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Saturday, July 31, 2010

NBCC's Arup Roy Choudhury may NTPC new chairman

National Building Construction Corporation chairman Arup Roy Choudhury will take over the reins of the country's biggest generation utility NTPC from R S Sharma on September 1. Choudhury, 50, also heads the Standing Conference of Public Enterprise (SCOPE), the apex body of state-run companies. 
A civil engineer with post-graduation in management and systems, Choudhury is at present pursuing a doctorate from IIT-Delhi. He started his career in 1979 and worked in major public and private sector companies before joining NBCC in 2001 to become the youngest CEO in the public sector. 
Choudhury has his task cut out at NTPC as he will take charge when the company is at a crossroads, with plans for major expansion and forays into nuclear power. Choudhury will also inherit the legal tangle over gas supplies with Mukesh Ambani's Reliance Industries Ltd besides delays and cost over-runs in several big projects, particularly hydel units. He will also have to tackle fuel shortage and lost opportunities at home and abroad. 
Choudhury is credited with turning around NBCC. From being a sick firm, he led NBCC to a ‘Mini-Ratna' status. Those who know him describe Choudhury as a workaholic with a positive approach to work and say he combines the wisdom of private and public sectors. 

NTPC's merchant power biz plans to get Govt nod

NTPC Ltd's plans to sell electricity in the spot market, under which around 65 per cent power generated from two of its projects is to be offered at a market-based price through short-term sales, is set to get the Centre's nod shortly. The company — the country's largest power generator — is in the process of working out a pricing policy for such sales.
NTPC currently sells the full quantum of power from its existing power stations to the State Electricity Boards under long-term Power Purchase Agreement, based on tariffs determined by the power regulator and for which payments are secured through LCs (letters of credit). The new proposal to sell power from two of its projects — the 500 MW third stage of the Korba project in Chhattisgarh and the 500 MW stage-three unit of the Farakka project in West Bengal — would mark NTPC's entry into the lucrative merchant power segment. Private sector players including the Naveen Jindal Group, Videocon and the Adani Group are among the frontrunners in the merchant power business, which is risky by virtue of power not being tied-up upfront but offers lucrative returns in light of the electricity shortages across the country.
“The matter is under consideration of the Government. NTPC has proposed 65 per cent of power generated from Korba and 63 per cent from Farakka to be sold outside long-term PPAs,” a Government official involved in the exercise said. Apart from the Farakka and Korba units, the state-owned utility was earlier planning to sell the entire power from two of its upcoming hydro projects outside long-term PPAs. However, it has now decided to convert them into regional power projects.
The company plans to have 7-8 per cent of its total capacity as merchant power by 2017. The utility has a power generation capacity of 31,704 MW, and plans to increase its installed capacity to 75,000 MW by 2012.
Short-term market deals are proving to be lucrative for players, with average tariffs hovering between Rs 5.50 and Rs 7.60/unit for the past two years in bilateral trade and trade through exchanges. Apart from the Adanis and the Jindals, new players such as Indiabulls and Navbharat Ventures have also announced plans to set up merchant power plants.

India can afford to double share of renewable energy, says study

India can afford to raise the share of renewable energy in national power output to 10% by 2015 from under 4% today, says a new report.
A so-called national action plan on climate change recommends India should generate 10% of power from solar, wind, hydro power and other renewable energy sources by 2015, and 15% by 2020. But the high production cost and its effect on state power utilities’ budgets is viewed as a deterrent.
The report by ratings firm Crisil Infrastructure Advisory assesses the renewable energy potential of states, the renewable energy purchase obligations of state utilities and its impact on tariffs. It says the additional costs will be minimal.
“The incremental impact on power purchase costs pan-India would be about 1.5 paise a unit in 2011 diminishing to 0.1 paisa by 2015,” says the report. “The maximum impact for any state would be 4.2 paise a unit in 2011, which would go down to about 1 paisa by 2015.”
India has to import nearly three-fourths of its energy needs due to a limited stock of conventional energy sources. India’s renewable energy potential is 100,000MW from solar energy and another 85,000MW from non-solar sources. Of that, only around 17,220MW has been tapped. This includes 69% from wind energy, 16% from small hydropower units and 8% from cogeneration. The remaining 7% covers solar energy and other sources, according to Crisil.
“Though wind-based power has the highest share in total renewable energy installed capacity, it also has the highest gap (between potential and production capacity) among non-solar renewable sources, providing an opportunity for further harnessing wind energy. The biggest potential exists for solar power,” the report says.
More reliance on renewable energy will not only help India reduce its import bill but also cut back its contribution to polluting gases that are blamed for climate change worldwide.
The Central Electricity Regulatory Commission (CERC) has come up with guidelines on issuing renewable energy certificates (RECs) from September to promote green energy. Certificate holders will be able to sell green energy to states, individuals or other trading entities.
States have been allotted different renewable energy purchase obligations (RPOs). While Gujarat met its target for 2009-10, states such as Tamil Nadu came close.
Sixteen state electricity regulatory commissions have specified the RPOs for their licensee distribution companies. They have also notified regulations to determine the tariff of energy generated from renewable sources.
“While some states had issued final regulations on the REC mechanism, several others were awaiting approval of the norms drafted by the respective state electricity regulatory commissions,” said Pramod Deo, chairperson and chief executive of CERC.
The Crisil report says RPOs reflect the target set out in the national action plan—5% of renewable energy in 2010, followed by a 1 percentage point increase every year, leading to 10% in 2015 and 15% in 2020.
The potential for renewable energy differs across states.“For instance, most of the wind potential is available in states like Tamil Nadu, Karnataka, Gujarat, Andhra Pradesh, Maharashtra, Rajasthan, Madhya Pradesh and Kerala. There are also states like Chhattisgarh, Uttarakhand and Himachal Pradesh where there is moderate RE (renewable energy) potential (primarily small hydropower). Remaining states have very little RE potential,” the report says.
Sushanta K. Chatterjee, deputy chief for regulatory affairs at CERC, said a standard RPO for all states is neither possible nor desirable. “There will need to be different trajectories for different states at varying potential levels.”He said most renewable energy projects were located in poorly connected areas, and transmission of power was a major challenge.

