News Hour- Adani Power puts 6,500 MW expansion on hold

MUMBAI (Reuters) - Utility Adani Power (:ADAN.NSADAN.NS) has put on hold its capacity expansion plans for 6,500 megawatt due to lack of clarity on coal supplies, Chief Executive Officer Ravi Sharma said on Tuesday.Adani earlier said it planned to increase its capacity to 16,500 MW, mostly in western India. At present, it operates about 2,000 MW but plans to have 6,000 MW capacity by March 2012.Coal accounts for 55 percent of India's power generation capacity of 182,344 megawatts.

The country holds 10 percent of the world's coal reserves, but power companies struggle to access local supplies due to environmental and land acquisition delays, forcing expensive imports from Indonesia and Australia.Asia's third-largest economy, where blackouts are common, faces a peak power shortage of 13 percent as rising demand from industry, homes and shopping malls outstrips capacity growth, but investments into the power sector have been slowing.Adani, which has been banking on Indonesian and Australian coal mines to meet its coal needs, is likely to feel pressure on margins because of price escalation in Indonesian coal, Sharma told reporters.

In 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, joining a growing number of Indian companies acquiring overseas mining assets.The rising cost of imported coal, coupled with a weakening rupee, could force some Indian power projects to default on their debt obligations, ratings agency Fitch said earlier this month.Shares in Adani Power, valued at $2.8 billion by the market, were trading 1 percent lower at 67.40 rupees in a weak Mumbai market.

(Source- Yahoo Finance)