Nine in race for Andhra mega power project

Nine semi-finalists are in race for the 4,000-Mw ultra mega power at Krishnapatnam in Andhra Pradesh. At least three of these are foreign companies "" one has applied solo while two are part of different consortia.

Krishnapatnam would be the country's third ultra mega power project (with the first two being at Sasan and Mundra respectively) having been transferred to the developers in the last few months.

Tata Power, which has bagged the imported coal-based Mundra project, is vying for the Rs 16,000-crore Andhra Project project, as is Reliance Energy which bagged the coal pithead-based Sasan project. Larsen &Toubro, Essar Power, NTPC and Sterlite are also in the fray.

Foreign players include Japan's Sumitomo Corporation, China Light and Power (with GMR) and Israel Electric Company (with DS Construction).

Globeleq Singapore is the only foreign firm to have bid for the project so far, in partnership with Lanco Infratech. The consortium was disqualified after putting in a winning bid for the Sasan project.

Industry experts are expecting aggressive bidding by the nine contenders for the Krishnapatnam project, which will be given on the basis of tariff-based competitive bidding. "However, the tariffs are unlikely to be as low as in Sasan (Rs 1.196 per unit) and Mundra (Rs 2.26 per unit)," said an analyst who tracks the sector.

There are two reasons for this. First, despite Krishnapatnam being a coastal project, it does not have the advantage of a functional port that Mundra has. Second, the appreciating rupee needs to be accounted for. "The tariff is likely to be over Rs 2.50 per unit," said a consultant.

The government has assured the bidders a three-tier payment security mechanism "" a letter of credit, an escrow account and the option of selling power directly to high-tension consumers in case of a default.

The idea of ultra mega power projects was floated to fast-track capacity addition under the public-private partnership route. At last count, the government was planning 10 such projects across the country.