Monthly Archives: May 2011
In an attempt to streamline lending to power distribution companies and improve their performance, India for the first time is planning a mandatory rating system for 65 state-owned distribution firms.
Power utilities in the country face aggregate transmission and commercial?losses of around 30% due to unmetered and unaccounted use—the highest in the world. Combined annual losses of all state electricity boards (SEBs) add up to around 1% of India’s gross domestic product.
Once the government assigns ratings to SEBs, they will form the basis on which state-controlled banks and financial institutions will lend to them. If a utility is highly rated, it will be eligible for more funds at a lower rate of interest. The rating exercise is expected to be completed in six months and the first meeting on the matter has been held by power secretary P. Uma Shankar.
“We will decide the parameters and will hold discussions with various stakeholders,” Shankar said. “Post the rating, the distribution utilities will be put in different categories. The ones who are in higher category will be eligible for larger quantum of lending at a lower rate of interest.”
“Such a system will bring about financial improvement,” Shankar added.
Most SEBs make substantial losses and are either not able to raise money or can do so only at high rates of interest. A dependence on subsidies and the political compulsion of providing free power to farmers reflects poorly on the books of these state-owned boards, which together have accumulated losses approaching Rs.2.5 trillion.
The health of the Indian power sector is linked to the financial condition of distribution utilities, given the fact that they are responsible for the power offtake from generation firms such as NTPC Ltd. There is growing concern about investing in the power generation sector due to the poor financials of SEBs.
“The prerequisite is that all the institutions should implement it in one go and should stick to it,” said Satnam Singh, chairman and managing director, Power Finance Corp. Ltd (PFC).
Currently companies such as PFC and Rural Electrification Corp. Ltd (REC) lend money to the utilities based on their own internal assessment systems.
State-owned PFC and REC together account for 60% of the money lent to power companies in India. They loan money to develop new power projects and finance restructuring of power distribution utilities.
Source – Live Mint
BS reported that Power Finance Corporation Ltd is now looking at equity funding opportunities in power projects and also looking at mining as prospective areas for growth. The day may not be too far off, as the corporation has been providing funds for power projects.
Mr D Ravi ED of PFC told reporters that PFC, the country’s largest listed term lending NBFC dedicated to power sector financing, 33% growth in sanctions, 21% growth in disbursements and 22 % growth in net profit.
He said that lending to the private sector was 7% of the total disbursements, 65% for state sectors and rest for centre. Corporation’s project wise loan assets stood around INR 99,570 crore.
Meanwhile, the Corporation which has been financing debt for power project is now looking at equity participation. “
Mr Nagarajan director finance of PFC said “We have moved the proposal to the ministry of power and asked for a few clarifications including if we should restrict our equity participation only in PSU developed projects or we can participate in private sector projects too.”
Mr Ravi added that the corporation will also look at funding standalone coal mine development projects. He told “Till now, coal mine was part the full project, including development of power plant and coal mine, now we are looking at funding standalone mine development projects.”
Source – Steel Guru
NEW DELHI: As discoms continue to demand steep tariff hikes, power sector experts say the only way to improve performance is to introduce competition in the power sector. Though this was pivotal to the privatization agreement of 2002, residents are still a long way from getting the luxury to choose their own supplier.
In cities like Mumbai which also has three distribution licensees, open access has proved to be successful. Here, the people can choose their own service provider. But this is yet to be replicated in the national capital. Power regulator Delhi Electricity Regulatory Commission (DERC) had brought down the cap for applying for open access to a load of 1 MW in July, 2009. But there are no takers for the scheme. Over the months, the commission had hoped that big-load guzzlers like housing societies or DMRC would seek open access, but they have not shown interest so far.
Source – TOI
The follow-on public offering (FPO) of state-run Power Finance Corporation (PFC) was subscribed 4.32 times shares offered till 6 pm on Friday, the last day of bidding for the issue.
Final subscription numbers for categories reserved for retail and non-institutional investors were not available till 7 pm on the websites of National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
The portion reserved for qualified institutional buyers (QIBs) was subscribed 6.92 times on Thursday, the last day of bidding for that category.
