Wartsila India Ltd, the Indian arm of the Finnish power major Wartsila OY, has decided to go slow on independent power projects, partly owing to uncertainty over the Dabhol power project and decision by some independent power producers (IPPs) to pull out of the country.
"Setting up independent power projects is not going to be our focus area of business for coming few years. Wartsila would emphasise on building captive power plants for industry who prefer good quality power at a competitive price and round the clock," Pradeep Mallick, managing director, Wartsila India said.
The company feels that the state electricity boards (SEBs), who are the principal buyers of electricity from IPPs, are yet to evolve mechanism to ensure smooth flow of revenue to power producers.
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"There has to be escrow mechanism in place to avoid delay in payments," Mallick said at the sidelines of "Competitiveness India 2001", a seminar organised by Confederation of Indian Industries (CII) eastern region in Kolkata. There has been growing tension between IPPs and state governments over fixing of tariff and delay in payments from SEBs.
The absence of a working formula that protects interests of all parties concerned viz. IPPs, lenders and buyers, have led many foreign companies to shy away from India. Mallick, however, reiterated Wartsila's overall commitment to India saying that company would continue to be in Indian power sector.
Wartsila OY, which had 51 per cent stake in Wartsila India, had recently made an open offer to buy out the remaining 49 per cent. "Wartsila operates through 100 per cent subsidiaries worldwide. Now that Indian laws has permitted foreign companies to set up wholly owned subsidiaries, Wartsila is making the open offer. It goes to show the firm commitment of our parent in Indian arm," Mallick said.
Wartsila India has also been consolidating its own business. It has merged Wartsila Operation and Maintenance India Ltd, a wholly owned subsidiary of Wartsila India, with itself.
The company sees the operation and maintenance business would do well in the future given that more and more companies would like to have trouble free operations. Globally O&M constitutes 30 per cent of Wartsila's turnover compared to 22 per cent in India.
Wartsila India has 2000 MW of installed capacity out of which 280 MW is billing energy where it operates the plant for the customer. It has build two IPPs of 106 MW each in Tamil Nadu. In three months ending June 30, 2001 Wartsila income was Rs 74 crore compared to Rs 71 crore in the corresponding period Rs 71 crore. The company posted a profit after tax of Rs 3.3 crore against Rs 3.5 crore in the same period 2000.