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Friday, April 29, 2011

Pooling of gas prices-I: Mechanism with a 5-15 year perspective suggested

The first meeting of the Inter-Ministerial Committee under the chairmanship of Saumitra Chaudhury on pooling of gas prices witnessed a range of views on the subject from participants.
  • Chaudhury himself was of the view that a pool price mechanism should stay in place for a reasonable period of time, ranging from anywhere between 5 and 15 years. This is because investors are wary of setting up large gas based projects on account of uncertainty in the pricing of gas because of the existence of a plethora of domestic prices and high price volatility of imported LNG, both on long term and spot basis. He said that there was a requirement for price certainty at least in the medium term. 
  • Chaudhury's view was supported by A.K. Balyan, Managing director Petronet LNG Ltd, who said that power and fertilizer sectors had shied away from tying up LNG for the long term on account of price volatility. While countries like Korea and Japan purchase LNG on a large scale for consumption by industry, Indian consumers hesitate to do so. He was of the opinion that a medium term pooling policy was the only way out.
  • The other big supporter of the pooling mechanism was GAIL chairman B.C. Tripathi. He said that his company had been unable to increase the market substantially for natural gas due to the number of prices prevailing in the country at present for both imported and domestic gas. A pooling mechanism would help under the circumstances.
  • Petroleum ministry representatives strongly supported the pooling concept, claiming that incremental gas supply capacity can only be built if there is certainty and uniformity in pricing of gas. 

Pooling of gas prices-II: Will pooling help or hamper power and fertilizer companies?

Power and fertilizer companies are unlikely to be happy with the pool pricing mechanism. This is because priority allocation of low priced gas is earmarked exclusively for them while more expensive domestic gas or imported LNG is reserved for other sectors of the economy.
  • The power ministry representative in the meeting highlighted that fact that India followed a merit-based tariff mechanism and in this context any fuel used by a power company had to be competitive. Even imported coal based plants were facing trouble because of cost of power was turning out to be too expensive. He said that gas based power would have to be competitive in order to generate electricity in the country.
  • Surprising however, the representative of the Department of Fertilizers supported the proposal for a pooled price mechanism. He said that urea demand in the country would go up to 30 MMT by 2011-12 whereas the production capacity currently existing was just 21 MMT. If India were to import urea on a large scale, it would be vulnerable to the international cartel, which would jack prices. In this context, new urea capacities would have to come up and this could only happen if prices were pooled.
  • But the point remains that urea companies would soon have to operate under a competitive Import Parity Pricing regime and they would only be competitive if the price of gas, which is the main feedstock, is low enough for Indian urea prices to compete with international prices. Whether the pool price mechanism would allow for this remains a moot point.
  • The joint secretary in the Cabinet Secretariat, Govind Mohan said that he was not entirely convinced that price pooling would be an effective solution. He was of the view that sensitivity analysis of various sectors at different gas prices would determine its acceptability. 

Pooling of gas prices-III: PNGB sounds a note of dissent

R.P. Watal, secretary in the Petroleum & Natural Gas Regulatory Board was the only member in the Inter-Ministerial Committee on pooling of prices to sound a note of dissent. 
  • He said he had problems with the terms of reference of the committee, claiming that pooling of prices seemed to be a pre-determined fact. 
  • Watal was of the view that the PNGRB Act 2006 mandated the Board to protect the interests of consumers by fostering fair practices and competition among entities and any attempt at regulating the price of gas would come into conflict with this provision.
  • He also had an issue with the fact that only two suppliers -- GAIL and Petronet LNG -- were members of the committee whereas private entities were not. All suppliers were were subject to regulations of the Board. 
  • The PNGRB secretary said that the terms of reference, including the fact that the Inter-Ministerial Committee had been mandated to examine the zonal transportation tariff  mechanism  and suggest how gas pipeline transportation tariff could be rationalized or brought at a uniform level, should be amended to take into consideration that some of the issues fell under the jurisdiction of the Board.
  • Watal's views were counteracted by S.C.Sharma, OSD in the Planning Commission who said that the terms of reference included a look at pipeline tariffs as currently such tariffs were highly distorted and vary in the range of US $ 0.30 per MMBTU to US $ 3.0 per MMBTU. Such pipeline tariff would affect the equal development and utilization of gas in the country due to high price variation.

Coal India facing shortage of mining equipment and poor quality supplies

Coal India Ltd is facing a shortage of mining equipment and poor quality supplies that are failing often, according to its chairman NC Jha. It may be noted that two PSUs — Bharat Earth Movers Limited (BEML) and Heavy Engineering Corporation (HEC) – are the major suppliers to Coal India.
Speaking to Business Standard here recently, Jha said that one of the major challenges for the company is the availability and quality of mining equipment. For instance, while CIL needs dumpers with a capacity of 240 tonne, BEML can only supply only 100 tonne capacity trucks.
"We are now importing. We told BEML to source a technology and start manufacturing higher capacity dumpers,&" said Jha.
According to industry sources, the market size of mining equipment in the country is estimated to be over Rs 10,000 crore. This industry is also highly competitive with over 100 companies of public (nearly 70%) and private sector companies (about 30% including joint ventures and closely held companies).
Of the proposed capital investment by Coal India of around Rs 4,200 crore for this fiscal, 80 per cent will be towards procuring equipments.
"Near time it is not an issue, but long-term it will affect the business and they are losing big opportunity,&" he said.
The other major issue is the quality of equipment. "It fails during the warranty period itself. We have asked them to improve the quality, performance and the availability,&" Jha said. They must improve the research and development (R & D) to increase the components quality. It is small components which fail and distrub the work, said Jha.

