Lanco makes peace with Telangana

The power deficit state to purchase 325 mw from firm's stranded plants in AP

Lanco Infratech has tied up with Telangana power utilities to sell 325 Mw to the power deficit state from its two merchant plants located in Andhra Pradesh.

This constitutes a bulk of over 500 Mw of power that will be generated from the stranded gas power project under the Centre’s Power Sector Development Fund (PSDF) scheme. Lanco sources as well as energy officials of Telangana confirmed the development.

Lanco Group’s power supply deal with Telangana also marks the end of a bitter past between the company promoters and the ruling Telangana Rashtra Samithi (TRS) headed by K Chandrasekhar Rao as company promoter and politician L Rajagopal had vehemently opposed the separate statehood demand.

Three private players, GMR, GVK and Lanco, whose stranded gas power assets are located in AP, had won gas allocation for a little over 2,000 Mw capacity in the recently-held reverse bidding for a four-month period beginning June 1. However, the plants will have to be operated at 25 per cent load factor in this period which means they effectively generate a quarter of the installed capacity.

“Power generation from the stranded capacity is expected to start from June 12 or June 15 as the gas supply schedules are yet to be finalised by GAIL,” Ajay Jain, secretary energy, government of Andhra Pradesh told Business Standard.

Lanco’s power supply agreement with Telangana comes as a relief since the power surplus AP was not in a position to absorb the additional generation on its own, leading to uncertainties about the success of the programme. Earlier,  the state had decided to buy power only from those stranded plants that have power purchase agreements. AP power utilities had decided to procure about 140 Mw from GVK’s 230-Mw Jegurupadu Stage II and GMR’s 370-Mw Vemagiri plant under this policy, forcing the other projects to find other markets.

Following the Lanco deal, the 384-Mw GMR Rajahmundry gas power project (GREL) is the only plant now that is yet to find a customer.  AP Transco officials said  the state government had changed its stand to facilitate procurement of power from non-PPA plants as well. This will help the remaining capacity to be absorbed locally.

An official of the Lanco group said their two merchant power plants would start generation in a day or two.