Operating one gas based plant at 50% capacity: GVK Power

A: I cannot say anything on that because we have certain processes and procedures that we will have to follow within the company.

Latha: Is it likely in a quarter, in a month, is it something on the radar?

A: These are couple of options that we are looking at but I cannot disclose anything before I inform Securities and Exchange Board of India (Sebi). So I would prefer not to comment on this.

Sonia: This newsflow has been going on for a very long time, can you give us an indication of whether we should expect anything in FY16 at all?

A: I don’t know whether it will be proper for me to make a statement on this right now. I would prefer to keep out of this because there is a requirement that I should file with Sebi, inform Sebi first before I leak it out to the market.

Latha: What is the status on the gas power plant, now with the government announcing that imported gas can be used by plants like yours and it will be subsidised, does that become a viable proposition, are you operating that plant at all?

A: There are three gas based power plants that total to more than 900 capacity. Out of that we are operating one partially with the gas supplies being made from gas authority of India.

The other two plants, which has a capacity of close to 700 megawatt is not operating at all. That is where this new import policy for liquefied natural gas (LNG) comes into the picture, it is not pooling of gas any longer. What the government is now stipulating is that they will import gas and then they will supply to run the plant at 30 percent capacity.

Gas-based power projects are sensitive to the capacity utilisation because what happens is if you operate 30 percent, the heat rate will go beyond control so there will be heat rate losses one has to understand. The optimum level at which gas based power plants should operate is about 70-80 percent capacity.

Latha: In that case will you not participate in this?

A: We will because this will contribute to the fixed charges and then we will still have to get a lot of details from the government as to how exactly their scheme will work out. Broad parameters have been laid down but my only concern is that operating at 30 percent capacity I will not be able to service my debt to fullest but will be partially in a position to service the limited amount of interest but debt repayment and all is a distant dream.

Latha: You said you are already operating one plant, what is the capacity of that plant at which you are operating?

A: Roughly about 50 percent.

Latha: So for that plant, you can take the other 30 percent?

A: I don’t know whether they would be giving it to those plants, what they are talking about is plants that are stranded and which are not operating.

Latha: What is the going rate in terms of power, will you be able to sell power at Rs 5 a unit if you were to generate in those plants?

A: We have a power purchase agreement (PPA) signed with the state government where the variable charges is a pass through. So the state government will be the offtakers as far as we are concerned for both these power projects.

Sonia: Can you update us on which hydroprojects will come up for commissioning and by when in the next three-six months?

A: There is one project called Alaknanda Hydropower project of 330 megawatt capacity, which should start commercial operation next month. This is the target date, hopefully in the first week or at the most second week we should start commercial operation of unit number one and there are four units. So one-by-one we will start commercial operation of each of the units.

Sonia: But your Goindwal Sahib project was expected to be commissioned in May, however, your coal mine got de-allocated and so, what happens post that, how will you source coal and when do you expect that to be commissioned?

A: That project is complete in all respects. If I have coal then it is even tested with oil that particular project so we are just waiting for coal. Now the coal mine has been de-allocated and we were unsuccessful in the auction, I think Essar got it and we are just waiting for the government’s next step as to when we will get coal through either a linkage or an allocation and we will then be in a position to commence commercial operation of that.

Latha: What about your Australian coal mining business? It was being opposed by environmental groups, is it now taken off?

A: All the approvals are available, we are ready with all the approvals. There is an investor who has come in, shown interest to participate so we are waiting for necessary approvals from the lenders to carry forward that transaction.