MUMBAI: State-run Bharat Heavy Electricals (BHEL) will set up a joint venture with Maharashtra State Power Generation Company (Mahagenco) to set
up supercritical thermal power plant with a maximum capacity of 1,500 MW at Latur in Maharashtra. A memorandum of understanding (MoU) to this effect will be signed on Wednesday.

A Mahagenco official told ET that the JV would invest Rs 7,000 crore in the project. Initially, BHEL and Mahagenco would hold 50% stake each, which would later be reduced to 26% each, by offering the remaining shares to financial institutions.

The contours of the plan suggest that the venture will have two 660 MW coal-fired thermal units. The plan also envisages setting up 1500 MW gas-based power unit in the absence of adequate coal linkage.

The power from the proposed plant will be sold only in Maharashtra at rates to be determined by the state electricity regulatory commission. BHEL will reserve the right to exit after commencement of commercial operations. Currently, Mahagenco has an installed capacity of around 10,000 MW and plans to add nearly 3,000 MW by 2012, excluding the deal with BHEL.

The proposed JV will be BHEL’s third such initiative with state power utilities. It had formed JV companies with Karnataka and Tamil Nadu power generation firms with a 26% stake each in these ventures. BHEL is expected to sign similar agreements with Madhya Pradesh and Gujarat for power generation projects, said its CMD K Ravi Kumar. BHEL’s Karnataka JV has a capacity of 3x800 MW while its Tamil Nadu venture has capacity of 2x800 MW.