Vol 3, PW 5 (31 Mar 99) Midstream & Downstream

It was once the pride of the Essar Group of companies.

On 1 October 1997, Essar Power began commercial operation of Indias first privately constructed power plant: a 515-MW combined cycle operation at Hazira in Gujarat, with three gas turbine generators of 110 MW each and one steam turbine of 185 MW. In those days all looked rosy.

Fired by naphtha, the plant was eventually to run on LNG, in a joint venture with Shell. Power Purchase Agreements (PPA) were signed with Essar Powers sister company, Essar Steel (for 215 MW) and with the Gujarat Electricity Board (for 300 MW).

Then, everything started to go wrong. Shell pulled out and the PPA with the Gujarat Electricity Board went to court, where it languishes today.

Worse, the Ruia family which controls Essar began stripping Essar Steel of funds, making it unable to pay for the electricity from Essar Power. Today, the Hazira plant is up for sale - and like most other companies in the Essar stable - heavily in debt.

Enron International and Reliance Industries are the latest reported to be taking a look. Others before included Powergen, British Gas, Shell and AES Energy.

No doubt whoever ends up buying the plant will get it cheap. Essar is under intense pressure from financial institutions to sell at any price.

"The banks have put the sale of Essar Power as a condition to bankroll the refinery project at Vadinar", writes a correspondent, "Also, Essars LNG plans have collapsed and this has made their so-called strategic entry into power worthless". Is this the beginning of the end for Essar as we know it