Monthly Archives: February 2012
Although trading in ‘renewable energy certificates’ (REC) touched a new watermark on Wednesday – for the first time the volumes crossed the 200,000-mark – the trend in demand and prices have left market watchers disappointed. As many as 206,188 RECs were traded on Wednesday, of a total value of Rs 62 crore.
On the Indian Energy Exchange, which accounted for 92 per cent of the trading, the average price was Rs 3,066, marginally bettering the Rs 3,051 witnessed in the trading session of January. (Trading happens once a month, on the last Wednesday.)
On Power Exchange of India Ltd, which accounted for the rest, the average price was Rs 3,051.
RECs are generation-based ‘certificates’ awarded (electronically, in demat form) to those who generate electricity from renewable sources such as wind, biomass, hydro and solar, if they opt not to sell the electricity at a preferentially higher tariff.
These certificates are trade-able on the exchanges and are bought by ‘obligated entities’, who are either specified consumers or electricity distribution companies. These obligated entities may either be required to purchase a certain quantum of either green power or RECs.
While this is a matter of satisfaction, what is not is the fact that the total demand for RECs dipped to 390,000 from 432,000 last month. “This dip of 10 per cent is not a healthy indication for the market,” says Mr Vishal Pandya, Director, REConnect, a consultancy that helps green energy producers secure RECs and trade them.
“Settlement price of Rs 3,066 was short of our expectations,” says Mr Umesh Bhutoria, Director, E-CUBE Energy Trading Pvt Ltd, another consultancy. “Looking at the trend over the last few sessions and also the increase in number buy bids (as we are approaching the fiscal-end) we were expecting the price to be around Rs 3,150-3,200,” Mr Bhutoria told Business Line.
Both Mr Pandya and Mr Bhutoria stressed that it is important to see how the regulators enforce the RPO obligations and what sort of penalties are imposed for non-compliance.
Source: Business Line
Fitch Ratings has published an update of its ‘Rating Criteria for Solar Power Projects’, which describes the analytical framework Fitch applies to evaluate debt issued for a broad range of utility-scale photovoltaic (PV), concentrating PV, and concentrating solar power projects worldwide. The solar projects discussed in the report are financed as stand-alone assets (or portfolios) with no formal guarantee of debt service from the sponsors (nonrecourse).
The updated report replaces the existing criteria (published Feb. 23, 2011) without modifying Fitch’s analytical approach. No changes to the ratings of existing transactions are anticipated as a result of the application of the updated rating criteria.
The updated criteria report provides a summary of the broad attributes that support the ratings for solar power projects. The report highlights six key risk factors Fitch evaluates when rating debt issued for solar power projects. The criteria report also identifies typical attributes for the six risk factors, summarized below, which are assessed as strong, midrange, and weak.
–Completion Risk: Reasonableness of plan to achieve commercial operation considering technology risk, contractor qualifications, and construction contract terms including completion guarantees.
–Operation Risk: Stability and adequacy of plant performance supported by a qualified operator, comprehensive maintenance regime, and reliable technology.
–Supply Risk: Measured variability of solar resource; scope, quality, and reliability of a project’s energy production forecast.
–Revenue Risk: Strength, duration, and flexibility of the power sales arrangement as well as the stability of the regulatory support framework.
–Debt Structure: Composition of payment terms and strength of covenants to support debt payment, maintain adequate liquidity, and limit leverage.
–Debt Service: Cash flow resiliency to support timely debt payment under base case, stress case, and break-even financial scenarios. The full report, ‘Rating Criteria for Solar Power Projects’, is available at ‘www.fitchratings.com’.
NTPC, India’s top power producer, on Wednesday opened the price bids for Rs 160-billion equipment order, a company official said.
Three power equipment makers — state-run BHEL , a joint venture between BGR Energy Systems and Hitachi Power Europe GmbH, and another JV between Larsen and Toubro and Mitsubishi Heavy Industries — have bid for supplying supercritical boilers.
The process of awarding equipment order for NTPC’s nine units of 660 MW each was delayed by more than a year after utility boiler maker Ansaldo Caldaie challenged its disqualification on technical ground in the Delhi High Court.
The Delhi High Court stayed opening of price bids and later ruled in favour of Ansaldo. After India’s top court overturned the High Court’s order last month, NTPC resumed the process.
The actual award may take a few days, but the name of the lowest bidders may be known later in the day, the official said.
Shares in BGR Energy Systems were higher on expectations of winning a part of the 160 billion rupees order,
dealers said. At 1:29 p.m, the stock was up 8.04 per cent at 363.80 rupees.
