Adani Power puts on hold Rs6,500 MW capacity expansion plans

Utility Adani Power has put on hold its 6,500 MW capacity expansion plans due to uncertainty on coal supplies according to chief executive officer Ravi Sharma.

The company had earlier said it planned to hike its capacity to 16,500 MW, mostly in western India. Currently it operates around 2,000 MW but has plans for 6,000 MW capacity by March 2012.

Coal accounts for 55 per cent of India's power generation capacity of 182,344 MW.

India holds 10 per cent of the world's coal reserves but these remain inaccessible due to environmental and land acquisition delays, forcing companies to go for expensive imports from Indonesia and Australia.

India faces a peak power shortage of 13 per cent amidst growing demand from industry, homes and shopping malls which has outpaced capacity growth. However, the sector is seeing slowing investments.

Adani, which imports coal from Indonesian and Australian mines to meet its needs, is likely to experience pressure on margins due to price escalation in Indonesian coal, Sharma told reporters today.

Over the past year, the Adani group acquired stakes in Australia's Galilee coal project for $2.7 billion and Abbot Point Coal Terminal for $2 billion, adding to the list of Indian companies holding overseas mining assets.

Ratings agency Fitch said earlier this month, that some Indian power projects may be forced to default on their debt obligations amid increasing cost of imported coal coupled with a weakening rupee  (See: Fitch: Indian coal power projects pressured by fuel costs)