August 28, 2008

TN approves plans to set up cogeneration power projects

BL reported that Tamil Nadu government has cleared an INR 865 crore plan to set up over 185 MW of cogeneration power plants in the cooperative and public sector sugar mills.

Tamil Nadu Electricity Board will establish the power plants jointly with the state sugar department, which runs the 15 cooperative sugar mills and the 2 public sector mills in the state. The mills will lease the land available with them to TNEB to implement the project.

TNEB will raise a 13 year loan from the Rural Electrification Corporation Limited covering about 80% to 90% of the project cost. The members in the cooperatives will bring in 10% and the balance would be in the form of equity from the government. The sugar mills will run the cogeneration facilities, which will power the mills and the surplus power will be exported to the state grid.

TNEB would pay the sugar mills the power tariff at rates fixed by the Tamil Nadu Electricity Commission after deducting the loan repayment due to the REC. The cogeneration plants would be transferred to the mills after the entire loan is paid off.

TNEB pays INR 3.15 a unit to buy the power from cogeneration units. On an average cogeneration units earn about INR 5 million for every MW of power annually. According to official sources, this was in line with the state government’s decision to set up ethanol plants and cogeneration facilities in the cooperative sector sugar mills. The objective is to add value and augment income to the mills.

TNEB’s involvement in the project, which is structured as build lease operate transfer, will help the raise funds at competitive rates. The cooperative mills which are cash strapped do not have the financial capacity. The proposal to set up the distilleries for ethanol production is also on.