In a major boost to its power business, Lanco Infratech Ltd has emerged as the lowest bidder for two mega power projects - Prayagraj and Sangam - in Uttar Pradesh aggregating 3,300 mw. Lanco quoted Rs 2.88 per kwh for the 1,980-mw Prayagraj and Rs 2.838 per kwh for the 1,320-mw Sangam project, outbidding other contenders like Reliance Power (Anil Ambani Group), NTPC Ltd, CESC Ltd and Jindal Steel & Power Ltd. Bids were opened on April 11, 2008.
Lanco expects to invest Rs 14,000 crore in the two projects, both in Allahabad district. Financing will be done on a debt-equity ratio of 4:1. With this, the Lanco Group's power portfolio has risen to 14,000 mw including projects under development. The Uttar Pradesh government will receive 90 per cent of power generated from the two plants while Lanco can sell 10 per cent in the market. The formal letter of award will be issued in the coming weeks, while the projects are expected to commission within 48 months from zero date.
Tariff-based bidding: The Prayagraj and Sangam projects represent Uttar Pradesh's initiative of developing power capacity through the competitive bidding route. State-owned power generation company Uttar Pradesh Power Corporation Ltd and distribution entities in 2007 invited bids for developing the two projects where the developer would be selected depending on the levelised tariff offered. Two special purpose vehicles, Prayagraj Power Corporation Ltd and Sangam Power Corporation Ltd, have been formed to develop these projects. Currently, these are wholly-owned subsidiaries of the UP government and would be transferred to the Lanco Group. The state government will assist in land acquisition, establishing coal and water linkages, securing clearances, etc. In the competitive bidding guidelines verbiage, this is referred to as Case 2, which is also the system followed for the Centre's ultra mega power project series for which Power Finance Corporation is the nodal agency. Lanco will develop the projects on build-own-operate (BOO) basis for the lifetime of the power projects, usually taken as 25 years.
Lanco in UP: The two projects have strengthened Lanco's power portfolio in Uttar Pradesh. In September 2006, Lanco won the letter of acceptance from Uttar Pradesh Rajya Vidyut Utpadan Nigam for the 2x600 mw Anpara-C coal-fired power project in Sonbhadra district. This, according to industry sources, is India's first ever project to be awarded under tariff-based competitive bidding.
Energy scene: Uttar Pradesh in 2006-07 faced an energy shortage of 16 per cent with the 48,245 Gwh generated falling short of the estimated demand of 57,444 Gwh. In the same year, there was an 18 per cent deficiency in meeting the peak power requirement of 9,184 mw.