Essar Power to set up plant at Hazira

In talks with Shell Hazira for supply of gas

Shell Hazira Gas is in talks with the Essar group for supply of gas for the latter's proposed 1500 megawatt gas-based power plant at Hazira near Surat.

Essar Power, part of the Essar group, announced on Wednesday that it will set up a Rs 4,000 crore power plant at Hazira. Shell Hazira Gas is in advanced stages of completing a liquefied natural gas (LNG) terminal at Hazira.

"Shell Hazira is in talks with the Essar group to provide gas for the new power plant that Essar Power plans to set up at Hazira. We intend to finalise the deal with Essar on providing gas for the proposed project," said Nitin Shukla, chief executive officer, Shell Hazira Gas.

Essar group chairman Shashi Ruia announced here that the power plant will be set up at Hazira, where Essar Power already has a 515 MW combined cycle power plant. Essar Power has already tied up gas from a supplier and has also signed power purchase agreements for selling power produced at the plant.

Chief minister Narendra Modi said: "With the announcement of Essar setting up yet another mega power plant in Gujarat, the power scenario in the state would be brighter and the way industrial houses are committing investment in Gujarat, seems apart from new industries, there would be huge employment generation also. Till this afternoon, commitment of investment worth Rs 51000 crore came from industrial houses, excluding Reliance Industries Limited which has not given any investment amount though the port-based SEZ project of Reliance would attract huge amount of investment for Gujarat."

The company is said to have approached the Power Finance Corporation for financing the project and the funding is being structured in such a way that tariffs could be well below Rs 2.50 per unit of electricity.

While a company spokesperson said that "the project is in initial stages of development," it is not clear exactly when the power project will be commissioned. However, a company spokesperson said that gas for the proposed power plant has "already been tied up" and agreements have also been signed for sale of power produced.

"Essar Power as been working on capacity expansion plans over the past few years and with significant positive developments in its existing operations and welcome developments in the policy framework in the sector, the present environment is conducive to implement the expansion plan," a company spokesperson said.

Of the total 515 MW of electricity presently being produced by Essar Power at Hazira, 300 MW is being supplied to the Gujarat Electricity Board, while the remaining 215 MW is being supplied to Essar Steel. Essar Power's power plant at Hazira has been operating at consistent profitability for the past seven years and at a plant availability of 96 per cent.

Essar Power posted a total income of Rs 550 crore for the 2003-04 fiscal and having achieved stable level of operations, it is looking to expand further.

The expansion plans have also been hastened with the new electricity act that provides several opportunities in the power sector and allows for bulk sale or purchase of power and private participation in distribution.