Sell coal at global, local price average: Plan Panel

The planning commission has mooted the need for pooling imported coal with domestic supply to average out costs and supply it to all users at uniform prices. This will help lower cost for companies that rely on import to meet their coal needs. Imported coal is about 50% costlier than Indian coal despite the recent price increase by Coal India Ltd , the state-run coal miner. "We have to develop a system of pool pricing of coal so that imported coal plants don't becomes uneconomic ," Planning Commission member BK Chaturvedi told ET. 
The commission has forecast coal shortage in India will soar to 200 million tonnes by the end of the 12th Plan (2012-17 ), with a demand of 1,000 million tonnes against a production of 800 million tonnes. Next year, the shortage is expected to be around 142 million tonnes, with availability of 554 million tonnes against a requirement of 696 million tonnes. At a meeting with the prime minister last week, the commission had stressed on pooling and the need to expand the role of Coal India to that of a supplier. 
The panel's proposal on Coal India was in line with the Central Electricity Authority's suggestion earlier that the state-run miner should act as a nodal agency for importing, pooling and supplying coal. "If we have to meet energy requirements , we need to have large amount of power from coal and gas. Large amount of imports have to done," Chaturvedi said. The Plan panel member said the idea of pool pricing of coal came from a gas pooling policy that helped revive power projects like the Dabhol plant, owned by Ratnagiri Gas and Power. "We had a system of pool pricing for LNG, and plants like Ratnagiri became viable along with others . This is the intention of pool pricing. And we are looking into the possibilities of formulating the policy," Chaturvedi said. 
If implemented, the pricing policy will benefit companies such as Adani Power that invest heavily in imported coal. "In my view, pooling prices of coal will rationalise the transportation of coal, reduce congestion and increase efficiency," said Adani Power vice-president Kandarp Patel. But it could impact other players differently, he added. For other stakeholders, such as National Thermal Power Corporation , the largest consumer of coal in the country, coal prices will rise because the company meets most of its needs through domestic output. "It will depend on how the government formulates the pricing policy. We rely heavily on domestic coal, so for us prices will increase ," an NTPC official said. 
The electricity authority had also suggested a coal pooling pricing formula based on average price of imported coal after transportation and insurance charges, and taking into consideration coal produced by Coal India and Singareni Collieries Company. However, the proposal has received few takers and will be worked on by the coal ministry after it gets feedback from all users.

Tuesday, April 26, 2011

NTPC floats Rs 35 billion global tender seeking supply of four million tonnes imported coal for its power projects

NTPC on Monday issued a Rs 3,500-crore global tender seeking supply of four million tonnes imported coal for its power projects. 

The company has for the first time bypassed trading firms like State Trading Corp and MMTC that have been importing coal for NTPC. NTPC estimates total coal requirement of about 162 million tonnes during the current year and targets importing 16 million tonnes. 
It has already signed an agreement with state-run State Trading Corp for importing 12 million tonnes. The selected bidder would be responsible for sourcing non-coking coal and delivering it at various NTPC power stations. The company would finance the tender through its internal resources. 
The bid documents will be available from April 27 to May 26, it said. NTPC decided to import the fuel on its own in 2009 after one of the bidders for a 12.5 million tonnes tender demanded investigation into coal procurement process of the public company. 
The Rs 6,000-crore tender placed on MMTC had to be scrapped. NTPC consumed 12.5 million tonnes imported coal in 2010-11. NTPC plans to add 4,320-mw during 2011-12 to its existing capacity of 34,194-mw

Annual growth in energy generation during the financial year 2010-11 is 5.55 per cent: Central Electricity Authority

India,AS PER the annual report of the Central Electricity Authority (CEA), the annual growth in energy generation during the financial year 2010-11 has been 5.55 per cent. The gross annual generation of the country has crossed the 811.1 BU, gross monthly generation figure has crossed the 75.5 BU mark achieved during March 2011, and gross daily generation figure has crossed the 2.508 BU on March 18.The thermal generation was 664.9 billion units (BU) against target of 690.9 BU; Hydro generation was 114.3 BU against target of 111.4 BU and nuclear power 26.3 BU against target of 22 BU.As per CEA report the nuclear and hydro generation exceeded the annual targets by 19.48 per cent and 2.64 per cent respectively but thermal generation was 4.76 per cent below the target. The total thermal generation achieved a growth rate of 3.81 per cent.
Coal based generation recorded a growth rate of 3.99 per cent.The average PLF of thermal power projects achieved during the year was 75.10 per cent, as compared to 77.68 per cent in the previous year. Nineteen thermal power stations with an aggregate installed capacity of 21995 MW operated above 90 per cent PLF. Dhanu thermal of Reliance achieved 101per cent PLF.OP Jindal thermal achieved 98.04 per cent PLF.53 thermal plants operated above the national average. The thermal plants in region, which operated at more than national average of 75.10 per cent PLF are Ropar thermal (88.07 per cent), Lehra Mohabatt (86.82 per cent) and Panipat (77.85 per cent).However, growth of thermal generation was mainly restricted due to coal shortages, receipt of poor quality/ wet coal. The loss of generation in year due to coal shortage was 7.3 billion units, loss of generation due to poor coal quality 7.7 billion units and delay in commissioning scheduled of plants 13.7 billion units.13 new thermal plant units exceeded their target while 35 new thermal units fell short of assigned targets. 

Power Finance $1.2 billion share sale on May 10, say Sources

Indian state-run Power Finance Corporation Ltd will launch on May 10 a share sale to raise up to $1.2 billion, the biggest equity issue so far this year, four sources with direct knowledge of the matter said on Tuesday. 
The follow-on issue will close on May 12 for institutional investors and a day later for retail bidders, said the sources, who declined to be named as the information was not public yet. 
Power Finance Chairman and Managing Director Satnam Singh did not respond to calls from Reuters seeking comment. 
Power Finance, a lender to power projects, plans to sell 15 percent fresh equity shares while the Indian government will divest 5 percent stake in the firm, the company has said in its prospectus filed with the regulators.

Central Electricity Authority for Coal India as price pooling nodal body - But, the proposal has few takers

The Central Electricity Authority (CEA) has suggested that Coal India Ltd (CIL) be made the nodal agency for pooling of coal prices besides being made the canalising agency for import of coal. The proposal, though has found few takers in the coal ministry.Coal is currently freely imported into the country by power projects mainly through an intermediary trading company which also arranges for transportation.

