Work on the plant had been stalled since 2012-13 after the Comptroller and Auditor General (CAG) started an enquiry into the allocation process of coal mines including the mine which was to supply fuel to the project. Allocations were later scrapped in September 2014 following a Supreme Court order.
The reallocation process, which started in February, saw Essar Power winning the bid for the Tokisud mine at a bid of Rs.1,110 for every tonne of coal mined. Coal from this mine will be used for Essar’s Mahan power project as well as the Tori power plant, a top company official said.
“(The Tokisud coal block) gives us the benefit to revive the Tori project which was half completed and left out because of cancellation… Now we are discussing with the lenders on a way to revive the project because the mine is now available next door. We will start working on the plant again,” said Sushil Maroo, chief executive officer (CEO) of Essar Power Ltd.
The company has already invested Rs.3,850 crore in the half constructed Tori power plant.
The plant is to be developed in two phases with a total capacity of 1,800 megawatts (MW). In the first phase, the plant is likely to have a total capacity of 1,200 MW. The original cost for the entire 1,800 MW capacity was pegged at Rs.10,000 crore. Of this, Rs.5,700 crore was to be invested in the first phase.
At present, coal mined from the operational Tokisud block is to be used to fuel the Mahan power plant.
“Going forward, when the Tori plant is ready, we can use it (the mine) for Tori also at a later date,” Maroo said.
The coal auction guidelines allow companies to swap the end use for a certain coal block, provided it meets the plant completion requirement for that particular coal block. Coal from the Tokisud mine, which is an operational mine, can be used for power projects which are ready or closer to completion.
According to an expert, using coal across different power projects will help justify the high bids placed by some firms.
“The proposal sounds a reasonable optimization plan. Given the high bids some power companies have quoted, besides the direct cash benefits of fuel security, they are looking for such optimization across multiple plants to achieve overall better return on investment,” said Kameswara Rao, executive director and leader of utility, mining and infrastructure practice at consulting firm PricewaterhouseCoopers Pvt. Ltd.
Rao, however, cautioned that using coal from a block across multiple projects will only work if they are direct subsidiaries of the parent company that won the block—as is the case with Essar Power.
Construction work at the Tori project started in 2011 and was earlier scheduled to be completed by the end of 2015. Coal was to be earlier sourced from the Chakla and Ashok Karkatta coal blocks. Work, however, came to a standstill in 2012-13 owing to uncertainty over the Chakla and Ashok Karkatta coal blocks. The plant is now expected to be ready in the next two years.
The company is yet to work out the revised cost of the project after accounting for the delays. Also, the coal from the Tokisud mine will not be adequate to meet the plant’s needs over its entire lifecycle, said Maroo, adding that the firm would look at acquiring other mines to meet the longer term requirements.
Tokisud mine has an extractable reserve of 52 million tonnes and an annual capacity of 2.3 million tonnes.
Published on April 13, 2015