NTPC revives power equipment award process, places orders worth Rs. 6,000 crore

India is planning to set up a bulk of its capacity on supercritical and advanced ultra-supercritical equipment

NTPC Ltd, which failed to award contracts for power equipment since 2009 because of land and legal issues, has placed orders worth Rs. 6,000 crore with Doosan Heavy Industries and Construction Co. Ltd and Toshiba JSW Turbine and Generator Pvt. Ltd for its 2,400megawatts (MW) Kudgi project in Karnataka.

“We have placed the orders for Kudgi as it was the only project for which land was available,” chairman and managing director Arup Roy Choudhury said. “It is a good start.”

Key hurdle: NTPC chairman and managing director Arup Roy Choudhury says orders have been placed for Kudgi as it was the only project for which land was available.

The supercritical equipment order, which was earlier supposed to be part of India’s biggest power generation contract, is for three units of 800MW each. While Doosan has been awarded the boiler part of the tender valued at around Rs. 3,796 crore, Toshiba JSW, a joint venture of Toshiba Corp. and the JSW group, has been given an order worth Rs. 2,300 crore for supplying turbine generators. Toshiba Corp. owns a 75% stake in the venture.

The equipment will help NTPC improve plant efficiency and achieve economies of scale. By 2032, about half the country’s generation capacity is expected to be coal-based.

To mitigate the shortfall in coal, India is planning to set up a bulk of its capacity on supercritical and advanced ultra-supercritical equipment, which are more efficient.

NTPC had sought bids for around Rs. 22,000 crore of boilers and turbine generators for nine units of 800MW earlier last year for proposed projects at Kudgi, Lara (1,600MW) in Chhattisgarh, and Darlipali (1,600MW) and Gajmara (1,600MW) in Orissa. The projects will have a total capacity of 4,000MW each after all the phases of development are completed.

NTPC requires an acre of land per megawatt. Mint reported on 27 December that the utility has been unable to place bulk orders for four projects (nine units of 800MW each) as it has been unsuccessful in acquiring land for the proposed projects at Lara, Darlipali and Gajmara.

While Doosan will get orders for boilers for two additional units of 800MW each, the remaining four units will go to state-controlled Bharat Heavy Electricals Ltd (Bhel). Similarly, a joint venture of BGR Energy Systems Ltd and Hitachi Power Europe GmbH and Bhel will get remaining turbine generator orders for four and two units, respectively.

“The other orders will be placed in due course of time as and when we get the land for other projects,” said another NTPC executive, requesting anonymity.

NTPC is also set to place orders worth another Rs. 22,000 crore for 11 supercritical boilers and an equal number of turbines of 660MW each with the Supreme Court ruling that Ansaldo Caldaie Boilers India Pvt. Ltd, a unit of Italian boiler maker Ansaldo Caldaie SpA, had failed to technically qualify for the bidding process.

The bidding process for supercritical boilers was stalled by Ansaldo Caldaie Boilers India’s petition to the Delhi high court in 2011 after it was disqualified by NTPC on technical grounds. The high court had directed NTPC not to open commercial bids until it decided on the matter and finally ruled in Ansaldo’s favour. NTPC then appealed the decision in the Supreme Court.

NTPC will now invite price bids from Bhel and the joint ventures of BGR Energy Systems Ltd and Hitachi Power Europe GmbH; and Larsen and Toubro Ltd and Mitsubishi Heavy Industries Ltd, which had technically qualified for the boilers order. While the joint venture of Bharat Forge Ltd and Alstom SA has already emerged as the successful bidder eligible for the award of five turbine units, Bhel and Toshiba JSW are to be awarded two units each.

Toshiba will also supply two 660MW sets for the Salaya-II thermal power plant run by Essar Power (Gujarat) Ltd. The company has also received a letter of intent for the purchase of two 660MW turbine and generator sets for an NTPC project in Uttar Pradesh. Toshiba JSW will have a capacity of 3,000MW by 2013, and 6,000MW by 2015, the company’s managing director, Itaru Ishibashi said last week.

NTPC currently has an installed power generation capacity of 36,104MW and projects totalling 14,088MW under construction.

Toshiba JSW to supply steam turbine for NTPC's Kudgi power project

Toshiba JSW Turbine and Generator Pvt., Ltd. (Toshiba JSW), a Toshiba Group company based in Chennai has been awarded a contract by NTPC Limited, India’s largest state-owned energy service provider, for the supply of three 800 Mw supercritical steam turbine and generator island packages for the Kudgi Super Thermal Power Project, Stage-I (3 x 800MW) in Kudgi. The contract has an estimated value of around $470 million (approximately Rs 2,315 crore)

Toshiba JSW was established in September 2008 and has inaugurated its main plant facility to manufacture mid- and large-sized turbines and generators on February 12, 2012. The contract is the largest-scale project for NTPC in recent years and the first EPC project for which Toshiba JSW will conduct most of its engineering, manufacturing and erection and commissioning work of the complete steam turbine and generator equipment as a prime contractor. Delivery of the equipment is expected to start in 2013.