National Thermal Power Corp commissions a 490-MW unit at its Dadri thermal power plant in Uttar Pradesh for upcoming Commonwealth Games

NTPC commissioned a 490-MW unit under its thermal power project at Dadri, in Uttar Pradesh, which will ensure uninterrupted power supply for the upcoming Commonwealth Games.

Delhi will require an extra 1,000 MW per day of electricity to tide over the augmented demand during the Games. At present, power consumption in the capital is about 4,000 MW per day.

Power generated from the Dadri plant will mainly cater to electricity demand for the upcoming Commonwealth Games. Out of the entire 2,400-MW generation capacity, 90 percent of the output will be supplied to Delhi, while Uttar Pradesh will get 10 percent.Power Minister Sushilkumar Shinde inaugurated the 490-MW unit of the Dadri project at a ceremony at the plant site.

With the commissioning of this project, the total installed capacity of NTPC stands increased to 32,194 MW, chairman and managing director RS Sharma said here.

The total capacity of NTPC's Dadri thermal power project is 2,400 MW, which includes 840 MW set up under Stage-I of the project, 840 MW under Stage-II and another 829 MW of gas-based capacity.

The Commonwealth Games are being hosted at New Delhi in October this year, for which NTPC has assured the supply of 1,000 MW of electricity.NTPC's plans to further augment its capacity to 50,000 MW by March, 2012.

Adani Enterprises to invest Rs 6,500 cr in coal mining

After its big-ticket entry into infrastructure sector, such as port and power segments, the Adani Group is now focussing on end-to-end coal mining operation with a planned investment of Rs 6,500 crore over the next three to four years that includes laying of private railway lines in Orissa and Chhattisgarh to enable it to ship coal by sea route to Mundra and then transport it by train to the upcoming power plants in Gujarat and Maharashtra.
Recently, the flagship company of the group, Adani Enterprises Ltd (AEL), raised nearly Rs 4,000 crore primarily for its coal mining activity, company sources told.
QIP route
The AEL board had, through its May 14 resolution, enabled the company to raise funds through the QIP route for coal mining in India and abroad. AEL has set up a subsidiary, Adani Mining Pvt Ltd (AMPL), which will execute the mining of nearly 70 million tonnes per annum (mtpa) for the next 30 years of contract period from three coal blocks in Orissa and Chhattisgarh which, together, have mineable coal reserves of around 1,900 million tonnes (mt).These blocks had been allocated by the Centre to the State electricity boards (SEBs) of Gujarat, Maharashtra and Rajasthan, which entrusted mining work to AEL.
AEL will start mining of coal at Parsa Kante block of Chhattisgarh, in an area of 27.67 sq km with coal reserves of 452 mt, in mid-2011. Initially, it will mine half-a-million tonnes per annum, to be subsequently ramped up to 15 mtpa by 2014. Work on the Machchhakunta block in Orissa, with reserves of 1,200 mt in an area of 20.43 sq km, will start in 2013, peaking up to 50 mtpa in 2018. Similarly, mining of 5 mtpa of coal in an extension of Parsa block in Chhattisgarh, with reserves of 150 mt, will commence in 2013 and peak in 2016, the sources said.
To transport this mined coal, the company will lay private railway lines of 22 km and 67 km, respectively, from the Machchhakunta and Parsa blocks. It will also acquire land on behalf of SEBs and set up coal washing facility, before transporting coal to the nearest railway stations. From there, coal will be shipped from Paradip and Kalinga ports of Orissa by sea route via the Bay of Bengal and the Arabian Sea to Mundra in the Gulf of Kutch. “This relatively cheaper transportation of coal via the sea route would improve our margins,” the sources said.
Funding pattern
To fund coal mining, the company will utilise Rs 2,500 crore, out of the Rs 4,000 crore raised last week, as equity, and has tied up debt of Rs 4,000 crore. The balance of Rs 1,500 crore from QIP funds, it will utilise in acquiring coal blocks abroad. After the rights issue, QIP and full conversion of FCCBs, the net worth of AEL would be nearly Rs 10,000 crore and it would become a zero-debt company at a holding level.
The promoters' holding of AEL, which was 84 per cent post the merger of Mundra Port and SEZ Ltd, is now 78 per cent post-QIP exercise. By mid-August, with the completion of merger process, the market capitalisation of AEL is expected to be Rs 66,000 crore, making it one of the top 10 companies in India, the sources added.

