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London-listed Essar Energy Plc today reported a pre-tax loss of $163.2 million in 12 months ended March 31 and said it will spend $200 million to convert two of its gas-based power plants in Gujarat to coal owing to shortages in domestic supplies.
The firm had reported a pre-tax loss of $1.15 billion in the 15 months ended March 31, 2012.
Essar Energy this year moved its year-end to March from December, making the previous comparative period a 15 month one.
Company chief executive Naresh Nayyar said earnings before interest, taxation, depreciation and amortisation, on a current price basis, was $1.33 billion in the year ended March 31, compared with $484.5 million in the 15 months ended March 31, 2012.
The rise in earnings was primarily due to improved refining capacity at Vadinar refinery in Gujarat as well as Stanlow refinery in UK which pushed up margins.
Full-year refining margins rose 79% to $7.96 per barrel.
Nayyar said the company has decided to convert the 515 MW Hazira power plant and 500 MW Bhander power station to coal fired boilers based on imported coal due to issues regarding availability of domestically produced natural gas.
"Considering gas position in the country, it doesnt make sense to generate electricity using high-priced imported LNG," Nayyar said adding the conversion would take 3 years to complete.
Many of the gas-based power plants in the country are stranded due to an unanticipated fall in output from Reliance Industries' eastern offshore KG-D6 gas fields. Importing gas in its liquid form (called liquefied natural gas or LNG) is an option but generation costs may be too high.
"Ongoing high gas prices, with little prospect of this situation changing for the foreseeable future, has led to a review of our current gas fired generation portfolio.
"The result is that we have agreed with our customers to convert the Hazira I (515 MW) and Bhander (500 MW) power stations to coal fired boilers based on imported coal," he said adding generating power through imported coal would be cheaper than LNG-based power generation.
While the conversion will be subject to the receipt of all necessary approvals, the existing gas turbines will be sold or relocated to regions where there is ample supply of economic natural gas, he said.
Essar said higher operational earnings, before interest,tax, depreciation and amortisation, or EBITDA, in the year was offset by higher interest and depreciation costs as projects moved into operations.
"The recently completed projects in our refining and power businesses are now delivering good results. The much higher margins seen at our flagship Vadinar refinery reflects the benefit of investment in increased complexity and capacity.
"Our Stanlow refinery has achieved considerably improved margins through implementing its 100 day plan. In power, we continue to deliver increased capacity and generation at a time when demand remains strong," Nayyar said.
"Our focus now is to complete our remaining projects, continue optimising our operations, reduce our financing costs and to reduce our net debt. We are making good progress on these fronts and we continue to be encouraged by the strong energy market dynamics in India," he said.
Revenue totalled $16.57 billion in refining and marketing in India, up 9% from last year's 15-month-period, while refining and marketing, UK revenues, climbed 61% from the previous year's 15-month-period to $10.24 billion.
Power revenues increased 26% to $448.6 million, as the previous 15-month-period generated $356.5 million.