“It will be simpler (for introduction of pool pricing mechanism) if all imports to meet the shortfall in the availability of domestic coal be made by domestic public sector company like CIL,” CEA said in its recommendations on the pooling mechanism for domestic and imported coal.
A senior CIL executive told Business Standard that the company does not want to import coal for other companies, a condition which has also been imposed by the New Coal Distribution Policy.
“According to the policy, CIL and Singareni are required to meet the country’s coal demand even through imports. We did not want this but it was thrust on us. It is a policy in which one company is asked to meet the country’s entire coal demand even if it has to be met through imports,” he said.
Questioning the feasibility of pooling coal prices, coal minister Sriprakash Jaiswal told Business Standard that pooling was feasible only if one company imports coal.
“Pooling is a proposal but no decision has been taken so far on this. Import of coal is under open general licence (OGL). As of now, there is no use talking about pooling because CIL is not the only one importing,” he said. The Union minister said private companies could go ahead and import coal at any cost.t has also proposed a pooled price formula based on the average price of imported coal, after transportation and insurance charges, and the coal produced by CIL and Singareni Collieries Company Ltd (SCCL). While drawing up the formula, the technical regulator for the power sector also said captive coal should be kept out of the mechanism for arriving at the pooled price.
Around 87 coal blocks have been allocated to independent power producers and states for captive coal mining in power sector. It is difficult to price this coal since there was no bidding for distribution of the mining rights. Besides, as CEA pointed out, the pooling of captive coal will create problems for these projects since they have power purchase agreements signed with utilities through bidding on tariffs arrived on the basis of captive coal blocks.
NTPC Ltd, the biggest coal consumer in the country with an annual requirement of more than 150 million tonnes, is also not keen on the pooling proposal. The average cost of NTPC coal will go up since around 85-90 per cent of its consumption is met through domestic coal. “We are already pooling coal at our power plants so at the company level our cost is pooled,” said a senior NTPC executive.

India generates 811 billion units electricity in 2010-11 primarily on account of shortage of coal and water

India saw an electricity generation of 811 billion units in the last fiscal, marginally lower than the set target, primarily on account of shortage of coal and water.The country, which needs enhanced infrastructure and power capacity to sustain high growth trajectory, had targeted an electricity generation of 830.8 billion units (BU) in 2010-11.
Latest figures from the Central Electricity Authority (CEA) show that power generation stood at 811.1 BU in 2010-11.
However, the figure represent a growth of over five per cent as against 768.4 BU achieved in 2009-10 financial year.The statistics exclude generation from plants having capacity of 25 MW capacity.In the last fiscal, the electricity generation from thermal power sources stood at 664.9 BU compared to the target of 690.9 BU."Growth of thermal generation was mainly restricted due to coal shortages, receipt of poor quality/wet coal, closure of some units in the Western region due to acute raw water shortage...," CEA said in its report.

BHEL suppliers to set up own power plant - Move comes in the wake of power shortages affecting production

Move comes in the wake of power shortages affecting production
BHEL Small Industries' Association (BHELSIA), the consortium of local material suppliers to Bharat Heavy Electricals Ltd (BHEL), Tiruchi complex, is planning to set up a captive power plant with 12-16 MW capacity, in an effort to overcome the power shortage which has badly affected their business. The association has applied to register a new company to run the BHELSIA Power Project, with the Registrar of Companies.
It is in talks with two Korean firms and a Chinese firm to import their plants to Chennai and is planning to invest around Rs 20 crore in the project, said Rajappa Rajkumar, president, BHELSIA.
The association, which has around 280 members, would carry out civil works to set up the imported second-hand plants in Tiruchi, once it is approved by the government. It is looking at capacity of 12MW to 16 MW through the project.
"We are forming a new company to manage the captive power plant, which would come up in next six to eight months provided we get all the approvals from the Tamil Nadu government in time," said Rajkumar.
The association would approach the state government for approval to set up the power plant, and to use the Tamil Nadu Electricity Board grid for storage and usage of power from the grid, he added.
Around 70 per cent of the proposed investment would be from banks while the rest of the amount would be invested by the industry members of association, who would be inducted as promoters to the newly-formed company.
Around 350 small industries and another around 130 tiny manufactuers relying on supplies to BHEL for their survival are currently facing severe power shortage, which has affected their productivity of late, he said.
While the power requirement for the industries in Tiruchi is around 7 MW, the available power supply at present is only of around 4.5 MW.
"Setting up the plant, we will take 7 MW and will supply the rest of power to BHEL. They have agreed to provide us technical support for setting up the plant," said Rajkumar. He added that the newly formed company expects coal supply to be arranged through National Small Industries Corporation (NSIC).
The Tiruchi units put together has a capacity to supply around 2.5-3 metric tonne materials for BHEL. However, the power shortage has brought down the productivity of the units to around 2.2 MT, he said. Once the plant is set up, the local suppliers could leverage their maximum production capacity.
BHELSIA Power Project could supply electricity to BHEL and other industry players at the existing market rate while its promoters could get power at a subsidised rate, he added.

Sunday, April 24, 2011

Larsen & Toubro sees $1.5-billion annual business in nuclear power by 2015

Infrastructure major Larsen & Toubro said it sees a $1.5-billion (Rs 6,690 crore) annual business opportunity from nuclear power in another three to five years, despite the recent accident and sequel at Fukushima in Japan.
The company expects a major part of the growth in this business to come from nuclear power producers outside India, in the US, Britain and France. "A number of reactors in these countries would go for replacements of some of the parts and upgrades. That would be an opportunity L&T will be looking at," said M V Kotwal, president-heavy engineering.As a part of its heavy engineering division, the company manufactures vessels for pressurised heavy water reactors, fast breeder reactors, steam generator assemblies, heat transport systems and other critical equipment. The company is also engaged in engineering, procurement and construction of nuclear power plants.

Currently, the nuclear business contributes three per cent of its heavy engineering business, but this can go up to 15 per cent in another five years. Kotwal noted safety standards of nuclear plants across the world were being reviewed after the Fukushima disaster. "There has been a pause in orders from outside India in the short term. But in the long term, we see no impact," he said.
L&T's high-grade metal forging foundry in Hazira, to be commissioned early next year, will contribute to the plans. The company hopes to upgrade it to international standards by 2013-14 and then look at high-grade forgings for nuclear power plants. Initially, the unit will look at forgings for the hydrocarbons business, rolls for steel plants and turbine rotors for power plants.
"We have already commissioned the furnace at the unit and will start work by the second quarter of next year," said Kotwal. The forging unit is being set up with a planned investment of Rs 2,000 crore and it has already invested Rs 1,500 crore in the first phase. The orders for this business are expected to come from obroad. It already exports 60 per cent of its forgings to 40 countries.
L&T has aimed to double its revenues in the next four to five years and has set similar targets for the heavy engineering business. "We are seeing improvement. Orders which have been pending have started reviving, especially in the hydrocarbons segment on the refining side," said Kotwal.
He also said activity in the exploration of the oil-rich tar sands in Canada (Alberta province) had revived after hit by a slowdown. "If they come up, we can see some orders next year and the year after," said Kotwal.

