“We are going in for proper energy mix options”: Interview with Mahagenco’s CMD, Sanjay Khandare

Interview with Mahagenco’s CMD, Sanjay Khandare

Maharashtra State Power Generation Company Limited (Mahagenco) was established in 2005, following the restructuring of Maharashtra State Electricity Board (MSEB), and today has a well-balanced generation portfolio of over 13.1 GW across coal, hydel, gas and solar power plants, making it the largest power generation company in India after NTPC Limited, with the highest generation capacity amongst all state generation utilities in the country. The genco has steadily improved its performance over the years, with most thermal units today running within a competitive variable cost of Rs 2-Rs 3 per unit. In a recent interview with Power Line, Sanjay Khandare, chairman and managing director, Mahagenco, shared his perspective on the company’s performance; future plans, including the progress on the installation of emission control systems; the key issues and challenges; and the outlook for the sector. Excerpts…

What have been some of the significant highlights for Mahagenco in the past one year?

Mahagenco has enough capacity to change itself in this era of change and competition. The power sector being a service sector, there are different types of challenges in running a business cycle of power generation. As far as performance in 2020 is concerned, Mahagenco had a remarkable year. Despite Covid challenges, the utility had a good plant load factor (PLF), even with its vintage units and with adverse coal quality. With a daily baseload thermal generation of 6,500-7,500 MW, Mahagenco is capable of providing about 10,000 MW of power at any time, as per state grid requirements. In January 2021, it achieved the highest thermal generation of 4,514 MUs, with most of the units operating without any outages and with PLFs of more than 80 per cent. In the same month, the Koradi thermal power station (TPS) Units 8, 9 and 10 (3×660 MW) achieved the highest ever generation of 1,029.71 MUs since its commissioning, and the Chandrapur super thermal power station (STPS) Units 8 and 9 (2×500 MW) achieved a PLF of 92.24 per cent, the highest since its commissioning.

In addition, Mahagenco has successfully reduced its cost of power generation by 20-30 paise per unit, through better fuel management, coal swapping and better O&M practices. Most of its TPSs are running within a variable cost of

Rs 2- Rs 3 per unit, which is quite competitive and affordable. As a result, most of them are running within merit order despatch (MOD) norms. The financial benefit of this will ultimately be reaped by the end consumers.

How has been the operational and financial performance of the genco in recent years?

Mahagenco is India’s second largest power generation company after NTPC. In 2020, due to the Covid-19 lockdown and the consequent reduced power demand, particularly from the commercial and industrial (C&I) segment, we had to keep our generation low in the initial four to five months, which was indeed a loss of essential revenue for us. However, later, when the unlocking process began in a phased manner, there was a continuous hike in power demand due to C&I load. Some of our thermal and hydro power stations achieved record generation in this critical period.

By speeding up the process of financial restructuring, the utility saved on interest amounts through the restructuring of high-interest loans. During 2020-21, Mahagenco restructured a mid-term loan of Rs 8.85 billion, availed of from REC Limited, by reducing its interest rate from 11.75 per cent per annum to 10.25 per cent per annum, thereby saving Rs 51.8 million. It also restructured a short-term loan of Rs 5 billion, availed of from MSC Bank, by reducing its interest rate from 8.25 per cent per annum to 7.25 per cent per annum, thereby saving Rs 18.6 million. In 2021-22, Mahagenco aims to explore the possibility of availing of soft loans from various Government of Maharashtra-owned utilities that have surplus funds.

What has been the impact of Covid and what are the measures taken to mitigate it?

Nobody can deny the importance of electricity in day-to-day life amidst the unexpected pandemic situation. During the lockdown period, the work-from-home concept was possible only because of the availability of ample electricity. Service sectors such as power were thus key to handling such a calamity.

Even though it was mandatory to produce more power as per grid requirements, Mahagenco never compromised with the safety of its staff/manpower. We successfully implemented well-planned and timely measures such as proper sanitisation, social distancing norms, the practice of using masks and washing hands frequently, thermal screening, isolation wards in colony premises, following the government’s quarantine norms, and frequent camps on the premises for RTPCR Covid testing. Daily reports of employees working at power stations and offices are monitored by our top management to plan preventive and corrective actions.

