Korea Western Power Co. (KOWEPO) strives to make its mark by successfully undertaking the 388MW gas-based combined cycle power plant project in the MIDC Industrial Complex in Vile Bhagad, Maharashtra, India. 

The $270 million project calls for building the combined cycle power plant and operating it for 25 years. KOWEPO has a 40 percent stake in the project with the remaining 60 percent help by the local developer, Pioneer Power-Infra Ltd. (PPIL). The special purpose company, Pioneer Gas Power Ltd. (PGPL), has already been established, and KOWEPO will acquire a 40 percent interest in PGPL over two stages. 

KOWEPO said 25 percent of the $270 million the project will cost will be funded through equities and the remaining 75 percent will be funded through project financing managed by the Industrial Finance Corporation of India (IFCI).

TATA Projects, a subsidiary of the TATA Group, has been selected for the engineering, procurement, and construction (EPC) portion of the project. The plant will have a composition of 1:1 with a 259MW gas turbine and a 129MW steam turbine, to be supplied by GE and Doosan Heavy Industries & Construction, respectively. Construction is to be completed by the end of 2013 in 24 months. PGPL will be responsible for operation & maintenance (O&M) of the plant, and KOWEPO will take charge of O&M under a technology stewardship agreement (TSA), which the Korean power company will sign with the project company. GAIL, a natural gas processing and distribution company in India, will supply gas to the plant, while the electricity generated by the plant will be sold to nearby big power consumers, such as POSCO, via exclusive power lines.  

The project dated back to June 2011 when DSME, with which KOWEPO signed an MOU for overseas power project collaboration, proposed their participation in the project. DSME, which wanted to be responsible for EPC, took a pass due to its proposed limited role after conducting a field study, but KOWEPO accepted the project. 

Unlike the existing overseas projects that started from the planning stage, the project began to cruise by the time KOWEPO reached an MOU on the project in October 2011 with PPIL, which had already made much progress in such areas as site procurement, licenses and permits, and EPC selection. Following intensive feasibility and risk evaluations, the project received the green light from KOWEPO’s board of directors last December. The two companies finally reached a deal and held a ground-breaking ceremony last Dec. 31.

OPPORTUNITIES AND RISKS 

India ranked 5th in the world in terms of power generation capacity at 186GW as of the end of 2011. The country is faced with a more than 10 percent electricity shortage caused by the growth of the economy and population. In particular, the shortage of supply in the state of Maharashtra, one of India’s economic and industrial centers, ranges from 19 percent to 27 percent during peak load hours. The Indian power generation market has a huge potential market, as the Indian government is expected to expand power facilities by 103GW in accordance with its 12th five-year power development plan between 2012 and 2016. But the market is considered to have high risks, given the fact that the expansion rate under the 8th power development plan stood at a mere 50 percent, coupled with pesky site procurement, environmental and other administrative red tape. Fortunately, the project has more favorable business conditions, such as its placement in the industrial complex and the possible preferred supply of gas, KOWEPO officials said. 

KOWEPO plans to dispatch a project manager in charge of the operation of the plant and a chief financial officer to make it complete in December 2013 as planned to ensure the systematic management of the project. The company expects to earn 120 billion won in average annual sales for its share of the 25-year O&M of the plant. KOWEPO expects to raise additional revenues on follow-up projects. 

The Korean power company has set its sights on making the plant a platform for it to make inroads into foreign power markets by capitalizing on the experiences and expertise its dispatched manpower will accumulate. KOWEPO expects the project to contribute to realizing its business goal, dubbed “KOWEPO Vision 2020: Triple Sales, Higher Sustainability.”