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MAR 17 2017

Old thermal power plants offer new business opportunity in dismantling

  • Economic Times, ET Bureau / Hyderabad
  • Created: Fri 17th MAR 2017

 

India's ageing thermal power plants could mean good times for companies in the dismantling business.

About half of the country's thermal power plants—which collectively account for almost 30% of total installed capacity—are over 25 years old, and a large number of them are fast approaching 40, which is considered the end of their useful life span. Beyond this they will necessarily need to be scrapped, opening up a market for effective disposal of these plants.

"In fact, 188 thermal power plants out of a total 396 are more than 25 years old. They have a total installed capacity of about 56 GW, out of a total installed capacity of 188 GW. A large number of these plants would be scrapped," said Ashok Khurana, director general of the Association of Power Producers.

According to experts, generation capabilities of a thermal power plant reduce by about 40% after surpassing the operational age of 25 years. Requirement of coal also keeps increasing, thereby calling for de-rating of such plants.

"All these 25-year-old plants were built with technology that took care of pollution norms prevalent at that time. However, norms have turned stricter and these old plants need to spend more on adhering to norms. If they undertake renovation and modernization, tariffs also increase, as the additional costs need to be passed on," the executive said.

The need for shuttering old plants has opened up a large market for decommissioning and effective disposal, similar to the ship-breaking industry. Companies like mjunction and MSTC have stepped in to grab a chunk of this market.

"The service requires onsite inspection, inventorying, segregation and estimation. All of which culminate into an online sale to qualified and credible buyers which fetches the optimum price for the power plant," an executive of mjunction said.

VinayaVarma, mjunction's CEO, said, "Our focus is on transparency and price discovery of such assets, which are not only economically unviable but also a hazard for the environment."

An executive from a power plant said, "Considering that we need working capital to expand our operations, it is imperative that we sell our defunct units and scrap at a competitive price in the shortest possible time."

Getting rid of the plant includes segregation of scrap, assets that can be refurbished, unused assets and hazardous items. It also involves inventorying the assets and sorting them by type and use. The inspection and estimation process is followed by devising selling strategies.

Recently, mjunction offered valuation and estimation service to a power utility company to sell its 4x120 MW decommissioned thermal power plant by recognising the value of the plant and assets. This was followed by an online sale in which assets worth Rs 105 crore were sold at a premium of 23.5% over its expected price.

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