Right on track to synchronise the first Unit-I of the 4,000 MW Ultra Mega Power Project at Mundra by Sept 2011: Tata Power

Tata Power today said that it was right on track to synchronise the first Unit-I of the 4,000 MW Ultra Mega Power Project (UMPP) at Mundra in Kutch district of Gujarat by September 2011. 

The company has completed critical steam blowing process at unit-I of the UMPP, bringing it closer towards its synchronisation. 

"We have achieved a significant milestone towards commissioning of unit-I. The completion of steam blowing signifies the readiness of unit to start synchronisation process," Coastal Gujarat Power Limited (CGPL) Executive Director, Alok Kanagat said. 

CGPL , is a special purpose vehicle ( SPV )), constituted by the company for implementation of UMPP. The project shall have five units of 800 MW each, generating 4,000 MW of power using supercritical technology. 

Steam blowing of the boiler is an activity undertaken prior to the commissioning of a new unit or for initiation of turbine powering. 

The first unit is slated to be ready for commissioning by September 2011, a company statement said. 

The Mundra UMPP is progressing as per schedule with engineering, procurement and construction activities in full swing, it further said. Equipment and piping erection is progressing sequentially for the units 2 to 5, the statement said.

One lakh MW power target ecologically unsustainable, says Minister of Environment and Forests

Even as the government is mulling setting an ambitious target of creating new power generation capacity of one lakh MW for 12th Plan (2012-17), Minister of Environment and Forests Jairam Ramesh thinks that is "ecologically unsustainable". Expressing serious concerns during the full Planning Commission meeting headed by Prime Minister Manmohan Singh last month, Ramesh emphasised on correlation between energy, water and environment and said, "it is ecologically unsustainable." During the meeting, Ramesh had highlighted the need to address structural bottlenecks and pointed out that 15,000 million tonnes of coal lay unused because of evacuation problems and lack of transport facilities, as per the minutes of the meeting of the full Commission held on April 21. Ramesh's comments assume significance in the backdrop of the Planning Commission's assertion in the meeting, "We must set a target of one lakh MW capacity in 12th Plan" to achieve average economic growth of 9-9.5 per cent during the five-year period. The Commission has admitted that coal availability would be major constraint. But this is also projected by the panel that commercial demand will increase at 7 per cent per annum if Gross Domestic Product grows at 9 per cent. The Plan panel has pegged GDP growth at 9 to 9.5 per cent for the 12th Plan. Thus, adding one lakh MW new generation capacity in the next five years ending March 2017 would be necessary.

Smart grids enhance energy security

 India, in the past few decades, has witnessed significant changes in the generation and network technology deployment, and the volume and use of electricity in the country coupled with changes in market and regulatory structures governing its power sector. This transformation has largely been successfully managed, but ageing infrastructure is raising concerns that further changes could affect system stability, reliability and security. Thus, there is a need for continued investment to maintain reliability and quality of system and electricity supply.

In future, as demand grows and its pattern changes (with socio-economic growth) and distributed generation becomes more widespread in the country, ageing distribution and transmission infrastructure would need to be replaced and updated, and new technologies would need to be deployed. This coupled with the growing challenges of environmental depletion, fast depleting conventional sources of energy and more recently the growing challenge of climate change are necessitating the adoption of an integrated approach for both demand and supply side in the power sector.

On the supply side, there is a drive towards sustainable, low-carbon electricity generation using renewable sources and hydrocarbon substitution using biofuels and biogas technologies. On the demand side, consumers are increasingly seeking more information and control over their consumption. The existing distribution system is primarily designed for one-way flow of electricity with limited information to consumers about the patterns of electricity use.

These supply and demand side changes with growing emphasis on distributed clean power require a fundamental change in the design of the grid. The current grid network in the country is able to only accommodate the supply of electricity generated through a growing number of medium to large-scale renewable energy projects, but the choice to procure green power is very limited for all categories of consumers. To avoid stalling progress towards a sustainable and low-carbon future, India can decide to make necessary investment in new grid designs and opt for smart grid technology to improve the power grid and distribution system.

