Torrent Energy Limited (Dahej)

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In May 2008, the Oil and Natural Gas Corporation (ONGC),signed a MoU with Torrent Power Limited to supply 350-400MW power to the Dahej SEZ in the State of Gujarat. Torrent Energy, 100% subsidiary of Torrent Power Limited, agreed to set up a gas-based power plant at Dahej Special Economic Zone (DSEZ). The project involved the development of a 1200 MW (3 X 400 MW) of gas-based combined cycle power plant and associated distribution infrastructure at Dahej SEZ. The Project was proposed to operate on Domestic gas/R-LNG. Torrent Power Limited established Torrent Energy Limited (TEL), a special purpose vehicle, to execute this gas based power project. TEL had been designated as the co-developer of Dahej Special Economic Zone (SEZ) for establishment of generation project and distribution infrastructure.TEL after obtaining its distribution license has commenced the distribution activities in the SEZ with effect from 4th April, 2010. Environmental clearance had been received from MoEF for 2 units and the Terms of Reference for other unit had been approved. EPC implementation was in progress. Non-EPC work has commenced and raw water reservoir and road/drains were nearing completion. Connectivity and Long Term Open Access for 1,200 MW had been granted by the Central Transmission Utility. The Gas requirement at 70% Plant Load factor was 4.48 MMSCMD. Details of Fuel supply agreement couldnot be ascertained at the time of collection of this information, although it may be expected that both domestic gas as well as imported LNG would be sourced with the SEZ promoter ONGC. The power generated from the 1200 MW power plant was expected to be sold to the Dahej SEZ, including the Petrochemical complex being set up by ONGC Petro-additions Ltd (350-400MW to OPaL). Apart from this, the project was expected to meet 387 MW additional demand of Ahmedabad and Surat distribution. Offtake for the remaining 413MW could not be ascertained at the time of collection of this information. The power purchase agreement for the project had not been ratified by the regulator at the time of collection of this information. The state regulator noted that, while, there was no bar in the Electricity Act, 2003 on the distribution licensee to establish their own generating station, the MOU had been executed between Torrent Energy Limited (TEL-D) and Torrent Energy Limited (DGEN) which were two divisions of the same entity. Hence, it was not a valid long-term power purchase agreement as the same was not enforceable in case of default by any division of the same entity. As such, the MOU in present form couldnot be approved.Torrent Energy Limited was directed by the State Regulatory commission to approach the central regulator for adoption of the Tariff for procurement of power from its own generation unit for the Dahej SEZ usage. In July 2010, a fixed-price, fixed-time turnkey EPC contract, was awarded through an international competitive bidding process to Siemens of Germany. TEL clarified that they ensured the competitiveness of the project cost by identifying the EPC Contractors through International Competitive Bidding (ICB) process. The reasonableness of the cost would also be verified by the Centre Electricity Regulatory Commission (CERC) as part of its tariff determination process in accordance with the CERC (Terms & Conditions of tariff) Regulations,2009. The project cost was estimated to be approximately USD 1251.7mn (INR 56328.7mn @45 INR/USD). Financial close took place on 21st May 2011 at a Debt/Equity ratio of 70/30. Torrent Power financed this project through an equity contribution of USD 375.5 million (INR 16898.7 @45 INR/USD) and a 14 year term loan of USD 876.2 million (INR 39430mn @45 INR/USD). The debt was arranged by SBI Capital and attracted four lenders, Bank of Baroda, IDFC, PNB and State Bank of India. Repayments will be in 44 equal quarterly instalments commencing 11 months from COD. The construction started in September 2010 and is to be compl