At a time when most of the private power projects in India are languishing for one reason or another, the 360 MW Lanco Kondapalli combined cycle project shows that fast project implementation times can be achieved in India, given the right conditions. It was built under a build-operate-own arrangement with the state government.

The first and second gas turbine generators were synchronised to the Andhra Pradesh grid on 22 June and 19 September 2000, respectively, while, just one month later, on 18 October 2000, full combined cycle operation started, with synchronisation of the steam turbine to the grid.

The contract for Lanco Kondapalli was one of six awarded for short gestation power plant projects by the government of Andhra Pradesh (specifically the Andhra Pradesh State Electricity Board (now AP Transco)) in July 1996. The projects were awarded through international competitive bidding, as per government of India guidelines. But, of the six, only the Lanco Kondapalli project achieved financial closure. It has gone on to completion of construction in a record time of 22 months from financial close.

The project has been developed by the Lanco Group of India (a multi-industry conglomerate), in partnership with Eastern Generation Ltd of the United Kingdom. Commonwealth Development Corporation, UK, and Hanjung of Korea are the other equity partners.

The power purchase agreement for the US$275 million plant was signed with the then Andhra Pradesh State Electricity Board in March 1997, signalling the start of the project proper. AP Transco will purchase the entire power output of the plant for 15 years.

Lanco Kondapalli was the first plant to be cleared by the Central Electricity Authority under the international competitive bidding route for power projects in India. After the loan agreements had been signed and upon receiving the first disbursement from lenders, Lanco Power achieved financial closure on 9 December 1998. Incidentally, it was also the first of the international competitively bid power projects in India to achieve financial closure. In addition it was also the first private sector power project to receive disbursement of finance from the Power Finance Corporation Ltd, the industry-specific financial institution. The Industrial Finance Corporation of India Ltd is the lead financial institution. The Export Import Bank of Korea (K-EXIM) is financing the suppliers credit of US$76.875 million. The other project lenders include Industrial Development Bank of India, Life Insurance Corporation of India, General Insurance Corporation of India, Bank of Baroda, Dena Bank, Industrial Bank Limited, and Vysya Bank From the time the project was awarded, it took Lanco Power a little over three years to get all the statutory and non-statutory approvals and clearances in place.

After the financial closure, Lanco Power issued a ‘notice to proceed’ to the EPC contractor, Hanjung of Korea. This was on 21 December 1998. The work then proceeded at a hectic pace, avoiding the hitches experienced on other, less fortunate projects, which have included political sanctions against India and the loss of a gas turbine generator at sea due to a storm.

The Lanco Power project consists of two Frame 9E gas turbine generators of around 115 MW each, being supplied by GE Energy Products, France, two heat recovery steam generators, supplied by Hanjung, and an Alstom steam turbine generator of around 130 MW. The power plant achieves a heat rate of 1900 kcal/kWh. It can run on naphtha, as well as natural gas.

The location of Lanco power plant, in an industrial development area close to AP Transco’s 220 kV Kondapalli substation gives the plant transmission cost advantages over other projects, with minimal losses.

Water requirements for the plant are being met by the river Krishna, from the upstream side of the Prakasam Barrage.

On the fuel side, Lanco Power has already received allocation of natural gas and signed a contract with GAIL (Gas Authority of India Ltd). The naphtha is being supplied by Hindustan Petroleum Corporation Ltd.

Eastern Generation Services (India) Private Limited, an affiliate of Eastern Generation Limited (EGL), United Kingdom, has been appointed O&M (operations and maintenance) contractor for the project and has hired and trained 45 experienced engineers. The EGL plant at Peterborough, UK, is identical to Lanco Kondapalli in terms of capacity and basic technology and has recorded an availability of 99.6 per cent since it started commercial operation, in 1993.

Overall, the Lanco Kondapalli power plant is expected to be one of the lowest cost IPPs in India.