Reliance Power of Anil Dhirubhai Ambani Group (ADAG) won the bid for 4,000 mw Tilaiya ultra mega power project (UMPP), the third such project in its kitty after Sasan (Madhya Pradesh) and Krishnapatnam (Andhra Pradesh). Reliance Power has bagged the Tilaiya ultra mega power project (UMPP) by offering to supply power at Rs 1.77 per unit — the lowest price quoted by the four companies in the fray.
Sources said the financial bids were opened by the government's nodal agency for ultra-mega power projects, Power Finance Corporation, on 28-01-2009. RPL quoted a levelised tariff of Rs 1.77 per unit for the coal-fired project. State-owned NTPC quoted a tariff of Rs 2.34 to come second, followed by Jindal Steel & Power Ltd Rs 2.67. There were two other bidders — Jindal Steel and Power which offered to supply power at Rs 2.69 per unit and Sterlite Industries which bid the highest at Rs 2.97 per unit.
The fifth company shortlisted to bid, Lanco Infratech, partnership with Genting Power International, withdrew at the last minute, according to an official of the Power Finance Corporation (PFC), which is the nodal agency for the ultra mega power projects. Lanco said that bankers to its partner, Genting Power, withdrew support for the project at the last moment, forcing them to withdraw their bid.
Eleven companies had originally qualified to bid for the Tilaiya UMPP but the global financial meltdown and the subsequent credit crunch saw many companies opt out of the bid. These included the likes of Tata Power and Larsen & Toubro.
Reliance Power has quoted an extra 57 paise per unit for Tilaiya over its bid for Sasan, the first UMPP to be auctioned. Although Sasan and Tilaiya are of the same size, 4,000 mw each, and based on captive coal blocks, the Tilaiya bid comes amidst tight liquidity conditions in slowing global economy.
The Tilaiya project will get its coal from a captive mine that will also be developed by the power project bidder. The coal mine is estimated to have reserves of 972 million tonnes. An analyst report by ICICI Securities says coal reserves in the block are 86% more than the power plant's requirement, which is expected to help the project.
The project will require an investment of Rs 18,000 crore with a debt-equity ratio of 70:30. The letter of intent to Reliance Energy will be awarded in the next few days and the company will be given 60 days to comply with the provisions.
"We expect the contract to be signed in a month," the PFC official said. The bids were opened by a high-level committee that included representatives from the governments of Bihar and Jharkhand.
PFC had once deferred the bidding process as power companies had expressed concern over getting funds for the project. They also wanted clarity over the coal transportation system in the project.
Last year, the government had awarded the Sasan project to Reliance Power after Lanco's bid was disqualified by a group of ministers led by power minister Sushilkumar Shinde. The company lowered its bid to Rs 1.19 per unit to match Lanco's. The government has asked RPL to hand over the Sasan project in four years against the quoted time-frame of 10 years. Lanco, whose bid was disqualified, had vowed to complete the project in seven years.
Unlike the Tilayia and Sasan projects, the Krishnapatnam project will use imported coal. This is the second ultra-mega power project that plans to use imported coal after the Mundra unit planned in Gujarat that was bagged by the Tatas. For the Mundra imported coal-based project, the Tatas had quoted a tariff of Rs 2.26 against Reliance Power's Rs 2.66, L&T's Rs 3.22 and Sterlite's Rs 3.74.
"The tariff is much higher when compared to Sasan. We expect much better margins," said Reliance Power's chief executive, JP Chalasani. Analysts were also concerned about the financing challenges that the company would face given the group exposure norms that it is likely to run into.
"We do not expect any financing challenges," asserted Chalasani. "The Tilaiya project is due for commissioning in 2015, which gives the company enough time to manage the funding. Financial closure for the Sasan UMPP is expected next month, while that of Krishnapatnam is likely in the first quarter of the next financial year, he added.
While there is no cap on the number of UMPPs that a company can bag, the performance guarantees required go up with each project. For instance, a performance guarantee of Rs 300 crore is required when a company bags its first UMPP. For the second project, the performance guarantee required goes up to Rs 450 crore, and Rs 600 crore for the third project, officials informed.
The Tilaiya project in Jharkhand, which will be funded seven parts by debt and three parts equity, is a part of the government's showcase UMPP scheme under which over 50,000 Mw of power capacity is planned through 13 projects during the 12th Five-Year Plan (2012-2017).