Smart grid technologies provide a range of solutions that can be tailored to the specific needs of each region. India is in a unique position as it is still building its most of its electrical infrastructure and thus will be able to leverage the maximum benefits of smart grids. Smart grids will not just help reduce theft, but also improve the network efficiency, consumer efficiency, and will be able to utilise dispersed energy resources like wind and solar to its optimum capacity. The country has 173,626 MW of installed capacity and is going to add approximately 80,000 MW in next five years representing over $200 billion opportunity in building energy infrastructure. Additionally, the National Solar Mission is going to add another 20,000 MW of solar energy in next 10 years.

Recently the Bureau of Energy Efficiency has initiated work on designing a programme for smart grids. The programme if implemented in the near future will help in modernisation of the transmission and distribution system through the integration of new information technologies that allow for new uses of the electric grid, both in operations and through new customer side applications.

Such a programme will also benefit the utilities through improvements in grid reliability by reducing the frequency and duration of power outages and the number of power quality disturbances, including reducing the probability of regional blackouts. The price of electricity can be reduced through increased interaction of the demand side of the market (consumers) with the supply side (suppliers).

Finally, smart grids will promote the use of green power leading to reduced amount of GHG emissions in the country. Promoting a more even deployment of renewable energy sources, and allowing access to more environmentally-friendly electricity generation will prove to be a win-win situation for managing both socio-economic and environmental challenges of the country.

EGoM on natural gas allocation on June 9 from fields like Reliance Industries' KG-D6 and ONGC's C-Series to power plants

A ministerial panel is likely to meet on June 9 to consider allocation of natural gas from fields like Reliance Industries' KG-D6 and state-owned ONGC's C-Series to power plants. The Empowered Group of Ministers on Pricing and Utilisation of Gas headed by finance minister Pranab Mukherjee is scheduled to meet in second half of June 9 to consider giving gas for generating electricity to meet peak summer demand, sources in know of the development said.

Power Ministry has sought allocation of gas for nine power projects including NTPC's Kawas Station-II (1,200 MW), Gandhar Station-II (1,300 MW) and RGCCPP-Kayamkulam Station-II (1,050 MW). Also, Andhra Pradesh Power Generation Corp has sought about 9 million cubic meters per day of gas.

Besides, the request of the power ministry for converting fall-back allocation of three power plants into firm or permanent allotment is likely to be considered at the EGoM.The EGoM had in 2009 allocated 12 mmscmd gas from KG-D6 to power plants on fallback or temporary basis. Of this, the power ministry now wants one-fourth to be converted into firm allocation, they said.

However, with output dipping at Reliance's KG-D6 fields, there isnt gas for allocation to new plants. In the week ended May 22, KG-D6 produced about 48 mmscmd. Of this, 14 mmscmd was sold to fertiliser plants and another 26.5 mmscmd to power plants.

The remaining 7.5 mmscmd was consumed by other sectors like sponge iron plants, LPG, city gas distribution networks and petrochemical/refineries.The only gas available for allocation is about 3 mmscmd from western offshore C-Series fields of state-owned Oil and Natural Gas Corp (ONGC).

Sources said the EGoM may serve as the ratification authority of oil ministry's decision to curtail supplies to non-core sectors like steel plants in view of fall in output at KG-D6 fields.

Oil Ministry has ordered Reliance to meet the full requirement of consumers in priority sectors of fertiliser, power, city gas distribution and LPG plants and supplies to non-core sectors be made only if there is gas left after that. Priority sector has been allocated over 47 mmscmd of KG-D6 gas, leaving very little for non-core users.

