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Cost-effective bid or global crunch?

business Updated: Nov 08, 2007 00:04 IST
Utpal Bhaskar
Utpal Bhaskar
Hindustan Times
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Bharat Heavy Electricals Ltd (Bhel), the country's largest manufacturer of power generation equipment, has emerged the sole bidder for the Andhra Pradesh government's 1,600MW power project at Krishnapattnam, indicating, according to one analyst, Bhel's cost competitiveness or the global shortage of such equipment.

"Earlier the bid was to be carried out in June, but it was delayed to accommodate the other players such as (Korea's) Doosan (Heavy Engineering) and (Japan's) Toshiba Corp. that requested for additional time. Even after allocating additional time, Bhel being the sole bidder indicates that either there is a serious capacity crunch world-over, or the other players are not competitive against Bhel on the price front," said Abhishek Puri, an analyst with ASK Securities.

A senior official in the Andhra Pradesh government confirmed that Bhel was the sole bidder for the project. "Since we have received only one bid we are now contemplating how to go about for awarding the contract. We have a timeframe to award the project by December-end," said this official who did not wish to be identified.

The 1,600MW coal-fed project will cost Rs7,000 crore and will be owned and operated by Andhra Pradesh Power Generation Corp. Ltd (APGenco): 70% of the coal would be sourced from the domestic market and the balance imported. The state government is already in talks with the Dubai-based Coal & Oil Group (C&O), one of the leading suppliers of imported coal in India.

In the first phase of this project, APGenco plans to build capacity of 1,600MW; it eventually plans to add three units, each with a capacity of 800MW to the project taking its total capacity to 4,000MW. It plans to use power from the plant for distribution largely within the state.

Andhra Pradesh has a total installed capacity of 11,617.4MW, of which the state's power generation utility APGenco accounts for 6,760.9MW. It plans to add 8,963MW of capacity by 2012 at a cost of around Rs35, 000 crore.

Andhra Pradesh is planning for additional power generation capacity as it wants to avoid a Maharashtra-like situation: the western state, one of the most industrialized in the country, did not add the required power generation capacity in the 1990s and is now in the midst of a power crisis.

The power generation capacity of Andhra Pradesh and other South Indian states is crimped by the shortage of gas. Analysts say that this has resulted in idle capacity with gas-fed power plants remaining unoperational or partially operational. The Krishnapattnam project is located near the coast and will have easy access to a port where imported coal will land.