Payment nightmare for BSES in God's Own Country

Vol 6, PW 6 (22 May 02) Midstream & Downstream

Think carefully before you set up a power plant in Kerala - touted as 'God's Own Country' for its scenic beauty and literacy rate of more than 90%.

On 22nd April and for the second time in five months, Mumbai power utility BSES shut down its brand new power station in Kochi because Kerala State Electricity Board still refuses to pay outstanding bills. The 165-MW naphtha-fired power station began operations in June 2001 but BSES shut it down just four months later after unpaid bills from KSEB amounted to Rs112cr ($23m).

Letters flew back and forth and after much persuasion, money began to trickle in. On 1st April BSES restarted the power station after it received Rs65cr ($13.5m) and assurances that it would receive the balance payments.

Sadly the promise was not kept and payments stopped again. "We have not got any money since we restarted the power station," the company tells us.

"We cannot go on like this, we have to pay IOC cash for the naphtha, we need to pay staff, we need money for spares." BSES concedes the situation looks hopeless. "We don't see much hope of any improvement in the situation," he adds.

"Our investment is in serious trouble." BSES is looking at ways to salvage its investment. For instance, by trying to run the power station on gas and supplying electricity to neighbouring states.

Its Kochi power station cost Rs500cr ($104m) and was built with a debt equity ratio of 30:70. BSES has 80% and is operator.

Kerala State Industries Development Corporation holds 20%.