Essar Steel, whose supplies have come down to one-fifth of the contracted volumes, has challenged the oil ministry's decision in Delhi high court saying only the EGoM was competent to take such a decision.The high court has so far not stayed the decision but if it directs the oil ministry to get the decision ratified by the EGoM, the June 9 meeting will serve that purpose, sources said.Oil Ministry has argued in the Delhi high court that it itself is empowered to take the decision on reallocating KG-D6 gas even without the EGoM.

Essar had challenged the authority of the ministry in imposing cuts on supply of KG-D6 gas in the absence of any such mandate from EGoM.Essar had argued that since the allocations have been made by the EGoM, the matter should be placed before the EGoM and directions obtained before any order on cuts is passed by the ministry.The ministry's view on the matter is that the direction to impose cuts on non-core sectors was in furtherance of EGoM's decisions.

NTPC approaches Indian Railways for a sharp reduction in freight rate for coal ash generated by its power plants

Facing difficulties in complying with the ministry of environment and forests’ (MoEF) stipulation on utilisation of coal ash generated by its power plants, NTPC has approached the Indian Railways for a sharp reduction in freight rate for the hazardous material.

Power plants are required to equip themselves to utilise 100% coal ash in seven years from their operations, as per the guidelines laid down by the MoEF. However, NTPC is facing difficulties in complying with the MoEF’s stipulation due to lack of demand for the material, which has applications in key areas like road construction, cement and asbestos manufacturing, agriculture besides abandoned mines.

NTPC has asked the Railways to reduce freight rate for flyash to one-third of the prevailing rate.

“We have written a letter to the Railway board member (Traffic) recently seeking a two-third reduction in the freight rate,” an NTPC official told FE.

As the emphasis on gainful utilization of flyash has increased, the usage over the years has also increased. NTPC’s ash utilisation increased from meagre 0.3 million tonne in 1991-992 to 26 million tonne in 2010-11. But utilisation rate is still just 55% of the total ash generated by the central utility's plants during the year.

Given the hazardous nature of flyash, the power ministry is also putting pressure on NTPC to progressively increase its ash utilitisation level. For example, NTPC has to accept an annual target on ash utilisation in the memorandum of understanding signed with the power ministry every year.

But despite the growing urgency, NTPC is feeling difficulties in stepping utilisation of generated fly ash. With its ash utilisation rate just at 55%, the company is still far from complying with the MoEF’s guidelines.

Dissent over cut in gas supply from D-6 block: Government's final order

After discussing out the stakeholders, the government made the following observations:

• It would be necessary to identify sectors where lower price of gas is a pass through and benefits are passed on to the public at large. Such sectors are fertilizers, power, LPG and city gas distribution projects. This is the reason why they are termed as core sectors. The EGoM recognized these sectors required the highest priority. 
• Sectors like refinery, petrochemical and steel are decontrolled with units operating in a competitive market, where prices are not determined through a cost plus approach but via market forces. Accordingly, these sectors, along with captive power plants, and city gas distribution (for industrial and commercial purposes) have lower priority than fertilizer and power plants. If gas is required for the relatively less important sectors, the demand can be met through imported LNG for which sufficient capacities exist in the country. While it is a fact that the price of imported LNG is higher than domestically produced natural gas, such sectors should not be dependent on low cost gas for their survival in a market that is decontrolled. Further, availability of a low cost input like gas distorts the level playing field vis-a-vis competitors not having access to such low cost inputs. 
• Legally, the government is within its right to issue directions to the contractor for imposing cuts on non-core sectors rather than on core sectors. The Supreme Court vide its order dated May 7, 2010, in the RIL and RNRL cases, has also held that the government owns the gas till it reaches its ultimate consumer and that PSC provisions would override any other contractual obligation between the contractor and any other party. Under the provisions of the PSC, commercial utilization of natural gas would be determined in accordance with the government policy in this regard. In this context, the Supreme Court has deliberated in detail on the subject and has concluded that government decisions would be binding on the contractor. 
• Firm allocations definitely have a priority over fallback allocation. With regard to the issue raised by the Counsel for both Welspun and Ispat that the allotments to the steel sector were on firm basis and GSPAs were signed accordingly, and hence, reduction in supplies cannot be made now, the government pointed to some fallback allocations that were made to power plants to operate beyond 70% to 75% PLF. However, in view of the reduction in gas availability, such fallback supplies have been cut first and, when gas supplies increase, even though power is a higher priority sector, the fallback allocations will operate only after firm demand has been met. Using the same logic, firm allocations will have to be trimmed in non-priority sectors in order to ensure adequate gas supply to fertilizer and power plants.
• It is not correct to say that steel sector was allocated gas within the first 40 mmscmd. In fact, the unutilized quantity allocated to CGD (transport & domestic) was transferred to steel sector. Subsequently, when gas production was projected to increase to 60 mmscmd some units were not in a position to offtake the gas immediately, it was decided to extend the gas allocation to sectors, like refinery and petrochemicals, as also to supply gas to existing power plants to increase their PLF and to new power plants. Any allocation in a particular sequence would not change the priority amongst sectors and, even if steel was allocated some gas within 40 mmscmd, the priority of steel sector would remain the same. 
• The EGoM has not accorded a higher priority to steel vis-a-vis refinery, petrochemical or CGD (industrial & commercial) sectors. In case pro rata cuts are to be made on all customers, such directions would apply to all non-core sectors and not just steel, as the steel sector will not have a higher priority over these sectors.
• The priority of allocation when the production of gas was going up has to be maintained  when the production of gas is going down, in line with the Gas Utilization Policy. The ministry had written to RIL to make pro-rata cuts in July 2010, when the reductions were small and there was uncertainty about the period for which cuts were to be imposed; there was still an expectation that gas production may increase. Thus, those directives cannot be referred to now when cuts have reached substantial levels. 

Meeting to address shortfall in supply of D-6 gas : Issues raised by RIL, GAIL, RGPPL and IPPs

The following are some other issues raised by stakeholders during the meet chaired by the petroleum ministry to pay heed to concerns with regard to supply of D-6 gas:

• Independent Power Producers (IPPs): IPP of Andhra Pradesh, such as GVK, GMR and Konaseema, submitted that they have long term PPAs with APTRANSCO. Their plants were ready for operation in the year 2005 and 2006, however, the plants could not be operated since gas was not available for three years. The initial cost of power plants has increased considerably on account of additional Interest during construction (IDC). The PPA provides for recovery of fixed cost at 85% PLF, while gas has been made available for operating at 75% PLF and with cuts there is a further shortfall of about 15%. This makes the operations of the power plants unviable. 
• RGPPL: A separate EGoM has taken decisions which led to the revival of the project and ensuring availability of gas was an important parameter of making RGPPL viable. The EGoM on pricing and gas availability has decided to give priority to RGPPL at par with fertilizer sector.
• GAIL: GAIL submitted that it is using gas for production of LPG. LPG is a subsidized product in which the country is not self-sufficient. The LPG fractionators were established along with the HVJ pipeline as LPG extraction from gas was a national priority. Any disruption in supplies of LPG would lead to public outcry in the country. Further, GAIL is a part of under-recovery mechanism for supporting the low fuel prices in the country and cannot be burdened with higher production costs of LPG. 
• Reliance Industries Ltd (RIL): RIL submitted that it discovered the gas price from fertilizer and power sectors and drafted the GSPAs accordingly. Later, government has identified customers for gas. The agreement has a provision for pro-rata cuts amongst the customers, but also has provisions that government directives are binding. The EGoM has taken a decision that higher fractions should be extracted from gas and, accordingly, LPG and petrochemicals should be considered for full supply of gas. 

