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Sunday, October 31, 2010

Firm supply from KG D-6: 53 GSPAs for 56.3 MMSCMD signed

Mukesh Ambani-led Reliance Industries Limited (RIL) has, so far, executed GSPAs with the operators of 53 gas-fueled units, for the supply of 56.3 MMSCMD of gas from the KG D-6 basin. Consumers over seven industry segments -- fertilizer, power, sponge-iron, city-gas distribution, LPG sector, refineries and petrochemicals-- have signed these binding agreements, which are preliminary to the commencement of gas supplies. 

Out of the 53 industrial units, 23 units are gas-fired power stations, which have been allotted 26.67 MMSCMD of gas on firm basis from the KG D-6 basin. Sector-wise details of these GSPAs have been given below: 
  • Fertilizer sector:  16 plants, 15.34 MMSCMD of gas
  • Power sector: 23 plants, 26.67 MMSCMD of gas
  • Sponge iron and steel industries: 3 units, 4.19 MMSCMD of gas
  • City-gas distribution: 4 operators, 0.65 MMSCMD of gas
  • LPG sector: Executed with GAIL for 2.59 MMSCMD
  • Refineries: 4, plants, 3.66 MMSCMD of gas
  • Petrochemical: 1.92 MMSCMD, retained by RIL for its unit in Gujarat.

MoF asks MoC to ensure coal PSUs stick to dividend declaration norms

It seems that the finance ministry feels that it is not being given its pound of flesh from coal Central Public Sector Units (CPSU). The ministry has now directed the Ministry of Coal (MoC) to ensure that central guidelines, which call for a 20% minimum dividend to be declared by all profit-making CPSUs, are adhered to by coal sector entities.

  • The 20% figure is calculated as a proportion of equity or post-tax profits, whichever is higher. The payout for oil, petroleum, chemical and other infrastructure sectors is stipulated as 30%. 
  • The finance ministry claims claims that absence of a reasonable level of dividend acts as an additional burden on the Government in the form of implicit subsidies. This is not acceptable, given the huge financial commitments, especially to the social sector, asserts the ministry.
  • The coal ministry has also been asked to encourage undertakings with healthier profits to declare higher dividends, as the extant guidelines only stipulate a minimum level. 

Mahagenco calls for long term gas linkage for its 1220 MW CCPP from RIL's KG D6 basin

Burgeoning power demand in the state of Maharashtra has led Mahagenco to seek priority in natural gas allocation from the Ministry of Power (MoP), so that the power company can commission its 1220 MW combined cycle expansion project at its existing Uran GTPS at the earliest. 

  • Accordingly, it has requested MoP's recommendation to the Ministry of Petroleum and Natural Gas (MoP&NG) to allocate 5.4 mmscmd of natural gas on priority basis from KG DF6 basin at an affordable price.  
  • Notably, an Empowered Group of Ministers (EGOM) appointed for gas allocation, had decided that gas from KG-D6 field will be made available as and when projects in the pipeline are ready to commence generation. 
  • Concomitantly, the power company has asserted that since all preparations such as land acquisition, arrangement for gas pipeline and other statutory clearances for launching the proposed Uran Project have been done with, it should get priority in gas allocation.  

Long-term procurement planning for coal: Not much movement seen on acquisition of overseas assets

Much to the disappointment of the coal ministry, Indian companies have been unable to make much headway in acquiring overseas coal properties. The Union government, seeking a solution to the looming coal crisis, had decided to throw its weight behind such foreign acquisitions, obviously to not much avail.

  • The domestic coal major, Coal India Limited, on which the coal ministry had pinned much hope, has acquired only two blocks in Mozambique, thus far. Further, no clear estimates exist for likely production from these assets, for which detailed drilling and exploration are still to be wrapped up.
  • As a result, their contribution during the forthcoming 12th Plan period remains uncertain, though the preliminary estimates indicate 5-10 MTPA of coal production from these blocks in 5-6 years' time.
  • Even more discouraging are the insignificant resources contained in a handful of foreign blocks acquired by major private companies, like Adani, Jindal, Reliance, etc. The coal ministry expects a maximum of 5-10 MT of annual production from these properties by 2016-17.
  • This surely calls for a rethink by the government, as, by the end of the 13th Plan, at least 5-10% of the country's coal demand is to be met by overseas coal blocks. 

Friday, October 29, 2010

Has the Planning Commission become irrelevant to the power sector?

The planning commission increasingly appears to be nothing but a relic from the Soviet era, at least for the power sector. It has no real power (pun intended) to set targets for capacity addition, which is fast moving towards the domain of the private sector. Even the pseudo-targets communicated to the public, in consultation with the power ministry, are never met. It cannot send proposals directly to the Cabinet, neither does it have the right to inflict punitive damages, against under-performance, on any entity of the economy.

  • In such a rapidly-decentralizing economy, does it make sense to waste resources in keeping the bureaucrats of the apex planning body employed? Supporters argue that having a monitoring mechanism, under the government, in place for the macroeconomy is essential. Further, they say that the body has evolved into a policy formulator for the broad sectors of the economy. It also acts as a mediator and consultant for issues that involve both the state and central governments.
  • One can argue, however, that the monitoring duties can easily be performed by a data repository, such as the existing Ministry of Statistics and Programe Implementation. Further, if the Planning Commission is to do policy, what use are the myriad of ministries and departments set up by the increasingly large government? Does it not make sense to absorb the "experts" of the Planning Commission into the respective ministries?

Advisory Group on power sector-I: Is the CEA being too careful with capacity addition commitments?

The Ministry of Power (MoP) is unhappy with the capacity addition target, of 60,000 MW, identifiied, thus far, by the CEA for the forthcoming 12th Plan Period. 