Larsen & Toubro was down 2.18 per cent, while BHEL was up 1.7 per cent.
The government will limit imports and encourage domestic manufacturing through public private partnerships to boost solar energy generation as power consumption goes up dramatically with the fast-growing economy, minister for new and renewable energy Farooq Abdullah said on Wednesday.
Foreign companies must set up manufacturing facilities along with research and development centres if they want to enter India for solar power generation, he said while inaugurating a conference organised by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).
About 170 megawatt capacity of grid solar power has already been set up under the Jawaharlal Nehru National Solar Mission.
During its first phase, 1,100 MW capacity is envisaged by 2013. In the second phase, additional capacity of 10,000 MW capacity for various off-grid applications has been sanctioned.
“This scale-up will require a paradigm shift in the approach. We must continue to rely more on the regulatory framework, development of transmission infrastructure and developing innovative business models. The sector will require an investment of 20 billion dollars by 2017,” said Abdullah.
The challenge is to introduce newer and efficient technologies which can lead to cost reduction and ultimately help in grid parity, he said adding there is need to grab opportunities in developing partnerships in all spheres of research, development, designing and setting up projects.
Meanwhile, ASSOCHAM president Rajkumar Dhoot said the country is endowed with vast solar energy potential and 5,000 trillion kilowatt hour per year energy is incident over the land area with most parts receiving four to seven KWh per square metre daily.
Hence both technology routes for conversion of solar radiation into heat and electricity – solar thermal and solar photovoltaic – can be effectively harnessed providing huge scalability.
Dhoot said the government should allocate a substantial portion of clean energy fund to service capital requirements of solar energy projects at low bank interest rates.
Others present during the conference were Pramod Deo, chairman of the Central Electricity Regulatory Commission, Anil Agarwal, past president of ASSOCHAM, Rakesh Bakshi, chairman of ASSOCHAM council on new and renewable energy, and N.K. Bansal, former head of department at Indian Institute of Technology’s centre for energy studies.
They said solar energy applications are cost effective in remote and far-flung areas where grid penetration is not feasible.
These applications ensure that people without access to electricity move directly to solar power by leap frogging the fossil fuel growth trajectory.
Also, the mobile phone network infrastructure in the country consists of more than three lakh towers with 3,000 new ones being added every month.
By 2015 India is expected to have over five lakh telecom towers with almost all of them having a diesel back-up. This is another area where solar power can play a substantial role.
Source: India Blooms
GVK Power & Infrastructure Ltd. (GVKP), controlled by Indian billionaire G.V. Krishna Reddy, gained a second day in Mumbai on speculation it will sell stakes in assets to repay debt.
Shares of the builder of utilities and airports rose 3.8 percent to 17.95 rupees at the close, extending yesterday’s 8.1 percent gain. The stock has risen 55 percent this year, outpacing the 15 percent increase in the key Sensitive Index. (SENSEX)
The company explores various options to buy or sell stakes in businesses in the normal course, GVK Power said in a stock exchange filing yesterday. No agreement has been signed to sell stakes in its airport or oil and gas businesses, it said.
“While denying that they are in agreement for a stake sale, the GVK Power management indicated it has various options open,” said Pramod Amthe, an analyst with RBS Equities India Ltd. “Investors may still be hoping that these transactions will materialize.”
GVK Power chief financial officer A. Issac George declined to comment when reached on his mobile phone.
GVK Airport Holdings Pvt., the unit that operates the Mumbai and Bangalore airports, increased its stake in the properties last year. GVK Power has a total debt of 69 billion rupees ($1.4 billion), according to data compiled by Bloomberg.
GVK Power is in talks with BG Group Plc (BG/) for a possible sale of its stake in seven oil and gas blocks, Mint newspaper reported yesterday, citing two unidentified people familiar with the development. The Indian company is looking to raise $1.1 billion to invest in power and other businesses, according to the report.
BGR Energy and Bharat Heavy Electricals Ltd (BHEL) have emerged as lowest bidders for Rs 9,000 crore contract seeking supply of equipment for five projects of NTPC and Damodar Valley Corp (DVC).
BGR Energy is likely to be awarded contract for supply of 660-mw energy-efficient boilers to three projects, while BHEL is expected to bag rest two, an NTPC official said.
“The lowest bidder is BGR Energy followed by BHEL and L &T Power. After the bids are evaluated the orders will be placed to two lowest bidders as per cabinet guidelines,” an NTPC official said.
