Business Today

There's life after Sasan

Lanco takes stock after losing the ultra-mega power project.

By E. Kumar Sharma        Print Edition: August 26, 2007

It's better to have bid and lost than never to have bid at all. That's how Lagadapati Madhusudhan Rao, Chairman, Lanco Infratech, prefers to look back at the loss of Sasan power project. One of the first two 4,000 mw ultra mega power projects to be thrown open for bidding, Sasan will now be executed by Reliance Energy, the second-lowest bidder in the fray. "It is a good opportunity lost," shrugs Rao, "but we will start looking afresh at new opportunities emerging in power, including other ultra mega-power projects."

The loss of Sasan has also taught Rao some hard lessons. "We will now need to be very cautious when choosing our global partners, particularly those that are fund-based structures," he says. Lanco, which had bagged the Sasan project last December, found its bid coming in for a fresh review after its Singapore partner, Globeleq, which was part of the bid, decided to exit the power generation business. That's when the government decided to review Lanco's bid.

Lagadapati M Rao
Lagadapati M Rao

Rao sees other takeaways from the failed bid. For instance, he is satisfied with the leadership role played by Lanco in setting a competitive tariff benchmark for the sector. Lanco's benchmark tariff bid of Rs 1.196 per unit is what Reliance Energy will now have to offer.

As far as Rao and Lanco are concerned, Sasan is now history. But the group's interest in power is hardly that. Backed by what it calls its innovative and competitive strategy, Lanco hopes to tap into some of the opportunities that will arise courtesy the government's target of adding about 75,000 mw in the XI Plan period (2008-2012). Currently, it has 3,500 mw spread across six states under implementation and has a target to reach 15,000 mw by 2015. Group turnover is around Rs 1,700 crore and the goal is to reach Rs 15,000 crore by 2012. As things stand, it plans to close the current financial year with Rs 3,000 crore turnover, half of which will come from construction projects. Lanco's other high-profile project is the 1,000 mw Anpara 'C' power project, which, according to Rao, has now been increased to 1,200 mw. The project is "moving ahead" and Lanco is in the process of finalising the EPC contractors; the group has time till November 2007 for financial closure which, Rao says, is possible.

For the moment, Rao seems more upbeat about what he terms "a good response (in terms of bookings)" to the group's first foray into realty with a venture that will include the world's tallest residential complex, all of 112 floors, in Hyderabad. The skyscraper is to be part of a largely self-funded Rs 5,500-crore, 108-acre integrated techno-township that Lanco plans to set up near Hyderabad. By the time that project sees the light of day, the ghost of Sasan would have been truly exorcised.

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