Supercritical steam turbines and generators achieve more environmental friendly power generation by higher generating efficiency and Toshiba Group’s extensive experiences in their manufacture and delivery include delivery of 65 units in Japan and 18 units overseas, Toshiba said in a press release.

Toshiba Group has Toshiba JSW, 75 per cent owned subsidiary at Chennai, Toshiba India Private Limited as the EPC engineering center at New Delhi, TPSC (India) Private Limited as the erection and commissioning engineering center at Hyderabad. This local business organisation, track record, plus a high evaluation of Toshiba’s advanced technical capabilities, high efficiency and high reliability were factors in the selection of Toshiba JSW by NTPC.

With this contract, Toshiba Group has, at over 60 per cent of equipment ordered, secured the top share in India’s market for supercritical steam turbines and generators over 800 Mw.

BHEL scrip dips 10% on cancellation of orders

Shares of state-owned Bharat Heavy Electricals Limited (BHEL) plunged on the bourses because of cancellations order inflow reported by the company in its third quarter results on Friday.

BHEL reported a net profit of Rs 1432 crore in the quarter ending December 30, 2011, against Rs 1412 crore in the previous quarter. While profits have remained flat, BHEL's order book has declined by nearly 9 per cent quarter-on-quarter and by 7 per cent year-on-year.

The company had an outstanding order book position of about Rs 1,46,500 crore as at end December, 2011. At the end of the second quarter of FY12, BHEL's outstanding order book position was Rs 1,61,000 crore.

The company has not been able to garner major orders in the last quarter. An order worth Rs 5,840 crore was cancelled which led to de-growth in the order book. “The major reason given for order cancellation was that customers were unable to make significant progress in getting clearances, said a report by Prabhudas Lilladher.

Investors were also upset because the third quarter results showed lower-than-expected margins. Many brokerages have downgraded the stock due to possibility of future cancellations of orders. Brokerages have given a ‘neutral' and ‘sell' ratings to the stock.

HSBC Global research estimates the “outlook unlikely to improve over the next four to six quarters.” They fear further cancellations or execution delays from the company's private sector order book.

Motilal Oswal feels that the multiple de-rating triggers will put the stock's valuations under pressure. There could be a “Possible downside to our order intake assumptions in FY12/13 due to worsening external environment in the power sector, downside risk to FY13 earnings estimate due to execution constraints and deteriorating working capital, and uncertainty around the company's proposed follow-on offer (FPO),” said a report by the brokerage.

Suzlon bags $400-m orders in last one month

Wind turbine maker Suzlon has bagged contracts worth over $400 million from three countries, including Brazil and the US, in the past one month.

The company bagged 80-MW worth of orders in India and a total of 189-MW worth of orders in Brazil and the US over a one-month period, excluding orders announced separately, Suzlon said in a statement today.

The firm orders secured between December 22, 2011, and January 23, 2012, from international special purpose companies, PSUs, large corporates and SMEs, are valued at approximately $403 million or Rs 2,000 crore, the statement said.

The order size ranges from as small as 0.6 MW to 121 MW.

"These orders reiterate not only the dynamic and rapidly growing Indian wind sector, but also Suzlon’s presence in emerging economies and competitive markets such as Brazil and the US,” Suzlon Group Founder, Chairman and Managing Director, Mr Tulsi Tanti, said, adding that Brazil is an important market for the company under its focus on emerging economies.

Suzlon Energy Ltd (SEL), India’s largest wind turbine manufacturer, has announced that it will develop a wind capacity in Andhra Pradesh totalling 3,000 MW between 2012 and 2016. The company’s initiative would attract an investment of Rs 18,000 crore in the state.

The company had also signed a memorandum of understanding (MoU) with the State Government in this regard earlier this month.

Under the MoU, the Andhra Pradesh Government will facilitate the acquisition of necessary permissions, registrations, approvals and clearances for the development of wind farms by Suzlon.

The company, in turn, will play the role of a developer and facilitate the channelisation of investments into the state through its customers investing in wind energy.

