OREANDA-NEWS. August 19, 2011. Essar Energy plc [LSE: ESSR], the India-focused integrated energy company, today announced that it will be signing a power purchase agreement (PPA) with the Bihar State Electricity  Board (BSEB) for 300 megawatts of contracted capacity from its 1,200MW Tori I power station which is under construction in Jharkhand state, India.

BSEB has issued Essar Energy’s subsidiary Essar Power Jharkhand Limited (EPJL) with a Letter of Intent to purchase the power over a 25 year period and it is expected that a binding PPA will be signed within two months. This follows a competitive bidding process.  The supply of power under the terms of the PPA will commence from May 2015.

Under the terms of the Letter of Intent issued by BSEB, the 300MW PPA will involve EPJL supplying power at a levelised tariff of Rs. 3.28 per kWh (approximately 7.4 US cents per kWh) net of transmission costs.

The PPA, when signed, will be the second 25 year PPA to be agreed with the Bihar State Electricity Board for Tori I, following an agreement signed in July 2010 for 450MW of capacity at a levelised tariff of Rs. 2.64 per kWh (approximately US cents 5.62 per kWh).

Naresh Nayyar, chief executive of Essar Energy, said: “This PPA with Bihar will be the latest demonstration of the progress we are making in securing revenues from our investments in power generation in India, where we currently have 1,600MW of capacity operational and another 8,070MW under construction.”

Tori I, in the Latehar district of Jharkhand, is a coal fired power project consisting of two generation units of 600MW each. Tori II is an additional 600MW project.

The Tori projects will source coal from the nearby Chakla and Ashok Karkata captive coal blocks, which have been secured for the power project. Coal mining operations will begin once the outstanding forest clearance and other permissions have been obtained. EPJL has applied to the Government of India for a temporary coal linkage supply in the event that coal mining operations at the captive coal blocks have not commenced in time for commissioning of the power station or to cover any shortfall in coal as production is ramped up at the mines.