the Sasan ultra mega power project. “We will work with the same partner so that we can work faster,” said the source.

Sources say Reliance Power has also received offers to develop power projects in Indonesia during its negotiations with the government. The company is yet to take a view. Reliance Power did not respond to a questionnaire on this.

Faster mine development and subsequent signing of the fuel supply agreement for the Krishnapatnam project will help the company draw money from banks. The power projects have already achieved financial closure. The company has signed loan agreements with 15 banks and financial institutions for about Rs 13,125 crore. However, the company cannot draw this money without tying up fuel for the project. “We have put specific conditions for fuel linkages and will review the progress made by the borrower while releasing the money at certain milestones,” said a banker associated with the deal.

Reliance would require 15.3 million tonnes per annum coal to fuel the 4,000-Mw project, one of the biggest in the country. “There has to be a proper arrangement on the fuel side. After they sign the agreement, we will do a due diligence of the quality of the coal. Until then, we will not be able to disburse the money,” said another banker who has signed the loan agreement. The banker said Reliance was speeding up the process as it was keen on disbursal.