Torrent seeks foreign ally for Surat power plant

The Ahmedabad-based Rs 2000 crore Torrent group is scouting for a foreign partner for its upcoming 1050 MW power plant at Akhakhol near Surat.

The foreign ally is expected to pump in Rs 1000 crore out of the Rs 3700 crore investment required for the project. The company had floated a special purpose vehicle, Torrent Power Generation (TPGL), last year.

Work for the plant, which is expected to generate 700 MW of power by fiscal year 2007-08, has already started. TPGL has finalised the EPC contract and has decided to sell 270 MW of power from this plant to Power Trading Corporation (PTC).

A recent report prepared by TPGL on environmental issues related to the upcoming plant, which was submitted to the Asian Development Bank (ADB), said: "The project will cost $740 million. Of this, Torrent expects to fetch foreign direct investment of $200 million during the course of setting up and the commencing of commercial operations of the plant."

Though TPGL officials could not be reached for comment, sources close to the company said: "TPGL aims to offload its 49 per cent share to partners with which it has been looking for strategic alliances. A significant domestic partner may also be offloaded some portion of the 49 per cent stake of Torrent in the SPV.

"Way back in 2001, PowerGen Plc of UK, had picked up the stake of Gujarat Power Corporation (GPCL) in the 655-MW Gujarat PowerGen Energy Corporation (GPEC) at Paguthan near Surat for a consideration of Rs 288 crore. PowerGen is believed to be interested in further investments, provided it secures approval from Foreign Investment Promotion Board (FIPB)."

Before this deal, PowerGen had picked up 46.3 per cent equity in the erstwhile Gujarat Torrent Energy Corporation from the Torrent group for Rs 1,065 crore, adding to its existing equity exposure at 28 per cent.

Besides, PowerGen, TPGL is also looking for other prospective foreign investors , while a search for a 'suitable partner' from India has also been initiated.

The Akhakhol project, which is nearing financial closure with the Infrastructure Development Finance Company (IDFC). The upcoming plant will help Ahmedabad Electricity Company (AEC), Torrent's distribution arm in Gandhinagar and Ahmedabad, and Surat Electricity Company (SEC), the distribution company of the Torrent group for Surat city, to come out from crisis of power.

The two plants of AEC in Sabarmati and Vatva produce 490 MW of power against an immediate requirement of 690 MW (the difference Torrent buys from Gujarat Electricity Board). TPGL has already completed initial talks with PTC for selling 270 MW of power through its transmission line, a sort of inter-state power sales.

"Out of the total production from the Akhakhol plant, 270 MW will be given to PTC as interest sale by TPGL," said the report submitted to ADB by the company, a copy of which is with Business Standard. PTC officials were not available for their comment on the deal with TPGL.