CoS calls meet of EGoMs to resolve power sector issues

The Pulok Chatterjee-led committee of secretaries (CoS) has begun work on resolving issues threatening growth of the Indian power sector by convening meetings of two empowered groups of ministers (EGoMs) — one on gas allocation and another on ultra mega power projects (UMPPs).

The fuel-related issues being considered by the two EGoMs is critical for future growth of power sector where investment of over $200 billion is proposed during the Twelfth Five year Plan (2012-17). The committee has also proposed a meeting of the inter-ministerial panel to resolve issues relating to short supply of domestic coal to power projects.

Sources said the committee has identified five key areas — gas linkage, Coal India Limited's fuel supply agreement, diversion of surplus coal from captive mines, forest clearance for allocated captive coal mines located in dense forests and Indonesian coal pricing issues relating to the Mundra and Krishnapatnam UMPPs — for the government intervention. These would be taken up on priority basis as the committee has been given the mandate to resolve all issues in three months.

“We have a lot of expectation from the committee. The Prime Minister has promised to reolve all power sector issues in a time bound manner,” Association of Power Producer's director-general Ashok Khurana said.

The constitution of the commitee is being seen as an intevention by the Prime Minister’s Office (PMO) to ensure that inter-ministerial wranglings did not impede growth of critical infrastructure. Though government agencies and ministries have been aware of the problems, decisions have been pending for a long time. This has severely affected the power sector which is expected to end the 11th Plan with a capacity addition of mere 42,000-45,000 MW against the original target of 78,700 MW.

Few days in to its constitution, the Chatterjee-led commitee has called for a meeting of the EGoMs on gas allocation on February 14, while a similar committee is also expected to meet shortly to look into the Indonesian coal pricing issues affecting Mundra and Krishnapatnam UMPPs which are caught in a contractual bind.

The EGoM on gas allocation has been asked to ensure gas linkage to power projects worth 8,000 MW capacity expected to be commissioned by March end. The ministerial panel has not met for the last two years.

Similarly, the EGoM on coal has been requested to ensure that Coal India signs fuel supply agreements (FSAs) with all power projects that may be commissioned in the current 11th Five-year plan. Besides, it has also been asked to ensure that under the FSAs, CIL commits to supply enough coal to help these projects run at 85% capacity. That entails annual coal requirement of 425 million tonne.

The ministerial panel has also been asked to ensure speedy forest clearance to eight captive coal blocks including Chatrasal, Mahan located in dense forest areas.

The CoS has also asked the coal ministry to prepare a policy to facilitate diversion of surplus coal captive coal blocks through consultations with the concerned ministries.

The EGoM on UMPPs has been asked to examine Indonesian coal pricing issues relating to the Mundra and Krishnapatnam projects which have been caught in a contractual bind as the existing power supply contracts do not allow tariff revision due to increase in fuel costs.

The CoS was set up after top bosses of private power companies, including Ratan Tata and Anil Ambani, met Prime Minister Manmohan Singh on January 18 to seek his intervention for early resolution of power sector issues.

Top officials from the ministries of power, finance, coal and petroleum are members of the CoS, which is headed by Pulok Chatterjee, principal secretary to the PM.

Govt to review stuck power projects

FM to chair meeting on Feb 1 ten major projects stalled on fuel cost issues to be discussed

With lending to some of the many stalled power projects becoming a major concern for financial institutions, the Union government has decided to review 10 major ones, involving an investment of Rs 32,301 crore, on the coming Wednesday.

These projects have Rs 17,764 crore worth of loan sanctions from public sector banks alone, of which a substantial chunk has been disbursed.

In all, Rs 1,16,000 crore have been invested in projects that have a total generation capacity of 21,160 Mw. Most of these are either ready for commissioning or are expected to be in a few months, said officials. The projects include Tata Power’s 4,000 Mw ultra mega power project and Adani Power’s 4,620 Mw project at Mundra in Gujarat. While the first unit of the Tata project is ready for commissioning, 3,300 Mw of the Adani project has already been commissioned and the remaining 1,320 Mw is expected to be commissioned in two months. Both the projects are unable to generate because of the increased cost of Indonesian coal, which cannot be passed on in power supply rates under the present norms.

The department of financial services, that has convened the meeting, feels the disbursed amounts would turn into non-performing assets (NPAs) in certain cases if the uncertainty surrounding these 10 projects and another 25 infrastructure projects, including those in the steel and iron sector, reviewed earlier, were not removed. These 25 projects involve investment of Rs 1,50,415 crore.

The Wednesday meeting comes within a month of high-level interactions between the government and the power industry. It would be chaired by finance minister Pranab Mukherjee and attended by other ministers concerned. For the 10 projects, the meeting would especially address the issue of uncertainty of coal supply, said an official.