India to enhance power production through nuclear energy by three folds by 2050: Atomic minerals directorate for exploration and research

Atomic minerals directorate for exploration and research director Dr Anjan Chaki said that India would enhance power production through nuclear energy by three folds by 2050.
Delivering a lecture on fuelling India's power requirements and role of nuclear energy, organized to mark the celebration of 94th foundation day of University of Mysore at Crawford Hall, the director said India has plans to increase nuclear power production by 10 pc in the next four decades.
Presently, installed capacity of nuclear power in India is only 3.2 per cent as against 78 per cent in France and 19 per cent in China. The main source of power generated in our country is thermal and it constitutes 63 per cent of total power production. Our installed capacity of power utilities is over 1.60 lakhs MW, he said and added that India comprises 18 per cent of world's population but produces only 2 per cent of world's electricity.
Chaki felt that to sustain the growth, India has to vastly improve in power sector as well as in infrastructure.

Supreme Court judgment leads to gas-power gold rush - Current capacity of gas-based power in the country is only around 30-35 mmscmd

The Union government announced that it had got applications for the allocation of 550 million cubic metres of natural gas from prospective power producers, making any deal between the Ambani brothers for future gas supply less likely.A recent Supreme Court judgment had held that it was up to the government of India to allocate gas, even if it is produced by a private company.Jitin Prasada, minister of state for petroleum and natural gas, said the Centre has received applications for the allocation of a whopping 550 million cubic metres (mmscmd) of natural gas a day from those who wish to set up new gas-based power plants.The current capacity of gas-based power in the country is only around 30-35 mmscmd.The Centre had recently allocated around 18 mmscmd of gas for power plants from an expected production of 80 mmscmd from Reliance Industries' KG D6 block in the Bay of Bengal.The total gas production in the country is only around 135 mmscmd, split equally between government companies and Reliance Industries.The new applications are likely to be bad news for the Anil Ambani group, which has been trying to secure an assurance of gas for its planned power plants totalling 28 mmscmd.
A recent ministerial meeting on gas allocation, which was widely expected to change existing gas policy to allow the Mukesh Ambani group to promise gas to the Anil Ambani group, failed to arrive at any such decision.A high level of demand, of the order of 550 mmscmd, is likely to make it difficult for the government to allow the two Ambani groups to enter into a contract for future gas supply.Prasada also announced that oil-marketing companies like Indian Oil Corporation and Hindustan Petroleum will no longer conduct interviews for the award of LPG dealerships, to combat corruption. He said such awards will now be done by drawing lots.Prasada said Reliance Gas Transportation Infrastructure Limited (RGTIL), a private company owned by Mukesh Ambani, is the only private firm permitted to build pipelines in the country. In addition to the existing east-west pipeline, the company has been granted permission to lay pipelines from Chennai to Mangalore through Bangalore, from Chennai to Tuticorin and to Vijaywada, and to extend its pipeline from Kakinada in Andhra Pradesh to Howrah in Bengal.

Friday, July 30, 2010

NTPC extends tenure of Mr A.K. Singhal, Director (Finance), beyond July 31

NTPC informed BSE on Thursday that it has further extended the tenure of Mr A.K. Singhal, Director (Finance), beyond July 31.
Mr Singhal took over as Director (Finance) on August 1, 2005, for a period of five years. The Ministry of Power in its order dated July 28 has said that Mr Singhal’s tenure has been extended beyond July 31, 2010, till the date of his superannuation that is January 31, 2014, or until further orders, the filing added.

R-Power not in priority list for next D6 gas flow

Anil Ambani-owned Reliance Power does not figure in the first six companies that will get gas on priority from Reliance Industries' KG -D6 when output from the block goes beyond the current capacity of 60 mmscmd, a power ministry official told.
The list, which is being finalised by the ministry, includes GSPC’s 700 mw Pipavav power project, Gujarat State Energy Generation Ltd’s 350 mw project at Hazira, Pragati Power Corporation’s 1,000 mw Bawana power project, Lanco’s 740 mw Kondapalli Phase III, GMR’s Vemagiri expansion project, and Uttarakhand’s Kashipur project.
“The list will be submitted to the empowered group of ministers (EGoM). Priority is given to these plants as they will be commissioned between 2010 and 2012,” an official said, requesting anonymity.
If the EGoM accepts the recommendations of the power ministry, it may delay Reliance Power’s plans of setting up about 8,000 mw gas-based power projects in the country as the next allocation of gas will happen only in 2012. The company had earlier told the power ministry that it plans to commission its projects by March 2012. An email sent to a Reliance Power spokesman did not elicit a reply, though the spokesman confirmed that he had received the mail. 

A government official said a second list of companies that will get natural gas is likely to be announced next year and it is possible that Reliance Power will figure in that list. Reliance Power’s 2,400 mw Samalkot project in Andhra Pradesh has been identified by the power ministry for allocation of about 8 mmscmd gas from KG-D6 for 2012-13, he said.“The second list is not yet finalised and will depend on the verification of the commissioning schedule,” a power ministry official said.
The EGoM, in its meeting on Wednesday, did not allocate gas to any new power plant and decided to ask fertiliser and power ministries to prepare a new list of projects that would require gas on an urgent basis. “The prioritisation is being done due to scaled-down projection of gas flows from the KG basin,” an oil ministry official said.The first priority list prepared by the power ministry is based on around 16 mmscmd gas supply to run six plants at 70-75% capacity, the power ministry official said.

