New Delhi (Platts)--26Dec2012/1201 pm EST/1701 GMT

Essar Power, a subsidiary of Essar Energy Plc, said Wednesday that the 600 MW unit of its 1,200 MW Mahan I coal-fired power project has commenced generating power.

Mahan I, located in Madhya Pradesh, central India, is Essar Power's eighth operational power plant, taking its total generating capacity to 3,910 MW, the company said in a statement.

"The commissioning of the first unit at Mahan is another major milestone for Essar Energy and means we have now more than tripled our generation capacity over the past couple of years," Naresh Nayyar, the chief executive officer of Essar Energy, said in a prepared statement. "Our focus now is on the development of the Mahan coal block which will provide a low cost fuel source for the power plant, placing it among the lowest cost power generators in India."

Unit two at Mahan I, also with a capacity of 600 MW, is expected to begin commercial operations during the first quarter of the 2013-2014 fiscal year.

The Mahan I plant is using a combination of imported coal and coal sourced from state-run Coal India Limited's e-auction process. The company also has applied for an interim tapering coal linkage allocation from Coal India.

Coal from these sources will be required until Essar Power's nearby Mahan coal block is operational. It has received forest clearance for the Mahan coal block in October this year.

Essar is investing $1.2 billion in the Mahan I project.

--Sapna Dogra, newsdesk@platts.com --Edited by John Kingston, john_kingston@platts.com