Normally, delay in implementation escalates project cost. But Kolkata-based SREI Group-controlled Rs 660-crore DPSC Ltd claims to have used delays to their advantage.
According to Chairman Hemant Kanoria, DPSC’s upcoming 3 X 150 MW coal-based thermal power capacity in Haldia in coastal West Bengal, which is now to be commissioned in early 2015 – two years behind the schedule — will not face any cost-push beyond the originally estimated Rs 2,475 crore.
The NSE-listed company, Kanoria says, renegotiated the contracts, taking advantage of the slowdown.
“We planned the project during the boom, when everyone was in power. There was excess demand for equipment and prices were non-negotiable. Now it’s a different story. The vendors have idle capacity or money blocked in unclaimed power equipment. And, we are in a position to renegotiate the prices,” Kanoria told
The price negotiation, he says, was most successful for the balance of plant equipment, which includes gears other than the key boiler turbine and generator (BTG) package. BHEL was awarded the BTG contract for the project.
‘Deliberate strategy’
Kanoria says that the company had “deliberately” gone slow on project implementation as it anticipated trouble a little too early. The power sector today is flooded with excess capacities as there are not many buyers for electricity at a remunerative tariff.
Interestingly, unlike majority of the idle generation capacities, DPSC has entered into power purchase agreements (PPA) with the West Bengal State Electricity Distribution Company for part of the generation. The PPA even allowed the company to pass through the cost of imported coal. But, Kanoria now claims that even a PPA might not be of much use, so as to ensure viability of the project, at this juncture.
“We intentionally went slow on the project. It was a deliberate strategy as the environment was not good,” he said anticipating fundamentals to improve in the next one-and-a-half years.
Improved bottomline
According to Kanoria, DPSC has posted substantial growth in revenues from its distribution business in Asansol area in West Bengal.
Having taken over from the state-owned Andrew Yule in 2009, DPSC’s electricity sales increased from a mere 100 MW to 250 MW.
This coupled with 99 per cent recovery (of sales), reduced 2.9 per cent transmission and distribution loss and phasing out of the archaic generation facilities improved bottomline.
The company was awarded the franchise for electricity distribution in Gaya in Bihar last week.