Lanco plans Rs 3,500 crore power investments

The Rs 1,000 crore Hyderabad based Lanco Group, is drawing up a power project roadmap which will see it invest close to Rs 3,500 crore over the next five years.

Lanco is also talking to foreign strategic investors and financial investors for stakes in future power projects that the company is slated to start.

The group, with a Rs 2,000 crore asset base, has interests in power generation, engineering & construction, information technology and manufacturing, is slated to generate 750 mws of power in the next five years.

Speaking to Business Standard, Y Harish Chandra Prasad, managing director, Lanco said that the company had set itself a target of generating 250 mw of power from hydel projects and about 500 mw of power from thermal projects. The company has achieved financial closure for its 250 mw coal-based project, Lanco Amarkantak at Chattisgarh, which is slated to be commissioned by 2007.

"Thirty per cent of the requirement of funds for the next five years would come in the form of equity contribution from the promoters while the rest would be in the form of debt," Prasad said. Start-up power companies in India typically prefer to set up a special purpose vehicle for each project.

"We have decided that in future we will only look at coal or hydel based projects. We have also decided in favour of pit-head stations having open cast mines for all our thermal projects. It has been proved that the cost efficiencies involved in generating power through this mode of mining is the best," Prasad said.

Power from the project Chattisgarh is going to be sold at Rs 2 per unit and this according to him was possible only because Lanco decided in favour of pit-head plants.

In pit-head plants there is no need to ferry or transport coal over long distances, which increases the cost of power generated, as the generating units are near the source of coal.

"Any power project that generates and sells power at more than Rs 2 per unit will not be viable over the long run," he pointed out.

Lanco Amarkantak will also see a 250 mw capacity expansion after the first phase is completed.

"The second phase should be over by 2009," Prasad said. On the hydel front the company is slated to execute five hydel projects of five mws in Himachal Pradesh and Uttaranchal.

Apart from this it is also slated to participate in two tenders for hydel projects of 60 mw and 70 mw in the state. "We are also likely to participate in the tender for a 100 mw hydel project coming up in Uttaranchal," Prasad.

Lanco he said was in talks with financial institutions and strategic investors from USA, Middle East and Asia for financial participation in future projects.

At present Lanco has a strategic relationship with Malaysia based Genting Group which has participated in all its power projects so far.