The price band for the issue was fixed at Rs 193-203 per share. Retail investors and PFC employees will get a five per cent discount on the issue price. Shares of PFC closed almost flat at Rs 215.85 on the Bombay Stock Exchange (BSE) on Friday.
“PFC has witnessed strong growth in loan assets over the past five years driven by significant investments in the power sector. Company’s net interest margin has been robust and return on assets/return on equity have been impressive,” brokerage IIFL (India Infoline) told its clients in an FPO note.
“We recommend investors to subscribe in the issue, as implied valuation is attractive at 1.4-1.5 times price to book value as in December 2010,” it added.
The size of PFC issue was 22.95 million shares, comprising a fresh issue of 17.21 million shares and an offer for sale by the government of 5.74 million shares.
With PFC issue, the Indian government has started its Rs 40,000 crore disinvestment programme for the current financial year. It next plans to bring out FPO of SAIL in June, followed by ONGC in July.
Source – Business Standard
Coal supply shortage has forced the government to plan a capacity addition of only 7,675 Mw for the year 2011-12, which is the last year of ongoing 11th Five-Year Plan. With this target, the capacity addition for the 11th Plan will be little over 42,000 Mw, as against a target of 62,374 Mw.
Though the government is now trying to fix a target of over 113,072 Mw for the 12th Plan, officials said the issues relating to environment and land acquisition could be a dampener. “Targets will need to be looked at afresh after the government decides the approach for the Plan. A low carbon approach can mean that the over 1 lakh Mw capacity addition target will have to reworked,” said a senior government official. Even while fixing the target for 11th Plan, these issues were not anticipated, he added.
During 2010-11, Coal India Ltd (CIL) had committed 335 mt of coal, but the actual supply stood at 302 mt, according to a senior official from the power ministry. Even the plants commissioned during 2009-10 would operate at lower PLF and the plants commissioned in 2010-11 would not operate at all as they have no coal supply. This has forced us to keep an achievable target of 7,675 Mw for the last year of the 11th Plan period, the official added.
In 2010-11, the government has been able to achieve 12,160.50 Mw, which is the highest capacity addition in a single year. The year 2009-10 too was a record year with the country adding highest ever capacity of 9,585 Mw.
For the total 11th Plan, a capacity of 34,462 Mw had been achieved till March this year. The government had fixed a target of 78,000 Mw for the 11th Plan, which was later revised to 62,374 Mw during the mid-term appraisal by the Planning Commission.
However, about 9,000 Mw out of the total capacity added so far in the current 11th Plan has been on account of projects that were to come up in the 10th Plan period. The government had fixed a target of 40,000 Mw capacity addition in the 10th Plan but only 21,180 Mw was achieved leading to a spillover in the current plan.
The Planning Commission had also set up a working group on power to review the capacity addition for the 11th Plan as well as formulate strategy for the upcoming 12th Plan. It had been proposed that nine sub-groups should be set up under the working group, which would submit its report by September 30.
It would also recommend optimal mix of additional generating capacity during 12th Plan period on the basis of different fuels at different locations, besides exploring avenues for purchase of power from neighbouring countries through joint venture schemes.
An assessment of investment requirement for the 12th Plan in the power sector would also be done by the group. Infrastructural support such as transportation, port facilities, construction and manufacturing capabilities that would be required for implementation of the 12th and 13th Five Year plans would also be looked at.
Source – Business Standard
India and the Asian Development Bank (ADB) have signed a $ 69 million loan agreement which is the sixth and final tranche of the $ 620 million Madhya Pradesh Power Sector Investment Program.
This multi-tranche financing facility was approved by ADB on 29 March 2007, an official press release said.
The signatories of the sixth tranche, signed here yesterday, were Mr Venu Rajamony, Joint Secretary (Multilateral Institutions), Department of Economic Affairs, Ministry of Finance on behalf of the Government of India and Mr. Hun Kim, ADB’s Country Director for India.