  • During the most recent meet of the Advisory Group of the ministry, the Power Minister, Sushilkumar Shinde, has pointed out that for past four-five months, the apex power authority has not been able to add to this figure-- bad news for the goal of "Power for All by 2012".
  • On its part, the CEA claims to have just concluded its regional meetings to review the status of other under-construction power projects and has already identified an additional capacity of about 25,000 MW. However, the body is still in the process of carefully vetting the status of these projects, so as to ensure that they will come up by 2016-17.
  • The CEA's chariness is likely driven by past history, wherein capacity addition has, without fail, always fallen short of targets, calling to question the point of the entire goal setting exercise.

Advisory Group on power sector-II: Shahi calls for gas allocation prior to start of construction

concerned  over the uncertainty surrounding the availability of gas for many ready-to-be commissioned power projects, former power secretary, R V Shahi, has asserted that gas allocation to the power projects must be made prior to the award of contracts or, at least, before the commencement of actual construction activities.

  • According to Shahi, the Ministry of Power (MoP) should not let the developers set-up gas-based plants without tying up gas supplies, either, from the Ministry of Petroleum & Natural Gas (MoP&NG) or from the open market.
  • Shahi's anguish stems from a disturbing situation, in which three under-construction projects, worth 1,763 MW capacity, are likely to miss being commissioned within the 11th Plan Period, due to the unavailability of gas supplies.
  • While these three-- Lanco`s 770 MW Kondapalli stage-III and GMR Rajamundry`s 768 MW Vemagiri projects in Andhra Pradesh, as well as, at Sravanthi Energy`s 225 MW Kahipur project in Uttarakhand-- need 6.99 MMSCMD of gas to operate, all the gas available at this time has already been allocated. 
  • Shahi feels that his suggestion would prevent generation capacity from idling, a costly scenario for the developer.

Construction likely to take off soon at Krishnapatnam UMPP

Although the Krishnapatnam UMPP is running behind schedule, development activities are likely to pick up tempo soon, now that the critical land acquisition process is nearing completion. Significantly, over 96.28% of the land needed for the project has been handed over to Reliance Power Limited (RPL), the owner of the UMPP
  • The remaining 98 acres of land is also expected to be surrendered shortly, handing the developer control over the entire 2,625 acres identified. Meanwhile, work pertaining to ground leveling and boundary, among others, is also proceeding apace in anticipation of start of construction.
  • Pertinently, the notifications necessary for land acquisition, under Sections 4 and 6 of the Land Acquisition Act, were due to be issued back in January 2009, but litigation had hampered the process.
  • The UMPP was originally planned to be on steam by September 2013, when the first 800 MW was expected to be operational. Following recent developments, the project is likely to be fully commissioned by February 2015.

Thursday, October 28, 2010

MoP castigates NTPC for shoddy performance during H1

The Ministry of Power (MoP) has lambasted NTPC, which has, so far, apparently achieved only 19.68% of the capacity addition target set for the current fiscal, even as the first half (H1) of the year is over. 

  • In a recent communiqué to the NTPC-chief, Arup Roy Choudhury, the Power Secretary, P Uma Shankar, has asked that the power utility, without fail, achieve this year's target of 2,490 MW, and excuses for the contrary are not acceptable. Notably, NTPC could only commission the 490 MW Dadri unit during H1. 
  • The Secretary has asked Choudhury to address the following areas of concern with regard to the generating units scheduled for commissioning this fiscal, on a priority basis, so as to achieve the fiscal target:
  • Simhadri Unit-3 (500 MW) 
  • NTPC needs to provide inputs like foundations for mills, 2nd FD fan, flue gas duct, completion of main control room/ESP control room with regular air conditioning system, pipe racks for erecting fuel oil piping, feeder floors and coal bunker terminals, etc., to ensure that the revised commissioning schedule of February 2011 is met.
  • Simhadri Unit-4 (500 MW) 
  • Work on TG deck, availability of foundations for ID/FD fans, duct, mills, ESP and main control rooms, pipe rack, etc., needs to be expedited so that the commissioning of the unit does not slip beyond March 2011.
  • Farakka Unit-6 (500 MW) 
  • To commission the unit by February 2011, work on the 2nd ID/ FD fan foundations, left hand side mill foundations, coal bunkers, etc., needs to be expedited.
  • Korba Unit-7 (500 MW) 
  • In order to ensure the unit's commissioning by November 2010, against the previously envisaged target of October 2010, some of the areas that need specific attention include foundation for left hand side mills, readiness of coal handling plant and air conditioning works for the central control room. 

Country's grid-interactive green power capacity at 18155 MW

According to a recent report brought out by the Ministry of New and Renewable Energy`s (MNRE), the grid-interactive installed generation capacity emanating from various renewable energy sources has reached 18,155 MW, as of September 2010. 

  • This total comprises of 12,809 MW of wind power, 2,823 MW of small hydro-based, 2,505 MW of bio-power and 18 MW of solar projects.
  • Around 6,560 MW capacity has been added during the 11th Plan, so far, against the five-year target of 12,230 MW. The grid-interactive green power capacity addition during the 9th and 10th Plans stood at 3,497 MW and 6,761 MW, respectively.8Alongside, the cumulative off-grid/distributed renewable power generation capacity in the country was recorded at 456 MW, including 263.1 MW from biomass power plants, 128.2 MW from biomass gasifiers, 60.8 MW from waste-to-energy sources, 2.9 MW from solar photovoltaic power plants and 1.1 MW from aero-generators/hybrid systems. 

