Kerala hesitates over Kayamkulam power

Vol 14, PW 14 (13 Jan 11) Midstream & Downstream

First it was Karnataka.

Now Kerala seems to be hesitating about signing a PPA with NTPC for its proposed gas-fired Kayamkulam power station expansion. Kerala and Karnataka both originally planned to buy 500-MW each from Kayamkulam; Kerala was expected to sign the PPA with NTPC by mid-August last year.

“But no PPAs have yet been signed,” a worried NTPC source tells PETROWATCH. “We have a fuel supply agreement for Kayamkulam in place (signed with GAIL in December 2009 for 1.2m t/y of Gorgon R-LNG for 20 years from 2014) but nobody to buy the power.

” Without PPAs in place, NTPC cannot order turbines or issue tenders to add 1050-MW of gas-fired power generation capacity to its existing 350-MW naphtha-based Kayamkulam power station. Why are Kerala and Karnataka hesitating “They feel they’ll get cheaper power from projects they are promoting themselves,” says a power sector analyst, “instead of buying from NTPC.

” More, both states find the projected power cost from the Kayamkulam Gorgon LNG-based power station “unaffordable”. Faced with such challenges, NTPC would be forgiven for shelving the Kayamkulam expansion.

But it can’t. This project is politically important and has the strong backing of retired bureaucrat and Kerala native TKA Nair, principal secretary to Prime Minister Manmohan Singh.

No surprise then that in December NTPC continued talks with Qatar to convince it to take a stake in Kayamkulam in return for ‘reasonably priced LNG’. “Normally 30% of the capital cost of a project is equity,” we hear.

“We offered Qatar 40% of that.” Sadly, nothing concrete emerged from the meeting as Qatar is willing to take equity in Kayamkulam but unwilling to oblige NTPC with “reasonably priced LNG.

” But NTPC adds that this project could come up for discussion again at the January 14 India-Qatar (inter-government) meeting.

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