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Essar Energy has shifted focus to the power sector, as lack of clarity on diesel price deregulation is making its oil retailing business unviable.
“Our oil and gas refinery business is doing ok, but till oil retail becomes viable after diesel price deregulation, there is no excitement in the sector,” said Sushil Maroo, CEO of Essar Energy.
“Today, power is the sector where the excitement lies,” he told Business Line . Maroo’s excitement stems from the BJP Government’s focus on resolving the problems of power generators in the country.
Headwinds However, Essar Energy, which recently de-listed from the London Stock Exchange, faces major headwinds in the sector with nearly 1,000 MW of generation capacity lying stagnant due to lack of gas supply.
The company had a total generating capacity of 3,910 MW as of December 31, 2013.
“Gas-based power plants are all shut. We hope the fuel supply issue gets resolved soon,” said Maroo while ruling out using imported gas to run these plants.
“To generate power from LNG (liquefied natural gas or imported gas) is too expensive. If we have segregated transmission lines for places that can absorb higher electricity tariffs, then it makes sense using LNG. But there is a lack of dedicated transmission lines in the country.”
Maroo expressed hope that the Government will come up with an arrangement for resolving the gas supply issue for the power plants.
“Hopefully, the Government can come up with dedicated transmission lines so that people who can pay higher tariffs get that power.”
Below capacity Essar Energy’s coal-based power plants are also running below capacity due to low demand and transmission line constraints.
The company had told its investors in February that its 1,200-MW coal-based plant Salaya I in Gujarat was running at 50 per cent plant load factor during the quarter ended December 31, 2013 due to low demand from Gujarat Urja Vikas Nigam Ltd.
The 600-MW Mahan I unit in Madhya Pradesh, another coal-based plant of the company, was running at 17 per cent plant load factor in the December quarter because of transmission constraints in the Southern Grid, it said.
Nascent stage Essar Energy’s interests in the transmission and distribution sector are at a nascent stage and the company is unlikely to focus on this sector in a major way.
“Right of Way is an issue which needs to be tackled,” said Maroo.
“First, one has to acquire the Right of Way, then get land where the towers will come up, and finally get forest clearances because invariably power lines cross forests. All this needs to happen in a time-bound manner, otherwise, those getting into the transmission and distribution business tend to lose out.”
The company also plans to bid for the so-called ultra mega power projects, but only after fuel supply issues to its existing plants are resolved.
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