BHEL delays critical milestones at Farakka STPP-III

NTPC`s 500 MW Farakka-III super thermal power station is seemingly bearing the brunt of BHEL's lethargy. The STPP, which has already missed deadlines for various milestones, is unlikely to go on steam even by its latest expected commissioning date of February next year.  8This latest round of deferment has also been caused by BHEL`s laxity in finalizing an erection agency. As a result, boiler light up, completion of steam blowing, putting turbine generator on barring gear and turbine rolling have all been pushed back. 8Notwithstanding these delays, however, NTPC still expects to complete the project under its originally estimated budget of Rs 2570.44 crore. 8The Farakka thermal power plant, with a cumulative envisaged capacity of 2100 MW, is being executed via three stages in the Murshidabad district of West Bengal. Coal and water for the plant are being sourced from the Rajmahal Coal Fields and Farakka Feeder Canal respectively. 

BHEL, Era delay Simhadri STPP-II

Efforts by NTPC to persuade its contractors to hasten the pace of work at its 2x500 MW Simhadri super thermal power plant (STPP) seem to be largely unproductive, as the project is still to achieve various important milestones, already critically delayed. The erring parties in this case are BHEL and Era Infra Engineering Limited.

  • Delays have been observed in respect of poor progress in commencement of turbine generator erection, a responsibility attached to the civil vendor, Era, expects to start work only by this month, almost 10 months later than expected.  
  • Further, BHEL's negligence in supplying equipment on time has added to deferrals faced by the project, in the form of boxing up of the turbo-generator set and completion of steam blowing, both, being pushed back to November, 2010. 
  • Remarkably, inspite of these delays, the anticipated cost of the project has actually decreased. The power major now expects to complete this project at Rs 5038.53 crore, instead of the originally anticipated Rs 5103.39 crore. 
  • The Simhadri TPP, located in the Visakhapatanam district of Andhra Pradesh, has an installed generation capacity of 1,000 MW commissioned in 2002, while the Phase-II expansion to the project involves two 500 MW units. State-run transmission major, Power Grid Corporation of India limited (PGCIL), is constructing the 400 KVD/C line from Simhadri to Vizag to evacuate power from the project.

RPL's Tilaya UMPP faces impasse in land acquisition

Although, Anil Ambani-controlled Reliance Power Limited (RPL) has achieved substantial progress, over the last quarter, in terms of acquisition of land for the construction of its ultra mega power projects (UMPP) at Sasan and Krishnapatnam, its luck seems to have run out at the Tilaya UMPP. 
  • Only 470 acres of land have been acquired, so far, out of a total land requirement of 2,407.7 acres needed for the 4,000 MW UMPP, which has been proposed to be developed at Tilaiya village in the Hazaribagh district of Jharkhand. In fact, the project has witnessed no movement whatsoever on the land acquisition front since July 2010.8While the developer, at least, has managed to acquire 186 acres of land for the main plant, it is yet to even start the acquisition of 972 acres and 3.3 acres of land needed for the development ash and water corridor, respectively.
  • The project is being executed by the Reliance Power's subsidiary, Jharkhand Integrated Power Limited (JIPL). As per the commissioning schedule proposed by the company, the first unit of the project is due to be commissioned during May 2015, while the five remaining units are expected to go on steam at successive intervals of five months until June 2017, when the entire project would be operational.

Mundra UMPP: Tata Power on track for ahead-of-schedule commissioning

The Tata Power-subsidiary, Coastal Gujarat Power Limited (CGPL), is seemingly on track to achieve commissioning of the first two units of its 4,000 MW Mundra UMPP a year ahead of schedule. CGPL has recently concluded the hydro-test for Unit-II successfully, while the same was achieved for the first unit in March 2010.

  • Erection of boiler at Unit-I is also nearing completion, while around 80% of the erection work at Unit-II is complete. 
  • The developer has also achieved boxing up of the turbine generator (TG) for Unit-II. Erection of TG has also commenced at units II and III. Structural fabrication and erection of the TG deck are, presently, in progress at the remaining units.
  • Tata Power bagged the Mundra project in 2007 through the international competitive bidding route. The project entails an investment of over Rs 17,000 crore, which is being funded via a debt and equity ratio of 75:25.

Wednesday, October 27, 2010

Are price caps on short-term power justified?

Many state electricity regulatory agencies have proposed price ceilings on the short-term procurement of power, beyond which the relevant discoms will not be allowed to true-up their tariffs against power purchase expenditures. A case in point is the Karnataka Electricity Regulatory Commission (KERC), which has proposed a price cap in the range of Rs 6/kWh on such transactions.
  • Proponents of such regulatory intervention argue that India is a poor country and all efforts should be made to ensure that access to electricity for the masses should be at the cheapest rates possible. Recognizing that in a nation with such immense power deficits, sellers would have immense market power, such entities argue that buyers, i.e. discoms will have no bargaining chip whatsoever, to the detriment of end-consumers. Thus, a price cap would ensure that power generators are unable to extract obscene rents from discoms, ensuring reasonably priced power to the populace.
  • On the other hand, we have the power ministry`s recent push for merchant power plants, which are set up with no long term assurances for the sale of power through power purchase agreements. These plants, in order to be viable, would require prices for power commensurate with the increased revenue risk to their developers, without which they would be unable to obtain financial closure. Thus, a major avenue for capacity addition would be lost to the government.8As an alternative to an outright price cap, a differential price cap, based on cost plus principle, with appropriate assumption for Return on Equity, plant capacity utilization and fuel cost may be considered. Such a price cap would be applicable only for portfolio sellers and coal, lignite and hydropower-based plants, and not to any liquid fuel or gas based generation, which uses more expensive fuel and is subject to input price volatlity.
  • This cap may be applied only to the OTC market, as it is not possible to implement a differential price cap with the price discovery mechanism existing in power exchanges.

Construction likely to take off soon at Krishnapatnam UMPP

Although the Krishnapatnam UMPP is running behind schedule, development activities are likely to pick up tempo soon, now that the critical land acquisition process is nearing completion. Significantly, over 96.28% of the land needed for the project has been handed over to Reliance Power Limited (RPL), the owner of the UMPP. 

