China power giant inks $2.4 billion India project

HONG KONG/NEW DELHI Fri Apr 13, 2012 3:01am EDT

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HONG KONG/NEW DELHI (Reuters) - Power Construction Corporation of China said on Friday it had signed a $2.4 billion contract to build the second phase of a massive coal-fired power complex in southern India that will help meet soaring local demand for electricity.

The second phase of the project for India's Infrastructure Leasing & Financial Services Limited (IL&FS) will include the addition of four generators each with a capacity of 660 megawatts (MW), the Chinese group said on its website.

The deal is an EPC contract, meaning Power Construction Corp will be responsible for engineering, procurement and construction. It said the project will create more than 10,000 jobs in India and use power equipment made in China.

China has been playing an active role in power project construction overseas, particularly in developing countries, taking advantage of state financing as well as experience and technology acquired through three decades of economic boom.

Power Construction Corp, a sprawling enterprise under the direct supervision of China's central government, was created through a state-dictated merger of dozens of domestic survey and design institutions, power construction companies and equipment manufacturers.

The group, with total assets of 196 billion yuan ($31 billion) and 200,000 employees at the end of 2010, said it generated total profits of 6.47 billion yuan on revenue of 160 billion in 2010.

It says its strategy is to "become a world famous corporation with strong international competitiveness... capable of providing full-round and one-stop service in clean energy sector and water resources development and construction."

INDIA COAL SHORTAGE

IL&FS said it would import coal from Indonesia, Australia and South Africa to fuel the plant, the first phase of which included two generators each with capacity of 600 MW. It has acquired a mine in Indonesia to supply the generators.

IL&FS plans to sell the power from the project to state-run distribution companies on a long-term basis as well as in the open market.

Coal fuels more than half of India's power capacity of 191,000 MW and will be required for 85 percent of the 76,000 MW additional capacity targeted to be added in the next five years.

About 9,000 megawatts, nearly 10 percent of India's total coal-fired generating capacity, became unviable last year after Indonesia changed rules on coal prices. These plants have long-term agreements to sell power to states and no flexibility to pass on increased costs.

Slow environmental clearances and land acquisition have led to stagnating coal output in the country and have increased dependence on imports. Coal India (COAL.NS), which accounts for 80 percent of India's coal output, produced about 436 million tonnes in 2011/12, missing a scaled-down target. ($1 = 6.3073 Chinese yuan)

(Reporting by Charlie Zhu and Sanjeev Choudhary; Editing by Eric Meijer.)

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