The government-owned hydro-power company, NHPC, which launches its IPO on Friday, has brought down estimated project costs with the fall in steel and cement prices. NHPC plans to add 4,292 mw through 10 projects during the 11th Plan period ending 2012, for which it had budgeted an outlay of Rs 25,000 crore.
But then early last year, steel and cement prices reached abnormal levels, so much so that after the first quarter of 2008-09, the NHPC board considered either reviewing the entire investment plan or putting the projects on hold. Project contractors were demanding 40% hike against 7-8% allowed per quarter in escalation clause. Then, after the downturn, prices started to cool down.
Corporate project management group (CPMG), NHPC, executive director SC Gupta told FE NHPC made downward revision of its project cost in December 2008 and March 2009. Steel, cement and fuel account for 66% of a typical NHPC project. ?With prices of all these commodities coming down, the company feels it can complete all the projects to add 4,292 mw by 2012 within the estimated outlay of Rs 25,000 crore.?
According to the company executive director (finance) RK Taneja, to produce 1 mw of hydro power, you need Rs 4.5-5 crore. Steel is the most critical component in a hydro-power project with around 35 tonne of seismic construction steel required for every megawatt of capacity installed. When the price touched Rs 68,000 per tonne during June 2008 from a level of Rs 25,000-30,000 per tonne in 2007-08, NHPC project managers were worried. At that price point, the company would have required an additional Rs 650 crore only to purchase steel for implementing the 4,292 mw capacity addition.
However, economic slowdown led to steel prices being slashed by over 50% and cement prices by around 12-14%. With steel prices currently stabilising at Rs 30,000 per tonne and cement prices likely to stabilise at Rs 190-200 a bag from a level of Rs 235-240 a bag, NHPC might not have to change project costs in the coming quarters. However, as a routine affair the company will revise project cost every quarter, Taneja said.
He said the agitation in Darjeeling for a separate Gorkhaland, which made transporting material difficult to the 132 mw Teesta Low Dam-3 and 160 mw Teesta Low Dam-4 project, has eased now.
Apart from the Teesta Low Dam projects in West Bengal, are the 240 mw UN-2, 120 mw Sewa-2, 45 mw Nimmo Bazgo, and 44 mw Chutak projects in Jammu & Kashmir. In Himachal Pradesh, NHPC is implementing 800 mw Parbati-2, 520 mw Parbati-3 and 231 mw Chamera-3. In Assam, it is implementing the 2000 mw Subansiri lower project, which is the biggest hydroelectric project taken up in India.