?We?re interested in acquiring coal companies & assets abroad?

Tamil Nadu-based central PSE, Neyveli Lignite Corporation Ltd (NLC), is an integrated power company that produces both fuel (lignite) and power. NLC has three opencast mines to produce 24 million tonnes of lignite and three pithead thermal stations with a combined capacity of 2,490 mw. NLC has projects underway to add 2000 mw of power generation capacity during the 11th Plan and another 1,000 mw in the 12th plan. Its mining plans aim at raising capacity to 32 million tonnes by the end of the12th Plan. With its corporate identity and leveraging the freedom as mini-ratna PSU, NLC plans to spread its wings to be a major player in the national power generation scene. In an interview to FE’s Joseph Vackayil, AR Ansari, chairman & managing director of NLC, spells out the company?s plans. Excerpts:

NLC apparently wants to move ?beyond Neyveli and beyond lignite.? Tell us about your massive investment plans that mark a predilection for diversification.

It is true that NLC is going beyond lignite and beyond Neyveli, even beyond Tamil Nadu. It wants to go abroad also. We have lined up several projects in the country involving a projected investment of Rs 53,200 crore. To be specific, I should categorise them as projects under implementation and under formulation in and near Neyveli in Tamil Nadu and in other states. In Neyveli, mine-II is being expanded by 4.5 million tonnes, from 10.5 million tonne, and the capacity of the thermal power station -II is increased by 1,000 mw (500×2) .

The Lignite-based mine and power projects in other states under implementation are the 2.10 million tonne-capacity mine and 250 mw (125×2) capacity thermal power project at Barsingsar, Rajasthan.

Six projects are under formulation in Rajasthan and Gujarat, where there is considerable quantity of lignite reserves. They are the expansion of the Barsingsar thermal power station by 250 mw, a 2.25 million tonne mine and 500 mw (250×2) mw power project at Bithnok ( Rajasthan) and an 8 million tonne capacity mine and 1,000 mw (250×4) power project in south Gujarat.

As part of its beyond lignite programme, NLC is implementing as a joint venture with the Tamil Nadu Electricity Board (TNEB) a coal-based 1,000 mw ( 500×2) thermal power project at Tuticorn in Tamil Nau. NLC, along with Mahanadi Coalfields and Hindalco Industries, is floating a joint venture company for Talabira II and III coal blocks. The proposed JV intends to mine around 20 million tonnes of coal a year.

In order to raise money for all these projects , NLC will go for a debt: equity ratio of 70:30. The debt portion will be raised from financial institutions, banks and market borrowings. Equity will be derived out of company’s internal resources.

All major power producers in the world are diversifying into renewable energy-based projects. Has NLC got any plan in this direction?

NLC’s board had accorded in-principle approval for venturing into wind power projects subject to the approval of the ministry of coal and other statutory and administrative approvals as may be required. The coal ministry has accorded the in-principle approval. The initial plan is to go for a 50 mw wind farm power project in Tamil Nadu. The feasibility report is ready. Tender document preparation is in process to fix up a vendor. Based on the success of this project, NLC will expand further. NLC is also exploring the possibilities of venturing into hydropower projects, though no specific project has been identified.

NLC has floated NLC Videsh Limited, mainly to acquire coal mines abroad and import coal. Has the company made any acquisition so far?

The NLC board has approved the proposal for forming a separate subsidiary company called NLC Videsh Ltd to acquire coal blocks or even an existing coal company abroad. We also have the option of strategic equity partnership in an existing foreign mining company. These are, however, subject to the approval of the ministry of coal. The proposal was sent to the ministry for approval, which has informed us that NLC should utilise the services of coal India Ltd to meet its coal requirements.

As a major player in power generation, what are NLC’s plans to deal with the poposed reform for market economy in power generation and marketing?

Presently, tariff for NLC power stations is regulated by the Central Electricity Regulatory Commission. Power sale in future would be through a transparent competitive bidding mechanism. The National Electricity Policy recognises that competition will bring significant benefits to consumers, in which case, it is competition which will determine the price. The idea is to shift to market-determined pricing from the present cost-plus method.

The Tariff Policy also mandates procurement of power by distribution licensees through tariff-based competitive bidding.

For the public sector players also, all new generation should be decided on the basis of competitive bidding from January 2011 or when the regulatory commission is satisfied that the situation is ripe to introduce such competition. As per this policy, NLC should participate in competitive bidding process for contracting the sale of power for the newer plants from 2011 onwards. There is a risk of increased competition and NLC needs to prepare itself for that.

NLC is a likely candidate for disinvestment. When will the company hit the market?

The government will have to take a call on this.

Will labour unrest affect NLC’s growth plans?

In general, industrial relation is cordial in NLC. The occasional labour unrest here will not affect NLC’s growth plans.