Essar Power Limited, a subsidiary of Essar Energy plc [LSE: ESSR], the India-focused integrated energy company, on Wednesday announced that the 600 megawatt (MW) unit 1 of its 1,200MW Mahan I power project has been synchronised with the transmission grid and has commenced generating power.
Mahan I, in Madhya Pradesh state, India, is Essar Power's eighth operational power plant, taking it to 3,910MW of generation capacity, compared with 1,220MW at the time of the company's IPO in May 2010.
This 600 mw capacity is the largest size single unit commissioned in Madhya Pradesh.
The Mahan I plant begins operations using a combination of imported coal and coal sourced from Coal India's e-auction process, while an application has also been made for an interim tapering coal linkage allocation from Coal India.
Coal from these sources will be required until Essar Power's nearby Mahan coal block is operational.
Essar Power received stage 1 forest clearance for the Mahan coal block at the end of October.
Naresh Nayyar, the chief executive officer of Essar Energy, said: "The commissioning of the first unit at Mahan is another major milestone for Essar Energy and means we have now more than tripled our generation capacity over the past couple of years.
"Our focus now is on the development of the Mahan coal block which will provide a low cost fuel source for the power plant, placing it among the lowest cost power generators in India."
Unit 2 at Mahan I, also of 600MW, is expected to begin commercial operations during the first quarter of the next financial year 2013-14.
The Mahan I project represents a US$1.2 billion investment by Essar Power. It is the company's third coal-fired power project to enter commercial operations during 2012, with a total capacity of 2,310MW.
The Salaya I plant, also 1,200MW, was completed in June while the 510MW Vadinar P2 plant, completed in November, is providing power for Essar Oil's Vadinar refinery, where the availability of coal-fired generation is having a positive impact on refining margins.
The Salaya and Mahan plant will sell the majority of their output to state electricity boards.
The other six operational power plant are captive projects, supplying power to other Essar businesses and delivering secure revenues and EBITDA with the majority of payments based on availability, rather than on power generated, while fuel price and delivery risk lies with the power purchaser.
The captive plant, totalling 2,110MW, comprises Hazira (515MW, gas-fired) and Bhander (500MW, gas-fired) supplying the Essar Steel plant at Hazira, while Vadinar (120MW, refinery residue, multi-fuel), Vadinar P1 (380MW, gas-fired) and Vadinar P2 (510MW, coal-fired) are captive to the Essar Oil refinery at Vadinar.
The other, Algoma (85MW, gas-fired), is captive to the Essar Steel plant at Algoma, Canada.