Thursday, April 21, 2011

Power Ministry seeks curbs on used equipment imports - Calls for adherence to energy efficiency norms, spare-parts availability

Amid concerns over a surge in imports of second-hand machinery, the Power Ministry has sought restrictions such as adherence to energy efficiency norms and guaranteed spare-parts availability as prerequisites for such equipment coming into the country.

The matter was discussed at a recent Committee of Secretaries (CoS) and individual Ministries have been asked to inform the Directorate-General of Foreign Trade (DGFT) on the safeguards that they feel might be necessary in the event of a surge in imports in their sectors. Ministries in other affected sectors, including textiles and heavy industries, have also been asked to step up vigil, official sources toldBusiness Line.
Domestic capital goods players, especially those in the SME (small and medium enterprises) segment across sectors such as textile machinery, power equipment, machine tools and earthmoving equipment could benefit if the Government proactively curbs imports.
In its view placed before the Secretaries' panel, the Power Ministry had suggested that imported equipment should be allowed into the country only if it meets the efficiency norms stipulated by the Bureau of Energy Efficiency. Besides, the Ministry has suggested pre-shipment inspection for used machinery by designated inspection agencies recognised by Indian authorities, prior to the equipment being loaded onto vessels for shipment to India.
Dynamic approach
Though there was a proposal in favour of bringing the matter before the Cabinet for imposing immediate restrictions on such imports, the Secretaries' panel decided against that for now and instead called for a dynamic approach of reviewing specific instances of any rise in imports. While the Department of Industrial Policy and Promotion has been pitching for a long-term policy on second-hand capital goods, the CoS did not favour it for now.
If imports consistently see a surge, the safeguards proposed by the Department of Industrial Policy and Promotion include a tariff barrier in terms of higher Customs duty on second-hand machinery imports than that applicable for import of new machinery in the same sector. Besides, restrictions on the age of second-hand machinery and curbs on the number of ports through which such imports would be allowed are also under consideration.
At present, there is no difference in the treatment of imports of new and used capital equipment. Most countries, including China, Thailand and Australia, have in place specific policies on second-hand machinery and capital goods imports.

Alstom Projects India and Shanghai Electric to set up JV company to supply boilers and spare parts to power plants

Alstom Projects India Ltd's (APIL's) boiler assets are set to be demerged into a new entity.This is part of a proposal by APIL's parent firm, France's Alstom Group, to form a joint venture with China's Shanghai Electric Group.Under this, Alstom intends to spin off its boiler business into a new legal entity that will be held by the proposed joint venture firm.
The boiler assets held by APIL will be demerged into the new entity as part of the plan, subject to necessary corporate and regulatory approvals, APIL informed the bourses, quoting a communication it received from the Alstom Group.“Alstom and Shanghai Electric Group have signed a letter of intent for the creation of Alstom-Shanghai Electric Boilers Company, a 50:50 joint company combining both partners' activity in the boiler market for power plants,” the statement said. The joint company would supply new boilers and spare parts for services.In addition to the direct sales that the new entity would undertake in the international markets, Alstom-Shanghai Electric Boilers would be a “privileged supplier” to Alstom and Shanghai Electric for new equipment and spare parts to their respective turnkey and service businesses, it said.The new company is to be registered in Shanghai, with its operational headquarters in Singapore. The joint company would be set up once the agreements between the two companies are finalised and upon the completion of the social and regulatory processes.Alstom's global boiler business comprises manufacturing sites in Durgapur (India), Neumark (Germany), Chattanooga (US) and Wuhan (China), as well as engineering centres at Stuttgart (Germany), Ashby (UK), Massy (France) and Windsor (US).

2010/11 power output rises 5.55 pct vs year ago - Country added a record 15,795 megawatt of capacity

India generated 5.55 percent more power than a year ago in the last fiscal when the country added a record 15,795 megawatt of capacity to help bridge a shortfall in the world's second-fastest growing major economy, government data showed.
India's peak power deficit, the shortfall between supply and demand in peak hours, in last fiscal year to end March narrowed to 10.3 percent from 12.7 percent of the year ago, data from the Central Electricity Authority's website showed.
During 2010/11 (April-March), India generated 811.10 billion kilowatt hours (kwh) of power compared with 768.43 billion kwh a year ago. It added about 9 percent to capacity but this was a gradual process over the year.In March, India's power output rose an annual 7.56 percent to 75.50 billion kwh, the data showed.Thermal electricity, which accounts for about two-thirds of India's power generation and includes using coal, liquid fuel and gas, grew an annual 3.81 percent in the last fiscal and 5.14 percent in March.
Coal based generation during the year increased by 4.16 percent from a year ago, constrained by low imports and poor quality of the fuel. At the end of March, 13 power stations had stocks of less than four days.India has the world's fourth largest coal reserves after the United States, Russia and China, but its imported coal requirements have risen due to declining local output.Coal-fired plants accounted for over half of India's 173.63 gigawatt installed capacity at end March.According to the report, Indian utilities imported 21.825 million tonnes of coal versus estimates by the government of 35 million tonnes.

India's coal-fired power plants increase imports of fuel by 18 percent in the year ended March

India’s coal-fired power plants increased imports of the fuel by 18 percent in the year ended March, boosted by purchases from state-run NTPC Ltd., India Coal Market Watch said, citing an unidentified government official.Imports rose to 29.1 million metric tons from 24.6 million a year earlier, the coal newsletter said. This compares with a government target of 35 million tons set by the Central Electricity Authority.NTPC imported 10.57 million tons during that period, up 68 percent from a year earlier, according to the newsletter. That’s 3.3 million tons below the government’s target for the company.

