Tisco Sells Power Plant To Tec For Rs 300 Crore

Tata Iron and Steel Company (Tisco) has sold its 62.5 mw power plant in Jojobera (Bihar) to Tata Electric Company for Rs 300 crore. The price paid by TEC for the plant will thus work out to Rs 4.8 crore/mw. According to industry experts, this is much higher than the current average price of Rs 3.5-4 crore/mw paid to existing power plants.

The financial institutions, which hold a substantial equity stake in Tata Power Company the holding company for TEC had earlier asked for an independent cost evaluation of the power plant by private audit firms. The FIs felt this was necessary to arrive at a more realistic sale price for the plant.

 

Replying to a faxed questionnaire from Business Standard, Tata Electric maintained that the sale has been conducted as per the book of accounts of Tisco. However, a second questionnaire, which enquired about the employment of private audit firms for cost evaluation of the plant, received no response.

The Tatas have a 16.76 per cent stake in Tata Power, while mutual funds own over 11 per cent of its equity. Financial institutions, including the Industrial Development Bank of India, Industrial Finance Corporation of India, Life Insurance Company and Unit Trust of India hold another 15 per cent, while the balance is held by non-banking financial companies and other corporates.

Tisco commenced construction of the coal-fired plant in 1992. The plant was synchronised in early 1996. Tata Electric will complete the remaining work, which mainly involves the testing of systems and sub-systems, and operate the plant.

The entire power generated will be sold back to Tisco for its requirements.

Tisco, which supplies power to Tata plants and the town of Jamshedpur, has an annual requirement of 248 mw for 1997. This requirement is expected to increase to 340 mw in 2001-2002.

Tisco already has contracts with the Damodar Valley Corporation and the Bihar State Electricity Board for supplies of 195 mw and 30 mw respectively. However, with power supply by both these bodies falling short of the contracted amount, Jamshedpur is expected to suffer a power shortage of about 240 mw by 2001-2002.