The equipment is being sourced for NTPC’s Mouda, Solapur, Meja, Nabinagar and DVC’s Raghunathpur projects.
A joint venture between BGR Energy Systems and Hitachi Power Europe GmbH has emerged the lowest bidder for Rs. 16,000 crore ($3.27 billion) power equipment order from NTPC.
State-run BHEL, the biggest power equipment in producer in the country, is the second-lowest bidder, while the joint venture between Larsen & Toubro and Japan’s Mitsubishi Heavy Industries emerged the third lowest, a senior official at NTPC said.
NTPC opened the price bids on Wednesday for supply of the supercritical boilers for nine units of 660 MW power each. Price bids for two units of 660 MW each of Damodar Valley Corp, another state-run company, were also part of the process.
Shares of BGR Energy rose 9.61% to Rs. 368.95 on the news, while Larsen & Toubro fell 3.02% to Rs. 1,308.05. BHEL was down 0.37% to Rs. 307.35 after initially rising.
BGR Energy said in a statement it would be awarded contract for seven boilers worth about Rs. 6500 crore.
The award of the orders comes with one-year delay after Ansaldo Caldaie, a bidder, challenged in the Delhi High Court its disqualification in the technical round of bidding.
NTPC resumed the process to award the contract after the Supreme Court overturned the high court order which had favoured Ansaldo last month.
The power generator will award the orders to the two lowest bidders after it evaluates the bids submitted by the three bidders over the next few days, said the NTPC official.
“It brings clarity to NTPC’s expansion plans,” said V. Srinivasan, a sector analyst with Angel Broking.
This award of orders will help NTPC add about 6,000 MW capacity. The company plans to raise its capacity to 66,000 MW by 2017 from 36,000 MW now.
“There are not many orders right now in the market. It’s a relief for BGR,” said an analyst, rated five-star by Thomson Reuters StarMine. “It will improve their cash flows but it won’t improve their profitability as they will import 70-80% initially.”
The country’s power producers have slowed their expansion as they struggle to source fuel, acquire land and get environmental clearances. There were not many major orders for gear makers in the past one year because of this.
On the other hand, many equipment makers such as Bharat Forge, JSW Energy and Thermax have partnered with international players such as Alstom SA, Toshiba Corp and The Babcock & Wilcox Co, to bid for contracts better.
Shares in NTPC, valued at about $30 billion, ended 0.56% up at Rs. 181.05.
Source: live mint
Union Minister for New and Renewable Energy, Farooq Abdullah said the government was yet to receive the probe report into the alleged Lanco-NTPC bidding fraud in which rules were reportedly flouted in bagging projects under the National Solar Mission.
“The inquiry is already going on. That (the report) hasn’t come yet. We have given one month for it. They are looking into it,” he said on the sidelines of a conference here.
The government had ordered an inquiry on February one into allegations by a research and advocacy group– Centre for Science and Environment (CSE)– that rules were flouted in granting the project.
“Investigations have revealed that these guidelines were blatantly flouted by Lanco Infratech. This company floated front companies and grabbed no less than nine projects worth 235 MW.” the CSE report had alleged.
The charge, however, has been refuted by the diversified group.
NTPC Vidyut Vyapar Nigam Ltd (NVVN), a unit of state-run NTPC Ltd, is the nodal agency for awarding projects.
Speaking at the conference ‘Solar India’ by industry body Assocham, Farooq emphasised on the need for securing non-conventional energy to meet with the growing energy demands in the country.
“There is a need for ‘Indianisation’ of energy, to build our energy capacity.
“The energy requirements of the country is going to grow every year and to meet the demands, we need to harness renewable energy even greater,” Abdullah said.
With every third bulb in the country lit with power supplied from NTPC’s generating stations, the central utility remains the mainstay of the Indian power sector, despite the entry of several private players. That is the reason there is always pressure on the state-owned generator to deliver on the capacity addition front. Since it is a public sector company, it also has to accommodate political aspirations while taking its investment decisions.
In an interview with FE’s Noor Mohammad, NTPC chairman Arup Roy Choudhury discusses the company’s capacity addition plans.Excerpts:
What is the status of NTPC’s capacity addition programme for the 11th Five-Year Plan?
Our capacity addition target is 9,220 MW. Against that, we have already added 8,610 MW. We will exceed the target.
What is the capacity addition target for the coming Plan? What is the fuel-wise composition of the capacity addition envisaged?
