Neyveli Lignite: A Powerful Story Re-told

After PTC, PFC, PGCIL is it the turn of Neyveli Lignite to raise massive resources through an Equity Offering to finance its proposed Rs 50,000 crore ($ 12.5 bn expansion)?
Opportunities & OutlookThe Power Sector is all set to grow at a faster pace with massive capacity additions in the next 10 years. The new and liberalized policy initiatives of the Government of India, are designed to welcome large scale new investments and new combines of entrepreneurship.

NLC has proven experience in lignite mining and power generation and has the required people with expertise to take up new power projects. Developments taking place in the coal and power sector do offer enormous growth opportunities for your Company to spread its wings outside Neyveli and Tamil Nadu.

NLC has submitted new project proposals, as outlined above, for the XI and XII Five Year Plan periods entailing an investment outlay of about Rs 50,000 crore. All the new projects are expected to have the latest technology, the lowest possible cost structure and the shortest time schedule. With due attention to cost, technology and environment parameters, the time ahead for your Company is promising and rewarding and I am sure, NLC can encash this opportunity

Performance Highlights 2006-07

Physical

The lignite production for the year 2006-07 was 210.14 Lakh Tonnes (LT) (previous year 204.35 LT) and the power generation was 15786.58 Million Units (MU) (previous year 16242.42 MU).

- The lignite production from Mine-I was 105.48 LI (previous year 102.72 LT). This was the highest production from Mine-I in any year since inception exceeding the installed capacity of 105 LT.

- The lignite production of 38.04 LT from Mine-IA during the year 2005-07 (previous year 37.35 LT) was the highest ever from this Mine since inception, and for the third year in succession, the production exceeded the installed capacity of 30 LT.

- The overburden removal from all the mines for the year 2006-07 was 1280.70 Lakh Cubic Metres (LM3) (previous year 1196.59 LM3) and the highest in any year since inception.- Thermal Power Station-I Expansion Plant achieved a Plant Load Factor (PLF) of 88.76% which is the highest since inception of this project and the PLF of this station has crossed the 80% mark for the 3rd successive year.

Financials

For the year 2006-07 your Company recorded a Sales turnover of Rs 2108.11 crore (previous year Rs 2201.41 crore). The profit before tax for the year ended March 31, 2007 was Rs 874.66 crore (previous year Rs 987.39 crore) while the net profit after tax was Rs 566.78 crore (previous year Rs 702.35 crore).

Performance in 2007-08

NLC has kept up its impressive performance in the first quarter of the current year. Overburden removal from Mine-IA, power generation from TPS-II and total power generation for the Company as a whole, achieved during the first quarter of the current year, were the highest for any quarter since inception. The lignite production during the first four months ended July 31, 2007 was 74.96 LT (corresponding period in the previous year 65.48 LT), recording an increase of 14.48%. Generation and export of power for the four months of the current financial year were 6499.17 MU and 5545.19 MU respectively as compared to 5266.23 MU and 4447.24 MU respectively recorded during the same period in the last financial year. The Company recorded a PLF of 89% in the first four months of the current year (corresponding period of previous year 72%).

During the current financial year 2007-08, for the four months ended July 31, 2007, your Company has recorded a sales turnover of Rs 1025.11 crore (corresponding period in the previous year Rs 850.78 crore).

The profit before tax for the four months ended July 31, 2007 was Rs 512.59 crore (corresponding period in the previous year Rs 404.73 crore) while the net profit after tax for the said period in the current year is Rs 346.58 crore as compared to Rs 293.22 crore, for the same period in the financial year 2006-07.

Expansion Programme

NLC has chalked out ambitious expansion plans for adding up its mining as well as power generation capacity. By the end of XII Plan, the lignite mining capacity has been proposed to be expanded to 61.9 MTPA (from 24 MTPA) and the power generation capacity to 11990 MW (from 2490 MW) at present.The proposed capacity addition will be from projects under implementation and through projects under formulation and I would like to dwelve briefly on these projects.

Projects Under Implementation:

a. Mine-II Expansion (10.5 MTPA to 15.0 MTPA) linked to Thermal Power Station-IT Expansion (1470 MW to 1970 MW)This mining project, now under implementation at a capital cost of Rs 2161.28 crore, is expected to attain full capacity by June 2009. The first overburden system is expected to be commissioned by December 2007 / January 2008. This lignite mine will be the fuel source for the Thermal Power Station-II Expansion Project, now under implementation at a capital cost of Rs 2030.78 crore

Erection of major inning equipments is in progress while erection of few of the major equipments have already been completed as per the project schedule. BHEL has been awarded the main plant package for the thermal project and orders have also been placed for other packages. Civil works are in progress for all packages. The first unit is scheduled to be commissioned by February 2009 and the second unit by June 2009.

