The Hindu Business Line : Haldia Petro buys out L&T stake in HPL Cogen

Kolkata, May 6 Haldia Petrochemicals Ltd has acquired management control in HPL Cogeneration Ltd, formerly a 49:51 power generation joint venture between HPL and L&T. In a cash deal of Rs 180 crore HPL today acquired the 51 per cent controlling stake in HPL Cogeneration from L&T.

Accordingly, HPL Cogeneration Ltd (HPLCL) has become a wholly owned subsidiary of Haldia Petrochemicals beginning today. HPLCL currently produces approximately 70 MW of captive power – against a nameplate capacity of 116 MW – and steam using naphtha as feedstock. The naphtha is supplied by HPL. The company generated a net profit of Rs 76 crore during the last fiscal.

Addressing newspersons here today, the HPL Managing Director, Mr Swapan Bhowmick, said that following acquisition of the entire interest in the generation company, HPL is now planning to invest in plant and technology to reduce the generation cost, which is currently “reasonably higher” than the cost of grid power.

A detailed technological evaluation has been launched with immediate effect to enable HPLCL use both naphtha and gas as a feedstock. While the State has no access to natural gas, HPL is planning to use its petrochemicals refinery gas to replace part of the naphtha consumption in HPLCL.

“As part of our petrochemicals production we produce some ‘mixed gas’, which is used for various captive consumption. We are planning to use it to replace part of the naphtha consumption in the power plant,” Mr Bhowmick said.

This coupled with a projected increase in 30 per cent more captive consumption will increase the capacity utilisation to optimum level, thereby reducing the cost of production to a sustainable level.

According to Mr Bhowmick, HPL was so far using the high cost naphtha-based captive power to ensure uninterrupted supply. HPL authorities are, however, tightlipped about the reasons behind L&T exiting from a handholding partnership with HPL, which was scheduled for a revision in 2020.

Meanwhile, HPL expects to take a Rs 200 crore hit on the bottomline in 2008-09 from the five per cent import duty on naphtha This coupled with 75 days shutdown for installing the ongoing capacity expansion project between October and December is expected to leave substantial impact on the profitability of the company in 2008-09.

HPL has witnessed a substantial erosion of margins during the last year resulting in a 54 per cent drop in net profit in 2007-08 to Rs 262 crore. The lower profits came irrespective of a topline growth of 4.8 per cent to Rs 8,600 crore.

To restrict further squeeze in margins the company is taking up a slew of energy saving projects in 2008-09 and 2009-10.

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