Pvt cos keen on hydel projects

Hydel power could well emerge as a winner in a country where power stations run on fossil fuel. Private sector interest in hydel power has grown and several new projects are underway. Almost 6,500 MW of hydel power capacity has been added in the past five years - almost double the thermal power capacity commissioned in the same period.

Many of the thermal power projects commissioned in the past few years are liquid (naphtha) or natural gas fuelled plants. Prices of these fuels have shot up over the past two years - mirroring the rise in crude oil prices and cost of power from such projects is currently in the range of Rs 7-8/unit.

In contrast, while hydel projects have a high capital cost, there is no fuel cost involved and hence little risk of escalation in cost. Unlike coal or gas-based power plants, hydel projects don’t face fuel shortage or fluctuations in price. Most of the large construction companies are moving into hydel power as project developers - since hydel projects involve large construction projects as well.

Jaiprakash Associates has already commissioned a 300 MW plant and is close to completing another 400 MW hydel project. Among the major construction companies, L&T, Gammon and Nagarjuna Construction are developing hydel projects. Patel Engineering, a construction company involved with dams, also proposes to take up projects as a developer.

These projects are attractive for construction companies because of their large size and high margins. Margins on hydel projects can be as high as 20%, against margins of 7-10% for road projects. The government proposes to set up 50,000 MW of fresh hydel power capacity over the next 15-20 years., about 1.5 times the current installed capacity of 32,000 MW.

The estimated investment required for this kind of capacity is in the range of Rs 2 lakh crore. The ministry of power has identified around 162 projects spread across 16 states through out India.