Neyveli Lignite Corporation Ltd.

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Neyveli Lignite Corporation Ltd.

Neyveli House
135 Periyar EVR H
Chennai 600 010
India
Fax: 91 44 2825 5499
Web site: http://www.nlcindia.co.in

Public Company (94% Government-Owned)
Incorporated: 1956
Employees: 22,200
Sales: $601.1 million (2003)
Stock Exchanges: Bombay
Ticker Symbol: NELG.BO
NAIC: 212111 Bituminous Coal and Lignite Surface Mining; 221122 Electric Power Distribution; 325311 Nitrogenous Fertilizer Manufacturing

Neyveli Lignite Corporation Ltd. (NLC) is India's largest lignite mining company, and is also one of the country's leading power generation companies. The company operates three open cast mines in Neyveli, in the state of Tamil Nadu at the southeastern tip of India, producing some 24 million tons of high-grade lignite per year. Mine I, the company's original mine, is operated over an area of nearly 17 square kilometers and offers a reserve of nearly 300 million tons. Mine II, first tapped in early 1984 and expanded in the early 1990s, features a reserve of nearly 400 million tons. The total reserves in the Neyveli field are estimated at more than two billion tons. Most of that production is used in NLC's two thermal power generation plants, which combine for a total capacity of 2,070 megawatts. After shutting down its fertilizer and briquette and carbonization plants in the early 2000s, NLC has begun a drive to expand its power generation capacity. In 2003, the company began construction of a greenfield power generation facility in Tuticorin, in Tamil Nadu, with a proposed capacity of as much as 1,000 megawatts. In 2004, the company received approval to expand beyond its home state, and is beginning preparations to build a 250 megawatt facility in Bikaner, near Rajasthan. NLC has also been tapped to restart the nearly 4,000-megawatt plant in Hirma, originally developed by a Mirant-Reliant partnership. Owned at 94 percent by the Indian government, NLC has as its primary customer the Tamil Nadu Electricity Board. In 2003 the company posted revenues of INR 2,681.48 crore ($601.1 million).

Powering the Economy in the 1950s

The vast Indian subcontinent had always offered an abundant supply of natural resources. Particular interest was placed on exploring for fossil fuel sources in what was later to become the Tamil Nadu region along the country's southeastern tip. Among the first to be discovered were the peat fields in Calimere, in 1828. The first lignite deposits, a still more valuable fuel source, were located along the coast region near Cannanore in 1830. This initial deposit was followed by the discovery of others in the region, at Beypore, Pondicherry, and elsewhere. French engineers began drilling bore holes in then French-dominated Bahoor, and succeeded in locating significant lignite deposits in Kasargod and in the region around Cuddalore, near Neyveli, in 1884.

Attention again focused on the region around Neyveli in the 1930s. Neyveli was then a small village in Tamil Nadu; its chief resources at the time were its cashew and jackfruit forests. The earliest discovery of exploitable lignite deposits in Neyveli was attributed to Jambulingam Mudaliyar, a prominent local landlord who controlled some 600 acres across Neyveli, Cuddalore, Mandarakuppam, and Virudhachalam. Farms covered only a small part of Mudaliyar's land. In the early 1930s, Mudaliyar began sinking well holes, searching for a source of water in order to transform more of his holdings into cultivatable land. Water proved easy to find—but brought with it pieces of a black substance that local workers called "black clay," which were thrown away. Yet, once dried by the sun, the "black clay" proved highly combustible.

Mudaliyar brought the existence of lignite to the attention of the British authorities, hoping to convince them to launch a lignite mining operation in Neyveli. Mudaliyar began drilling new bore holes in 1935, discovering large quantities of the substance. Samples were sent to the governor of Madras for testing, yet the British colonial government remained uninterested in pursuing the project. Instead, Madras-based Binny & Co. began sinking bore wells in Aziz Nagar, near Neyveli, in 1941. That company succeeded in discovering a significant lignite deposit, but, lacking the equipment to pursue further drilling operations, the company withdrew.