  • The remaining 98 acres of land is also expected to be surrendered shortly, handing the developer control over the entire 2,625 acres identified. Meanwhile, work pertaining to ground leveling and boundary, among others, is also proceeding apace in anticipation of start of construction.
  • Pertinently, the notifications necessary for land acquisition, under Sections 4 and 6 of the Land Acquisition Act, were due to be issued back in January 2009, but litigation had hampered the process.
  • The UMPP was originally planned to be on steam by September 2013, when the first 800 MW was expected to be operational. Following recent developments, the project is likely to be fully commissioned by February 2015.

UP government derails Sasan UMPP-I: Jealousy at work?

  • It seems that Uttar Pradesh government is peeved about being overlooked by the power ministry, which has not deemed the state suitable for the installation of any of the prestigious ultra mega power projects (UMPP). The apparently vindictive state government has still not accorded permission for the Reliance Power-subsidiary, Sasan Power Limited (SPL), to construct the much-needed water pipeline, proposed to pass through the catchment of the Rehar reservoir, for the 3,960 MW Sasan UMPP, located in Madhya Pradesh. Thus, the availability of water for the mega venture remains uncertain. 
  • As a result, the developer has been forced to revise the commissioning schedule for the project, which being executed in the Sidhi district of Madhya Pradesh. The first 660 MW unit, which was scheduled to be commissioned in December 2011, is now expected to be operational only in January 2013, followed by the commissioning of the second and the third unit in April 2013 and September 2013, against respective schedules of March 2012 and June 2012.
  • Similarly, the three remaining units are now expected to go on stream at successive intervals of three months until June 2014, while, as per the previous timetable, the entire project was slated to start producing power by March 2013.
  • Adding to Reliance`s cup of woes, NTPC is also still to accede to supply the water required for the project from the open discharge channel of the Singrauli power station, as an interim measure. Repeated pleas from the private power company, which achieved financial closure for this project back in April 2009, have failed to yield the desired results. 
  • Reliance, on its part, is, however, moving full steam ahead with all construction activities, water hurdles notwithstanding. It has already commenced boiler erection, with the boiler hydro test expected to be completed by July 2011.

UP government derails Sasan UMPP-II: However, land acquisition nears completion

Fears of more delays notwithstanding, on the brighter side, the erstwhile sluggish land acquisition process for the Sasan UMPP has finally gained a measure of tempo, with Reliance Power close to possessing the entire land required for the mega venture.

  • As per the latest data released by the Central Electricity Authority (CEA), out of a total land requirement of 3,488 acres, around 3,244.68 acres, or 93.02%, has already been acquired by Sasan Power Limited (SPL), the SPV set up to execute the plant.
  • Further, 2,011.72 acres of land is available with the developer for the construction of the main plant, against the estimated requirement of 2,035.04 acres. 
  • Likewise, around 785.36 acres of land has been acquired, out of the 811.4 acres needed, for the construction of the ash pond; while around 438.68 acres, out of the 448.56 acres required for the residential colony, have been acquired by SPL. 
  • However, no land is, yet, on hand for the coal handling plant, which requires at total of 144.21 acres. 
  • Besides, the private company has just commenced the process of acquiring some 49 acres required for developing the intake water channel, ash pipe line, road, etc.

NTPC's views on hydropower development framework-I: Calls for augmented road infrastructure

The state-run power company, NTPC, has expressed grave concerns on the sorry state of road transport infrastructure in the country, asserting that the woeful situation severely affects capacity addition in the hydel sector of India.

  • According to the power major, most hydroelectric projects are located in hilly and remote areas, making it difficult for project developers to transport the needed manpower and materials without an urgent upgrade to the highways in these regions.
  • NTPC has, thus, demanded that adequate roads be a pre-condition to offering any hydel project to developers. Wherever transport infrastructure is found deficient, a route survey, must be conducted to assess the cost and time frame required to construct the needed roads. 
  • Further, the State or Central governments, as the case may be, should be held accountable to bridge the deficiency within the timeframe stipulated by the survey.  

NTPC's views on hydropower development framework-II: Forest clearance should be granted much earlier

In a bid to avoid idling of the huge investments involved in hydropower development, NTPC has urged that in-principle clearance for a project from the Ministry of Environment and Forest (MoE&F) be granted at the pre-feasibility report (PFR) stage itself.

  • NTPC's demand is driven by the experience at its Rupsiabagar-Khasiyabara project in Uttarakhand, where all necessary approvals (except forest clearance) had been accorded, and substantial amount of expenditure had been incurred; however, the MoE&F eventually declared the project area as "No-Go", resulting in massive losses for the company.   
  • The power utility has also criticized, what it considers, the ambiguous  procedure that is at present followed for the grant of green clearances. It has asked the environment ministry to, instead, delineate a clear and objective checklist that potential developers must adhere to, to obtain sanction for projects.
  • The company has also asked that the environmental feasibility of transmission and distribution (T&D) lines needed for evacuation of power from the project also be assessed at the PFR stage.

