GAIL, NTPC to form JV for Dabhol terminal

GAIL India Ltd and NTPC are likely to form a joint venture company to pitch for the liquefied natural gas (LNG) receiving and regasification terminal at the Dabhol power plant in Maharashtra, even as a third suitor, Reliance Industries, throws its hat into the ring for the same terminal.

"Together with NTPC, we may form a separate joint venture company that will buy the LNG terminal," a senior GAIL official said.

GAIL and NTPC hold 28.33 per cent each in Ratnagiri Gas and Power Pvt Ltd (RGPPL), the company implementing the power project. The Maharashtra State Electricity Board (MSEB) owns 15 per cent and the rest of the stake is held by the lender banks.

"We have told the empowered group of ministers and the finance ministry that GAIL should have the first right of refusal for hiving off the LNG terminal," the GAIL official said. "In fact, our claim is stronger than NTPC as NTPC does not have any experience in handling gas," the official added.

RGPPL is not in favour of hiving off the LNG terminal to a third party, since there is synergy between the power plant and the LNG terminal. This is also the stand of the power ministry.

However, if the present promoters pick up the stake, and are willing to pump in more money, the issue may be resolved amicably. "A third party (like Reliance) would complicate matters," the GAIL official said.

RGPPL Chairman and Managing Director Chandan Roy, who is also director (operations) of NTPC, said that "if the reconstruction committee approves of its sale," the terminal should be sold only through a bidding process.

A senior Reliance Industries official told Business Standard that the company would be interested in bidding for the terminal as it falls near the route of the $4 billion gas pipeline the company is planning to lay from Kakinada in Andhra Pradesh to Bharuch in Gujarat.

An empowered group of ministers on Dabhol recently said a reconstruction committee under banking secretary, Vinod Rai, would be set up to look into the financial restructuring of the project. The project cost has increased by around Rs 2,594 crore to Rs 12,897 crore.

One of the options to make the plant viable is to sell some amount of power from the plant to the highest bidder in order to meet the increased cost requirements. Currently, MSEB is the only customer for the power.

RGPPL is also seeking a higher price for the power from the Dabhol plant. "MSEB has agreed to buy power at 96 paisa. We are looking for price of around 99 paisa per unit. Meetings are currently on with MSEB," the GAIL official said.

The Dabhol plant is currently running on naphtha and was to switch to gas after March 31, 2007. However, gas is yet to reach the plant. GAIL is hoping to complete the Dahej-Uran and Dabhol-Panvel pipelines only by mid-May.

"Problems with the farmers in Maharashtra have been sorted out. We are targeting end-April, but mid-May seems a likely date," the GAIL official said.

Now that the power plant will have to run on naphtha for another month or so, the cost of power would go up by another Rs 2.50 per kilowatt hour. "The additional cost of commissioning the power plant and the LNG terminal would be almost Rs 1,400 crore," the GAIL official said.