Essar Power to bring in plant from Scotland

Project to cost Rs 2,700 crore

Essar Power is evaluating a proposal to relocate a 1,200 megawatt power plant from Scotland to Vadinar in Gujarat. Sources in financial institutions indicated that the completed cost of the plant per megawatt of power to be about Rs 2.3 crore.

The sources told Business Standard that the total project cost, including all duties, could be about Rs 2,700 crore.

Essar Power proposes to purchase the plant, dismantle it and subsequently relocate it in Vadinar. It planned to run the plant using the residue from its proposed refinery at Jamnagar as the primary fuel, the sources said.

When contacted, an Essar group spokesperson said the company was exploring several options. "We are also studying an option to set up a new plant," he said.

According to the spokesperson, the company has already initiated a due diligence exercise. "A final decision will be taken by June-end," he added.

Institutional sources also confirmed that the company was in the process of preparing a detailed project report to arrive at cost estimates. The plant in Scotland comprises two units of 600 megawatts each which are stated to be in good condition. The company will submit the detailed project report to the financial institutions by the end of May.

The cost of power generated by the unit, the sources indicated, was estimated to be Rs 1.70-1.80 per unit, which would make even the sale of surplus power to the grid extremely viable.

In response to Essar Power's initial proposal, the financial institutions have sought a clarification on the transfer pricing mechanism under which the company will price the refinery residue to be used as fuel by the plant.

The institutions have also asked for a time frame within which the refinery in Vadinar will be set up. Since the power plant proposes to use the refinery residue as fuel, unless the refinery comes up on time, the plant will not have a fuel link.

The Essar group spokesperson, however, said the institutions had not yet been approached for funding the project. "It is only after we take a final call whether to set up a new plant or opt for a second-hand plant, that we will approach the institutions," he said.

When asked about the cost of the project, the spokesperson said, the company would comment on the cost only after the detailed project report.

Import of second-hand power plants was put on the open general licence (OGL) last year but there has been no instance of a plant of this size being relocated so far.

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Transfer of power

• 2 units of 600 Mw each to be dismantled, relocated to Vadinar.
• Plant to be fed by residue from Essar's Jamnagar refinery.
• Cost of power to be generated is estimated at Rs 1.70-1.80 per unit.