New Delhi: Neyveli Lignite Corp plans to add 750 mw power capacity and 6.6 million tonne (mt) of lignite mining capacity by September 2009, director (finance) J N Prasanna Kumar said on Thursday.

The state-controlled company will invest Rs 6,630 crore in the projects being set up at Neyveli, Tamil Nadu, and Birsingsar in Rajasthan. It will invest Rs 2,700 crore in the current year ending March 2009.

“In Neyveli,we are setting up a 500 mw power unit and mine capacity of 4.5 mt. In Rajasthan, we will have a 250 mw power and 2.1 mt lignite production,” Kumar said.

The company currently has a power capacity of 2,490 mw and lignite mining capacity of 24 mt per year.

Neyveli will raise debt to meet 70% of the expansion cost, and has tied up a significant amount of debt.

“We have tied up Rs 2,500 crore debt with Canara Bank and Rs 250 crore worth of euro debt with Calyon,” Kumar said.

“We will decide about raising around Rs 1,800 crore in a day or two,” he said.

Shares of the company slid after the news, reflecting investors’ concern over large debt the company will take on its books. They closed at Rs 116.55 on the National Stock Exchange, down 4.4% from the previous close.

Besides the two projects in Neyveli and Birsingsar, the company has lined up a series of other projects, and is likely to soon start tying up funds for them, Kumar said.

A project in Tuticorin, Tamil Nadu, is planned to produce 1,000 mw power,while two other projects in Rajasthan will add 750 mw power capacity and 2.5 mt lignite mining.

“We are considering some other projects also in Madhya Pradesh and Jharkhand. But they are in a preliminary stage,” Kumar said.

Tamil Nadu and Pondicherry account for 82% of India’s total lignite reserves of 38.8 billion tonne, while Rajasthan and Gujarat follow with 11% and 7% share, respectively.

A very small portion of these reserves have been tapped, leaving a large scope for expansion for companies such as Neyveli Lignite.

Lignite, often called brown coal, is cheaper than coal and is seen as a growing alternative for thermal power generation in the country. It also makes Neyveli Lignite the lowest-cost power generating company in India.

Thermal coal prices have shot up over 100% to $130 per tonne on growing demand from China and rise in crude prices, which has led to increased freight costs.

“Captive source of feedstock and depreciated plants allow Neyveli Lignite to supply power at the lowest tariffs, thereby mitigating the risk of substitution of NLC’s power with alternative sources of power,” Enam Securities said in a report.

Kumar said the full expansion programme, much of which is still on the drawing board, is likely to add 46.3 mt per annum of lignite capacity and 8,750 mw of power.

Source : DNA