CLP gets technical approval from Central Electricity Authority for its 1,200 MW gas based power plant in Gujarat

China Light and Power (CLP) India has finally got the technical approval from the Central Electricity Authority for its 1,200-Mw gas-based power plant in Gujarat. The project that is expected to cost Rs 6,000 crore involves expansion of its existing Bharuch plant.
The expansion has been held up due to unavailability of natural gas as fuel. Recently, the Central Electricity Authority appraised the project for domestic gas allotment, and it might get a fuel allocation in the 12th five year plan gas starting 2012. "As far as the readiness is concerned, we think we will one of the first few to get gas," said Naveen Munjal, Director Business Development, CLP Power India.
The combined cycle gas-fired plant in Gujarat, currently has a capacity of 655 megawatts. The company planned to expand it about five years back. However, the plan could not go through as domestic gas was not available. Buying imported natural gas was not viable. "The prices of liquified natural gas (LNG) are linked to crude oil prices. The tariffs currently prevailing in the Indian Power Sector cannot sustain usage of only LNG as a fuel," said Munjal.
Currently, the spot prices are at approximately $15 a million British thermal unit, and going by this, the variable cost itself will be close to Rs 4.50 a unit. With fixed charges and transmission charges, the total cost per unit will be well over Rs 6 per unit.
Unlike many gas fuelled power projects under construction, the company does not plan to construct the project before a committed fuel allocation. "There is no point in building a project and not using it to generate power – it won’t even receive the shareholders and lenders’ approval" said Munjal.
CLP has already acquired land and environmental approval for the project. Hong Kong headquartered CLP entered the Indian market in 2002. It currently has an installed capacity of 900 megawatts and around 1,600 megawatts under construction including those from 10 wind power projects. It also plans to invest in projects accounting to 10,000 megawatts by 2015.
The company plans to achieve this feat by bidding for and winning ultra mega power projects (UMPPs), two of which might seek bids this year. Even as the company plans to look mainly as case 2 power projects where government assures them of land, fuel and approvals, it is also looking at case 1 projects where no such assurances are available.
CLP is also looking to purchase projects from promoters who have been trying to sell the licences. "We are exploring opportunities to enter projects where some amount of development work like land acquisition, environmental approvals and fuel tie-ups have been arranged," said Munjal.

Reliance Power plans to commission first unit of its 3,960 MW Sasan Ultra Mega Power Project in January 2013

Reliance Power today said it plans to commission the first unit of its 3,960 MW- Sasan Ultra Mega Power Project in January 2013. The first unit of 660 MW of the Sasan project in Madhya Pradesh would be coming up ahead of its Power Purchase Agreement (PPA) schedule. 
"We are happy with the rapid progress being achieved at the site and are confident of bringing the project much ahead of original PPA schedule with the first unit starting in Jan 2013," Reliance Power CEO J P Chalasani said. 
"Sasan, with its landmark tariff of Rs 1.19 per Kwh, will benefit power consumers in seven states due to its early commissioning," he added. 
As per the PPA agreement, the first unit was to be ready by May 2013. According to the company, the six units of 660 MW each would be commissioned by June 2014. 

Sasan project is estimated to cost around USD 4.3 billion, with financing by an equity contribution of USD 1.2 billion and term loans to the tune of USD 3.1 billion. The project has received final commitments for term loans of more than USD 1.1 billion from Chinese banks. 
"Sasan's financing is unique with both US Exim Bank and Chinese Banks joining the Indian lenders for financing the Project. The financing not only ensures competitive rates, but also helps in reducing foreign exchange risks and equipment performance risks," Chalasani said. 
Based on super-critical technology, Sasan UMPP is a pit head coal-fired power plant and the company has entered into a 25-year PPA with off takers of power for the entire 3,9602 MW capacity. Power generated from Sasan would be supplied to seven states -- Madhya Pradesh, Punjab, Uttar Pradesh, Delhi, Haryana, Rajasthan and Uttarakhand. 
Chalasani noted that while having a coal mine along with the power project increases the complexity of the project, "in the long run, the advantages of assured fuel availability and control over fuel prices far outweigh the increase in initial efforts required."

NPCIL tests confidence in world’s biggest nuclear plant - Firm plans to raise Rs 30 bn this year through bonds and loans

Nuclear Power Corp. of India Ltd.(NPCIL) will proceed with its first foreign bond sale to build the world’s largest reactor complex, even as Japan battles to stop radiation spewing from a damaged plant.

India’s sole atomic energy firm plans to raise Rs. 3,000 crore this year through a mix of bonds and loans, locally and overseas, finance director Jagdeep Ghai said in an interview last week, without revealing more.
 3,000 crore this year through a mix of bonds and loans, locally and overseas, finance director Jagdeep Ghai said in an interview last week, without revealing more.

The extra yield investors demand to hold its five-year rupee debt over government notes has fallen 38 basis points (bps) to 136 from a two-year high on 21 March after Japan averted a meltdown and Kazakhstan promised India 2,100 tonnes of uranium by 2014. A basis point is one-hundredth of a percentage point.
“NPCIL should allow concerns over safety to settle down before planning a bond issuance,” said London-based Raj Kothari, a fixed-income trader at Sun Global Investments Ltd. “If it hits the market after a couple of quarters, it should get a good reception.”
Yield spreads on the Mumbai-based state company’s debt touched 174 points last month, the widest since February 2009, after an 11 March tsunami that followed a 9-magnitude earthquake knocked out cooling systems at Tokyo Electric Power Co. Inc.’s (Tepco) Fukushima Daiichi nuclear plant, causing the worst nuclear disaster since Chernobyl. Tepco’s relative yield has surged 24-fold since to 273 points from 11.5 before the temblor.
The relative yield on China National Nuclear Corp.’s 4.9% yuan-denominated notes due July 2019 climbed 5 bps since 11 March to 201 on Monday,Chinabond prices show. The spread on similar-maturity 4.375%, euro-denominated debt sold by Areva SA, the largest provider of nuclear equipment and services, widened 31 points to 164 on Monday, BNP Paribas SA prices show.

Indian companies have issued $3.5 billion (R
 15,645 crore) of bonds overseas in 2011, compared with $2.3 billion in the same period last year, as they sought cheaper funding after the central bank raised the benchmark interest rate eight times since March 2010 to 6.75%.

