Mumbai, July 18: Hindustan Petroleum Corporation (HPCL) will soon invite bids from multinationals to pick up a stake in its Rs 2,300-crore power project being set up in Visakhapatnam, Andhra Pradesh.

The 500-MW plant is jointly promoted by HPCL and the Andhra Pradesh State Electricity Board (APSEB). The company has recently signed a memorandum of understanding with the board to set up a joint venture company to implement the project.

While HPCL will hold 26 per cent, APSEB's stake will be confined to 24 per cent. The foreign partner can subscribe up to 15 per cent in the project, sources said. The balance will be raised from the financial institutions and public. The quantum of public subscription will be finalised only after the foreign partner is identified. The project will have a debt-equity ratio of 70:30, sources added. The company will soon invite tenders solely from overseas companies. Besides financial capability, they should have the technology to operate integrated gassification combined cycle (IGCC) power plants.

The second of its kind in the country, the power plant will supply electricity to a group of consumers who, in this case, are high-tension users like private industrial units and government organisations.

The list includes Bharat Dynamics, Hindustan Shipyards, Essar Industries, Coromandal Fertilizers, Andhra Cements and Sugar Industries. However, the onus of identifying clients and bringing them on one platform to purchase power from the new company is largely left to APSEB.

After selecting the consumers, the new company will have to negotiate the tariff payable. Observers say that this will not be difficult given the power scenario in Andhra Pradesh. The power company will not have to sign a power purchase agreement with APSEB but with the final buyer. The joint venture has good prospects since the clientele includes bulk consumers. So long as supply is assured, price will not be a constraint, sources say. The financial loss arising from shortage of power would be larger than the outgo on electricity charges, they added.

The arrangement to supply power to a set of consumers through the state grid is possible in Andhra Pradesh which is the only state to have allowed `third party sale of electricity'.

The IGCC power station will use heavy fuel oil which will be sourced from HPCL's refinery. The plant is a logical sequence to the refining major's plan of diversifying into related activities. The project cost has gone up significantly from the originally planned Rs 1,865 crore almost two years ago.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.