The Hindu Business Line : Lanco Infratech to partner DongFeng for Sasan project

With Lanco Infratech Ltd bagging the Rs 16,000-crore 4,000-MW Sasan ultra mega power project quoting one of the lowest tariffs for coal fired plant in the country, the project bankability is being debated.

As the company commands a total capacity of about 8,000 MW now under implementation, the Lanco management is huddled in a strategy session in Bangkok today to chart out its way forward.

The Chairman of Lanco Infratech, Mr L. Madhusudhan Rao, just before embarking on the flight to Bangkok, told Business Line how the company plans to build the country's lowest priced coal plant and its efforts to rope in a Chinese and global equipment major DongFeng Electric Corporation for supercritical technologies.

Mr Rao spoke on how they have made the power plant financially attractive. Excerpts.

What is the basis for such a pricing. Is the project financially viable?

If you look at the next bidder, it just has about 10 paise differential per unit. The uniqueness of the project is in the captive coal mine blocks that come along with the project. Therefore, we have quoted a fixed price of 90 paise per unit and the coal component would be about 30 paise. There are two things that distinguish this project from others thus far implemented in the country, one is its sheer size and magnitude. It is four times a 1,000-MW project, and the other, the captive coal blocks.

Significantly, the coal from these mines has a high calorific value and is located in two thick seams and does not need underground mining. Lanco draws on its construction expertise and would be able to make a difference to this mining as well. These coal blocks would also mean that the plant when completed would be able to work on higher plant load factor, others work at around 80 per cent due to inadequate coal supplies.

How do you go about finalising the equipment?

We have a strategic tie up with DongFeng Electric, which is one of the largest power equipment makers. This would help construct the plant in four-and-a-half years as against 9 years, using supercritical technology. This also means we will be entitled to carbon credits. The other issue relates to construction, which accounts for about 50 per cent of the overall project. Lanco is actively engaged in infrastructure for power plants which will help to handle a significant part of the power project from within the company fold.

What is the time frame for financial closure?

We have Globaleq, UK, as our partner and the Rs 16,000-crore project, including coal mining, is based on 80:20 debt equity. One of the important aspect of this plant is if there are no contracted buyers, we have the option to sell to whomsoever we prefer. This project commands a Government escrow mechanism. With some support from the Government, we may even achieve the financial closure within six months, but the outer deadline is December 2007.

As per request for proposal, certain clearances are required. Once achieved, we will engage consultants to work out financing strategy.

You are heading to Bangkok, what is the strategy session about?

As a company, we have grown significantly and the activities have become quite diverse. This is part of Vision 2015 strategy and seeks to chart out the way forward for the group.

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