In the run-up, the finance ministry has asked the power ministry to take policy decisions to mitigate problems relating to coal, to prevent slippages of projects into the NPA category, besides aggravating the deficit in power generation. Its contention is based on the fact that any increase in coal cost cannot be passed on in power rates in the 10 projects, since they were given out on rate-based bidding. It is estimated that the deficit in coal supply has increased fuel cost by around Rs 0.7 to Rs 1 a unit, depending on factors such as technology and location.

Besides the Adani and Tata projects at Mundra, based on imported coal, other projects expected to figure in the discussions are the 3,300 Mw Tiroda plant in Maharashtra and the 1,320 Mw Kawai project in Rajasthan, both of Adani Power; three projects of Essar, in Madhya Pradesh, Gujarat and Jharkhand, involving 4800 Mw; and JSW’s 1,200 Mw Ratnagiri, India Bulls’ 1,320 Mw Amravati and GMR’s 600 Mw Waroa plants in Maharashtra.

The power sector has become a big area of concern for the government. On January 18, chief executives and chairmen of power companies camped in Delhi, holding meetings with Prime Minister Manmohan Singh and key ministers. Singh decided to form a committee of secretaries under his principal secretary, Pulok Chatterjee, to resolve issues in the sector

BHEL’s worsening order inflow shows up policy bottlenecks

The 7% drop in order inflows compared with the year-ago period looks rather ominous for BHEL’s performance in the next 12-18 months

All eyes were on the order inflows clocked in the December quarter by the country’s largest capital goods maker, Bharat Heavy Electricals Ltd (BHEL). For this would not only influence earnings forecasts for the company but also provide insights on the trend for the sector.

Unfortunately, the 7% drop in order inflows compared with the year-ago period looks rather ominous for BHEL’s performance in the next 12-18 months. Investor hopes were dashed, all the more so because two big (660MW*2) orders, along with some others totalling Rs5,850 crore, were cancelled, which reinforces concerns on policy bottlenecks on land acquisition, coal linkages and volatile spot prices of coal.

Total nine-month order inflow of Rs. 13,360 crore for fiscal 2012 (up to end-December 2011) is a mere one-fifth of the management target of about Rs. 66,000 crore. A Motilal Oswal Securities Ltd report says, “The situation is unlikely to improve in the near term, putting our FY12/13 order-intake assumptions also at risk.” A report by Barclays Capital Ltd says order inflows for the year will be Rs. 42,550 crore, nearly 30% lower than fiscal 2011.

Shrinking order inflows and cancellations are worrisome for BHEL and its peers. This could see a U-turn in the capital goods stocks, which have been on an uptrend since January in anticipation of better times. BHEL’s stock fell nearly 3% to Rs. 273.61 on Friday after the results were announced.

The only silver lining in BHEL’s performance is the 19% year-on-year (y-o-y) growth in net sales to Rs. 10,743.1 crore-- a mark of sustained strength in project execution. In spite of this, the meagre 2% growth in net profit suggests poorer profitability.

Even at the operating level, there was a 360 basis points dip in operating margin from a year before to 19.4%, on account of higher other expenses due to increase in freight expenses and provisioning for contractual obligations. One basis point is a hundredth of a percentage point. The strong execution and billing, which is not backed by adequate order inflow, shows up in the poor book-to-bill ratio (see table).

Moreover, BHEL seems to be stuck in a quagmire of declining advances and higher receivables, seen in its increasing working capital requirement and reducing cash on the books. This declined to about Rs. 5,000 crore in the quarter, from Rs. 7,900 crore in the September quarter and Rs. 9,600 crore in March.

The road ahead for BHEL, whose core business hinges on the power sector, is tough. One must not be surprised by earnings downgrades until fiscal 2013 and a contraction in the price-to-earnings multiple for the stock.

NTPC Raigarh project: green panel recommends clearance

A Ministry of Environment and Forests (MoEF) panel has recommended clearance for the 18-MTPA Talaipalli coal-mine project of NTPC in the Raigarh district of Chhattisgarh.

The project had come up for discussion for grant of environmental clearance in the meeting of Expert Appraisal Committee (EAC) that was held recently.

“The Committee after discussions recommended the proposal for environmental clearance subject to MoEF circular dated September 9, 2011,” the MoEF said on its website.

The ministry had issued a circular in September which stated that projects awaiting environmental clearance would be eligible for consideration even if their application for forest diversion is under consideration.

NTPC had applied for environmental clearance for ensuring a production capacity of 18.72 million tonnes per annum (MTPA) from both underground and open cast operations.

