Swan shadow over Gujarat Pipavav Power stake

Vol 16, PW 5 (20 Sep 12) Midstream & Downstream

At least five companies are believed to have submitted Expressions of Interest (EoIs) to acquire a 49% stake in the controversial GSPC Pipavav Power Company project - just days before the September 23 deadline set by lead promoter SBI Caps.

“This is a great investment opportunity,” says SBI, without disclosing names. “Both Indian and foreign companies are interested.

” SBI Caps believes GSPC Pipavav Power Company is attracting buyers because there is no construction risk associated with the proposed 702-MW power station in the Amreli district of Gujarat. “There is always uncertainty with such large infrastructure projects,” he adds.

“You never know if they will materialise. But this project has overcome those risks and will be commissioned.

Whoever invests will get a return on his investment immediately.” Jointly promoted by GSPC (34%) and the Gujarat Power Corporation (17%), GSPC Pipavav is planning to commission the first 351-MW unit in December this year and the second 351-MW unit in March next year (2013).

Also afoot are plans to scale-up to 1050-MW, but past talk of raising capacity to 2100-MW has taken a back seat. SBI is confident the project is sufficiently attractive for potential investors to pay a premium to the Rs300cr ($60m) ‘book value’ of the 49% stake.

What will be the premium “It’s for the customer to decide,” says SBI. With a debt-equity ratio of 80:20 the total project cost is estimated at Rs2900cr ($530m).

“Arranging gas at an affordable rate for the project,” we hear, “is GSPC’s responsibility.” On this there is also comfort: a Gas Supply Agreement for 3.2m cm/d R-LNG to generate 702-MW electricity - all of which will be sold to the local Gujarat electricity board.