Tuesday, October 26, 2010

NTPC scouting for tie-ups with global reactor manufacturers for setting up nuclear power projects on its own

NTPC Ltd is scouting for tie-ups with global reactor manufacturers for setting up nuclear power projects on its own.The thermal power major, which already has a minority stake in a partnership with its state-owned counterpart Nuclear Power Corporation of India Ltd (NPCIL) for setting up nuclear units, also plans to firm up independent collaborations with global reactor vendors to set up imported Light Water Reactor-based atomic projects.NTPC's 49:51 joint venture with NPCIL is slated to commence operations with a 700-MWe indigenous Pressurised Heavy Water Reactor-based project.
“The Indo-US (nuclear) deal has opened up opportunities… We will enter the nuclear business with the NPCIL joint venture. But in the light of the opportunities, we would want to go on our own and will scout for tie-ups with global reactor firms,” NTPC's Chairman and Managing Director, Mr Arup Roy Choudhury, said.India has broadly shortlisted four reactor technologies for future Light Water Reactor-based projects — Westinghouse Electric Company's AP1000 series of reactors, GE-Hitachi's ESBWR reactor series, Areva 1,650 MWe European Pressurised Reactors and the Russian state-owned firm Atomstroyexport's VVER reactor series.
The Atomic Energy Act, 1962 “requires nuclear power generation to be done by a government company in which at least 51 per cent of shares are held by the Central Government.”A state-owned utility such as NTPC, where the Centre has an 84.5 per cent stake, automatically qualifies to set up nuclear projects on its own. The company hopes to draw from its initial exposure to the sector through its joint venture with NPCIL.
NTPC had earlier this year signed the pact with NPCIL for incorporating a joint venture company for setting up nuclear projects. The venture is likely to take up a 700-MWe indigenous reactor-based project shortly.Currently, NPCIL and its sister firm BHAVINI are the two companies that are in the business of setting up nuclear power plants in the country.
There are 19 nuclear power reactors with a capacity of 4,560 MWe in operation in the country at present. India has drawn up an ambitious plan to have an installed nuclear capacity of 63,000 MWe in 2032, of which about 40,000 MW will be generated through Light Water Reactors sourced through international cooperation.

Long-term procurement planning for coal-I: Demand to exceed 1.3 BT by March 2022

The country is set to witness a two-fold increase in demand for coal over the next two plan periods-- from 713.24 MT by the end of the current Plan in 2011-12, to 1,339 MT in 2021-22. 

  • This emerges from an analysis performed by the Planning Commission, which also forecasts the coal demand in the intervening 12th Plan as 994 MT.
  • Out of the total, the demand from power utilities is likely to increase, from 473 MT in the 11th Plan, to 660 MT in the 12th Plan and, subsequently, to 886 MT by the end of the 13th Plan period.
  • This estimate is based on the assumption that coal-based generation would contribute 915 BU and 1,230 BU to the power sector of India, respectively, in the terminating years of 12th and 13th Plans.
  • Further, the cumulative increase in coal requirements of the steel, captive power and other sectors is anticipated to be of the order of 93.78 MT between the 11th and 12th Plans, and 119 MT between the 12th and 13th Plans.
  • From 240.24 MT in FY 2011-12, demand from these sectors is expected to rise to 334 MT in FY 2016-17, followed by 453 MT in FY 2021-22.

Long-term procurement planning for coal-II: CAGR of over 8% needed in domestic production

A compounded annual growth rate (CAGR) of between 8% and 9% over the next 10 years is needed for domestic coal production to meet the projected demand by the end of the 13th Plan period.
8Such performance is likely a pipedream, given that the coal sector has, thus far, limped along, with a lot of difficulty, at a 6.6% growth rate over the ongoing XIth Plan. Assuming that growth picks up to a more realistic 7%, according to the Planning Commission, the gap in domestic coal availability will be observed as 179 MT by 2021-22, 15 MT more than the 164 MTs projected at the end of the 12th Plan.The demand-supply gap by the end of the current Plan is likely to stand at 120 MTs, with the estimated availability of 630 MTs in 2011-12.

Long-term procurement planning for coal-III: Increased Indian imports likely to jack up international prices

With the projected shortfall of 164 MT in the availability of domestic coal likely to be met via equivalent imports by 2016-17, India is poised to push up the local prices of coal internationally.

  • This assertion is backed by the fact that, at present, only 600-700 MT of coal is available globally for trading. This quantity constitutes 10-12% of the total coal production of 6,000 MT across the world, implying that about 90% of coal is consumed where it is produced.
  • In such a situation, a surge in demand of the magnitude of 20-20%, as envisaged if India indeed sources 150 MT of additional coal from the world market, will obviously drive prices in other countries upwards. This is likely to push governments to put restrictions on the amount of coal available for exports.
  • Besides, the adoption of climate change-related policies will increasingly force coal-rich countries to opt for restricted mining of coal or at least levy taxes on the cross-border movement of the mineral. This will further restrict the availability of coal in the international market.8It is, thus, unlikely that India will be able to achieve its import targets in the medium to long run. Rapid augmentation of domestic coal production seems like a better idea. 

Power, mining MoUs top investments at Khajuraho meet in Madhya Pradesh

When asked to described the outcome of the Global Investors Meet-II, organised in Khajuraho last week, Anil Dhirubhai Ambani group chairman Anil Ambani said, “MP has vast potential for coal, cement and other minerals”.
A cursory glance at the list of the major companies that made the investment figure huge, suggests as many as 19 power generation companies have signed memoranda of understanding (MoUs) of Rs 1,32,950 vis-a-vis a total MoUs of Rs 2,35,736 crore, besides MoUs worth Rs 40,236 crore in the mining sector.If insiders are believed a large number of companies were queued up to sign up deals with state government to grab coal, mines and land for MP has at present the cheapest land available in India and Khajuraho-II was probably the last chance for profit-makers.