The Coal Ministry had allocated the block to NTPC in 2006. One of the conditions of the allocation letter by the Coal Ministry stated that power projects (4,000 MW) based on coal from this block shall commence generation at the latest by the end of the 11th Five Year Plan (2007-2012).

With the development of the coal block getting inordinately delayed, the Ministry had last year issued warnings to the power major.

The warning letter also stated that some of the important milestones, including forest clearance, were pending and no serious efforts had been made by the company to develop the block

Higher depreciation, fuel costs short-circuit NTPC profits

NTPC had to shell out a lot more money for fuel. Fuel costs rose 29.4% to Rs10,793 crore in the December quarter

In theory, NTPC Ltd scores over other power generators in that it has surer fuel supplies; it gets preference over domestic coal supplies, can pass on fuel price increases. Coal India Ltd guarantees almost 80% of NTPC’s fuel requirements compared with just 50% for private producers, and recently the government decided to reallocate captive coal blocks to the utility after cancelling them in 2011.

In practice, disruptions occur and NTPC has to rely on imported coal to make up the deficit. Indeed, plant availability factor had plunged to an alarming 73.8% in the September quarter. In the December quarter, though, things improved. Yet, capacity utilization remained at some 84% compared with 87% a year ago. Lower capacity utilization also wreaked havoc on margins and profitability.

Thus, although NTPC’s revenues rose, profits declined. In the three months ended December, the company’s revenues increased 14.2% over a year ago to Rs15,332.3 crore aided by tariff hikes in many states and new capacity additions. That, however didn’t prove enough.

For one, financially hamstrung state electricity boards (SEBs) aren’t lifting enough output, preferring blackouts to expensive power. Angel Broking Ltd estimates the company lost out 9.2 billion units of power generation because of this. Moreover, the states aren’t prompt in payment. By the end of September, NTPC’s debtor days had risen to 67 days, well over the mandated 2 months within which SEBS have to pay. Lower power production also means lower incentives, another hit to profitability.

Second, NTPC had to shell out a lot more money for fuel. Fuel costs rose 29.4% to Rs10,793 crore in the December quarter. Third, as the company commissioned some 1800 megawatts (MW) of capacity during the course of this fiscal, depreciation costs are mounting. The company had to set aside Rs756 crore, a quarter more than a year ago, for wear and tear. Add to this an almost 40% increase in interest costs and it’s no wonder net profit declined. Profit after tax fell a more-than-expected 10% to Rs2,130 crore.

As NTPC aims to add 4,300MW by the end of this fiscal, notwithstanding problems in land acquisition, these problems are likely to continue.

Bangladesh inks deal with India for power plant

NTPC will build and operate the $1.5 billion project on a 50:50 equity basis

Bangladesh’s state-run Power Development Board on Sunday signed an agreement with India’s NTPC Ltd to build a 1,320MW coal-fired power plant in the south-west of the country, officials said.

The signing ceremony in Dhaka was attended by Bangladeshi finance minister Abul Maal Abdul Muhith and P. Uma Shankar, the power secretary of India. It is the first joint venture deal the board has concluded with a foreign company.

NTPC will build and operate the $1.5 billion project on a 50:50 equity basis.

Bangladesh has increasingly turned to coal to generate electricity as the nation’s natural gas reserves are depleting fast, and may not last beyond 2021 unless new structures are found and explored.

Officials have said Bangladesh wants to nearly triple power generation to 15,357MW by the end of 2015. The country, home to 160 million people, now generates the bulk of its energy from natural gas and imported fuel oil, but suffers from power shortages as wide as 1,500MW a day.

Bangladesh has reserves of about 3.4 billion tonnes of coal, but only produces about 2,000 tonnes a day from one mine.

Plans to collect coal from the other mines have been delayed in the face of violent protest by human rights and environment protection groups, which say the extraction would displace thousands of families and pollute the air.

Coal prices may be corrected this month

Some analysts said the fact that the ministry is reviewing prices in the wake of protests is a pointer to a cut in prices or some sops for power producers

Coal prices may be “corrected this month”, a senior official in the coal ministry said on Monday, but did not specify if it could mean a downward revision as demanded by power producers.

“There could be a rationalization,” said the official, who did not want to be named. “It could be this month itself. The board of Coal India Ltd has to take a decision.”

Coal India, that supplies 80% of India’s coal, introduced a new gross calorific value-based pricing mechanism on 1 January, but consumers said the company also simultaneously raised the prices of coal by 5-20% in an opaque manner. On Friday, coal secretary Alok Perti said a meeting was held to review the prices, but he did not say if lowering them was being considered. “We are in discussions,” coal secretary Alok Perti had said after the meeting. “The gross calorific value-based system will stay. Our discussions are over pricing.”

