Essar to set up 1200 mw plant

The Essar group today announced plans to set up a 1,200 MW power plant in Gujarat for Rs 4,800 crore. This, according to Essar Power Managing Director A K Srivastava, is part of the group's Rs 20,000 crore plan to scale up its generation capacity to 6,500 MW in five years.

As of today, the group has announced details of projects with a combined capacity of 3,600 MW. The details of the remaining projects including their location and investments would be announced in next six months, he added.

The group's vehicle for Gujarat venture"" Essar Power (Gujarat) Limited (EPGL)""signed an agreement to supply 1,000 MW of power to Gujarat government for next 25 years at Rs 2.40 per unit. EPGL is free to sell the balance power at its will.

The project, for which the company will import coal from Indonesia, would be implemented in two phases, said Srivastava. The first project of 600 MW is expected to go on stream by February 2011 while the balance 600 MW will start commercial operations by August 2011.

For uninterrupted supply of coal, EPGL is keen to strike a strategic deal by picking up upto 10 per cent stake in an Indonesian coal company. The project will need nearly 3 million tonne of coal a year.

EPGL plans to finance the project through a mix of debt and equity. While Rs 1200 crore is likely to be the company's equity contribution, the balance Rs 3600 crore will be mobilised through debt. The financial closure is expected to be achieved before the end of the year.

The company has identified around 700 acres of land near Khambalia in Jamnagar district for the project . EPGL will create its own captive infrastructure to receive imported coal by setting up a port and other related facilities. The Kutch area in Gujarat is known for its natural deep water draft and its ability to handle vessels around the year in all seasons. Essar's port will be built with the capability to handle large vessels.

EPGL is in the talks with a Chinese company and Bhel for procuring equipment for the project. It is expected to place orders for equipment by next two months.

EPGL is a subsidiary of Essar Power Holdings Limited, the group's investment vehicle in the power sector. The group has so far completed five power projects with a capacity of over 1200 MW. The range of power projects executed by Essar includes gas-based power plants, multi-fuel power plants, co-generation power plant and coal-based power plants. The group has to enter the sectors of transmission and distribution.