The government has issued a request for quotation (RfQ) for developing the 4,000-Mw Sarguja ultra mega power project (UMPP) in Chhattisgarh. Plans to bid out the proposed UMPPs in Tamil Nadu, Orissa and Andhra Pradesh are also on the cards.
During the economic downturn, big projects such as these, whose cost came to Rs 20,000 crore, might have looked risky. But now, companies say the investment climate has improved. "The ability of companies to look at such projects has improved and conditions are better. Liquidity conditions have improved as well," said Subba Rao, chief financial officer (CFO) of GMR Infrastructure.
Lanco Infratech, the flagship of the Hyderabad-based Lanco Group, submitted the lowest bid for the Sasan UMPP in Madhya Pradesh, but lost out to Anil Ambani-led Reliance Power over technical issues. The company says it is evaluating opportunities in the UMPP space. "We are surely looking to bid and working out the details. The environment is surely better than when the Tiliaya UMPP (in Jharkhand) was bid out. It will be competitive this time," said Suresh Kumar, CFO of Lanco Infratech. A consortium of Lanco and Genting of Malaysia withdrew its bid for Tiliaya at the last moment last year.
According to the new power ministry rules, Reliance Power, with three UMPPs in its kitty, might not be able to participate in the Sarguja project. But Tata Power, which is on the verge of finishing the imported coal-based Mundra UMPP in Gujarat, said it would look at bidding for captive coal-based power projects.
However, companies such as L&T Power and Essar Power are known to be planning to stay away from such huge projects. "The participation should be good because it is a pit-head project. The bidding should be easy now because of the experience that these players have gained with earlier projects. However, some big companies are stretched on financing with big projects. We will have to see what kind of capital appetite they have," said Kameshawara Rao, Leader (Power), PricewaterhouseCoopers.
Some experts are of the belief that companies which have lost out in earlier rounds may see this as an opportunity. "While 20-odd companies participated in the earlier rounds, till date, only two companies have won these large projects, entailing an investment outlay of Rs 80,000 crore, leaving many other players starved. Given the improvement in economic environment, coupled with stabilisation in the financial markets, including easing of financing and external commercial borrowing norms for infrastructure projects, there is renewed interest as well as appetite for these projects," said Sujit Ghosh, executive director, BMR Advisors.
UMPPs come with certain natural advantages like a single-window land, water and environment clearence. The last pit-head project which was bid out - Tiliaya - did not see widespread interest due to the economic slowdown. Experts say Sarguja, also a pit-head project, might see aggressive bidding on the lines of the Sasan project, which was bid at Rs 1.19 paise per unit.
Tariffs could also be aggressive like Sasan. "Now that it is clear that companies are allowed to sell coal from their captive mines, many companies could bid aggressively," said an equity analyst who tracks the sector.
Reliance Power has been allowed to divert excess coal from the captive coal mines of the Sasan power project to other projects, according to a decision taken by the Empowered Group of Ministers.
However, experts said the project cost could be higher this time due to a variety of factors. "The recent decision to bar foreign equipment makers not having manufacturing base in India from supplying to UMPPs may not augur well for the sector and may hurt investor sentiment. Although equipment manufactures may line up to set up their manufacturing base in India, such a move is likely to delay the implementation of these projects and may lead to an increase in tariffs," said Ghosh.
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