The Mittals-controlled Ispat group is reviving the Bhadrawati power project in Maharashtra, following the passage of the Electricity Bill, 2003.
However, due to a spate of financial problems faced earlier, the group has decided to prune the capacity of the project to 500 Mw from 1,082 Mw.
The project was originally envisaged at a cost of $1.4 billion in the early 90s, with Electricite de France and Alstom as strategic partners. However, both EdF and Alstom walked out of the project later. The Ispat group is still open to roping in a partner.
The cost of the coal-fired project was being lowered to Rs 2,500 crore (Rs 25 billion), Ispat group executives said. They added that the group companies would not contribute to the promoters' equity, following stiff restrictions imposed by the financial institutions.
The non-resident Indian Mittal family will bring in its own funds to contribute to the equity, which could be pegged at around Rs 750 crore (Rs 7.5 billion).
The group has already initiated discussions with the Power Trading Corporation for wheeling and distributing power. The latter has completed an initial study, wherein it has recommended a Rs 2.60 per unit tariff for selling the power to other states.
"We are working out the tariff structure in keeping with the recommendations of the Power Trading Corporation. Instead of only one power purchase agreement with the Maharashtra State Electricity Board, we plan to have a number of pacts," an Ispat executive said.
Analysts said working out multiple power purchase agreements with other state electricity boards could help mitigate the risk that may flow from the frail financial condition of the Maharashtra State Electricity Board.
The sources said around 100 Mw of power from the plant would be for captive consumption by Ispat Industries, the group's steel flagship. The steel company, which has seen its project cost jump from Rs 4,600 crore (Rs 46 billion) to almost Rs 7,500 crore (Rs 75 billion), has not yet managed to start work on its proposed captive power plant.
The project had faced several problems earlier, involving linkage of coal from public sector companies. This time, the company is looking at sourcing coal from the Western India Coalfields.
With Maharashtra facing an acute power crisis, the Ispat group feels there will be adequate demand to ensure a smooth offtake from the project.
Power recovery