Coal supplies to Farakka, Kahalgaon STPS-I: CIL blames NTPC's unloading facilities for low dispatch

Brushing aside NTPC's claim of being supplied lower-than-committed amounts of coal at its Farakka and Kahalgaon super thermal power stations (STPS), which are at present grappling with tremendous coal shortages, Coal India Limited (CIL) has blamed the entire situation on the lack of adequate unloading infrastructure at the project locations. According to CIL, while it makes every effort to dispatch eight to 10 rakes of coal to these plants, the average dispatch during April-June 2010 was restricted to 7.8 rakes per day due to the absence of track hoppers, which are essential for unloading Box-N wagons, via which Indian Railways prefers to transport coal. Further, the coal handling plants (CHP) at the two stations encountered faults on many occasions during the first quarter (Q1) of the current fiscal, claims CIL. According to the coal company, these constraints have caused even the supply of imported coal, which are also delivered by rail, to remain below target.

Farakka and Kahalgaon STPSs are linked with the Chuperbita and Hurra-C coal mines, which are expected to commence production not before April 2012. In the interim, it has been allotted linkage from other CIL sources, which have been less than exemplary in meeting their requirements. While the total coal requirement of the Farakka and Kahalgaon-I and II projects is estimated to be around 25 million tonnes per annum (MTPA), CIL has, till the time the dedicated mines become operational, agreed to supply only 15 MTPA, leaving a gap of 10 million tonnes, which is to be sourced by NTPC from other sources.

Only 10% of capacity addition target for 2010-11 met, so far

While the country grapples with power shortages, it is not being helped by the abysmal progress of capacity addition. Pertinently, out of the total capacity addition target of 20,359 MW for the current fiscal, only 2,105 MW, or 10.33%, has been achieved, so far. Out of this, the central undertakings have added 205 MW, while state and private participation stand at 1300 MW and 600 MW, respectively. Pertinently, the corresponding targets are pegged at 7,639 MW, 6,368 MW and 6,352 MW.  

Further, a sector-wise analysis reveals that targetted capacities of 1346 MW, 17793 MW and 1220 MW, in that order, have been assigned to the hydroelectric, thermal and nuclear power sectors, respectively. Of this, hydel projects aggregating to only 130 MW have been commissioned, so far, this year. At the same time, 1975 MW of capacity has been commissioned via thermal power projects, while no nuclear-powered units have been commissioned, yet, this fiscal.

U'khand may not revive hydel project scheme

The controversial self-identified scheme under which the allotment of 56 hydel projects was cancelled this month is unlikely to be revived in the near future.
This is being seen as a setback to the energy sector in Uttarakhand where hydropower is considered to be one of the key growth drivers. Official sources told that the government finds it tough to reinitiate the bidding process under the self-identified scheme after a host of private companies challenged its decision to cancel these projects.The government had returned the premium money of over Rs 32 crore to all the companies soon after cancelling the whole bidding process this month. The government had charged a premium of Rs 5 lakh per Mw on the 56 projects with a total capacity of over 960 Mw. But now, nearly six to seven companies have sent back the drafts to the government, challenging the basis of the cancellation process. A Punjab-based company has even threatened to move to court on this issue.

“It is true that some companies have returned the money. We are now assessing the whole issue to give an appropriate response to them,” said Energy Secretary Utpal Kumar Singh. The sources told that the government is taking a legal opinion over the issue.
While cancelling the projects last week, the government had said the Uttarakhand Jal Vidyut Nigam Limited (UJVNL), which was the nodal agency for the bidding process, has been asked again to modify the advertisement of July 25, 2008 for inviting fresh bids for the self-identified projects. However, the UJVNL has so far, not received any official communication from the government in this regard.
The decision to cancel the process was taken by a high powered committee under the chairmanship of Singh. A careful study of the objections which had come after the allotment of 56 hydel projects, the committee found that there were certain flaws in the advertisement.
Under the 2008 power policy, the government had received 741 bids for setting up hydel projects upto 25 Mw. Early this year, the government quietly allotted 56 hydel projects. Some of the companies like Madhucon Project Ltd had been allotted three projects.

Aravali Power's Jhajjar STPP in a mess-II: NTPC considers extreme steps

In view of the inordinate delay in the completion of major civil works at the Indira Gandhi super thermal power project (STPP), factions within NTPC are considering the legalities of hiring another company to supplement the contractor, Kirloskar Brothers Limited (KBL), or even terminate the contract with the Pune-based firm. Such extreme measures are being contemplated as even a high level meeting between NTPC and KBL failed to elicit the extra efforts needed for the quick completion of the contract.

KBL, in September 2008, bagged the Rs 2,688 crore civil work contract for the power plant, being developed by Aravali Power Company Private Limited-- a joint venture between NTPC, Indraprastha Power Generation Corporation private Limited (IPGCPL) and Haryana Power Generation Corporation Limited (HPGCL), at Jhajjar in Haryana.