The average yield for Indian dollar debt has fallen 8 bps in the past month to 5.1%, according to HSBC Holdings Plc indexes. India’s nuclear power company should offer a coupon of 4-5% to draw investors, said Kothari.
Suppliers including General Electric Co. and Areva are looking at contracts in India after a civilian nuclear treaty with the US in 2005 helped lift international restrictions imposed nearly four decades ago when the country tested its first atomic bomb. Prime Minister Manmohan Singh’s government won access to fuel and technology in September 2008 from the Nuclear Suppliers Group on a proposal made by former US president George W. Bush.
“Our board approved overseas borrowing in 2008, when people didn’t care much for us,” said NPCIL’s Ghai. “Things have changed now after the deal with the US and people outside are taking note of India’s nuclear energy programme,” he added.
India and China, undeterred by the Fukushima accident, are betting on nuclear power in their quest for alternative energy sources amid rising crude oil and coal prices.
Opposition to some of the Indian generator’s projects from anti-nuclear activists and villagers may damp appetite for the bonds, and some investors may demand a higher yield to compensate for the risks, said Pierre Faddoul, a Singapore-based credit analyst at Aberdeen Asset Management Plc.
“It will come down to pricing at the end of the day,” Faddoul said in a phone interview on Monday. “A good discount would be required to compensate the negative headwinds coming from Japan. It could stretch from a handful to maybe 100 bps.”
Mango farmers and fishermen are opposing what would be the world’s largest nuclear power plant near Jaitapur on the western coast of India, arguing that hot water discharged from the reactors poses a risk to prawns, mackerels and king fish that are exported to markets including Europe, Thailand and Japan. One person was killed on Monday as protests turned violent.
India plans to spend $175 billion by 2030 on nuclear generation, according to estimates by the US-India Business Council, while China was constructing 27 reactors as of 1 April, according to the website of the World Nuclear Association.
The two Asian nations plan to boost their share of global atomic power sevenfold to 30% by 2030 to meet demand and emission goals, according to securities and research firm Sanford C. Bernstein and Co. Inc.
India plans to increase its nuclear capacity 13-fold to 60 gigawatt (Gw) by 2030, according to the nation’s Planning Commission, while China is planning a sixfold expansion to 70 Gw in nine years, according to the National Development and Reform Commission.
Rupee bonds, with a 0.7% drop this month, are the worst performers among local-currency debt in Asia outside Japan, HSBC indexes show.
The yield on the most-traded 8.08% bond due August 2022 slipped 1 bp to 8.24% as of 11.32am in Mumbai, after reaching the highest level in two months on Monday. The rate has risen 16 bps this month, the most since February 2010. The rupee slid 0.7% to 44.63 a dollar.

Government asks power generators to increase use of imported coal in an effort to meet country's rising demand

The government has asked all power generators to ensure their upcoming projects use more imported coal in an effort to meet the country's rising demand for electricity. 
The Central Electricity Authority (CEA) has told central and private power utilities and equipment manufacturers to use boilers and auxiliaries designed for blending at least 30% or more imported coal. 
Equipment at existing plants cannot use more that 15% imported fuel in their coal supply as it leads to pollution and corrosion of boilers. 
"As there exists a large gap between projected demand and supply of indigenous coal, all future coal-fired thermal power stations to be set up in the country shall be so designed as to enable use of higher percentage of imported coal.to keep pace with the large generation capacity addition programme in the 12th plan period and beyond," the CEA said in an advisory issued on Tuesday. 
"The station facilities shall also be designed for unloading, handling and blending more imported coal," it said. 
Imported coal has a higher calorific, or heat, value as compared to domestic coal.

Tuesday, April 19, 2011

Hydel plant shutdown: Ministry wants compensation for NTPC

The ministry of power will soon move a Cabinet note seeking budgetary support to compensate NTPC Ltd for shutting down its Loharinag Pala hydro power plant in Uttarakhand on religious and environment grounds. Though the exact compensation for closing the project is yet to be ascertained, it is expected to be above Rs 2,000 crore.
If the government pays the state-run power major, it will be the first to get compensated for closing a project on religious and environment grounds.Senior officials told Business Standard that the ministry would also seek a permission from the Cabinet to set up a technical advisory committee for the closure of the project. “The committee will not only decide on the compensation to NTPC but also the amount to be spent on making the site safe for future,” said a power ministry official.

On August 20 last year, the project became the first to be scrapped midway on religious grounds. Around 155 km stretch on the Bhagirathi, a tributary of Ganga, has been declared a no-dam zone by a group of ministers leading to scrapping of four projects, of which only the NTPC project had started construction.
NTPC had completed about 30 per cent of construction work — including 10-km excavation in the mountains for tunnelling and creating a desilting facility when construction was stopped on July 20, 2009. The expenditure on the project included some Rs 600 crore directly spent on construction besides the maintenance being currently undertaken to keep the tunnelled mountain stretches safe. The company had also tied itself to orders worth about Rs 2,000 crore for which it would need to compensate its contractors.
The technical committee would also advise on the ways to close the project. Unlike the man-made barrages and power houses that can be easily dismantled and broken, tunnels in mountains would need to be filled up. Mountains have natural water running through them and if left unattended, these streams can lead to dripping inside the tunnels and flooding, especially during monsoons. Currently, contractors hired by NTPC carry out dewatering exercise at the site.
On why the delay in seeking the Cabinet approval, the official said the decision of a group of ministers had to be routed through the Ganga River Basin Authority headed by the Prime Minister.

GoM on coal in its next meeting to consider the issue of exact location of NTPC's 1,980-MW thermal power project in Jharkhand

The Group of Ministers on coal in its next meeting-- likely this month-end-- will also consider the issue of the exact location of NTPC''s 1,980-MW thermal power project in Jharkhand, an official said here today.
"It has been decided, with the approval of the Prime Minister, that the Group of Ministers constituted to consider environmental and developmental issues.....and other developmental projects, will also be mandated to deliberate regarding the location of North Karanpura Super Thermal Power Plant," a Coal Ministry official said.
The Rs 8,000-crore NTPC project has been hanging fire for almost a decade now due to a controversy over its location.
The North Karanpura project situated in Chatra district in Jharkhand was supposed to be implemented during the 11th Five-Year Plan (2007-12).
It, however, got entangled in a dispute between the coal and the power ministries over the location and has been stalled for long now.
The coal ministry wanted the plant to be set up at another site in Jharkhand. It has been pressing for relocation of the project arguing that the proposed site is situated above an estimated 6 billion tonnes of coal reserves.
The power ministry had opposed relocation of the proposed site.
In February this year both the coal and the power ministries had decided to refer the matter to the Cabinet.
The official said the project will be one of the agendas that would come up in its third meeting of the GoM.
The Cabinet Secretariat in a memo issued to various ministries, including coal and power, on April 15 has asked the group of ministers (GoM) to also "make suitable recommendations in this regard (project)".

