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Raghu Mohan
Mumbai, Sept 3: Here is a new twist to Essar-Marathon power deal. With Gujarat Electricity Board (GEB) strongly objecting to Marathon's agreement of selling power to Essar Steel at lower than grid rate, the Ruias are having a second thought of selling the entire 100 per cent stake in Essar Power, announced last Tuesday, to Marathon, said persons in the know-of-the-deal.
Ruias, say sources, may team up with Marathon Power Company to ensure power-supply to Essar Steel at less than grid rate. Ruias may hold a minority stake instead of selling out 100 per cent stake in Essar Power.
It has been learnt that while both Marathon Power, and the Essar group would like the status quo on concessional power supply to Essar Steel to continue, this "ideal" situation may not materialise going by the GEB objection for third party power sale.
Section 43 AI(C) of the Electricity Act allows a generating company to enter into power-sale contract with any entity, but is explicit that the consent of the concerned stategovernment body be secured. The 515 mw naphtha-fired Essar Power unit currently supplies 300 mw to the state-grid with 215 mw going towards the captive consumption by Essar Steel.
The settlement of the issue now rests on the exploration of three options, all with their pros and cons. They include:
a) GEB goes along with the existing arrangement, but thereby opening up similar demands from other captive producers (CPPs) in the state. The generation capacity of CPPs in the state is estimated at 2,512 mw with the generated at 1,500 mw.
b) Essar Power, post 100 per cent acquisition by Marathon Power sells the entire 515 mw to the state-grid with Essar Steel, in turn, entering into a separate power purchase agreement to buy power with GEB. This would, however, impact on the concessional power supply factor to Esasr Steel, or
c) The Essar group holds a strategic stake in Essar Power via Essar Steel and/or Essar Oil or an SPV. Mauritius-based Prime Hazira, which holds a 49 per cent stake in Essar Poweris for all purposes out of the Essar group fold. Marathon Power, in such a scenerio, may have to take a view on the benefits a strategic alliance with Essar would provide, other than the element of concessional sale of power to Essar Steel.
It now appears imperative that the Essar group holds a strategic stake in Essar Power going by Marathon Power's director-business development Timothy H Nesler's statement to The Financial Express that "Marathon has agreed to sell power to Essar Steel at a concessional rate for a period of 20 years".
Nesler's statement is in line with the power purchase agreement as its exists now.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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