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Published:Friday, April 12, 2013 11:16 AM

Exodus! Gas-based power plants shifting base to Africa

Shortage of gas forcing entrepreneurs to rethink plans in India


Generation loss of 11 per cent in 2011-12 due to non-availability of gas
Ghana and Nigeria are the new destinations of choice for Indian entrepreneurs in power sector. Reason: Paucity of power,
combined with abundance of gas in the African sub-continent.
Power shortage is acute in India too and ideally all new plants by local entrepreneurs should be coming up within the country but
the problem is that there is virtually no gas available here at present to fire these new plants which have already built capacities
based on gas as fuel source.
With gas production drastically coming down from Reliance Industries Limited's (RIL) KG D6 basin, the country's largest reservoir
of the fuel, gas-based capacity of 8,000 mw is stuck. Whatever gas is available through other sources is allotted to customers in
line with the gas utilisation policy which prioritises users -- existing fertiliser units come first, followed by existing power, petro-
chemical and city gas projects. New gas-based projects are not on the priority list. Due to this, generation from gas-based plants
has had a negative growth this year. India suffered a power generation loss of over 11 per cent in 2011-12 on account of fuel
shortage, transmission bottlenecks and equipment problems, a Central Electricity Authority review says.
Capacity vs commissioning
India has gas-based power generation capacity of 18,903.05 mw with significant capacity under construction. While around 5,000
mw of gas-based capacity is ready, there is no fuel to commission these projects. Since capital investment has already been made
in setting up these projects, the developers are looking at ways and means to service the loans. Even the commissioned capacity is
receiving less fuel than required.
Harry Dhaul, Director, Independent Power Producers' Association (IPPA), says, "Gas-based power plants contribute approximately

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9 per cent of India's total power generation capacity. However, due to natural gas shortage, gas-based plants are either lying idle or
running at low capacity. PLF (plant load factor) for gas-based plants in the country was around 45 per cent in the first six months of
the current financial year."
Just outside Delhi, the first unit of the new 1,500 mw gas-based Bawana power plant is ready to generate electricity, but is forced
to idle away because the Delhi government-owned Pragati Power Corporation Ltd, which is to run the plant, has failed to arrange
the gas needed to operationalise the first of the two 750 mw units. Chief Minister Sheila Dikshit has asked the Centre to ensure gas
for the plant. The Centre had allocated 0.93 mmscmd gas from KG-D6 for Bawana for 2009-10 and 2010-11 but as the plant
missed the scheduled deadline, the Delhi government could not sign the gas sale purchase agreement with RIL.
Africa bound
Indian developers are now looking at countries such as Ghana and Nigeria for relocation. Sravanthi Group's 450 mw gas-based
power project in Uttarakhand, which has already been built but is awaiting gas for its commissioning, is a case in point. An
investment of `1,740 crore has been made towards setting up the project, of which `1,300 crore is debt component. "We have
completed the project but can't commission it due to non availability of gas. We have a two-pronged strategy in place. We are
trying to relocate our project to East Africa and are looking for right partners.
Power is scarce in Africa so it is an ideal option for us. However, we are also looking at other countries. They are offering good tariff,
which is a plus. We are also looking at sourcing liquefied natural gas (LNG) from overseas," says D.V. Rao, chairman and
managing director of Sravanthi Group. "Being first generation entrepreneurs we don't have that much money to survive. Also, the
pressure of financial institutions is increasing by the day so we have to get this plant functioning. It is quite a tedious task to shift
the plant to Africa but right now I do not see any other option left with us. However, gas-based power plants are modular and can
be located from one place to another without much difficulty."
Another case in point is of GVK Power & Infrastructure which reported a net loss of `43.6 crore in the second quarter of the current
fiscal, against a profit of `38 crore year-on-year. The company's consolidated net sales turnover was up at `640.3 crore versus
`477.4 crore last year. Isaac George, Chief Finance Officer of the company says the PLF of one of its power plants in Andhra
Pradesh is about 60 per cent due to shortage of gas. The other plants too are working at extremely low PLFs. According to George,
one of the main reasons why his plants are facing a shortage of gas is that the east coast does not have an LNG terminal. All LNG
terminals are right now located on the west coast of India. If a terminal comes up on the east coast, LNG itself will become
cost-effective and power generated from it will cost just about `6-6.5 per unit.
And it is not only Rao who is thinking of packing his bags for Africa. Some are keeping their plans under wraps. The chief executive
of a private power generation firm, requesting anonymity, says, "A lot of companies are looking at this option. Such a model exists
in Bangladesh where developers bring in power plants and operate them. He adds that gas-bearing regions such as west and
north-west Africa aspire to reduce flaring, and increase gas production. In years to come, east African gas assets will also be
commercialised. In that period, assets stranded for gas in India would be tempted to shift to these regions," he adds.
And it is not only Rao who is thinking of packing his bags for Africa. Some are keeping their plans under wraps. The chief
executive of a private power generation firm, requesting anonymity, says, "A lot of companies are looking at this option.
Such a model exists in Bangladesh where developers bring in power plants and operate them. He adds that gas-bearing
regions such as west and north-west Africa aspire to reduce flaring, and increase gas production. In years to come, east
African gas assets will also be commercialised. In that period, assets stranded for gas in India would be tempted to shift
to these regions," he adds.
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