It would be pertinent to mention here that, KBL has been awarded several civil and structural work contracts by NTPC, for projects across the country. The company has undertaken work the supply of various pumps packages for 2x500 MW Vindhyachal STPP, Stage-II, CW pump sets for the Unchahar project, the ash water recirculation pump package for the Talcher STPP, the miscellaneous vertical pumps package for Stage-I of the Talcher STPP and the makeup water pumps package for the Simhadri STPP, amongst others.

Thursday, July 29, 2010

Cannot commit gas supply to either Reliance Natural Resources or state-run NTPC: Petroleum ministry tells Empowered Group of Ministers

The petroleum ministry is telling the Empowered Group of Ministers (EGoM) that as of now it cannot commit gas supply to either Anil Ambani’s Reliance Natural Resources Ltd or state-run National Thermal Corporation Ltd — the two firms vying for gas from Reliance Industries Ltd’s D6 field. 

 The inability to assure gas to both and some other firms stems from insufficient gas from D6 as well as EGoM decisions of January and October 2009 allowing gas link for proposed plants “as and when they are ready to commence production”. 

 Based on RIL’s input, the EGoM is being told that gas from D6 field would not cross the current 60 million standard cubic metres per day “in the near future”. This volume is more than committed to consumers with 61.61 MSCMD on firm basis and another 30 as fallback or unutilised gas. 

 “It is proposed that petroleum ministry should indicate gas availability in the coming years to fertiliser and power Ministries and invite proposals for commercial utilisation of gas from them. Subsequently, appropriate proposals for gas utilisation from the next financial year would be put up by the petroleum ministry before the EGoM for decision,” says the agenda for Wednesday’s EGoM meeting. The ministry is instead proposing that D6 supply to ONGC for LPG extraction be cancelled as ONGC would have its own gas from C-Series and Bandra formation. It also wants that fuel to Pragati Power Plant at Bawana be scrapped as the plant was delayed to next fiscal 2011-12.

CEA calls for assessment of future coal requirements of power sector

The Central Electricity Authority (CEA) has called on the union power ministry to commission a comprehensive study of the coal requirements consequent to the fresh capacity addition envisaged in the country in the short and long-terms. The assessment, to be carried out by a third party consultant, is also expected to recommend timeframes within which various measures are to be implemented by the relevant agencies, to meet the burgeoning coal demand from the power sector. According to the central agency, such a study is essential in view of the massive generation capacity addition plans, aimed to cater to the power requirement anticipated in the country over the next 10 to 20 years, . 

 With capacity addition targets of 85,000 MW and 35,000 MW, respectively, for the 12th and 13th Plans, the power sector coal requirements in FY 2016-17 is likely to soar to 850 million tonnes (MT), almost double the current 434 million tonnes (MT). Accordingly, a paradigm shift, in terms of the formulation and implementation of realistic time-bound action plans for supply of domestic and imported coal, its transport and distribution and quality controls, is required. Accordingly, as per the authority, the comprehensive study would throw light on the procedural and technological changes required to effect the shift.

Dhaka inks power deal with New Delhi

Bangladesh on Monday signed an agreement with India for buying power. The accord, valid for 35 years, was signed between the Bangladesh Power Development Board (BPDB) and the Power Grid Corporation of India Ltd (PGCI) in the presence of Bangladesh Finance Minister Abul Maal Abdul Muhith, Energy Adviser to the Prime Minister Tawfiq-e-Elahi Chowdhury and other high officials of the two countries.BPDB secretary Azizul Islam and PGCI executive director Arun Kumar signed the deal.
Under the agreement, Bangladesh would buy 500 MW from Indian power plants and import it through the PGCI's regional transmission system.The power will be transmitted through a 400 Kv switching station and a 400 Kv single circuit line. The PGCI will construct a 400 Kv double circuit line stretching from Bahrampur in India to Bheramara in Bangladesh.
Initially, 250 MW will be made available by India. The transmission is expected to start in 2012.
The terms and conditions as well as the tariff will be set by the Central Electricity Regulatory Commission of India. The agreement, however, has a provision for amending the tariff from time to time. Bangladesh will have to make the payments within one-and-half month from the date of billing.Mr. Muhith termed the signing of the deal “a dream of regional cooperation coming true.” Mr. Chowdhury said, “This is a small step for Bangladesh and India, but a giant leap for regional cooperation.”The agreement is the result of a Memorandum of Understanding signed in January, during Bangladesh Prime Minister Sheikh Hasina's visit to New Delhi.