Anil Dhirubhai Ambani Group to invest Rs 750 billion in core power, mining and cement projects in the next five years in Madhya Pradesh

The Anil Dhirubhai Ambani Group will invest Rs 75,000 crore in core power, mining and cement projects in the next five years in Madhya Pradesh.Mr Anil Ambani, Chairman, Reliance ADA Group, announced his company's plans to increase the capacity of the two power projects at Sasan and Chitrangi, taking the total combined capacity of the two projects to 12,000 MW, and set up a cement plant with a capacity of 10 million tonnes per annum. He made the announcement at the Global Investors Summit-II here.
“Earlier, we were investing Rs 50,000 crore in the State, but now we plan to invest Rs 75,000 crore in the next five years. This would mean Rs 15,000 crore a year, and Rs 60 crore a day,” he said.“We will be setting up 10 million tonne a year cement plant in the State, which would be enhanced to 20 MTPA,” he said, adding “the cement plant will be utilising the fly ash and lime in the area.
“We are developing the country's largest private sector coal mines in the State with a production capacity of 25 million tonnes per annum of coal.”Mr Ambani sought infrastructure development, mainly for logistics, and cautioned that measures should be taken to protect the environment.
The Chief Minister of Madhya Pradesh, Mr Shivraj Singh Chouhan, said, “Land will be made available for air strips, but the industry also has to ensure that they follow the time line (commitments made for implementing the projects) and that employment is generated in the State.” The Chitrangi Power Project is being implemented by the Chitrangi Power Private Ltd (previously M.P. Power Generation Private Limited), a wholly-owned subsidiary of Reliance Power. It is set to develop a coal-based power project at Chitrangi Tehsil, Singrauli District, Madhya Pradesh.
In September 2007, Reliance Power signed a Memorandum of Understanding (MoU) with the Government of Madhya Pradesh for the project. The Anil Dhirubhai Ambani Group has obtained permission from the Central Government to use the incremental coal from the captive coal blocks allocated for Sasan UMPP.
The project is being planned to attain a final capacity of 5,940 MW.The environmental clearance for the project was accorded by the Environment Ministry on May 28, 2010. At the two-day global summit, the State Government signed 107 MoUs worth Rs 2,35,736 crore.

Monday, October 25, 2010

NTPC to sharpen focus on core generation biz

NTPC Ltd plans to put some of its diversified operations, including its entry into the gas value chain, electricity distribution sector and its hydro power venture, on the backburner.This is being done with a view to stepping up focus on its core business of electricity generation and comes against the backdrop of an impending shift from the current regulated tariff model to a tariff-based competitive bidding regime for bagging power projects from early next year, NTPC's new Chairman and Managing Director, Mr Arup Roy Choudhury, indicated.
NTPC is still to find its feet in the tariff-based bidding format and has so far drawn a blank in projects awarded through the bidding route, including the four ultra mega power projects. Slippages in generation project delivery schedules in the last couple of years are another reason why the state-owned firm wants to go slow on diversification plans.
Reviewing strategy
“The shift to the tariff-based bidding is to happen from next year… There is a need to look at … and consolidate strategic thrust and focus on our core area of generation. This does not mean that we will be getting out of our other businesses. But, clearly, the focus will have to be on generation at least for the next two years, and see this transition period (shift to tariff-based bidding) through,” Mr Roy Choudhury told Business Line.
The Government has categorically maintained that the January 2011 deadline for shifting to a tariff-based competitive bidding regime for the procurement of electricity from the market, and disallowing future projects to enter power purchase agreements on cost-plus, regulator determined tariffs, will stay.
The Central Electricity Regulatory Commission (CERC) had in June firmly ruled in favour of shifting to a tariff-based competitive bidding regime for future power projects, citing better price discovery and lower retail tariffs through the bidding route. NTPC, the country's largest power generator, had lobbied hard for an amendment to the Centre's Tariff Policy to permit continuation of the cost-plus tariff structure for public sector undertakings beyond the January 2011 deadline.
Hydro projects
Mr Roy Choudhury, who took over at the helm of the generation major on September 1 this year, also said a “re-evaluation” of its entry into hydro is on the cards, coming in the wake of a cancellation of the Loharinag-Pala project. The company had already spent Rs 600 crore on the project and placed orders for another Rs 2,000 crore. “We cannot have another Loharinag-Pala happening to us. A re-evaluation of the hydro venture is needed,” Mr Roy Choudhury said.
He also admitted he was “definitely worried” about slippages in project delivery schedules in the recent past, and plans to reverse the trend.
“Getting project delivery on track is a top priority. NTPC has slipped in project delivery and I'm definitely worried about that, even though a lot of factors extraneous to NTPC contributed to the delays. The process of ordering is being streamlined and we're firming up a list vendors, within the overall norms laid out by the Government.”

NTPC does away with illegal clause in bulk tendering guideline

In a bid to make the guidelines for bulk tendering more rational, state-run NTPC has called for abolition to the existing clause, which causes forfeiture of the bid security, for a bidder, in case it refuses to match the lowest evaluated price for that project, subsequent to the award of the contract.

  • As per the existing guidelines for the bulk tendering of 660 MW units, the L-2 bidder in a bulk contract has to match the lowest price quoted by the L-1 bidder, to bag the remaining part of the package offered through bulk tendering, else the bidder the bid security submitted for the package gets forfeited.
  • The Central Vigilance Commission (CVC) has recently observed that this provision may tantamount to coercion and may not stand in the eyes of law. Accordingly, the matter was referred by NTPC to Attorney General of India (AGI) for his opinion. The AGI has endorsed the CVC's viewpoint. In view of the foregoing, this provision has been deleted in the subject proposal for bulk tender for 800 MW units.
  • With this revision in effect for bulk tendering of 800 MW units, 
  • The bidders in their offers will be allowed to declare the maximum number of projects they would like to restrict themselves to, however, they would be required to quote for all the projects. 
  • In case there is a single qualified technically and commercially responsive bid for consideration of award for either steam generators (SG) or turbine generator (TG) packages, NTPC shall reserve the right to award to that bidder the number of projects declared by the bidder in the bid.
  • If the number of such projects, as declared by the bidder, is less than four, the specific projects to be awarded to the bidder will be decided by NTPC. Subsequent to placement of award, for the projects which have not been awarded, NTPC may invite fresh bids as per its normal tendering practice.