b. Barsingsar Mine Project (2.1 MTPA) linked to Barsingsar Thermal Power Project (250 MW)The Barsingsar Mine Project is being implemented by your Company at a capital cost of Rs 254.07 crore. This mine is scheduled to attain full capacity by June 2009. The linked thermal power project which is also under implementation at Barsingsar, at a cost of Rs 1114.18 crore, is progressing well. The first unit of the power plant is expected to be commissioned at the end of December 2008 and the second unit by June 2009.The overburden removal at Barsingsar Mine Project till July 2007 was 41.65 LM3 against the target of 33.68 LM3. Civil works are in progress in respect of all packages. Turbine structural erection is in progress and lifting of boiler drum for Unit-I has been completed.Upon commissioning of the above projects, the total lignite mining capacity of your Company would increase from the present 24.0 MTPA to 30.6 MTPA and the power generation capacity from the present 2490 MW to 3240 MW

New Projects:

The projects under consideration by your Company are as under;a. Coal based Thermal Power Plant at Tuticorin (2x500 MW) As Members may be aware, your Company has entered into a Joint Venture Agreement with Tamil Nadu Electricity Board (TNEB) and floated the Joint Venture Company, NLC Tamil Nadu Power Ltd, for setting up of 1000 MW coal based thermal power plant at Tuticorin, in the State of Tamil Nadu, at an estimated cost of about Rs 4909.54 crore, for supply of power to Southern Regional States.

The Public Investment Board (PIB) has already considered the project for sanction by Government of India (GOI). Approval of the GOI for the project is expected shortly. The project is expected to be commissioned within 48 months from the date of approval by GOI.

b. Jayamkondam Mine (9 MTPA)-cum-Thermal Power Project (1000 MW)NLC has proposed to implement a lignite mine-cum-power project at Jayamkondam in the State of Tamil Nadu at a total estimated cost of Rs 6300 crore. Preparation of Feasibility Report and Environment study for both Mine and Thermal projects are in progress

C. Barsingsar Thermal Power Project Extension (250 MW) with linked Mine (2.1 MTPA) at Bithnok & Hadla in Rajasthan

NLC has proposed to set up a Mine-cum-Thermal Power project at Bithnok, at an estimated cost of Rs 1690 crore. Preparation of Mining plan and Mine project Feasibility Report are under process. Draft Feasibility Report for thermal power project, has been received and the same is under consideration. Preparation of feasibility report for Hadla block will be taken up separately in due course

d. Power Plant (500 MW) with linked Lignite Mine (4.2 MTPA) at Riri in RajasthanA power plant and lignite mine at Riri in the State of Rajasthan has also been proposed to be set up by your Company, at an estimated cost of Rs 3060 crore. Detailed exploration is being carried out by Mineral Exploration Corporation Ltd (MECL). Feasibility Report for the mine project is under preparation. After the completion of exploration by MECL, the Feasibility Report for the Thermal Power project will be prepared

e. Coal based Thermal Power Plant at Orissa (4x500 MW)A coal based power plant, at an estimated capital cost of Rs 8000 crore has been proposed by NLC to be set up at Orissa. The coal for this project will be supplied by Mahanadi Coalfields Ltd (MCL). Draft Feasibility Study and Environment Study have been received and the same are under consideration. A joint Venture Agreement with MCL and Hindalco has been executed for setting up a Joint Venture Company for mining coal from Talabira II & III blocks and your Company's share of coal mined by the JV Company will also be used for power generation.

f. Gujarat Power Project (1000 MW) with linked Lignite Mine (8 MTPA)NLC in joint venture with Gujarat Power Corporation Ltd has plans to set up a Mine project in the State of Gujarat, at an estimated cost of Rs 5640 crore Feasibility Reports for the mine and thermal power projects are under preparation. g. Mine-III (8 MIPA) & Thermal Power Station-III (2x500 MW) at Neyveli

With a view to bring down the lignite mining cost and making the project viable, your Company is exploring alternative liming technology for Mine III. Members may be aware, the US Trade and Development Agency (USTDA) has given a grant of US $ 360,000 for preparation of Feasibility Report for the mining project with alternative mining technology.

Preparation of Feasibility Report with alternative mining technology option has been entrusted to a Consultant and the final report is expelled shortly. The Feasibility Report for the Power project will be finalized after firming up the frame work for Feasibility Report for the Mine.

NLC is also co-ordinating with Northern Coal Fields Ltd, Central Coal Fields Ltd and South Eastern Coal Fields Ltd, the subsidiary Companies of Coal India Ltd, for setting up of coal mine / power projects, as Joint Ventures. In addition to the above projects planned, NLC also intends to develop Underground Coal Gasification (UCG) projects, in order to tap deep seated as well as the shallow lignite deposits which are not amenable to conventional mining. For this purpose an agreement has been entered into with ONGC and suitable lignite blocks have also been identified for development of this project