The sixth tranche will assist the Madhya Kshetra Vidyut Vitaran Company reduce power transmission and distribution losses in 117 towns. It will also support the M. P. Poorv Kshetra Vidyut Vitaran Company, the M. P. Paschim Kshetra Vidyut Vitaran Company, and the M.P. Power Trading Company set up information technology (IT)-management systems linking all parts of the distribution and trading companies in the state.
The IT management system will have a number of modules, including energy auditing, inventory tracking, and human resources and financial management, which will help the distribution companies increase efficiency. The sixth tranche will be implemented over a period of three and a half years.
The six tranches of the Madhya Pradesh Power Sector Investment Programme will increase transmission capacity in the state to about 10,000 megawatts (MW) from 5,563 MW and reduce transmission and distribution losses significantly. Enhanced power reliability, quicker repairs, along with better meterreading and billing, will also help improve the service to consumers. These measures will boost the financial performance of the state’s power sector and reduce its dependence on external support, the release said.
Mr Rajamony said the long term impact of the programme would be inclusive economic growth of the people of the state, through enhanced power supply to households through reduced transmission and distribution losses, thereby increased transmission capacity. He said that the ADB programme would improve operational efficiency in electricity distribution and financial sustainability of the distribution companies in the state.
Mr. Hun said that ADB had been a long-standing development partner for Madhya Pradesh. As of today, it has approved 14 loans amounting to $ 2.27 billion covering the power, urban, state road, and rural road sectors. ADB has also helped the state through a public resource management loan, he said.
Private power developers, including Tata Power, Reliance Power, Essar, GMR and Jindal Power, have jointly moved the electricity regulator against state-owned NTPC Ltd.
The private players have alleged that the haste shown by NTPC in signing power purchase agreements (PPAs), in the wake of an impending shift to a tariff-based bidding regime from January 2011 was a clear “abuse of its dominant position” in the power sector.
NTPC, the country’s largest generator, had inked PPAs with distribution firms for around 37,000 MW of new generation capacity between October 1, 2010 and January 5, 2011 — the cut-off date for a mandatory shift to a tariff-based competitive bidding regime.
The petition, filed on Tuesday by the Association of Power Producers, has sought a “prudent examination” of the “anti-competitive conduct of NTPC” in inking these pacts “to escape regulatory oversight and somehow tie down and monopolise scarce resources of the economy.”
The APP, representing an upcoming project portfolio of around 120,000 MW and with nearly all major private developers among its members, filed the petition through law firm J Sagar Associates.
The main contention is that by going on a PPA signing spree, NTPC insulated itself against competition for bagging new projects, at least for a better part of the next 10 years. At the same time, the larger objective of projects being awarded to players based on a fair bidding process — in line with the provisions of the Government’s Tariff Policy and subsequent ruling by the CERC — have been flouted. The reason for the PPA signing spree, the private players allege, becomes clearer in the context of “NTPC’s continuous failures in competitive bidding.”
The petition wants the Commission to invoke its authority under “Section 60 and 66 of the Electricity Act 2003 and direct NTPC not to execute the contracts” and declare PPAs entered between October 1, 2010 and January 5, 2011, as being “null and void”.
By January 5 cut-off date, NTPC had managed to wrap up deals for around 1,00,000 MW capacity. Of this, 191 PPAs for over 47,000 MW were inked during 2010, a majority of which came in the last three months of the year. The company currently has a capacity of 33,000 MW and another 15,000 MW is under construction.
Source – Business Line
NEW DELHI: The All India Power Engineers’ Federation (AIPEF) and the National Confederation of Officers’ Associations of Central Public Sector Undertakings (NCOA) have come out strongly against the proposed Jaitapur nuclear power plant.
Terming it a “dangerous nuclear version of the Enron’s Dhabol fiasco,” they said the Centre agreed to the French reactor even without design and safety features being presented to and approved by the Atomic Energy Regulatory Board (AERB).
The Jaitapur plant would cost upwards of Rs. 22 crore a MWe against Rs. 8 crore in an indigenous equivalent nuclear plant, the two organisations said.
In a joint statement, AIPEF president Padamjit Singh and NCOA president K. Ashok Rao, said: “While the Dhabol power plant left losses of a few thousands of crores, the Jaitapur nuclear power plant will in addition leave behind a few lakhs dead, injured and displaced.”