The colonial government's Geological Survey of India at last began drilling in Neyveli in 1943. Over a three-year period, more than 30 bore wells were sunk, confirming the region's lignite potential. Following India's independence, the new government appointed H.K. Ghosh—who later earned the nickname "Lignite Ghosh"—to oversee further lignite exploration activities. Ghosh began sinking a new series of wells in 1947. Initial wells were abandoned, however, after they became blocked with water and sand. By 1948, Ghosh had discovered the first viable site, and succeeded in drawing out samples of lignite.

Ghosh revealed the ambitiousness of his project in 1949, when he drafted plans to establish a vast open-cut, mechanized mine covering an area of some 14 square kilometers. Ghosh began coordinating bids for the project that year. Preparations were made to drill a more extensive series of bore wells in the proposed area, and under Ghosh's direction, the drilling of 175 bore wells began in 1951. A second series of 150 wells was also launched that year, this time in Vriddhachalam under the auspices of the Tamil Nadu government. Ghosh's efforts were crowned with success—by the end of the drilling project, Ghosh had revealed potential lignite reserves of some two billion tons.

Approval for a pilot quarry was granted in 1952. By 1953, Ghosh had succeeded in mining the first 100 tons of lignite. The development was all the more significant because of the high quality of the field's lignite, which had a relatively high moisture content compared to other lignite deposits. A visit by Indian President Nehru in 1954 brought government backing to the lignite mining project, and in 1955, the Tamil Nadu state government transferred oversight of the project to the central government.

Neyveli Lignite Corporation was created as a governmentowned enterprise in 1956 in order to launch the full-scale exploitation of the lignite field. NLC's mandate was to produce lignite, and to construct and operate a lignite-burning thermo-electric plant providing electrical power to the state of Tamil Nadu. Construction on Neyveli Mine I began in 1957, using technology and equipment brought in from Germany. The mine by then extended over an area of nearly 17 square kilometers, with an estimated reserve of 287 million tons. Mine I was constructed to produce a capacity of 6.5 million tons per year.

With an "overburden" varying from 70 to 95 meters, the Neyveli field's first lignite seam—with a thickness ranging from ten to 23 meters—was exposed only in 1961. Full-scale lignite mining was launched in 1962. That year saw the commissioning of the first stage of NLC's Thermal Plant Station I. Built with technology and assistance from the Soviet Union, TPS-1's initial capacity stood at just 50 megawatts. By the end of the decade, however, NLC had commissioned a total of six 50 megawatt units and three 100 megawatt units. All of NLC's power production was then taken up by the Tamil Nadu Electricity Board.

In the mid-1960s, however, NLC diverted some of its lignite production to fuel its extension into two new areas. The first was the launch of its Fertilizer Plant, producing urea, a byproduct of its lignite mining operations. The second was a Briquetting and Carbonization Plant, established that same year to produce more than 3.25 million tons of charcoal and 2.6 million tons of coke per year. That plant also produced such byproducts as carbolic acid, xylenol, phenol, and neutral oils and other chemicals.

As India began its industrialization program in the 1970s, demand for electrical power rose steadily. By the late 1970s the decision was made to extend NLC's operations to include a second mine, which in turn provided support for a new thermal power station. The new mine, Mine II, was located some five kilometers south of the original mine, on a 26 square kilometer site that exploited the same lignite seam. The total exploitable lignite deposits at the site were estimated at 398 million tons. Construction of the open pit mine, with an overburden reaching up to 103 meters and a lignite seam between eight and 22 meters in thickness, was launched in 1978. Mine II's initial production capacity was placed at 4.7 million tons per year.

