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| Edited By: C Chitti Pantulu |Source: |Updated: Sep 15, 2017, 01:08 AM IST
HYDERABAD: With the regulated power sector losing its attraction, GVK Power and Infrastructure Ltd has decided to go after the more lucrative merchant power plants (MPPs).
“As a strategy, we will not look at regulated projects from now on,” Issac George, chief financial officer, GVK Power told DNA Money, adding, this will help rebalance the portfolio of the infrastructure company that runs 8 power projects today.
In MPPs, the independent power producer (IPP) takes the entire risk without the comfort of upfront power off-take agreements and government guarantees.
However, while regulated power projects, which have definite power purchase agreements with power utilities, offer returns of 14%, the unregulated MPPs, which pose a higher risk, promise returns of nearly 20%.
Typically, the selling price is higher for merchant plants, enabling higher returns to compensate for the risk of generating power without a firm off-take agreement.
While GVK is preparing a detailed project report for the 370 MW Goriganga hydel power project in Uttarakhand, perhaps the first of its kind MPP in the country, it is also in the running for two more MPPs, one each in Mahrashtra and Madhya Pradesh.
Ganeshram Jayaraman and Vijaykumar Bupathy, analysts at brokerage firm Spark Capital, estimate that the power generated from the Goriganga project will be sold at Rs 2.25 per kilowatt hour and increase by 3% each year.
Compared to this, power from the Shrinagar Hydro Electric Project, which is of a similar configuration, will have a levelised tariff of Rs 2.11 per unit.
Meanwhile, GVK Power announced on Monday the financial closure for the Rs 2,069-crore Shrinagar project being implemented by subsidiary Alakananda Hydro Power Company Ltd (AHPCL).
The project will be funded through a 80:20 debt-equity ratio, with the Rs 1,655 crore debt portion being syndicated by Axis Bank, while the Rs 414-crore equity portion will be funded from the $300 million raised by the GVK Power through a QIP issue.
AHPCL has a 30-year power purchase agreement with the Uttar Pradesh Power Corporation Ltd, while it will supply 12% of the output to Uttarakhand free of cost as fee for the water used for generating the power.
