Hopeful of 30% linkage getting restored for Mundra: Adani

In an interview to CNBC-TV18 Gautam Adani, chairman, Adani Enterprises said he is hopeful of 30% linkage getting restored for its Rs 25,000-crore imported coal-based power plant at Mundra in Gujarat.

The Standing Linkage Committee (SLC) in 2010 had granted the company 30% linkage for the Mundra plant, but it was withdrawn later on due to shortage of coal supply from Coal India.

The plant at Mundra is designed in a manner which needs 30 percent indigenous blended coal, but the unavailability of blended coal is affecting the viability and technical feasibility of our project leading to low plant load factors (PLFs), Adani explained.

The Mundra plant is currently working at 60-75% PLFs. If this issue is resolved, Mundra's PLFs can be increased to 85-90 percent, he added.

A high-level inter-ministerial panel recently met to take a call on fuel supply issues for the Mundra plant, but according to media reports the meeting was inconclusive. Ahead of the meeting, Power Ministry had recommended restoration of 30% supply for Mundra project.

Below is the edited transcript of Gautam Adani’s interview with CNBC-TV18.

Q: The biggest question is on your Mundra power plant where we believe a few days back there was a high-level inter-ministerial group meeting to discuss domestic coal linkages. What kind of outcome are you expecting? Do you think there is progress happening on that front?

A: This 30 percent linkage issue was taken up in the last Standing Linkage Committee (SLC) meeting in ministry of coal. The SLC meeting in 2009 had allocated 30 percent linkage for our Mundra power project for phase I and II,

It was withdrawn later on because of shortage of coal which was affecting the viability of our project and the technical feasibility of the plant. The boiler design is based on blended coal so it affecting plant load factor (PLFs). The ministry is now reconsidering that and we are hopeful that this will be restored.

Q: This was withdrawn by Coal India, have you had any discussions with them on re-establishing that coal linkage. Do they seem positively inclined to it at all?

A: This matter cannot be directly dealt with between us and Coal India we have the SLC in between, which has been inter-ministerial meeting, headed by the minister of coal. Because of Coal India’s objections and them not having enough productions it was withdrawn earlier, which I feel should be restored. The ministry of power is helping us to resolve these issues.

Q: Without domestic coal what kind of PLFs are you operating at now?

A: Right now, the Mundra plant is operating at 65-70 percent PLF.

Q: How significant could the upside if this issue is to be resolved?

A: Our boiler design and machine only will be able to take only 30 percent domestic blended coal and that will help us to increase our PLFs, 85-90 percent.

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Q: What about your other plants where your tied into power purchase agreements (PPAs) and therefore you are actually losing money because of the way costs have moved up. What kind of a resolution do you see around that?

A: We have two major plants one is at Mundra, which is the country’s largest power project 4,600 megawatts (MW) and second is in the Maharashtra, which is at Tiroda with a capacity of 3,300 MW. Both have different issues. In Mundra plant, the issue is, we built this plant and signed a fuel supply agreement (FSA) with Indonesian coal miners.

In 2010-2011 the Indonesian government had changed the law for allowing export of Indonesian coal at a market-driven price and not contract price, so now we have to get coal from Indonesia – the same miner at market-driven prices, which is affecting our viability heavily.

The second issue was we had been assured of linkages and that linkage quantity is not fully available because of less production from Coal India. On the other side, we have signed PPA with a fixed price. This fuel supply risk was not envisaged at that point of time, we never thought about it. With that, the viability is getting affected.

We sold 2,000 MW power to Gujarat State Electricity Board and 1,400 MW to Haryana – both matters are right now under the jurisdiction of the Central Electricity Regulatory Commission (CERC)

As far as Mundra project is concerned, the Government of India, ministry of coal has allocated Lohara coal mine and we have progressed very well on that. But later, the ministry of environment and forest has cancelled our ToR and environment clearance. Based on that, we signed PPA with Maharashtra – state distribution company.

Today, we don’t have coal mine and we are requesting the ministry of coal through ministry of power that we should be given a linkage against this mine and whatever is the tariff difference between linkage price of coal and captive coal mine should be passed on for this project to make this project viable.

Q: While the domestic coal supply issues resolved themselves. How much can you ramp up production from Bunyu in Indonesia?

A: Bunyu coal production is now at 4-5 million tonnes, which is going to ramp up by 10-11 in the next two years time. Bunyu coal is a moisture coal, so it can be utilized by mixing it with good quality coal.

Q: There has been some talk that you are also in talks with Lanco to buy their 1,200 MW Udupi plant. Can you confirm your interest in that facility?

A: Earlier we were looking about this acquisition, but I don’t know about the process of due diligence.

Q: It is going to be a big acquisition if it happens? It cannot happen without your blessings? Are you saying that you have lost interest in it or you are still pursuing it?

A: We are pursuing it. Right now it is under technical due diligence. We have matters lying with CERC for tariff fixation, so unless we get good results from it we would not like to jump to acquisitions.