Business Standard
May 16: The GMR Group is considering shifting the naphtha-based 220-MW barge-mounted Mangalore power project to Kakinada coast in Andhra Pradesh with the naphtha-linkage expiring in October this year.
GMR is also gearing up to run the 370-MW gas-based power project at Vemagiri in Andhra at below 30% PLF (plant load factor) for the first two years due to the non-availability of gas up to mid-2008. The Vemagiri project is expected to be commissioned in a month's time.
Constraints on fuel and other fronts have forced the group to undertake these measures with regard to its Mangalore and Vemagiri power projects.
The company has chalked out two alternatives for the Mangalore project - under the first one, talks have already been initiated with an Australian company for supply of LNG to the Mangalore power plant. Certain technological modifications will be required to convert the plant into an LNG-fired unit at an estimated cost of $10 million.
This is an immediate option as the naphtha linkage will expire this year itself though the power purchase agreement (PPA) entered into with the Karnataka government's power utility lasts till 2008, Madhu Terdal, chief financial officer (corporate) of the GMR Group, said at the upcoming Hyderabad international airport for which GMR is the developer..
The second and the long-term option is to move the plant to Kakinada coast in view of abundant gas availability in the KG Basin from 2008. "This requires about $18-20 million investment and we have already identified the land at Kakinada to anchor the plant," Terdal said.
Though the company is entitled to claim fixed charges for the project at the full contractual demand as per the PPA entered into with the Andhra Pradesh Transmission Corporation (APTransco) even in the face of gas shortage, the state government has agreed to compensate the loss of revenues for the first two years to the company by extending the PPA and other facilities in place of deemed generation clause.
Besides extending the PPA term to 23 years from the existing 15-year period, the state government is likely to allow us to sell power from 18.5 MW extra capacity of the project over and above the contracted capacity of 370 MW. These measures would enhance the valuation of the project and compensate the loss of revenue for the first two-year period, Terdal said.
Meanwhile, sources have informed PTI that Citigroup is close to buying 1.4% stake in GMR stake for Rs 175 cr. GMR is close to making its third pre-IPO private equity placement to raise another Rs 160-175 crore.
The company has almost concluded negotiations and Citigroup is expected to pick up the stake in the next few days, investment banking sources said.
"GMR was in discussion with Citigroup, and Temasek Holdings. Citigroup is expected to pick up minority stake, say about 1.3-1.4% in the company," sources said.
Meanwhile, GMR has fixed the price band for the IPO at Rs 325-350. The company will be raising Rs 1,000 crore through the IPO route and proceeds of the issue would be used for investment in infrastructure projects, including the Delhi and Hyderabad airport projects.