Capacity addition target for the 12 th Plan is yet to be finalised. But we plan to keep ambitious targets and become a 66,000 MW company by the end of 12th Plan (March 2017). Coal is and will be the dominant source of power generation. If gas is allocated, we can set up about 4,000 MW gasbased capacity. Hydro capacity of 1,328 mw is under construction will also get commissioned during the 12th Plan.We plan to add 1,000 MW capacity based on renewable energy, primarily wind and solar.
What is your coal import target for the financial year 2012-13? How much did you import in the current financial year?
We have awarded a contract for direct import of 4 million tonnes of coal. In addition, we have already placed orders with State Trading Corporation for supply of 12 million tonnes of imported coal. We expect to import 16 million tonnes of coal in the coming financial year.
Some of your plants are facing problems in selling power due to high tariffs. Do you plan to use more of domestic coal in such plants to bring down the generation cost?
To supply affordable power to consumers, we have to look at domestic coal, which we have in abundance in our country.There are about 114 billion tonnes of proven reserves of coal, most of which are in open-cast mines. We need to rapidly enhance domestic coal production, which is stagnating. If we could that, we should be able to meet the country’s requirement for affordable power.
We are developing our own mines and are targeting to produce at least 20% of our requirement from our mines. The government has also agreed to allocate more mines to feed about 8,400 MW capacity.
How is the progress in seeking environmental clearances and acquisition of land for projects where equipment supply orders have been placed through bulk tendering?
In case of the 660 MW bulk tender all clearances are in place and the required land has been acquired. But equipment orders have not been placed as the case is sub-judice in the Supreme Court. As regards the 800 MW bulk tender, we expect to place orders for the Kudgi Project in Karnataka. As for other projects — Lara in Chhattisgarh and Gajmara and Darlipalli in Odisha — land acquisition is under progress.
What changes have come in areas like the company’s project planning and execution and fuel security strategy after you took over?
We have taken initiatives to overcome issues which were dragging down our growth. For example, we have further streamlined our procurement system and project management.
We have also delegated more decision-making powers to our critical engineering staff like project heads in matters like preliminary construction activities for new and expansion projects. Khargone is going to be the first project of NTPC where the entire work will be undertaken on execution, procurement and construction (EPC) basis.
Source: The Financial Express
Associated Chambers of Commerce and Industry of India voices concern over Karnataka’s power supply notification
The Associated Chambers of Commerce and Industry of India (Assocham) has expressed concern over the notification issued by the Karnataka government forbidding power suppliers to distribute outside the State.
The industry body said this action by the State Government is creating a major hindrance to the implementation of open access regulation in the country.
“The State Government must review its decision and not reward the power producers with disincentives,” said Mr D.S. Rawat, Secretary-General, Assocham, in a statement. “Considering the extent of power shortages across the country, instead of invoking Section 11, Section 37 or Section 108, forbidding power exporters to supply power outside Karnataka, the State distribution companies must plan power procurement in advance and issue tenders for procuring power,” said Mr Rawat.
In its preamble, the Karnataka Government has notified that the demand for power will rise by about 10 per cent to about 200 million units and the only option available is to tap the power exported to other States.
Such notifications are not a feasible solution to the long and mid-term power purchase agreements.
Besides, if such a scenario persists it will severely hit growth and development process in the power sector and power-deficit states such as Andhra Pradesh, Madhya Pradesh, Maharashtra and Punjab in all probability might soon follow suit, cautioned Assocham.
“Even the Union Ministry of Power had advised the State utilities in the past to use this provision sparingly but the State Governments are not heeding to the Ministry’s advisory, thereby, creating stumbling blocks to open access,” said Mr Rawat.
Stiff resistance from State-owned distribution companies to allow migration of consumers and their apathy to allow open access, irrational policy, and the Government’s inability to absorb cost to serve liabilities together with the absence of independent system operator like in aviation sector are certain reasons, due to which open access remains a mirage.
Out of the total 12,366 mega watts (MW) installed capacity of power utilities in Karnataka as on August 31, 2011, with a share of about 34 per cent private sector accounted for about 4,241 MW.
Besides, the Karnataka Udyog Mitra invited participation from private power project developers to set up merchant power plant to generate about 900 MW and to set up 2,100 MW of gas-based generation projects through bid route.
Thus, considering the role of private sector in future capacity addition, Assocham has strongly recommended the State Government to encourage private investments through policy and regulatory initiatives.
“The open access in power sector is the need of the hour, besides the policies must be streamlined to open up the power market to ensure that consumers get power at competitive rates,” said Assocham.