What are the company’s plans with regard to the installation of emission control equipment and fly ash utilisation?

Mahagenco has undertaken various measures for pollution control, load analysis, carrying capacity, hazardous waste management and ash utilisation. It has installed high performance electrostatic precipitators (ESPs) with

99.9 per cent efficiency, low NOx burners and ambient air quality monitoring equipment, and is planning to upgrade ESPs and pollution control equipment in its old units.

While the high initial cost of installing flue gas desulphurisation (FGD) systems is a matter of concern for every power genco, Mahagenco plans to move ahead in the larger interest of protecting the environment. The utility has initiated an e-tendering process for installing FGD systems at its major units at Koradi (3×660 MW), Bhusawal (2×500 MW), the Chandrapur (5×500 MW), Khaperkheda (1×500 MW), Parli (3×250 MW) and Paras (2×250 MW). It has also initiated an e-tendering process for its six older 210 MW units at Koradi and Khaperkheda. All this installation work is expected to be completed within the next two to three years.

Mahagenco has also undertaken the retrofitting of ESPs at eight of its old thermal units, with an investment cost of Rs 3.50 billion, to comply with revised environmental norms. Zero water discharge systems have also been commissioned at all its TPSs to minimise the use of fresh water. Additionally, Mahagenco has installed an ash water recycling system, an effluent treatment plant and a sewage water recycling plant.

Mahagenco is a pioneering company in India when it comes to fly ash utilisation. The utility has been trying to control stack emission within the norms set by state/central pollution control entities. It has formed a subsidiary company, Mahagenco Ash Management Services (MAHAGAMS), which undertakes various measures for utilisation of fly ash. The end target is 100 per cent fly ash utilisation. The utility is trying to create clusters in the vicinity of its TPSs, as well as tie up with cement and other allied companies, for effective and cleaner transportation. In 2019-20, Mahagenco’s fly ash utilisation touched an average of 82 per cent among its seven TPSs. In addition, Mahagenco is planning to transport fly ash via rail from the Vidarbha area to the Mumbai-Pune area, where there is greater scope for ash utilisation in building and infrastructure development.

What are some of the new initiatives undertaken and planned by the genco?

Mahagenco is a pioneer in the use of pipe conveyor systems for coal transportation. Its pipe conveyer systems from the Bhatadi coal mine to the Chandrapur STPS and from the Western Coalfields Limited coal mines to Khaperkheda and Koradi are being built to minimise environmental pollution. I hope that by 2021 we will be able to use these systems, as the erection work is at the final stage and commissioning activities are in progress. We also commissioned a 130 mld sewage water treatment plant with the Nagpur Municipal Corporation at Bhandewadi in March 2016, to be used for cooling purposes at our 3×660 MW TPS at Koradi, for the first time in India. Moreover, in 2020, we started using a 190 mld Nagpur Municipal Corporation sewage water treatment plant for our Koradi and Khaperkheda TPSs. The use of secondary treated sewage water for all our TPSs at Chandrapur, Parli, Bhusawal, Nashik and Paras has also been proposed. Expressions of interest are being sought for a 50 mld plant at Chanderpur STPS.

Further, we are speeding up the development process of the Gare Palma Sector II captive coal mine at Chhattisgarh in order to cater to the coal requirement at least partially in the coming years. Even though captive mining is a new sector for us, we are checking the viability of setting up a reject coal-based thermal plant there, at the pit head.

Mahagenco has decided to use washed coal for its subcritical and supercritical units at Koradi, Chandrapur and Khaperkheda in order to improve their performance and avoid huge financial losses  from using poor quality coal with high ash content. It is also undertaking retrofitting and renovation of turbine and boiler auxiliaries at vintage thermal units that have a heat rate greater than than 2,600 kCal per unit. Further, renovation of the 672 MW Uran gas turbine power station (GTPS) and plans for its further expansion are also under way, with the aim of providing sufficient, cost-effective power to Mumbai and supporting the islanding of the Mumbai area during power supply emergencies. Plans to expand our hydro generation capacity, with a pump storage facility for maximum utilisation, are under way as well.