Some analysts said the fact that the ministry is reviewing prices in the wake of protests is a pointer to a cut in prices or some sops for power producers. But there were also sceptics who said a cut in coal prices would be a surprise as prices in the global markets are on an upward trend. “There is an upward pressure coming from unavailability of coal and the fact that the deficit is imported,” said Shubhranshu Patnaik, senior director at Deloitte Touche Tohmatsu India Pvt. Ltd. “Coal India’s prices are still 25-30% lower than international prices.”

Megawatt Show :West Bengal Attracts a Whopping 38K Crore of Investments From Power Majors

COAL India may be struggling hard to keep up its projected coal supply,but that hasn't deterred top power producers in West Bengal from collectively pumping in nearly a whopping 38K crore for setting up fresh generation capacities.The likes of CESC,NTPC,Damodar Valley Corporation,India Power Corp Ltd (IPCL) to DPSC are all on expansion mode in the state.

For instance,the RP-Sanjiv Goenka flagship CESC,which supplies electricity to Kolkata and adjoining areas,plans to emerge as a 7200 mw diversified generation-cum-distribution company over the next five years.It also has lined up elaborate plans to diversify into other modes of power generation.

So much so,CESC has roped in China's Shanghai Electric to supply boilers,turbines and generators (BTGs) for its 600 mw Haldia thermal project.The Chinese gearmaker will supply the BTG package at an estimated cost of 1,000 crore for a 600 mw thermal venture that will entail

3,250 crore of investment.Punj Lloyd,in turn,will supply the balance of plant (BoP) gear.The project,which requires 450 acres in the first phase,already has 420 acres in possession.All necessary clearances and the long-term coal linkage from Mahanadi Coalfields have come.The plant will be commissioned by mid-2014.

Apart from Haldia,CESC has taken up projects in Maharashtra,Chhattisgarh,and Bihar.Additional greenfield thermal projects are being envisioned in Rajasthan and Maharashtra.The utility is also exploring additional hydro projects in the Northeast and eastern India.

The countrys biggest power generation company,NTPC also plans to invest in two mega thermal projects in West Bengal.It is teaming up with the Railways in 74:26 JV to set up a thermal plant in Adra.It will be a 1320 mw plant that will be built on a 1300-acre plot owned by the railways.

NTPC has also decided to procure land and build a 1,600 mw thermal power project Katwa.Here,it will set up the plant over 1000 acres at an investment of about 8,000 crore.The state government acquired around 575 acres at the location while the remaining land will be acquired by NTPC.

Damodar Valley Corporation (DVC) is also about to execute 3,200 mw of fresh generation capacity at an investment of 16,000 crore.These include a 1000 mw plant in Duragpur,a 1,200 mw plant in Raghunathpur and a 1,000 mw station in Mejia.

Hemant Kanoria-controlled IPCL is also in the process of setting up 450 mw thermal power plants in Haldia.The project will entail an investment of roughly 2,475 crore.IPCL has acquired around 200 acres for setting up three 150 mw units.We have recently placed the order for boilerturbine-generator for the plant to Bhel.The order for (BoP) equipment has been awarded to Bharat Forge.It is expected to start generation by July 2013.

This apart,DPSC Ltd is in the process of setting up two 270 mw units in Raghunathpur.We had acquired about 155 acres for the Raghunathpur plant and the rest is being bought from locals.The order for boiler-turbine-generator for the plant has also been placed with Bhel.The plant is expected to start generation by 2014.

Coal supplies have also been secured for both the projects.We plan to import around 60 per cent of the coal requirement for the Haldia project, said Kanoria.

REC may raise Rs 4K cr via tax-free bonds

Rural Electrification Corporation (REC) plans to raise close to Rs 4,000 crore through tax-free bonds by the end of March. The power sector lender would be looking to use the unissued portion of Indian Railway Finance Corporation (IRFC)’s tax-free bonds.

"We are hoping to raise the residual amount after IRFC finishes raising the money it requires through these bonds. The balance amount should be around Rs 4,000 crore," said a senior REC official. IRFC’s tax-free bond issue closes on February 10.

The finance ministry has allowed IRFC to raise up to Rs 10,000 crore through tax-free bonds by March. The infrastructure finance company is raising Rs 5,000 crore through these bonds, while Rs 1,300 crore was raised from institutional investors.

"We may issue tax-free bonds by March-end if the government approves, as IRFC may not exhaust the total amount it is authorised to raise," the official said.

