MUMBAI: Essar Energy’s bidding price for the Tokisud coal block in Jharkhand was part of a Rs 7,600-crore investment in the power to protect its sector, according to a top company executive.
The Essar group company’s Rs 1,110-per-tonne bid, the highest by a power company, helped it win the coal block in the recent government auction, but it also drew criticism from industry experts and rating agencies for being too aggressive.
Rating agencies Crisil, ICRA and Macquarie Research have questioned the ability of power firms to report profits after submitting aggressive negative bids in order to win coal mines. Sushil Maroo, CEO of Essar Energy, told ET that it was essential for the company to secure fuel for its 1,200-MW Mahan power plant in MP which is lying idle.
While 600 MW of the plant has been ready for commercial operation since last year, another 600 MW will become operational in the next two months, he said.
“All this criticism is only optical illusion. If you look at a cost benefit analysis, given that the Tokisud mine is almost ready to produce and the first coal can come from April-May this year, which can immediately be sent to our Mahan power plant and make it commercially operational, then the bid cost is justified,” Maroo said. “Also, the comfort this gives our lenders, as the plant is largely debt financed, is immense, which is why they whole-heartedly supported us, since now we can actively move to sign power purchase agreements and actually monetise this investment. We will also be finalising a contractor who will develop this mine for us very soon.”
Maroo also cited high calorific value of coal, low mining cost, rail connectivity and low stripping ratio present in the Tokisud coal block as positives that fitted with the firm’s strategy, as the block promises to nullify the negative long-term financial impact of depending on the Mahan coal block to fuel the power plant, as the environment ministry has sought to take Mahan off the coal auction list.