What are the key issues and challenges impacting the company?

Despite power purchase agreements, the principle of MOD will be  key in the coming years. Hence, our major focus will be on increasing productivity and efficiency on a continuous basis. Unfortunately, it has been observed that we are often unable to utilise our entire installed capacity due to limitations laid down by MOD norms. Also, the Maharashtra Electricity Regulatory Commission (MERC) has issued the Deviation Settlement Mechanism (DSM) Regulations, 2019 for implementation, in line with the Central Electricity Regulatory Commission’s mechanism. With this, Mahagenco stations will have to follow strict discipline to keep actual generation in line with scheduled generation, while still trying to gain from higher generation during low frequency periods. the MERC has also implemented 55 per cent technical minimum scheduling; so even during low demand, many Mahagenco stations will need to manage their units at 55 per cent load. With the implementation of a national MOD, the chances of many of Mahagenco’s old units, located away from coal mines (mainly units at Nashik, Bhusawal and Parli), getting regular schedules look very grim, due to the additional cost of coal transportation. In the future, the utility may need to tap business prospects outside the state by working out a different business model for these plants.

Mahagenco has implemented a flexible utilisation of coal scheme for the 210 MW unit at Nashik and has been successful in achieving lower fuel costs. Due to the larger procurement of renewables power, there is a need to allow flexibility in using either thermal power or renewable at specific stations/units to meet their scheduled generation. Getting good quality and quantity of coal as per schedule is another tedious task.

On the one hand, the utility is incurring some revenue losses due to the MOD principle, while on the other it is facing a financial crunch due to piled-up dues from the state distribution company, Maharashtra State Electricity Distribu-tion Company Limited (MSEDCL), its only client. Mahagenco’s receipts from MSEDCL have been continuously in arrears for the past few years –  and significantly more so during the current Covid-19 pandemic. Due to mounting arrears, Mahagenco’s working capital borrowings have increased significantly, which in turn, will affect its generation costs, as the additional interest amount has a cascading effect and may yet go out of MOD somewhere. Further, the Uran GTPS has been facing a gas shortage for years, and is not operating at its full capacity.

We are leveraging new, clean technologies for seamless integration of renewable energy into the grid. We have similarly undertaken various new initiatives for digitalisation and to improve the efficiencies of the coal value chain. We are looking into asset performance management, station heat rate optimisation, floating solar plants, hybrid plants, flexibilisation of existing thermal plants, and robotics and automation to control critical activities. With all these efforts, we will be able to provide high quality customer service and foster the socioeconomic growth of our state, thereby serving our nation.

With a more balanced portfolio and diversification, we are now going for proper energy mix options. In the coming years, there will be little scope for any further thermal capacity addition. But, till then, we cannot afford to lose our basic strength of thermal capacity. Accordingly, erection work for a single 660 MW supercritical unit is in full swing at Bhusawal, which is expected to be operational by 2023.

We have also planned various solar projects through different models, which will result in a capacity addition of 2,700 MW over the next five years. This includes 588 MW through the Chief Minister Agri Scheme; 602 MW in engineering, procurement and construction mode; the 250 MW Dondaicha solar park on PPP mode; and a planned 250 MW ultra mega renewable energy power park, in collaboration with NTPC. This will help Mahagenco compensate for its thermal generation loss. To achieve all these goals, we will remain flexible towards technological tie-ups with expert institutes such as NTPC R&D, Bharat Heavy Electricals Limited R&D, Central Power Research Institute, and the IITs.

What is your outlook for Maharashtra’s power sector over the next few years?

The power business is a wire business. But the sector is driven by updated technologies. Who knows where the upcoming technologies will take all of us in the future? For example, if solar storage batteries are invented in a true sense for the supply of 24-hour solar power, or solar hybrid plants with pump storage, gas plants, etc. are developed, the monopoly in the thermal power business may be affected seriously. At the moment, central, state and private players are taking care of state power consumers with a roughly equal share of generation. But it is now crystal clear that solar/hybrid/hydrogen power sources will supersede traditional power in the near future. In such a situation innovation will be the only way to survive and lead amongst all the power generators.