PowerGrid gets Rs 2,200 cr relief from govt

The government has forfeited a service tax claim of over Rs 2,200 crore on Power Grid Corporation, a move that could facilitate smooth sailing for the proposed stake sale in the country’s largest transmission utility.The finance ministry has issued a notification relieving the transmission utility of any liability towards payment of service tax, a government official said. The finance minister had withdrawn service tax on power transmission in the Union budget 2010-11.
Industry analysts said the move was good from the investor perspective as it removed a contingent liability from the balance sheet of the company.
“It removes uncertainty and presents a clearer financial picture of the organisation,” said Kuljit Singh, partner, infrastructure and real estate at consulting firm Ernst&Young.The move will also lift confusion over the tax treatment of transmission services and help the company step up investment in the fund-starved sector.
The decision will also benefit a host of state power utilities that were also slapped with showcause notices. Some utilities had approached courts and secured stay orders against the levy.“We are happy that the government has finally accepted our plea. It will not only help the company plan its investments freely, but also will prevent consumers from any rise in transmission tariff,” Powergrid chairman and managing director SK Chaturvedi said.
Power Grid was slapped with a showcause notice last year for non payment of tax from a period starting May 2006. Powergrid said the claim was around Rs 2,041 crore for the period between May 1, 2006 and March 31, 2009.
During this period, power transmission was considered for service tax by the revenue department under the head of ‘business support services’. The levy was made even though power transmission was mentioned in the schedule of items on which service tax can be levied. In the absence of any directive from the Central Board of Excise and Customs on the issue, Powergrid neither paid any service tax for the aforesaid period nor got itself registered with the service tax authorities.Powergrid along with other state transmission utilities had been objecting to this levy ever since they received the showcause notices on the ground that the charge could levy an additional burden on the consumer.
With the intervention of the few state government, the power ministry also took up the matter with the finance ministry earlier. While the budget in February this year waived service tax on transmission, the issue of past dues has only been addressed late this month.
Powergrid is one of the largest transmission utilities in the world with a network of about 74,297 circuit kms of transmission lines. The company has already set up a national grid with inter regional power transfer capacity of around 20,800 MW, which is being enhanced to 32,000 MW by 2012. It is investing Rs 55,000 crore in Eleventh Plan to carry out the expansion plan. 

India plans Rs50,000 cr power sector debt fund

In an attempt to bridge a funding shortfall and help banks avoid asset-liability mismatches, the government plans to create a Rs50,000 crore debt fund that will raise low-cost and long-term resources for re-financing power projects.
“The fund is in the process of being formulated. Takeout financing is what we are looking at,” said Union power secretary P. Umashankar.Takeout financing is a system designed to help banks lend to long-duration projects. In takeout financing, a long-term financing institution such as India Infrastructure Finance Co. Ltd (IIFCL) agrees to take an existing loan off the books of a bank for a price. This would help banks in asset-liability management in financing long-term projects when their resources are short- or medium-term in nature.
“Any power sector project that has crossed the stage of uncertainty such as construction will benefit from this. The fund will also create room for the banks to lend,” said Umashankar.
The funding ability of Indian institutions is restricted by central bank limits on how much they can lend to each sector or business group. As a result, the country’s target of adding 160,000MW of capacity in the 11th Plan (2007-12) and 12th Plan (2012-17), requiring a total investment of Rs18 trillion, hinges on the ability to mobilize debt. According to a concept paper for the fund reviewed by Mint, it will be set up by one or more sponsors acting as general partners. It will be managed by an asset management company, and may refinance up to 90% of outstanding project debt and will earn around 100 basis points over what it pays to investors. One basis point is one-hundredth of a percentage point.“The plans for the funds are in the preparatory stages,” confirmed a senior government official aware of the development, who did not want to be identified.
The preparatory meetings for the fund will be held under the chairmanship of Deepak Parekh, chairman of Housing Development Finance Corp. Ltd. Officials of the Planning Commission, the Union power ministry, state-owned power sector lending institutions such as Power Finance Corp. Ltd (PFC), Rural Electrification Corp. Ltd (REC), and the Central Electricity Authority, India’s apex power sector planning body, will participate in the meetings.
 India has been for long contemplating setting up such infrastructure funds. Bloomberg had reported on 14 May about plans for an $11 billion (Rs51,590 crore today) debt fund to build ports, roads and bridges, citing Montek Singh Ahluwalia, deputy chairman of the Planning Commission.
The paper says the sponsors of the power sector fund may be a combination of organizations such as PFC, REC, Life Insurance Corp. of India, State Bank of India, Infrastructure Development Finance Co. Ltd and IIFCL, among others.It may also include investment banks and non-banking financial companies along with multilateral funding agencies such as the International Finance.