CLP finally gets technical approval from Central Electricity Authority for its 1,200-Mw gas-based power plant in Gujarat

China Light and Power (CLP) India has finally got the technical approval from the Central Electricity Authority for its 1,200-Mw gas-based power plant in Gujarat.
The project that is expected to cost Rs 6,000 crore involves expansion of CLP's existing Bharuch plant. The project had been held up due to unavailability of natural gas. Recently, the Central Electricity Authority appraised the project for domestic gas allotment, and it might get fuel allocation in the 12th Five Year Plan, starting 2012."As far as the readiness is concerned, we think we will be one of the first few to get gas," said Naveen Munjal, director, Business Development, CLP Power India.

The combined cycle gas plant has a capacity to generate 655 Mw. The company planned to expand it about five years back, but unavailability of domestic gas had stalled the plan. Buying imported natural gas was not viable. "The prices of liquefied natural gas (LNG) are linked to crude oil prices. The tariffs in the Indian power sector cannot sustain usage of only LNG as a fuel," said Munjal.
Currently, the spot prices are at approximately $15 a million British thermal unit, and going by this, the variable cost itself will be close to Rs 4.50 a unit. With fixed charges and transmission charges, the total cost per unit will be well over Rs 6.
Unlike many gas-fuelled power projects under construction, the company does not plan to construct the plant before a committed fuel allocation. "There is no point in building a project and not using it to generate power. It won’t even receive the shareholders and lenders’ approval," said Munjal.
CLP has already acquired land and environmental approval for the project. Hong Kong-based CLP entered India in 2002. It has an installed capacity of 900 Mw and around 1,600 Mw under construction, including those from 10 wind power projects. It also plans to invest in projects of 10,000 Mw by 2015.
The company plans to achieve this feat by bidding for and winning ultra mega power projects (UMPPs), two of which might seek bids this year. Even as the company plans to look mainly at Case-II power projects where the government assures them land, fuel and approvals, it is also looking at Case-I projects where no such assurances are available.
CLP is also looking to purchase projects from promoters. "We are exploring opportunities to enter projects where some amount of development work such as land acquisition, environmental approvals and fuel tie-ups has been arranged," said Munjal.

BHEL-NTPC JV becomes headless as CMD C P Singh quits

In less than three years of its incorporation, C P Singh, Chairman and Managing Director of NTPC-BHEL joint venture, has quit amid differences with the promoters, leaving the company headless.
The joint venture -- NBPPL (NTPC BHEL Power Projects Private Limited) -- was formed in April, 2008 to jointly execute EPC (engineering, procurement and construction) contracts and manufacture and supply power equipment in India and abroad.

Considering the large capacity addition plan in the country during the 11th and 12th Five Year Plans, a need was felt to expand the domestic power equipment manufacturing capability in India and this joint venture firm was formed to cater this demand.Sources in both camps blamed each other with the promoters (BHEL and NTPC) accusing the firm of non-performing, while CMD Singh alleging lack of support from the two PSUs.
When contacted, Singh confirmed the development and said "Yes, I have tendered my resignation unwillingly".
He, however, declined to elaborate.
Sources said that Ministry of Heavy Industries and PSUs was also not happy with the performance of NBPPL. This, however, could not be confirmed.NBPPL, however, claimed that it achieved outstanding performance against the MoU target with the government and said this was a great success story for a JV company conceived under a new concept on public-private partnership by the government.According to data available, NBPPL achieved a record turnover of Rs 115 crore during 2010-11 as against the target of Rs 90 crore, thus exceeding the target by 28%.

Monday, April 18, 2011

Bhel formulates new strategy to counter competition coming from Chinese companies, vouches for its superior equipment

Bharat Heavy Electricals Ltd (Bhel) has formulated a new strategy to counter competition coming from Chinese companies who have picked up a large share of orders from power projects. The company is organising workshops in different parts of the country to convince its clients about the superiority of its equipment vis-a-vis competition.

The initiative is backed by a strong team of Bhel engineers and marketing personnel who have been given the mandate to educate clients about availability and performance of power equipment produced by various companies (including Chinese) globally. Few such workshops have already been held and the company intends to take it to other parts of the country with increased frequency.
“The whole idea is to shift customer preference towards Bhel equipment that have served Indian power plants for several decades,” said a Bhel official not willing to be named. Bhel chairman and managing director BP Rao said recent workshops have yielded positive results for the company and have helped customers to make informed buying decisions.
The proliferation of Chinese equipment is becoming a cause of concern for Bhel that till recently enjoyed monopoly status in the Indian power equipment market. Bhel has orders worth around R1,60,000 crore at present but off late Chinese companies have made a major impact in the Indian power market. Government data suggest that out of 80,610 mw new capacity under construction in the 11th Plan (2007-12 ), about 43,048 mw (55%) is ordered on Bhel and 15,725 mw (20%) on Chinese manufacturers. For the 12th Plan (2012-17 ) period, of the 32,010 mw capacity already under construction, a substantial 10,170 mw (31%) is ordered on Chinese manufacturers.
All major industrial groups like Reliance, Adani, JSW Energy , Jindal Power, KSK, GMR, Sterlite, Lanco, Indiabulls have placed orders from Chinese suppliers.
“In addition to Chinese equipment, new joint ventures will soon start manufacturing in India. Bhel exercise is needed to keep the company prepared for new changes in the market,” said a government official.
Bhel has been organising such workshops periodically in the past too for the mutual benefit of the customers and the company but has increased its frequency now in wake of growing competition in the power equipment market.
In fact, feedback from these workshops have also helped Bhel to come out with new generation power equipment that are not cost competitive but also deliver high levels of performance. The company has also bagged few orders from companies that have earlier placed orders with Chinese suppliers. Bhel, which has ramped up its capacity to 15,000 mw is further increasing it to 20,000 mw to cater to the growing demand for power equipment and address the issue of delay in supplies. Delays has been one of the reasons for Indian companies looking outside for equipment supplies.

PowerMin likely to finalise draft report forecasting electricity generation and demand scenario for 12th five-year plan period in May

The Power Ministry is likely finalise the draft report forecasting the electricity generation and demand scenario for the 12th five-year plan period (2012-17), next month.The draft would form the basis for the 18th Electric Power Survey that assess power demand in the country.
In a recent meeting of the Electric Power Survey Committee, the chairman of Central Electricity Authority (CEA) Gurdial Singh said the "draft report of the forecast is to be finalised in May, 2011".The Electric Power Survey ( EPS) would be completed by September this year. The report would provide vital inputs for power planning, demand and development of infrastructure by various states.
The Government has already set up the Working Group for the 12th Plan under the chairmanship of Power Secretary.During the committee meeting, Singh said that any delay in completing the forecast of electricity requirements could consequentially delay the finalisation of 12th plan.
The committee would focus on achieving a per capita availability of over 1,000 units of power, among others.During the committee meeting held on March 29, a CEA representative said the preliminary data -- regarding power demand scenario -- from states like Uttar Pradesh, Maharashtra, West Bengal and Delhi are yet to be received.The data received from other states has already been scrutinised and modified for the preparation of preliminary forecast.
The consultation process would be undertaken with the states as well as state electricity regulatory commissions (SERCs) before finalising the draft report.During the 12th five-year plan, the Power Ministry hopes to add more than 1,00,000 MW of electricity.

