MARATHON BUYS TWO PLANTS FROM ESSAR
As predicted by Petrowatch in May (Vol 3, Issue 9 "24-MARATHON: FRONT-RUNNER FOR ESSAR POWER PLANT) Marathon Power has beaten Enron to clinch a deal with Indias Essar Group for the purchase of two power plants.
But at what price In an MOU signed Friday (25 June) US-based Marathon Power, a sister company of Marathon Oil, agreed with Essar to acquire the companys 515-MW naphtha and gas-fired power plant at Hazira in Gujarat, and a smaller 80-MW residue-fired power plant adjacent to the companys soon to be commissioned 10.5m tonnes a year refinery in Gujarat, in a deal valued at $212m ($170m for the Hazira plant and $42m for the Vadinar plant). The Hazira power plant is a combined cycle operation, with three gas turbine generators of 110-MW each and one steam turbine of 185-MW.
It came on stream in October 1997 as Indias first privately constructed power plant and has a 20-year Power Purchase Agreement with the Gujarat State Electricity Board. The smaller residue-based power plant will be commissioned around the same time as the refinery goes on stream, sometime in 2001.
It is a co-generation plant, operated by the Vadinar Power Company, a subsidiary of Essar Oil, and is designed to use refinery residue as a basic fuel for generation. A 238.5-MW Mitsubishi steam turbine is planned.
This plant is intended to service the power requirements of Essar Oil. Indian financial institutions (FIs) have put intense pressure on Essar to sell its non-core assets to fund activity in its core steel and shipping business.
Essars MOU with Marathon is currently under examination by institutions, but approval is a formality. Along with the power plants, Marathon also buys $368m of Essar debt, welcome relief for a company that today needs every penny it can get.