KSK Energy launches 540Mw Warora project

Hyderabad-based KSK Energy Ventures Limited, which was listed on the London Stock Exchange last year, has achieved financial closure for its first phase (270 mega watt) of the proposed 540-Mw coal-based power project at Warora in Chandrapur district of Maharashtra. The project is being developed through Wardha Power Company Private Limited (WPCPL).

Maharashtra chief minister Vilasrao Deshmukh laid the foundation stone for the project on Saturday. On completion, the project will generate about 3,500 million units of power a year.

While KSK Electricity Finance Private Limited, a joint venture between KSK and Lehman Brothers, holds 74 per cent of the Rs 600 crore equity in the project, the rest is held by Maharashtra-based Viraj Profiles Limited. Viraj has also entered into a 25-year agreement with the company to buy back the entire 270 Mw of power for captive use.

The tariff, which will remain unchanged for the entire agreement period, is much lower compared with what the Maharashtra power utilities charge from industries, according to S Kishore, director, KSK Energy Ventures Private Limited.

He, however, refused to divulge the per unit rate at which the company would supply power to Viraj. "We would still maintain over 18 per cent margin on the rate at which the company supplies power to Viraj," he added.

The three financial institutions, Rural Electrification Corporation (REC), Hudco, and Indian Overseas Bank (IOB) have agreed to fund Rs 555 crore, Rs 233 crore and Rs 100 crore respectively for the project, which requires a total capital investment of Rs 2,400 crore.

The first unit of 135 Mw under phase I is scheduled to be commissioned in May 2009. The remaining three units of the same capacity, under the two phases, will be synchronised to the power grid in three-month intervals thereafter, Kishore said.

The company has placed orders for equipment and machinery with China-based power plant manufacturer, SEDC, which has offered to supply and erect the plant in just 24 months as compared with close to 35 months the public sector BHEL requires, according to him.

The company has entered into a coal supply agreement with the Gujarat Mining Development Corporation (GMDC), which will supply coal from a captive coal block in Chhattisgarh. Under the long-term plan, the KSK Energy Ventures proposes to build over 2,000 Mw capacity of which 1,200 mw project will be in Chhattisgarh.

Of this, the Gujarat government will take 1,000 Mw power as part of the arrangement entered for coal supply from the captive coal block held by the Gujarat entity. Lehman Brothers alone proposes to invest $ 500 million in the entire $2.5 billion project, Kishore said.

He said the IDFC and PFC had come forward to fund the 270 Mw phase II project while enquiries from bulk consumers were also on.

"The bulk industrial segment is going to be the largest growing segment in the country, most of which require customised solutions," Kishore said.

According to a survey conducted by the company in association with Feedback Ventures in nine states, the bulk industrial requirement would be in the order of 65,000 Mw.

Incidentally, Viraj Profiles will be the single biggest customer sourcing 270 Mw power from a third party under the merchant independent power producer (IPP) model after the open access regime came into force in the year 2003.

KSK Energy Ventures has an asset size of Rs 2,000 crore. It has so far deployed Rs 600 crore equity in the projects. It currently operates six small size power plants, which supply power to cement, textile and other industries in Tamil Nadu, Kerala, and Andhra Pradesh.

The company is also planning to raise $1 billion venture capital fund to be invested in non-KSK promoted renewable energy projects in the country.