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C. Shivkumar

Bangalore , Dec. 16

RIO Tinto of Australia and PT Adaro of Indonesia have entered into a 12-year coal supply agreement with the Nagarjuna group for fuel supply to the 1015 MW power station under implementation near Mangalore.

Sources said that coal requirement for the power station, being implemented by Nagarjuna Power Corporation Ltd (NPCL), was expected to be in the region of three million tonnes with a calorific value of about 6,000 kilocalories per kg, on the basis of 85 per cent plant load factor (PLF).

Both suppliers were selected through the international competitive bidding route. However, pricing is still under discussion.

NPCL was attempting to obtain the coal at fixed prices for the term of the agreement or have it favourably indexed in order to keep power tariffs low.

Indonesian and Australian coal prices are currently in the region of $31 per short ton or about $34.15 tonne (1.10 short ton = one tonne).

International coal prices are already at rock-bottom prices with the fall in North American and European demand.

Other options for pushing down the tariffs down are also being worked out. These include altering the return on equity (RoE) norms.

The sources said that the company had agreed to bring down the RoE to 16 per cent on the basis of 80 per cent PLF.

Further, the incentive norms were also being scaled down to 0.4 per cent for every incremental increase in the PLF beyond 80 per cent.

The changes would imply some alterations in the power purchase agreement (PPA), according to the sources. They are likely to bring down power tariff down by at least 20 paise per unit.

The original PPA had a RoE of 16 per cent at 68.5 per cent PLF and an incentive of 0.7 per cent.

The engineering procurement contract (EPC) for the project is in the process of being finalised for the Rs 4,400-crore project. The short-listed EPC contractors include a consortium led by the China Machine Building International Corporation and global power equipment major, Alstom.

The project debt comprises 70 per cent of the funding and is estimated at Rs 3,080 crore. Of this, the foreign debt component would be Rs 2,200 crore.

The EPC component is estimated to be about 77 per cent of the project cost, which would be entirely in the form of funding from export credit agencies (ECA).

For the ECA component, PFC is expected to provide deferred payment guarantees to the extent of Rs 1,100 crore. According to the sources, NPCL is expected to shortlist strategic investors who will hold an estimated 49 per cent stake.

The short-listed companies include some Singapore-based long-term investors. Meanwhile, NPCL has finalised its arrangements to supply 100 MW to the Kerala State Electricity Board (KSEB) in line with its status as mega power project.

Karnataka Power Transmission Corporation would do evacuation up to Kasaragod and KSEB would provide the interface for onward transmission for consumers.

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