R-Power gives Samalkot power equipment order to GE

Anil Ambani’s Reliance Power (R-Power) has placed an order with US-based power equipment maker GE Energy for its 2,400 Mw gas-based project planned at Samalkot in Andhra Pradesh.
This is the largest order for GE Energy in India. In addition to supply of equipment, comprising six gas turbines, three steam turbines and generators, GE will be providing maintenance services. All the six gas turbines are scheduled to be commissioned before March 2012, said a company statement.t did not disclose the size of the order.
“We are confident of creating a new record for project execution and are hopeful of commissioning the project on a super-fast-track basis, substantially adding to capacity addition in the 11th Plan,” said J P Chalasani, CEO, R-Power.
It had initiated gas-based power projects following an amended family agreement between Anil Ambani and his brother, Mukesh Ambani, a few months earlier, which allowed the younger Ambani to enter in a major way into production using gas. However, their Dadri power project in Uttar Pradesh, planned as the largest in a single location, is yet to make much progress, due to litigation and land acquisition issues.

NTPC to set up 3,960 MW plant in Madhya Pradesh

State-run NTPC today said that it will invest about Rs 20,000 crore for setting up a coal-based power project in Madhya Pradesh.NTPC has executed a Memorandun of Understanding (MoU) with Madhya Pradesh and MP Power Trading Company for setting up a 3,960 MW thermal power project at Barethi in the state, the company informed the National Stock Exchange.For generating 1 MW of thermal power an investment of about Rs 5 crore is required.
The project is likely to be commissioned during the XIIth Five Year Plan Period (2012-17). Originally, NTPC had planned a 3,960 MW supercritical thermal power project in Uttar Pradesh. However, the plans ran into problems over differences with the state government on usage of electricity generated by the project.

The government wanted all the power produced from the project for Uttar Pradesh, while rules permit sale of only 50 per cent of the electricity generated to the state where the plant is being set up.NTPC, which has power generation capacity of over 30,000 MW from all sources of energy, is planning to augment it to 50,000 MW by March 2012.

Sunday, October 24, 2010

Vindhyachal STPP, Stage-V: NTPC invites bids for the supply of boiler

NTPC Limited (NTPC) has invited sealed bids for the supply and installation of Boiler with Electrostatic Precipitator package for its  Vindhyachal Super Thermal Power Project, Stage-V. The 500 MW power project is located at Vindhyanagar, District Singrauli, Madhya Pradesh.

The scope of work would involve design, manufacture, engineering, inspection, testing at manufacturer's works, packing, transportation, unloading, handling and conservation of equipments at site, complete services of construction including erection, supervision, pre-commissioning, testing, commissioning, control & instrumentation and structural works.
The estimated coal requirement of the project is 3 million tonnes per annum. NTPC intends to finance the Boiler and Electrostatic Precipitator Package for the project through external commercial borrowings and its own accruals. 

Generation, transmission capacity addition, both, miss boat in Q2

Notwithstanding its much-hyped efforts, the power ministry has again failed the deliver actual generation and transmission capacities that were slated to be added during the second quarter of the ongoing 2010-11 fiscal. Only 59.4% of the generation capacity addition target was realized, while only 69.22% of the target for new transmission lines was achieved. 

  • Only 2,870 MW on fresh generation capacity was added over the June-September quarter, against the target of 4,831 MW, while 2,659 ckm worth of lines, vis-à-vis the Q2 target of 3,841 ckm, was installed.
  • The central sector utilities achieved barely 50% of the targeted capacity, while state sector utilities could realize a mere 7.6% of their second quarter target of 1,437.5 MW. In contrast, the private sector power producers, surpassed their target comfortably, by 411 MW, against the quarter's target of 1,279 MW.
  • Notably, 6,270 MW of new projects has been commissioned this fiscal, as of October 15, 2010, as against the target of 20,359 MW for the entire year. 
  • A total of 3,006 ckm of transmission lines have been added in the first two quarters, against the target of 18,563 ckm set for the fiscal.

ONGC’s 15-year gas projections (2010-11 to 2024-25): Company’s total firm gas production adds up to 249 BCM in 15 years

A recent exercise by ONGC on natural gas production projections for the period 2010-11 up to 2024-25 have been based on two-pronged projections: a firm profile and an indicative profile. While firm profiles are gas estimations from the E&P major’s ongoing development activities and marginal fields which are to be put on production, the indicative profiles include existing discoveries, where appraisals are yet to be made and firmed-up. The firm profile does not include production from ONGC’s JV fields.

  Some of the highlights of the 15-year (2010-11 to 2024-25) projection profile are as under:
  • The E&P major’s total (firm profile) 15-year gas production is pegged at 249 BCM by 2024-25 (starting from 2010-11). This includes gas production from firm profiles as well as from marginal fields (excluding C-series gas). Out of 249 BCM, 215 BCM is going to come from firm profiles, while the remaining 34 BCM is going to come from marginal fields.
  • The gas from the company’s marginal fields is expected to start from 2011-12 onwards.
  • The gas production, which is pegged at 21 BCM for 2010-11, is going to peak in 2012-13 at 26.68 BCM. From then on, it is going to see a continuous decline and touch a low of 6.85 BCM in 2024-25.