They also questioned the rationale behind the government’s plans to increase the installed capacity of nuclear power in the country from 3.8 GWe to 655 GWe in the next four decades.
“Such a large expansion would be impossible without compromising quality and safety.”
It also meant a “summary rejection” of the three-stage development plan conceived by Homi Bhabha, founder and prime architect of the Indian atomic energy programme. “No sane power engineer, anywhere in the world, would envisage an almost 200 times increase in nuclear power within 41 years.”
Source – The Hindu
Power Grid, the country’s largest transmission firm, is expected to finalise a contract for leasing out its tower infrastructure for telecommunication by the end of May.
The company had shortlisted Viom Networks and Microqual Techno for the lease in December. “We are close to finalising the tender. It is expected to happen by the end of this month,” a senior Power Grid official said. However, the official refused to give the size of the contract.
Power Grid has informed the Central Electricity Regulatory Authority about its plans to use power transmission towers for the purpose of telecommunication. The company had invited bids for leasing out 12,000 towers in four states — Jammu & Kashmir, Haryana, Punjab and Himachal Pradesh — to independent tower firms or mobile service providers. It has 150,000 towers across the country, with about 70 per cent located in semi-urban and rural areas.
The company would come out with tenders for leasing in rest of the country in the coming months, the official added. In the first half of the last financial year, Power Grid had received an in-principle approval from its board of directors for venturing into this business stream. It expects its revenues from the telecom business to grow to Rs 350-400 crore over the next 4-5 years, as against the current Rs 150 crore.
With the telecom industry adding 14-15 million subscribers monthly and the entry of new operators, companies are looking to share infrastructure and save costs. A telecom tower costs about Rs 10-15 lakh. Power Grid diversified into the telecom sector four years ago. It offers end-to-end leasing of bandwidth to telecom operators through its overhead transmission infrastructure.
Power Grid’s main business involves laying transmission lines. It owns and operates 72,000 circuit kilometres of transmission lines and alone transmits over 45 per cent of the total power generated in the country.
Source – Business Standard
AHMEDABAD/NEW DELHI: Lack of prior experience and equity in the capital-intensive solar power sector is driving the Indian investors and EPC contractors to join hands with experienced cash-rich foreign players.
The National Solar Mission envisages installing 20,000 MW of generation capacity at an investment of about Rs 3 lakh crore in next one decade. Industry experts believe that at least a dozen of collaborations and joint ventures between Indian and foreign players have taken shape in just 12 months and the trend will continue in the sunrise solar power sector.
From zero presence of solar in Indian energy mix at least 2,000 MW of solar power generation capacity underway in the country. In Gujarat alone, government has entered into power purchase agreements (PPAs) with 83 developers to commission 958 MW of solar power generation capacity. Central government’s nodal arm for solar power trade National Vidyut Vyapar Nigam Limited , signed PPAs with developers in January for 620 MW of capacity.
Talking to ET, Electrotherm Immodo Renewables president Jose Luis Moya said, “Immodo has experience of setting up solar projects in parts of Europe and we find India as the next most promising destination for renewable energy business. With the solar mission and initiatives in other states, the solar photovoltaic market inis growing at a very fast pace.”
Mumbai-based PLG Power that is commissioning 40 MW of solar power project and related equipment manufacturing plants in Gujarat is in talks with Japanese and Italian companies for strategic alliances to access the proven technologies. The company, part of Rs 3,500 crore PLG Group is in talks with international investors for private equity . Earlier, L&T’s engineering construction and contracts division joined hands with Sharp of Japan for technology and equipments for its experimental solar power project.
Industry sources believe that long-term alliance might take concrete shape between the two in coming days. Commenting on the trend, Solar Energy Association of Gujarat founder chairman Pranav Mehta said, “Solar power sector is in nascent stage in India and there is lot of excitement and the project developers will need experienced hands with proven records. Also, there are no precedents for the financial institutions for funding the solar project and hence project developers will need investments from strategic investors.”
Source – Economic Times