In Budget 2011-2012, four infrastructure finance companies were allowed to raise money through such bonds. IRFC and National Highways Authority of India were allowed to raise Rs 10,000 crore each, while Power Finance Corporation and Housing and Urban Devel-opment Corporation were allowed to raise up to Rs 5,000 crore each by March.

The government-controlled non-banking financial company is pushing its case to issue tax-free bonds before the end of this financial year. "We are in the final stages of our talks with the finance ministry to secure the approval to raise money through tax-free bonds, and are hoping we would get the permission," the company official said.

So far this year, power sector companies has raised a total of Rs 22,000 crore through domestic and foreign sources of funding. "Tax-free bonds are a great source of funds in the domestic market, and have received good response from investors," the official said.

Additional power target could be 100,000 MW for 12th Plan

The government may fix the power capacity addition target at around 100,000 MW for the 12th Five-Year Plan period (2012-2017).

The Power Ministry had proposed a capacity addition target of 100,000 MW to the Planning Commission, which is likely to accept the proposal.

"Final call would be taken by National Development Council, it may be between 90,000 MW and 100,000 MW," B K Chaturvedi, Member Planning Commission, told reporters on the sidelines of the India Energy Congress.

The government had set a target of 78,577 MW during the 11th Five-Year Plan period, which was curtailed to 62,000 MW by the Planning Commission in its mid-term review citing coal shortage and environment reasons.

According to sources, the Power Ministry may only be able to achieve up to 52,000 MW capacity addition by March, 2012.

Consensus on levying import duty on power generation equipment

The move may specifically affect Chinese firms manufacturing power equipment

India’s ministries of heavy industry and power seem to have arrived at a consensus on the contentious issue of levying an import duty on power generation equipment, a move that may specifically affect Chinese manufacturers of such machinery and Indian power companies that are looking to place orders with them.

The minister for heavy industry, Praful Patel, said a consensus had emerged between his ministry and the power ministry on the issue and that he would be discussing it with Prime Minister Manmohan Singh soon.

Indian equipment makers have been lobbying for a duty on what they say are cheap imports of Chinese equipment but the issue soon became an inter-ministerial one with several differences of opinion.

On 8 November, commerce secretary Rahul Khullar said a compromise formula had to be worked out because of these differences.

“Both the power ministry and my ministry have agreed on the fact that there should be some import duty,” Patel said Monday, adding that he had met power minister Sushilkumar Shinde earlier in the day.

“Companies such as Bhel and L&T are at a specific disadvantage. Imports should not be disallowed but there is a case for (the Indian) power industry to have a level-playing field,” Patel said.

Bharat Heavy Electricals Ltd (Bhel) and Larsen and Toubro Ltd (L&T) have been lobbying the government to limit Chinese competition. State-owned Bhel has been facing competition from Chinese power generation equipment firms such as Shandong Electric Power Construction Corp., Shanghai Electric Group Co. Ltd, Dongfang Electric Corp. Ltd and Harbin Power Equipment Co. Ltd, both in domestic and overseas markets.

Mint had reported on 25 November that the power ministry had proposed imposing a 5% tariff on such imports. Planning Commission member Arun Maira had recommended a 10% customs duty and a 4% special additional duty on power generation equipment imported from China to strike a balance between protecting local manufacturers and the need to import equipment to boost power production. A committee of secretaries (CoS) recommended a 5% import duty on power equipment imports from China apart from a 10% countervailing duty and a 4% special additional duty.

Power generation equipment makers having a manufacturing base in India stand to benefit from such a move. They include Bhel, Doosan Heavy Industries and Construction Co. Ltd, and the joint ventures between L&T and Mitsubishi Heavy Industries Ltd; Toshiba Corp. and JSW Group; Ansaldo Caldaie SpA of Italy and Gammon India Ltd; Alstom SA of France and Bharat Forge Ltd; BGR Energy Systems Ltd and Hitachi Power Europe GmbH, and Thermax Ltd and Babcock and Wilcox Co.

Power utilities have placed orders for overseas equipment largely because of the inability of local manufacturers to meet growing demand. Chinese imports are relatively cheaper because equipment makers from that country benefit from low interest rates and an undervalued currency. Undervaluing the currency makes exports cheaper and increases demand for products.

In another development, Patel said that the equipment for ultra mega power projects (UMPPs) should be sourced through international competitive bidding.

Each UMPP has a capacity of 4,000 MW each and it is for the developer to finalize the procurement of equipment. The government wants to set up 16 UMPPs to meet the needs of the world’s fastest-growing major economy after China.

India’s move to curb Chinese power equipment imports comes at a time when the two countries have been discussing ways to double bilateral trade to $100 billion by 2015 and to plug a yawning trade gap in China’s favour.

