Cheaper gas to give fillip to R-Power's Dadri project

With the Bombay high court directing the Mukesh Ambani-led Reliance Industries to supply gas to the Anil Dhirubhai Ambani Group's Reliance Power at $2.34 per million British thermal unit 44 per cent lower than the rate approved by the government, the power generation company's plans of setting up a gas-based power project at Dadri in Uttar Pradesh will now gain momentum.

Sources at Reliance Power said if RIL honoured the 2005 family agreement to supply 28 million metric standard cubic metres per day of gas from its Krishna-Godavari basin to its group fuel transportation company Reliance Natural Resources Ltd as directed by the court, it would be sufficient to run a gas-based power plant of over 7,000 Mega watt capacity.

"The demerger scheme offered gas to RNRL on the same terms and conditions for supply to NTPC and that agreement has all the details on timelines for supply of gas and setting up of the plants," an R-Power official said, who did not wish to be identified.

Reliance Power's plans are to set up a 7,480-Mw project, which will be the largest gas-fired power project at a single location in the world, which will cost about Rs 20,000-25,000 crore (Rs 200 – 250 billion). The Dadri project, which was planned before the split of the Ambani brothers in 2005, has got most of the clearances, including environmental clearance and water linkages. ADAG is also in possession of more than 2,000 acres at the project site, said sources.

A few months ago, the company had initiated negotiations with General Electric, Bharat Heavy Electricals and a few other gas turbine makers for the supply of turbines, boilers and generators for the project. Since the global demand for gas turbines are less, the equipment could be procured in 9-11 months of placing the orders and the project could be commissioned by 2011 or 2012, sources said.

The project could come up in two phases, with the first phase generating 3,600 Mw of electricity with four-five gas turbines.

Reliance Power, which mobilised over Rs 11,500 crore (RS 115 billion) through its initial public offer, can raise about 25 per cent as equity for the project's first phase, which will cost about Rs 12,000 crore (Rs 120 billion). Recently, the group had achieved financial closures for about four projects, tying up with banks to raise the debt portion for over Rs 20,000 crore (Rs 200 billion).

Once R-Power succeeds in ensuring gas availability, Dadri will overtake the three 4,000-Mw coal-based ultra mega power projects it is implementing at Sasan, Krishnapatanam and Tilaya as the largest and one of the earliest power projects to be commissioned by R-Power. Existing projects of R-Power are currently planned to take off progressively in phases between the end of 2010 and 2016.

Reliance Power is planning to implement about 13 power projects to generate close to 30,000 Mw of energy and, with Dadri coming into the picture, the total generation capacity will shoot up to nearly 40,000 Mw.