BHEL likely to finalise NBFC plan by July

Bharat Heavy Electricals Ltd will be taking to its board a revised proposal to float a non-banking financial company (NBFC) to fund power projects.The power equipment maker is incorporating some of the suggestions made by Crisil on the original proposal.BHEL, which had been mulling the NBFC option to get better returns on its cash surplus, had appointed Crisil to advice on the proposal; the financial services firm recently submitted its report to the company.“We will be going to the board again with the (revised) proposal. We expect to finalise the proposal in the next three months,” the BHEL Chairman and Managing Director, Mr B Prasad Rao, told Business Line here.
BHEL, which is expanding its capacity from 13,000 MW last fiscal towards a target of 20,000 MW in the next two years, is sitting on a cash surplus of about Rs 9,000 crore.“The NBFC option will give us a platform to make better use of our cash surplus, especially as the Twelfth Plan Period envisages significant capacity addition in the power sector,” Mr Rao said.BHEL, which has an order book of Rs 1,75,000 crore, may rope in a partner to float the investment arm.
It is estimated that the funding shortage in the power sector in the Eleventh Plan Period would be a whopping Rs 4,50,000 crore. This is given the current funds availability to meet the Government's target of adding 78,577 MW capacity during this period.The funding appetite of the power sector will only grow during the Twelfth Plan, with the Central Electricity Authority setting its sights on a capacity addition target of about 1,20,000 MW, almost twice the Eleventh Plan target.


For BHEL, the NBFC option will bring in a two-fold benefit.Apart from getting better yields from its cash surplus, the company will also help create additional markets for its equipment through funding of new power projects.This is also expected to help the company at a time when it seems close to getting elevated to the Maharatna status. The Ministry of Heavy Industries and Public Enterprises is in the process of putting before the Cabinet new norms for Maharatna qualification.As this status will give the company significant flexibility to go in for overseas acquisition, BHEL's proposed investment arm could give a boost to its overseas ambitions

Sunday, April 17, 2011

NTPC floats Rs 52 bilion tender to source equipment for its beleaguered Kawas and Gandhar expansion projects in Gujarat

State-run NTPC today floated a Rs 5,200 crore tender to source equipment for its beleaguered Kawas and Gandhar expansion projects in Gujarat for which the company is fighting a legal battle with Reliance Industries.

"We have issued the tender for 1300 MW Kawas and Gandhar each expansion projects in Gujarat," a company official said
The value of the tender would be around Rs 5,200 crore. BHEL, and Larsen and Toubro are likely to bid for the tender.
NTPC is in a legal tussle with Mukesh Ambani-led RIL for supply of gas for these projects. The case is pending in the Bombay High Court.

Bihar government to float tenders for new power units to meet domestic and commercial requirements

Bihar government would soon be floating competitive tariff-based tenders for new power plants to meet domestic and commercial requirements.
Bihar chief minister Mr Nitish Kumar said that "We have decided to soon float tenders which will be competitive tariff based for raising new power units.” 
He added that "We have given thrust on giving opportunity to companies which would offer cheapest power. We want to become self-reliant in electricity.”
Blaming the centre for its alleged apathy towards meeting the energy needs of the state, he said, the state had projected the need of 4500 MW against which the Centre allocated not more than 1600 MW to 1700 MW.
However, he added that his government has comprehensive plans to tackle the power problem.
The chief minister claimed several power projects with an investment of INR 100,000 crore were in the pipeline and alleged that the Centre was not providing coal linkages of the proposed power projects.
Mr Kumar has directed the state energy department to purchase transformers to ensure replacement of damaged ones in rural areas within 72 hours and those in urban areas within 24 hours.
The state government has decided to provide INR 100 crore to the energy department for purchase of transformers in adequate numbers.

Work related to developing 10,000-Mw Jaitapur nuclear power project in Maharashtra would be carried out: Ramesh

Despite the Fukushima nuclear crisis, the government has said the work related to developing the 10,000-Mw Jaitapur nuclear power project in Maharashtra would be carried out.“As of now, Jaitapur stays on. My ministry had already given a conditional environment clearance to the project on November 28, 2010. The Nuclear Power Corporation (NPC) is currently holding negotiations with Areva, the supplier of reactors to the project,” said Union Environment Minister Jairam Ramesh.Ramesh, however, said the safety measures at the project site would have to be strengthened. “I must say Fukushima is a wake-up call. India can draw lessons from it. Therefore, safety applications at the Jaitapur nuclear project comprising six reactors should not be interlinked but separate.” He added the Ministry of Environment and Forests was not the agency to deal with the issue of nuclear safety, and the Atomic Energy Regulatory Board took care of such issues. Ramesh said his ministry had set up a committee to review the impact of all coastal projects, including nuclear projects, on the environment. This, he said, would help in dealing with environmental crises.

India could not afford to neglect nuclear capacity addition, Ramesh said. “Currently, nuclear power is just 3 per cent of the country's installed capacity. This would be increased to 6 per cent by 2020 and to 13 per cent by 2030. Nuclear is the best option,” he said.
Ramesh said the Jaitapur project could not be compared to the Posco project in Orissa, since it was not forest area. Unlike the Posco project, in which he had received resolutions from two Gram Sabhas, no such resolutions had come from Gram Sabhas on the Jaitapur project site.
Mahrashtra Chief Minister, Prithviraj Chavan, who met Ramesh earlier in the day to discuss various infrastructure projects in Maharashtra, said he had visited the project site and met villagers. He had also interacted with experts in Mumbai and discussed various issues pertaining to the project. “I have already clarified that the Jaitapur project will not have any major impact on fisheries,” he said.
The statements by Ramesh and Chavan follow the Shiv Sena's agitations against the project last week.