Wednesday, July 28, 2010

Gas demand rises even as India loses out on cheap LNG

When the empowered group of ministers (EGoM) on natural gas sits to decide on the fate of applicants seeking a pie of Reliance Industries Ltd’s D6 gas, an important question that may remain unanswered is whether India has done enough to meet the domestic gas demand. Officials say the Ministry of Petroleum and Natural Gas has applications from power and fertiliser sectors that total to a whopping 600 million standard cubic metres a day (mscmd) of demand, of which 28 mscmd alone is being sought by the Anil Ambani group for its four power plants. This demand is over and above the present requirement of 175 mscmd against a supply of around 140 mscmd. Internationally, natural gas prices have crashed due to the economic slowdown and availability of shale gas in the US market. Imported liquefied natural gas (LNG) in India is now available at a landed price of about $5.5 a million British thermal unit, making the differential between domestic and imported gas a comfortable $1 or so. Taking advantage of the global glut would have been ideal for India but it has not been able to stitch a new deal with even a stable gas partner like Qatar. A recent delegation to that country attempted to tie up a new contract but could not succeed. The reason: Long-term supply is unavailable in an uncertain market and the Indian market cannot commit to short-term contracts of a year or two, since the country does not have the required gas infrastructure, said a senior official in the ministry.
While the natural gas production in the country almost doubled in 2009, the trunk pipeline capacity would increase by about 50 per cent to 16,323 km, in December 2012. “The gas market is driven by a pipeline network. That is a must. We do not have a country-wide gas pipeline network and grid,” said A K Balyan, chief executive officer and managing director, Petronet LNG Ltd (PLL). The company, promoted by government-owned oil and gas companies, is the biggest importer of natural gas in the country. It is also the only domestic company to have two long-term LNG contracts. Balyan pointed out that no long-term contract has been signed anywhere in the world after PLL signed a contract with Australia for import of LNG from the Gorgon field last year, along with a similar contract signed by China for gas from the Australian field. Balyan said they faced pipeline constraint in the past to push regassified LNG and agreed that pipeline infrastructure, besides pricing was a problem for the domestic LNG industry. Balyan, who joined PLL recently and has been associated with Oil and Natural Gas Corporation, the second biggest producer of gas in the country, recollected that in the 1980s, ONGC had proposed a national gas grid which was a “futuristic” proposal then. The country still does not have a national grid in place.
Part of the problem is expected to be taken care of by 2012. The Petroleum and Natural Gas Regulatory Board (PNGRB), which has been empowered to issue authorisation for trunk pipelines almost three years after it was formed, has planned five more trunk pipelines, in addition to the nine scheduled to be completed by December 2012. “In the next five years, with the completion of these five trunk pipelines, the country will have a virtual national gas grid and all sources and consumption centres will get connected,” said PNGRB Chairman L Mansingh. India’s trunk pipeline capacity will be less than 30 per cent of Pakistan’s pipeline network of 56,400 km, even after the nine new pipelines become operational in 2012. This is despite the fact that the neighbouring country’s gross domestic product is roughly half the size of India’s. Despite the biggest global gas field coming into production last year, the share of natural gas in the total energy basket in India remains a paltry 10 per cent, compared to a global average of around 25 per cent. The potential demand is, therefore, immense. “The falling gas prices, plus the availability of extra output, such as from India’s Krishna-Godavari field, have raised enthusiasm for gas, and led to increasing use of the fuel variety in both China and India. China as a gas user is already as big as OECD countries such as Germany or the UK, and along with India can be expected to see ongoing increases in consumption, although coal will remain the major energy source in both countries,” said Nobuo Tanaka, IEA Executive Director. The condition for growth in the Indian gas market, as Balyan put it, would still be “an aggressive gas network”. 

EGoM likely to be flooded with demand for gas

The much-talked meeting of the Empowered Group of Ministers (EGoM) on Wednesday is likely to see a flood of demand for natural gas from sectors like power, fertilizer and refineries that far outstrips the supplies. While Reliance Industries has already stated that it cannot produce more than current 60 million standard cubic meters a day of output from its eastern offshore KG-D6 fields, demands for 52.28 mmscmd gas have been placed during the current fiscal alone, official sources said. The government has so far allocated about 64 mmscmd of KG-D6 output to customers in power, fertilizer, refineries, steel and city gas sectors. The field may hit the peak output of 80 mmscmd sometime in 2012, making available about 16 mmscmd for allotment. Also that year, Gujarat State Petroleum Corp (GSPC) is likely to start producing 8-9 mmscmd from its Krishna Godavari fields and another 3 mmscmd would come from ONGC fields. Against these supplies, power ministry has sought almost 13 mmscmd of gas for plants commissioning in 2010-11 fiscal and another 8.75 mmscmd for units coming up next fiscal, they said, adding it further wants 3.50 mmscmd for power plants coming up in 2012-13. 
Fertilizer ministry wants 1.1 mmscmd this year, 3.39 mmscmd next and 11.03 mmscmd in 2012-13 for urea manufacturing units. State-owned gas utility GAIL India wants 0.75 mmscmd for its Pata petrochemical plant in Uttar Pradesh. Sources said public and private sector oil refineries need over 35 mmscmd gas this fiscal and another 57.44 mmscmd in the next while city gas distribution firms wants 1.47 mmscmd in 2010-11 and 6 mmscmd in the next. Steel ministry has communicated a requirement of 1.541 mmscmd gas before expansion and 4 mmscmd after implementation of expansion plans for various steel plants of SAIL. These demand is without considering the 28 mmscmd Anil Ambani Group has sought for a period of 17 years for its proposed 8,400 MW power plants at Dadri in Uttar Pradesh, Shahapur in Maharashtra, Samalkot in Andhra Pradesh and Jambusar in Gujarat. None of the plants may need gas before 2013

NTPC Q1 net dips 16% to Rs 1,841.9 cr

State-run power enterprise, NTPC, has reported 16.03% decline in its net profit for the first quarter ended June 30, 2010. The provisional and un-audited profit-after-tax (PAT) stood at Rs 1,841.89 crore, against Rs 2,193.62 crore recorded during the same period of the previous 2009-10. While, at the same time, the net sales of the company rose from Rs 12,002.68, to Rs 12,944.49 crore, registering a growth of 7.8%, over the corresponding figure for the previous fiscal. 
The total income has also increased to Rs 13,529.42 crore, during the April-June quarter, from Rs 12,778.96 crore, recorded during the same period, a year-ago. NTPC`s total expenditure for the first quarter stood at Rs 10,640.48 crore, against Rs 9,439.80 crore in the Q1 2009-10. The earnings-per-share (EPS) of the company has declined from Rs 2.66, in the first quarter of the previous fiscal to Rs 2.23, during the period under assessment.
With an installed capacity of 31,704 MW, NTPC is the largest power generating firm in the country. The utility has contributed 28.6% of the total electricity generated in the country during the financial year 2009-10. NTPC mainly generates power from coal and gas. The company has, however, also diversified into hydropower, coal mining, power equipment manufacture, oil and gas exploration, power trading and distribution. With an increasing presence in the power value chain, NTPC envisages to become an 'Integrated Power Major'. 

