Date:14/09/2004 URL: http://www.thehindubusinessline.com/2004/09/14/stories/2004091401210200.htm

Back BHEL wins order from Nagarjuna Power

C. Shivkumar

Bangalore , Sept. 13

THE public sector BHEL has bagged the engineering, procurement and construction (EPC) contract for the 1,015 MW thermal power project near Mangalore promoted by Nagarjuna Power Corporation Ltd (NPCL).

Sources said that the contract was worth at least Rs 2,467 crore for the public sector power equipment maker for supply of boilers and turbines. BHEL outbid the Chinese consortium comprising China Non-metal Enterprises group and the China Machine building International Group to bag the contract.

The CNMEG-CMIC consortium had also offered an export credit package along with the contract. However, Power Finance Corporation Ltd has already offered to finance NPCL's debt estimated at Rs 3,150 crore (70 per cent of the project cost) at 7.25 per cent. Therefore, there was little interest in the Chinese vendor financing/export credit package offer.

This is the first time that BHEL has secured such a large value contract from an independent power producer in the country through the competitive bidding route. Most of the EPC contracts BHEL has secured in the past were from other public sector power utilities, including NTPC and State electricity boards. The sources said that BHEL has also offered performance guarantees on the equipment supplied by it. BHEL would also be expected to stick to a timeframe for implementation of the project.

The first phase of the project would have to be completed within 38 months after financial closure and the second phase 42 months. It may be recounted that BHEL, which was the EPC contractor for NTPC's Simhadri project, executed and commissioned it well before the deadline. The sources said that the Simplex group would implement the civil construction for the project. This would be worth about Rs 980 crore.

The sources said BHEL winning the contract would considerably reduce the foreign currency component in the Rs 4,500-crore power project. This, the sources said, would have a significant bearing on power tariff, since exchange rate fluctuation is treated as a pass through component.

The sources said that almost all the project financing components were in place. The components included the three-tier financial security package — a letter of credit, an escrow account and State government guarantee.

The foreign equity component was also in the process of being tied up, the sources added. Although there were a series of foreign suitors for the project, NPCL has not yet firmed the foreign partner for the project, the sources said. The promoters, which include Nagarjuna Fertlisers Ltd and its group companies, have already committed to infuse 51 per cent stake in the total paid up capital estimated at Rs 1,350 crore. The promoter group would bring in at least Rs 690 crore as part of their equity stake. The foreign partner/partners would be expected to bring in the remaining 49 per cent of the stake or about Rs 660 crore of the equity.

Fuel supplies for the project have already been tied up with Australian suppliers. The project coal requirement is estimated at 1.5 million tonnes per annum of coal with a calorific value of 6,000 kilocalories per kilogramme.