Essar Power is
evaluating a proposal to relocate a 1,200 megawatt power
plant from Scotland to Vadinar in Gujarat. Sources in financial
institutions indicated that the completed cost of the plant
per megawatt of power to be about Rs 2.3 crore.
The sources
told Business Standard that the total project cost, including
all duties, could be about Rs 2,700 crore. Essar Power
proposes to purchase the plant, dismantle it and subsequently
relocate it in Vadinar. It planned to run the plant using
the residue from its proposed refinery at Jamnagar as the
primary fuel, the sources said.
When contacted, an Essar
group spokesperson said the company was exploring several
options. "We are also
studying an option to set up a new plant," he said.
According
to the spokesperson, the company has already initiated
a due diligence exercise. "A final decision
will be taken by June-end," he added.
Institutional sources also
confirmed that the company was in the process of preparing
a detailed project report to arrive at cost estimates.
The plant in Scotland comprises two units of 600 megawatts
each which are stated to be in good condition. The company
will submit the detailed project report to the financial
institutions by the end of May.
The cost of power generated
by the unit, the sources indicated, was estimated to be
Rs 1.70-1.80 per unit, which would make even the sale of
surplus power to the grid extremely viable.
In response
to Essar Power's initial proposal, the financial institutions
have sought a clarification on the transfer pricing mechanism
under which the company will price the refinery residue
to be used as fuel by the plant.
The institutions have also
asked for a time frame within which the refinery in Vadinar
will be set up. Since the power plant proposes to use the
refinery residue as fuel, unless the refinery comes up
on time, the plant will not have a fuel link.
The Essar
group spokesperson, however, said the institutions had
not yet been approached for funding the project. "It
is only after we take a final call whether to set up
a new plant or opt for a second-hand plant, that we will
approach the institutions," he said.
When asked about
the cost of the project, the spokesperson said, the company
would comment on the cost only after the detailed project
report.
Import of second-hand power plants was put on
the open general licence (OGL) last year but there has
been no instance of a plant of this size being relocated
so far.
CORPORATE