Restarting the beleaguered 2,184 Mw Dabhol power project will cost at least Rs 10,000 crore (Rs 100 billion). The cost is to be shared among the government, the Indian lenders, National Thermal Power [Get Quote] Corporation and Gail (India) Ltd.

According to estimates put before the empowered group of ministers (EGoM) headed by Defence Minister Pranab Mukherjee, the restructured project cost will range between Rs 9,793 crore (Rs 97.93 billion) and Rs 9,977 crore (Rs 99.77 billion), depending on the final settlement with GE-Bechtel.

The settlement amount would range between Rs 1,276 crore (Rs 12.76 billion) and Rs 1,452 crore (Rs 14.52 billion) ($290-330 million), officials said.

The asset preservation expenses of Rs 160.2 crore (Rs 1.602 billion) and the cost for completing the project, estimated at Rs 880 crore (Rs 8.80 billion), are subject to revision since NTPC and Gail -- which have been assigned the task of restarting the facility and completing the second phase are looking into the details.

The estimates submitted to the EGoM do not include the cost of the LNG terminal.

Lenders put the cost of completing the project and the LNG facility at around Rs 2,000 crore (Rs 20 billion), raising the total restructuring cost, excluding the setting off of accrued interest of Indian lenders (Rs 2,500 crore), at around Rs 12,000 crore (Rs 120 billion).

As against this, the cost of setting up a new 2,184 Mw plant is around Rs 7,500 crore (Rs 75 billion).

The fixed cost of Dabhol power is estimated at 93 paise per kilowatt hour, a fairly competitive rate compared to the 95 paise per unit for NTPC's Kayamkulam project and around 88 paise per kWh for its older Kawas and Gandhar plants.

Fuel costs are variable, and in the current context, they could range between Rs 1.50 per unit and Rs 1.60 per unit, which will push up the total cost to about Rs 2.40 to Rs 2.50 per unit.

The power ministry is seeking to restrict variable costs at under Rs 1.37 per unit so that the cost of power does not exceed Rs 2.30 per unit.

The Maharashtra government has expressed its willingness to purchase power from the Dabhol project at Rs 2.20 per unit.

The cost of power was calculated on the assumption that the project will operate at 80 per cent plant load factor. The all-India average PLF for thermal plants during April was 75 per cent while for nuclear it was 61 per cent, according to data compiled by the Central Electricity Authority.

Gail, which has been given the task of sourcing gas for the project, is looking at Indonesia and Qatar as possible sources for fuel.

Officials said the project cost had gone down from the earlier estimate of Rs 9,992 crore (Rs 99.92 billion) in November 2004, on account of an improvement in the exchange rate and because the net present value of settlement of the political risk insurance claims of the OPIC was $20 million lower than had been anticipated.

However, the buyout of the offshore bank and OPIC's debt at 80 per cent of the outstanding principal amount as against the level of 70 per cent assumed earlier pushed up the project costs.

Last week, a panel under the International Court of Arbitration in Paris ruled that Maharashtra and two affiliate agencies expropriated a Bechtel affiliate's interest in Dabhol Power Co and awarded the company $125 million in compensation.

DPC shut the plant in May 2001 after a dispute with the Maharashtra State Electricity Board. There have been over two dozen court cases and arbitration proceedings, as the stakeholders, including DPC's majority shareholders, GE and Bechtel, as well as the foreign lenders, have been trying to recover their investments.

GE and Bechtel now own 86 per cent of DPC after buying Enron's 66 per cent stake. The MSEB owns the rest.