The Jindals are in the process of selecting an international power major to replace Tractebel which will pick up the balance stake. PowerGen is believed to be ahead of others in the race and a final decision is expected to be taken soon.

Jindal Tractebel Power Company, the 2x130mw project, is a 50:50 joint venture. JVSL managing director Sajjan Jindal told The Financial Express, "After having an experience of being in an equal joint venture, we would now like to stay as a majority partner to avoid any future conflict."

According to Jindal, the basic advantage has been the entire reworking of the power purchase agreement (PPA) signed by Jindal Tractabel with JVSL.

The future arrangement is worked out in a manner to reduce the return on equity from approximately 40 per cent to 20 per cent. The IRR that is being offered to theforeign players is also down from 20 per cent to 10 per cent.

The advantage of buying a ready powerplant and assured offtake has reduced the entire project risk for the company, which has made the propoasls very attractive even at the lower IRR.

According to the present arrangement, the power plant would be supplying power to JVSL plant at Rs 2.60 per unit. There is an arrangement for a 5 per cent annual rise in tarriff.

The power plant would be using a mix of corex gas produced from the corex-module and coal fines alternatively to produce the desired power. At full stabilisation, the plant-fuel requirement would be met evenly by fuel gas as well as coal fines.

Value for corex gas to be supplied as fuel is linked to its calorific value and the corresponding price of equivalent coal in international markets. This would ensure that there is hardly much variation in the tarriff charges. Company officials explained that coal prices are not as volatile as oil prices and hence the fuel cost, which isbasically a pass-through expenditure, would remain under control.