Mine II's lignite seam was exposed by September 1984, and full-scale lignite production began in 1985. By then, NLC had already been granted authorization to increase the scale of the Mine II project to 10.7 million tons per year. The mine reached full capacity in 1991. Mine II's production fueled NLC's Thermal Power Station II. Construction began on the new plant in 1978, with an initial capacity of 630 megawatts. With the increase in Mine II's production levels, TPS II's capacity was expanded as well, to 1,470 megawatts. The first 210-megawatt unit was commissioned in 1986, and the plant reached full capacity in 1993. Also in 1986, the Indian government converted NLC to a public company, selling shares to institutional investors as well as placing a small number of shares on the Bombay Stock Exchange. Nonetheless, the government's control of NLC remained at more than 94 percent.

Emphasizing Power Generation in the New Century

By that time the company had launched a Life Extension Project on TPS I, intended to extend the plant's viability by another 15 years. The project, launched in 1992, was completed in 1999. In the meantime, NLC had also been granted authorization to expand the capacity of the Mine I site, raising total annual production to 10.5 million tons. As part of that effort, the company also launched an extension of TPS-1 in 1996, adding an additional 420 megawatts to the plant's total capacity.

Company Perspectives:

Neyveli, home of the Neyveli Lignite Corporation, is India's energy-bridge to the 21st century and a fulfillment of Pandit Nehru's vision. Incidentally, Nehru and NLC share a common birthday (14.11.1956). Nehru launched the mining operations with his golden touch in May 1957. Ever since, there has been no looking back. NLC has achieved the objectives it has set for itself, fulfilling its corporate mission to be the leader in the industry.

In 1998, the government authorized NLC to expand its lignite production yet again, with the construction of an extension to its original mine as a new site, Mine IA. Construction of the mine began in 2000, with production of lignite expected to begin by the mid-2000s. The company also began preparations for the expansion of Mine II and the proposed construction of a Mine III, launching an exploration and drilling operation in 1999.

Low demand for fertilizer products led the company to close its fertilizer plant in 2003. By then, NLC had already shut down its outdated Briquetting & Carbonization operations as well. Instead, NLC focused on expanding its power generation operations. In 2002, the company announced its intention to expand production of Mine II to 15 million tons per year in order to fuel the extension of its TPS-2 facility to nearly 2,000 megawatts. These projects were expected to be completed by 2006.

At the same time, NLC began plans to develop a new 250-megawatt power generation plant at Rajasthan, which was activated in 2002. That project was approved in 2004. The company also launched development of a new greenfield site at Tuticorin. Initially planned for a capacity of 500 megawatts, in 2003 NLC announced its intention instead to build a 1,000 megawatt plant on the Tuticorin site. By 2003, NLC also appeared likely to revive a 2,000 megawatt plant in Orissa, part of the Hirma project initially developed by a partnership between Mirant and Reliant. In that year, the company also received an invitation from the Madhya Pradesh state government to construct and operate a 1,000-megawatt plant there, a tribute to NLC's technological and operational expertise. With plans in place to increase its total power generation capacity to more than 6,000 watts by the end of the decade, NLC appeared to be redefining itself, from a lignite mining concern to one of India's leading self-sufficient energy producers.

Key Dates:

1956:: Neyveli Lignite Corporation is established to exploit lignite deposits in Neyveli area in Tamil Nadu state in India.
1957:: Construction begins on Mine I and Thermal Power Station I (TPS 1).
1962:: Lignite mining operations begin; TPS I is commissioned.
1966:: Fertilizer Plant and Briquette & Carbonization Plant open.
1978:: Second lignite mine and thermal power station are launched.
1983:: Mine II begins operations.
1986:: TPS II is commissioned.
1992:: Life Extension Project on Mine I begins.
1996:: Mine II and TPS II are expanded.
2000:: Construction begins on Mine IA.
2002:: Mine II and TPS II expansions are completed; shutdown of Briquette & Carbonization Plant.
2003:: Shutdown of Fertilizer Plant; company begins development of new power plant at Rajasthan.
2004:: Company launches greenfield power plant at Tuticorin.

Principal Competitors

Fushun Coal Mine Bureau; RWE AG; Pingdingshan Coal Group Company Ltd.; Rostovugol; American Electric Power Company Inc.; Kreka Coal Mine; Mono Bobov Dol AD; Coal India Ltd.