Lanco Infratech eyes Indonesian power project

Gurgaon-based infrastructure company Lanco Infratech has partnered with Indonesian coal mining company Bukit Asam to bid for a 600 megawatt power project, sources said.

Indonesian state-owned electricity firm PT Perusahaan Listrik Negara (PLN) has sought bids to develop the coal-based power project in southern Sumatra on a build-own-and-operate model, with a concession period of 25 years. The approximate capital cost of the project is Rs 3,500 crore.

Bukit Asam, a listed company on the Indonesian Stock Exchange, is a leading coal miner. The state-owned mining company also invests and maintains port facilities along with power projects. Both Bukit Asam and Lanco Infratech have not responded to e-mails on the development.

“We are looking at projects internationally, wherever there are opportunities. Middle East is an area where there are power development opportunities,” Suresh Kumar, chief financial officer, Lanco Infratech, had told Business Standard in an interview.

Analysts said the increasingly competitive domestic electricity market is prompting Indian utilities to look at international opportunities.

“Until now, power producers had assured returns where they could set-up a project and get 16 per cent return on equity. From 2011 onwards, distribution companies have been mandated to procure incremental power only on a competitive bidding basis. Power companies have to competitively bid even to supply power, which means the assured return on equity concept will not hold true. It makes sense for companies to go for projects in countries where they might get better returns,” said a Mumbai-based power analyst.

Lanco also operates power projects domestically. Power generation has been the focus of the company, but it also has interests in road projects and port projects. Around 60 per cent of the company’s revenues come from electricity sales. It has been rapidly adding power capacity, which stands at 1,195 megawatts from 511 megawatts last year.

The company plans to double its capacity to 4,000 megawatts by the end of this fiscal. The company’s long-term plan is to take its generation capacity to 9,300 megawatt by the end of 2014.

“While we have another 2,500 megawatt in planning stages, at the same time we will be achieving financial closure for power projects aggregating 4,702 megawatt by the end of this quarter,” said Kumar.