The Mundra project of Tata Power is critical in more ways than one. The Rs170-billion, 4,000MW initiative in coastal Gujarat is India’s first ultra mega power project (UMPP) and the first to have large-capacity (800MW) ‘supercritical’ units. When commissioned, this project will more than double Tata Power’s current installed capacity of 3,682MW. What makes this project critical, besides its huge capacity, is the supercritical bit.

 

A supercritical power plant uses a boiler or turbine system that operates at 1,075°F; subcritical, or conventional, plants operate at 850°F. In simple terms, this makes the supercritical plant more efficient that its conventional cousin and cleaner, too.

 

That aside, the Mundra project will have far-reaching consequences in meeting India’s power needs. This was the first of a clutch of UMPP projects cleared by the Indian government as part of its ambitious ‘power for all’ initiative, which is focused on finding solutions that address the acute power shortage the country faces. These coal-based, supercritical UMPPs, each with a capacity of about 4,000MW, are being set up through public-private partnerships on build-own-and-operate contracts.

 

The Mundra project has been quickest off the block. Less than five years after Coastal Gujarat Power (CGPL), the wholly-owned subsidiary of Tata Power that is responsible for the project, concluded power purchase agreements (PPAs) with procurers — electricity boards of the states of Gujarat, Maharashtra, Punjab, Haryana and Rajasthan — the project is getting its final touches.

 

By January this year, two of the five 800MW units that make up the project were about 98 percent complete, and one of the units had already been synchronised to the grid. The rest of the units are expected to come up for synchronisation within four-six months of one other, and the entire project could be up and running by the first half of 2013.

 

“Mundra is India’s first UMPP and it has many other firsts to its credit,” says Tata Power managing director Anil Sardana, “most notably that it is the first to have brought 800MW-sized supercritical units to the country.” Adds Alok Kanagat, the executive director of CGPL, “The year 2011 was remarkable for us, with the project achieving a milestone every three-four weeks.”

 

For Tata Power and CGPL, Mundra has been an incredible journey. With no experience in building either a greenfield UMPP or executing a project based on supercritical technology, it was a learning process from day one. There was no precedent in the country from which to learn, India having joined the supercritical bandwagon a good three decades after the rest of the world had.

 

“On the bright side, we had access to the lessons from supercritical projects in other countries,” says Mr Kanagat. “The technology itself has become more refined over the past 30 years.”

 

Finding the right resources — human and technological — was a big part of the Mundra story. Tata Power picked South Korean major Doosan to supply the boilers for the project and Toshiba from Japan for the turbines. The human factor was a bigger challenge.

 

Starting with a bunch of just 10 Tata Power employees, CGPL soon built, trained and integrated a 500-strong team, hired laterally from other organisations and spanning all functions. “It was like building the ship and sailing on it at the same time,” recalls Mr Kanagat.

 

Tying up the finances for the project was another important milestone for Mundra. After the Enron-Dabhol fiasco, international financing companies became wary of investing in India’s power sector. Mundra was the first major power project in India since Dabhol to get international financing, and it saw the likes of the Asian Development Bank and the International Finance Corporation “gingerly taking their first steps back into the country’s energy sector”, as
Mr Kanagat puts it.

 

“The project achieved financial closure in record time — within a year of signing the PPAs. It is widely regarded in the industry as one of the best financial packages put together in such short time for a project of this size,” adds Mr Kanagat.

 

Even as Tata Power and CGPL pulled out all stops to advance the schedule in terms of project execution, the coal-pricing dynamics of the project began to go awry with the changes in regulatory norms. The project, designed to be fired entirely by imported Indonesian coal, saw the first signs of trouble when Indonesia, the largest exporter of coal worldwide, changed its coal export pricing formula last year, deciding to benchmark prices to international rates rather than sell at negotiated prices, as it did previously.

 

The coal-pricing situation affects not just Tata Power but the entire industry, which is now in talks with the government to find a solution to the added burden. “The pricing issue is hitting Tata Power first because we are at the head of the queue in such projects,” says Mr Kanagat. “The other players are taking a wait-and-watch approach as the situation is fluid at the moment.”

 

Pricing pressure

As Mr Kanagat explains, the pricing pressure is a matter of concern for the entire industry. “Buyers of imported coal cannot compete with those depending on domestic coal at these levels,” he points out. “The government needs to work out a suitable compensation model that will encourage private developers to participate enthusiastically in the capacity addition of the country.”

 

Meanwhile, the team at Mundra is looking to mitigate the impact of the pricing problem, including the use of a mix of low-grade coals and imported coal to bring down costs. “We will also see how we can push performance of the UMPP without making any changes to the design,” says Mr Kanagat.

 

After the excitement of executing the most crucial part of the project, the Mundra team is now preparing to take on the challenges that will come up in the days ahead. “Yes, there are big challenges. But we have overcome so many along the way that we are confident we will overcome these, too,” sums up
Mr Kanagat.