Dabhol plant in trouble again as FIs mull exit

The Dabhol power plant is likely to see further trouble with financial institutions likely to back out of the project.

According to sources, when the plant was taken over by Ratnagiri Gas and Power Limited (RGPPL), one of the consultants, Rochelle had estimated the company would need close to Rs 870 crore to refurbish blocks one and three. This was later revised to Rs 1,250 crore. The latest revision puts this figure at a higher Rs 1,600 crore.

According to the lending terms, the lenders to the projects would have to bear the additional costs.

"The FIs are not very keen on financing the project as they fear it will become commercially unviable at the current projected cost," the source said.

Ratnagiri's acquisition of the Dabhol plant was financed by FIs, which included SBI, ICICI and IDBI. IDBI had picked up 85 per cent of the project cost as debt. GAIL and NTPC invested 15 per cent by way of equity in the special purpose vehicle floated for the project.

The GAIL team found that Block 1 needed extensive repairs, in addition to regular overhaul, as Enron had run the plant for over 15,000 hours. It also found the heat recovery steam generators to be in bad shape.

Besides, the hot path components needed replacement "for them to complete their recommended life". An inlet air-cooling chiller plant at Block 1, as well as a transmission line for evacuating power from the plant needed to be installed.

Another reason the project has failed to take off is because the Maharashtra State Electricity Distribution Company (Mahadiscom) has refused to buy power from the plant as rates have shot up to Rs 6 per unit. Mahadiscom says it is able to source power from the eastern grid at far cheaper rates.

Although the state and the central government have reiterated that the project will continue, sources said that its fate depends on Mahadiscom buying power from the plant. The plant has been shut since early July as the state's peak load comes down during the monsoon months.

Sources indicated differences have also cropped up between NTPC and GAIL, the two JV partners, on the breakwater issue. NTPC had wanted to explore the option of making the 5 million tonne regassification plant at the site commercially operable.

While GAIL's initial estimates had suggested the channel may become operable for nine months of the year without the breakwater, it revised its estimates saying the breakwater needs to be built even for the smaller vessels to come in.

According to an internal estimate worked out by GAIL, it needs to invest nearly Rs 5,600 crore to get the LNG jetty and the regassification plant in working order. Of this, more than half will be needed for completing the marine facilities at the plant which include three storage tanks besides an LNG jetty.

When Ratnagiri, promoted jointly by GAIL and NTPC, took over the plant in October 2005, the LNG terminal and the marine facilities were around 75 per cent complete, while the breakwater was half complete.

The three LNG storage tanks were found to be 90, 80 and 75 per complete and the regassification plant was 85 per cent done. The GAIL team also found the channel for the LNG terminal had to be re-dredged completely as it had silted up from disuse.

GAIL estimates it will take the company around 11 months to complete the regassification plant and storage tanks. The LNG jetty, it estimates, will be ready for use by April 2009.

The government had announced that by December this year all the three blocks will be operational. When fully operational the plant has a capacity of 2,184 Mw.

Sources indicated that if the finances cannot be reworked to accommodate the FIs, there may be little option but to shut down the plant.