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C. Shivkumar

BANGALORE, May 10

IN a bid to ensure the gas linkages are financially viable the Karnataka Government has moved to upgrade the Bidadi gas power station as a mega project with a 1400 MW capacity and sell the power to the centrally-owned Power Trading Corporation Ltd (PTC).

Karnataka is the first State in the country to take this initiative. Classification as a mega project would make it an inter-State project and at the same time allow it to avail of duty concessions.

State Government sources said that the proposal had the sanction of the Chief Minister, Mr S.M. Krishna, and would now have to be cleared by the board of the State-owned utility Karnataka Power Corporation Ltd. KPCL is the project promoter and the chairman of the board is the Chief Minister.

The State Government's enthusiasm for gas projects was in view of the short start up time for peaking requirements.

The sources said that in addition, the State Government had also suggested that unit 8 of the Raichur Thermal Power Station be operated by KPCL. The existing seven units of KPCL are coal-based. This would mean that the capacity of unit 8 would increase from 210 MW, which was proposed, to 350 MW.

In addition, the State Government has also moved to upgrade the liquid fuelled 120-MW Yelahanka power station to another 350 MW gas-based station.

The conversions would translate into an addition of 2,100 MW to the power capacity of the State. These conversions coincide with gas supply offer of Reliance Industries, equivalent to 10 million standard cubic metres per day, which translates to about 2000 MW off-take.

Since these projects would have to be made fully bankable, the sources said the best option was to enter into a power purchase agreement with the PTC.

Distribution companies, particularly the Bangalore Electricity Supply Company in the State, in turn, would enter into separate PPAs with the PTC for lifting the power from the grid.

The bulk of the power generated from the project is to be made available to the Bangalore Electricity Supply Company Ltd, in view of the locational advantages. Bidadi is on the outskirts of Bangalore.

The peak load in Bangalore alone is in the region of about 2,000 MW. The sources said, this two-tier structure would enable the proposed Bidadi Power Plant to become acceptable to the project financiers. This method was conceived since KPCL's balance sheet has already stretched with a debt equity ratio of close to 2:1. Further the debt service coverage ratio, indicating its ability to absorb debt is about 1.25 times, whereas the prescribed norm is 1.5 times.

Besides a PPA with the PTC would allow KPCL to bypass the need for a financial security arrangement involving a State Government guarantee.

This was because the PTC is a centrally owned utility and therefore carried the weight of an implicit sovereign guarantee.

These upgrades were expected to coincide with the finalisation of the gas supply contracts. So far, only an expression of interest has been floated, where a handful of companies including the Gas Authority of India Ltd, Reliance and Exxon of the US have responded.

The next stage would involve floating a request for qualification and a request for proposal, which are expected to be done during the course of the year, the sources said.

But even if this exercise is completed, the project commissioning was expected to take place only during the Eleventh Plan period.

This was because the Bidadi project would have to secure the techno economic clearance from the Central Electricity Authority and Environmental approvals from the Union Ministry of Environment.

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