Bidadi Project Hit By Sanctions

Economic sanctions and the Asian crisis have hit Karnataka Power Corporation Ltd's (KPCL) power project with US-based Unocal near Bangalore, with most multinationals staying away from bidding for the project's EPC contract. Several companies, including Mitsubishi were expected to bid for the EPC contract.

A KPCL official said only three companies _ L&T, Bhel and ABB _ had bid for the EPC contract for the 200-mw Bidadi project, which is expected to feed the $600-million Toyota-Kirloskar's joint venture for multi-purpose vehicles, several Japanese auto ancillary units and Bangalore.

The tender for the EPC contract, which was floated on December 22, 1997, was opened on July 1, 1998. The processing is expected to take a month.

 

The KPCL official said because of the depreciation of the rupee, the estimated project cost of Rs 535 crore would shoot up. The EPC cost, which is about 75 per cent of the total project cost, will also substantially increase.

He said the bidders may quote below Rs 2 crore per mw for the EPC contract as gas turbines, a critical component for the plant, would have to be imported and there are only around seven manufacturers in the world who sell highly-efficient turbines.

"Most critical components have to be imported and there is a possibility that due to sanctions, it might be difficult to source them and can be done only at higher costs," the official said.

He said even the power producers were getting bids for around Rs 2 crore per mw and hence any drop in the price would hit the viability of the project.

The Bidadi power project has a debt-equity ratio of 70:30, with Unocal's holding at 25 per cent and KPCL's at 26 per cent. Talks for the raising debt part of the investment are underway. "Major financial institutions are keen to invest in our project," the official said.

BPCL will supply fuel for the project. The naphtha-based project was cleared by the Central Electricity Authority in March 1996 for setting up a 300 mw power plant. However, due to a change in the policy for naphtha-based projects, it was scaled down to 100 mw.

But subsequently, the power project's capacity was raised to 200 mw after the centre liberalised the policy on supply of naphtha. The promoters have tied up with Bangalore Water Supply and Sewerage Scheme for supply of 5,530 cubic metre of water per day. Around 170 acre of land has been acquired at a cost of Rs 10.40 crore.

The official said construction work of the project is expected to commence by August 15.