Equipment supplies to power sector: Chinese vendors catching up BHEL

Due to substantial cost and time implications and limited manufacturing capacity of the state-run BHEL, contracts for a large number of power projects have already been  awarded to the various Chinese equipment manufacturers. In the forthcoming days, BHEL, the country's largest heavy-equipment manufacturing firm, is likely to face a far stiff competition from its Chinese counterparts, as the trend in ordering of the contracts for power plants to the Chinese firms have witnessed a phenomenal rise since the beginning of the 11th Plan period. With no contracts for the 10th Plan projects in their order books, the Chinese firms have, till recently, managed to acquire around 25% share in the supply of power equipment to the projects that have been planned for construction during the 11th Plan programme. 

 Till the end of 2009-10 fiscal, major Chinese equipment makers such as, Shanghai Electric, Dongfang, Harbin, SEPCO and CNTICZ had commissioned power plants worth over an aggregate capacity of 4,395 MW, out of the 18,211 MW capacity added, over the first three fiscals of the ongoing Plan, in the country. As per an estimate of the Advisory Group to the Power Ministry, the participation of the Chinese-firms, in the country's capacity addition is expected to increase to 12,618 MW, which would be around 39% of the total capacity of the projects slated to be commissioned by the end of the 11th Plan. Thereby, posting a three-fold growth over the capacity that were realized during the first three fiscals. 

The increasing participation of Chinese vendors in the development of the country's power infrastructure can be attributed to the fact that, most of the projects awarded to BHEL has, over the years, have suffered frequent delays due various reasons including, delay in equipment supply, slow progress of civil work, lack of adequate skilled manpower and machinery as well as due to delay in import of components such as, turbine modules and CC-pumps. Commissioning of Aravali Power's Jhajjar TPP, Tata Power's Mithon plant, Mahagenco's plant at Bhusawal and Ukai, Damodar Valley Corporation's project in Durgapur, Pragti Power's gas-based plant in Delhi have been severely affected due to delay in completion of work by BHEL.

 The 11th Plan projects that are being developed by the Chinese-contractors include, West Bengal Power Development Corporation Limited's (WBPDCL) 600 MW Sagardighi and 300 MW Durgapur TPP in West Bengal, Lanco Infratech Limited's (Lanco) 1,200 MW Amarkantak and Anpara 'C' TPPs, Haryana Power Generation Corporation Limited's 600 MW Yamuna Nagar and 1,200 MW Hissar projects, amongst others.  

Adani unit invites bid for 3,300 MW project in Mundra

Kutchh Power Generation Limited (KPPGL), a subsidiary of Adani Power Limited (APL), is scouting for an EPC contractor to execute its proposed 5x660 MW supercritical unit-based power project at Bhadreswar, in the Kutch district of Gujarat. The company has floated a global tender for the purpose. The new power plant will be developed near APL's 4,650 MW coal-fired project at Mundra, which is currently under execution. The cost of the project has been estimated to be Rs 13,000 crore and would use coal imported from Australian and South African coal mines. The project is scheduled to be commissioned within 30 months from the date of issue of letter-of-intent (LoI) to the selected EPC-contractor.

 According to Adani Power, the scope of the EPC contract would include the design, engineering, manufacture, procurement, packing and forwarding, supply, transport, receipt, unloading, installation, erection, testing, commissioning and performance guarantee tests of the five supercritical technology-based units. The company has stipulated that if the bidder is a manufacturer of boiler and turbine generator (BTG) sets, it should have supplied at least two such orders, of a minimum of 300 MW capacity, in operation for at least two years at the time of bid submission. If a bidder is not a BTG manufacturer, the source of equipment procured should meet the said specifications. However, a bidder not fulfilling either of these criteria can bid for the contract in joint venture with other companies that meet these norms. The bidding documents for the package will be available for sale till August 3, 2010, while August 20, 2010 is the cut-off date for the submission of bids. 

 Pertinently, this project is likely to be granted the "Mega Power" status by the power ministry. Once this decree is issued, this project would qualify for the tax sops and other benefits enshrined in the Mega Power Policy. Adani Power, the power business arm of the Adani Group is currently executing projects worth over 6,630 MW capacity at Mundra and Tiroda in Maharashtra. Apart from the new 3,330 MW project at Bhadreswar, the company has identified two more power plants-- the 1,980 MW coal-based power plant at Dahej in Gujarat and a 1,320 MW project in the Baran district of Rajasthan-- and aspires to be a 1,2000 MW power company by 2012-13. APL is also executing a 800 km-long, 500 kV bi-pole high-voltage direct current (HVDC) transmission line, from Mundra to Mahendargarh in Haryana, which is capable of transmitting up to 2,500 MW of power. The promoters of the Adani Group has, recently, raised around Rs 4,000 crore, via dilution of 4% of stake in the USD 5 billion company, primarily, to fund the acquisition of coal assets in Australia and South Africa.