NTPC expresses concern over CIL’s pricing formula

State-run power major NTPC has joined the chorus of voices opposed to CIL’s new coal pricing mechanism, asserting that it could lead to an increase in its generation cost by about 40 per cent.

The power generation cost of NTPC could go up by about 40 per cent on account of the new pricing system, NTPC CMD, Mr Arup Roy Chaudhary, told reporters on the sidelines of the India Energy Conclave here today.

Power producers are opposed to the CIL’s new pricing mechanism implemented from January 1 based on the gross calorific value (GCV) of coal, saying that this has increased the prices of certain grades by up to 179 per cent.

Till December 31, 2011, Coal India followed a pricing mechanism based on the Useful Heat Value (UHV) of coal, which deducted ash and moisture content from the standard formula.

However, unlike the UHV pricing methodology, in which coal was categorised into seven grades, the GCV-based system has 17 grades and the new prices have been fixed accordingly.

Meanwhile, CIL’s board is likely to review the prices to rationalise them after the Coal Ministry took a decision to correct the prices at a meeting last week.

NTPC may sign pact for Bangla project by month-end

State-run NTPC expects to sign a joint venture agreement for the 1,320-MW Khulna power project in Bangladesh by the end of this month.

“The project would be a 50:50 joint venture between NTPC and the Bangladesh Government. We expect to sign the joint venture agreement for Bangladesh project by January 29,” the company CMD, Mr Arup Roy Chaudhary, told reporters on the sidelines of the India Energy Conclave today.

NTPC and Bangladesh Power Development Board (BPDB) had signed a memorandum of understanding (MoU) in August last year to establish two thermal power projects at Chittagong and Khulna for mitigating power shortages in the neighbouring nation.

The power plants are likely to come up at an investment of around Rs 13,200 crore. The coal-fired power plants are likely to be installed on a 50:50 equity basis to be run on imported coal and operated by NTPC.

About the 500-MW project in Sri Lanka, Mr Chaudhury said financial closure for the same is expected to be achieved by September this year. Construction of the project is likely to start by April next year.

A 50:50 joint venture company between NTPC and Ceylon Electricity Board, Sri Lanka, was incorporated in the name of Trincomalee Power Company Ltd on September 26 last year in Sri Lanka that would set up a 2x250-MW coal based power project in Trincomalee region.

NTPC to take up another mega project in South

NTPC Ltd, the country's largest power company with an installed generation capacity of 36,000 MW, continues to expand. It is planning to take up another mega project in South along with the 4,000-MW Kudgi project in Karnataka, during the XII Plan itself instead of the XIII Plan.

With an operating capacity of 4,450 MW in the Southern region, it is executing expansion projects at Simhadri near Visakhapatnam, Ramagundam in Andhra Pradesh, Kudgi in Karnataka, Kayamkulam in Kerala, and is planning another mega project, a 4,000 MW plant at Pudimadaka close to Visakhapatnam.

The Regional Executive Director of NTPC, Mr R. Venkateswaran, toldBusiness Line, “The Andhra Pradesh Government is keen that we take up another mega project near Visakhapatnam. While NTPC was looking at considering this project during XII Plan (2012-17), the keenness shown by the State is encouraging us to consider it ahead of planned schedule.”

Outlining NTPC progress in South, Mr Venkateswaran said supply of coal and gas continues to be worrisome. These require a long-term perspective approach. Excerpts:

How is the expansion plan of NTPC South progressing?

Overall at NTPC, we are looking at increasing the capacity to 1,28,000 MW by 2032 with projects defined for each Plan period. In South, we now have a capacity of about 4,450 MW. We plan to increase this to about 10,000 MW. The expansion projects include, 3x800 MW phase one at Kudgi in Karnataka, another 500 MW expansion, part of the phase II at Simhadri, and 3x500 MW project at Vallur and about 1050 MW at Kayamkulam. We are looking at augmenting two units of 650 MW each at Ramagundam in Andhra Pradesh. This could also be 2x800 MW. A decision on this would be taken up soon.

The Andhra Pradesh Government is encouraging us to expedite another mega project close to Visakhapatanm. There is land and sea water could be used.

The unit one of 500 MW at Vallur is ready. Once coal washery is ready, we would be able to take up generation. The fourth unit of 500 MW at Simhadri is also close to commissioning.

What is your engagement with Singareni Collieries project?

NTPC has been engaged by the Singareni to guide them through the implementation of a 1200-MW thermal power plant in Adilabad. There is no problem for land and water and the coal requirement could be addressed by pithead mines.