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Interaction | August 2016

Efficient global sourcing of coal proved profitable

Ramesh Kumar, Managing Director, Essar Power Gujarat Limited

Can you throw some light on the present operations of EPGL?
Essar Power Gujarat Limited (EPGL) is a special purpose vehicle of Essar Power Limited. This was created basically to implement the power purchase agreement (PPA), which was signed with Gujarat Urja Vikas Nigam Limited (GUVNL) in 2007. Commercial operations of both the units began in 2012. During the second, third and fourth years we have achieved customerĀ“s availability of 80%. During the current year, we are already at 83% level. In 2016, we also implemented the 5/25 financial restructuring scheme and we also achieved our first PAT-positive numbers in 2016. This 2x600 mega watts (MW) imported coal-based project was implemented at a cost of Rs.5,832 crore.

You are known to have some unique features in your operations. Can you highlight a few of them?
We have the ability to fire a wide spectrum of coal in the boiler. Actually if you see most of the thermal power plants normally operate with one kind of coal sourcing. They may be having long term tie-up with one mine or the other. But, we use 100% imported coal on spot basis and we procure coal from several countries, Indonesia, South Africa, Australia, Columbia, Russia and Mozambique. Our boiler is designed for around 5500 Kcal/kg coal, whereas we use right from 4200 Kcal up to 6500 Kcal (gross calorific value, measured in Kcal/KG) coal. Whatever change in our standard operating procedure for plant that is required that we adopted and ultimately we made the boiler to use this wide a band of coal. In fact, probably this is the only power plant in India which can move from coal of one GCV (gross calorific value, measured in Kcal/KG) to another and sourcing from different countries. There is no other power plant which has moved so swiftly modifying the plant parameters also, to ensure operational efficiency at the same time. And ultimately, by sourcing this wide band of coal, we could bring down our generation cost to a very low level and boost profitability.

What is the benefit of doing that?
If you talk in total terms, domestic coal will be 20% expensive at the coast, on an equated GCV basis. We are saying this for a coastal power plant, because we have to move coal from far off places.

The imported coal is of about 6000 Kcal, while available domestic coal not more than 4000 Kcal quality. Quality-wise there is a big difference. On the other hand, ash content of our imported coal is around 3 per cent, while for domestic coal it will be 25-35%, which is very low quality-wise.

Did you face any challenges in zeroing in on the right source or in using it?
I must say we faced no challenges either in selecting the source or using the sourced coal. We are evaluating three parameters - procurement, technicality and performance - together and based on that we source the coal and we used to fine tune the plant parameters required for each of these types of coal, which we were firing in our boiler. Continuously the team is bringing in different tools to evaluate coal and try to optimise plant parameters. Besides, we have never compromised with the useful life of the asset/plant, which is 40 years. Interesting part on sourcing of coal is, we have designed an indigenous technology which has helped us benefit at least on cost front by 3%. This is the only company where this has been done. And this experiment has turned out to be pretty successful.

The point is even after trying so many varieties of coal, in the month of April, when we had inspected boiler from inside, we found it in pretty good condition.

Do you have a captive port?
We are making a captive port which is 15 kilometres away. The port will be ready in another six months. Now, we are getting it through a commercial port of Gujarat Maritime Board (GMB), which is about 60 kilometres away. We truck it from there. Coal conveyor corridor from the captive port will be completed this fiscal.

What is your annual coal requirement?
If I run my plant at 100% plant load factor (PLF), I may need about 10,000 tonnes/day of 6000 Kcal coal. That means, monthly we need about 3 lakh tonnes, and annually, we need about 3.5 million tonnes at full capacity. Since we run the plant at 80% capacity, our coal requirement may be around that level.

The Indian power sector is saddled with a lot of problems. How strong are your financials?
In terms of our financial performance, we achieved PAT-positive (Profit After Tax) in 2015-16. Our EBITDA (Earnings Before Interest, Tax Depreciation And Amortisation) was at `533 crore. Slump in the coal prices significantly contributed to this, though that alone is not the full reason. Besides improvement in Q1 EBITDA during the current fiscal, the pointers are that we are on course for bettering this during the current year. Availability factor is at 83%. Gross generation 33% up compared to the corresponding quarter. GUVNL export is 36% up, that is, the off-take has improved by 36% Q on Q. Merchant export is up 9%. Auxiliary consumption is down by 3.9%. Revenues are up 30% in Q1 current as compared to the corresponding. Coal cost is down 12%. And EBITDA has improved by 80% Q on Q.

We are working aggressively on coal conveyor corridor from the port and seawater pipeline. We have all the clearances in place. The project construction is almost 65% complete and will be completed during this financial year. It will add straight away Rs.150 crore to my bottom line.

How much is your debt?
About Rs.4200 crore, and it is being serviced regularly.

What is the level of your auxiliary consumption and what is the necessity of using sea water?
We are amongst the top few power stations in the country with the lowest auxiliary consumption of 5.75%.

For three years in a row, we have been able to get rebate from GPCB, for judicious use of water. And our water consumption is much lower than the CERC prescription. We are a 100% fly ash disposal company and we are among the top 5 stations of more than 1000 megawatt which have 100% ash disposal rate. The Ministry of Environment gives four years time to achieve this. But we had achieved it in the year two. We actually offer the entire fly ash to cement manufacturers within the radius of about 200 kilometres.

We also follow a 100% zero discharge of water waste from the plant. This is becoming a norm for newer plants now, but we are already there.

How do your PPA and merchant pricing work out?
My PPA was at Rs.2.40 connected to the dollar. Dollar exchange rate is a pass through and in the current year, the tariff transits to about Rs3/kWh.

Last year, my merchant sale price was about Rs.3.20, which is much better. We have a merchant capacity of 120 MW, which is available for placement in the short term market, that is tied up with industrial consumers in Gujarat, including some special economic zones.

- BS Srinivasalu Reddy

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