Chennai Petro, Neyveli power project to cost less, courtesy soft interest rates

The cost of the 492-mw power project in North Chennai that is promoted by Chennai Petroleum and Neyveli Lignite is likely to fall by about Rs 300 crore to a level of Rs 2,400-2,500 crore because interest rates have softened since the project's conception.

S V Narasimhan, managing director, Chennai Petroleum, told Business Standard that it was now possible to raise loans at a lower interest rate.

The project was conceptualised a few years ago when the prevailing interest rate was about 15 per cent. On the strength of the current balance sheets of Chennai Petroleum and Neyveli Lignite, the power project is expected to raise loans at a lower cost.

The project, however, is at an early stage. The partners are to float a company which would complete the project and run it thereafter.

Narasimhan said the partners are currently in the process of choosing a consultant who would prepare a detailed feasibility report on the project.

The power plant is to be located in the midst of an industrial belt. Narasimhan said that Chennai Petroleum would use some of the power generated for its operations, and sell about 410 mw.

The power project is to use the heavy residue from Chennai Petroleum's refinery as fuel. The project's capital cost is relatively high because it plans to use Integrated Gassification Combined Cycle technology. At present, only Shell and Texaco possess the technology, said a Chennai Petroleum official.

The official added that the technology, however, is environment-friendly in relation to a conventional thermal power plant.