The ONGC’s indicative gas production also comes, more or less, closer to its firm production profile. While its total 15-year firm production profile is estimated at 249 BCM in the next 15 years, the indicative gas production is estimated a little lower at 230 BCM.
  • The fields which are taken into account while arriving at the indicative production figures are: Vashistha, S-1, G-1, C-24, B-12, KG-98/2, MN-OSN-2000/2 as well as MN-DWN-98/3, UD-1, YS-5/YS-6, Padmavati, Kanakdurga, G-4-5/G-4-6 and Khubal.
  • The indicative gas production is expected to start from 2013-14 onwards when fields like Vashistha, S-1, G-1, C-24, B-12 and G-4-5 as well as G-4-6 are anticipated to commence their production. In its first year, the production is pegged at 7.5 MMSCMSD.
  • The total indicative gas production, which is expected to start from 2013-14, is going to peak in 2021-22, at 71 MMSCMD. Then onwards it is going to decline gradually to 55 MMSCMD by 2024-25.
  • Thus, the ONGC’s total gas production -- both firm as well as indicative -- adds up to 479 BCM by 2024-25.
  • Fields like Vashistha, S-1, G-1, C-24 and B-12 which are presently considered as sources for indicative production are candidates for future firm productions sources. In the next long-term projection exercise, these fields are likely to be grouped with fields from where firm supplies are going to come from.
  • The website carries here, year-wise and field-wise production projections from 2010-11 up to 2024-25.

Nalco-NPCIL to set up Rs 12,600 cr power plant in Gujarat

Aluminium major Nalco on Friday said it will set up a nuclear power plant in Gujarat in association with Nuclear Power Corporation of India Ltd (NPCIL) at a gross investment of Rs 12,600-crore. "The project will be undertaken by our joint venture company in which NPCIL will hold majority stake. The JV agreement for the same is expected by October-end," Nalco CMD A K Shrivastava told PTI in an interview. 
The two state-owned entities had last year entered into a pact to explore possibilities of collaborating in the field of nuclear power. The proposed power project will have an annual production capacity of 1400 MW and would come up in Surat, Gujarat. Two separate units of 700 MW are likely to be built. For generating one mega watt of nuclear power, an investment of about Rs 9 crore is required. "We are now betting big on the power sector. We have joined hands with NPCIL to foray into the business of generating nuclear power for commercial use," he added. 
The proposed project is to be funded jointly by both the companies in proportion to their equity holding in the joint venture entity. Nalco, at present, has a cash reserve of around Rs 4,400 crore, Shrivastava said. "NPCIL has the capability of setting up nuclear power. For us, it is an attractive avenue," he added. Nalco, at present, operates 1,200 MW coal-based power unit at its existing aluminum operations in Orissa. Meanwhile, the navratna company has also announced independent Rs 6,000 crore capacity expansion projects in the aluminum space, which can also see creation of additional 1,250 MW unit in Orissa. Moreover, the PSU also plans to set up a super critical thermal power plant of 1,980-MW capacity (3X660-MW) in Dhenkanal district of Orissa.

Saturday, October 23, 2010

Petroleum ministry exercise on natural gas data (2010-11 up to 2029-30): Gas sales to touch 729 MMSCMD in 2030 under optimistic scenario

A recent exercise by the petroleum ministry on natural gas production and sales projections for the period 2010-11 up to 2029-30 has come up with some interesting data. The domestic production estimation is drawn from DGH’s projection up to 2016-17 which is based on established reserves. From 2017-18 and onwards, the projection is based on GAIL`s internal estimation considering additional gas from RIL, ONGC, GSPC, OIL, CBM blocks and other future discoveries. Two scenarios, one optimistic and the other pessimistic, have been projected as under: 

  Optimistic scenario:
  • The domestic production of natural gas is pegged at 146 MMSCMD in 2010-11. Under this scenario, the production projection is seen to be on an upward trajectory throughout the 20-year period. Gas production is projected to go up to 527 MMSCMD by 2029-30.
  • The production projections cross the 200 MMSCMD mark in 2014-15. It crosses the 300 MMSCMD, 400 MMSCMD and 500 MMSCMD mark in 2020-21, 2025-26 and 2029-30 respectively.
  • Under the optimistic scenario, cumulative annual growth rate is pegged at 6%.
  • LNG imports are pegged at 33 MMSCMD in 2010-11. These also move up consistently and touch 99 MMSCMD in 2014-15 when supplies from Gorgon are expected to arrive under long-term contract. In 2015-16, imports are pegged even higher at 117 MMSCMD. For 2016-17 and 2017-18, the LNG imports are projected to remain steady at 126 MMSCMD.
  • However, from 2019-20 onwards, up to 2029-30, LNG imports are pegged at a constant 162 MMSCMD.
  • As the cross-border pipelines -- which include TAPI and IPI pipelines -- are expected to be in operation from 2018 onwards, another 40 MMSCMD is expected to flow into the country from 2018-19 onwards through this route.
  • Total gas sales, which are pegged at 179 MMSCMD in 2010-11, are estimated to go up to 729 MMSCMD in 2029-30.
  •   Pessimistic scenario:
  • Even in a pessimistic scenario, no changes are seen in LNG import estimations. They are exactly the same as taken in the optimistic scenario. LNG imports are fixed at 162 MMSCMD assuming that no new LNG terminals will come up during the time.
  • However, 40 MMSCMD of gas, which is estimated to flow into the country through cross-country pipelines is not taken into account in the pessimistic scenario. It is assumed that no cross-border pipelines will be operational till 2030. This reduces the total gas imports to 162 MMSCMD, for the period 2019-20 up to 2029-30.
  • The domestic production estimations are also exactly the same as projected under the optimistic scenario till 2016-17. However, from 2017-18 onwards, variations can be seen. From 2017-18 onwards, GAIL has assumed a domestic production growth of 3% over previous years, that is, half of the growth rate considered under the optimistic scenario.
  • The total domestic production projections are pegged at 363 MMSCMD in 2029-30, which is much lower than the optimistic projection of 527 MMSCMD for the same year.
  • Sales are estimated at 525 MMSCMD by 2029-30, as against 729 MMSCMD projected under the optimistic scenario.