Dissent over cut in gas supply from D-6 block-II: Power & fertilizer sector defend cuts

The meeting to address issues arising out of sectoral cuts in supply of D-6 gas was also attended by stakeholders from the power and fertilizer sector. The following issues were raised: 

• NTPC: The power major, while supporting the decision of the government, submitted that gas based power plants were established in the 1980s and onwards with the government deciding that fertilizer and power units provided the most appropriate uses of domestic gas. In the initial KG D6 allocation of 40 mmscmd, 18 mmscmd was allocated to power sector, out of which NTPC`s share was 2.67 mmscmd. Since 18 mmscmd was not sufficient to meet the requirement of power sector, as units were able to operate only at 60% to 70% PLF, The EGoM decided that additional gas was to be given to power sector. With the increased production of KG-D6 gas, the allocation to power sector was increased to 32 mmscmd, out of which NTPC`s share was just 4.46 mmscmd. NTPC informed that, in addition to KG D6 and other indigenous gas, it had to tie up spot RLNG from time to time. It was explained that lack of affordable power not only affects common man and farmers, but also industrial and commercial activities in the country. Power cannot be imported into the country, whereas other commercial products, like steel, can be, the company argued. 
• Fertilizer: The representative of Fertilizer Association of India submitted that the decision of the government to impose cut on non-core sector, while ensuring optimum supply to core sector, is in accordance with the policy of the government. The first use of gas in the country was for fertilizers. It was stated that the subsidy on fertilizer is in the range of Rs 60,000 to 70,000 crore. Keep the subsidy level down by allotment of cheaper gas to fertilizer units made sense. The FAI also said that there would a requirement of additional gas for the four fuel oil based plants converting to gas at an investment of Rs 5,000 crore. Keeping in view the ensuing kharif season, the first priority of the government should be to ensure supply of available natural gas to fertilizer, so that kharif production does not suffer,the FAI argued. 

Dissent over cut in gas supply from D-6 block-I: Sanctity of allocations should be maintained until output stays above 40 mmscmd

The petroleum ministry, coerced by the Bombay High Court, convened a meeting recently to hear out the grievances of various stakeholders over the government`s decision to impose sectoral cuts in supply of D-6 gas. The Bombay High Court had directed the petroleum ministry to hear out the contensions of two companies, Welspun Maxsteel and Ispat Industries, which had filed a writ petition asking for a stay order on the ministry`s directive to RIL to stop supply of gas from KG-D6 basin to non-priority sectors. The following major issues were raised by representatives of the steel sector: 

• Welspun Maxsteel Ltd said that based on firm commitment for gas, it had entered into GSPA with RIL while the company, in turn, got into supply commitments to various end customers. It was further pointed out that the EGoM made allocations to steel sector when the production of KG-D6 gas was 40 mmscmd. In view of this, steel should be considered a core sector till gas production is above 40 mmscmd. 
• Ispat Industries Ltd. said it was currently buying spot RLNG, causing a loss to the tune of Rs 73 lakh per day. The total steel sector demand for gas is 4.2 mmscmd, which is negligible in the context of overall gas availability. 

Sasan UMPP: 660 acres of private land acquired for coal block

 Sasan Power Limited (SPL)-- a Reliance Power subsidiary-- responsible for the execution of the 4,000 MW Sasan UMPP has managed to acquire 660 acres of private land needed for development of the coal blocks meant to fuel the project. With this, nearly 945 acres of land for mine development, out of the 7,867.90 acres required, has been acquired. The figure includes 284.54 acres of forest land that was acquired earlier.      

• Land acquisition for the actual project, however, did not see much progress in April 2011, with only 4 acres of land acquired over the  month, taking the total land acquired to 3,349.1 acres out of the revised land requirement of 3,728.47 acres. Nevertheless, with over 90% of land acquisition completed, the developer has little reason to worry on this front. 
• As of April 2011, around 1,902.3 acres of land is now available with the developer for the construction of the main plant, against the estimated requirement of 2,034.21 acres.
• Likewise, land required for the construction of the ash pond is almost all in possession of the company. Along similar lines, even the land required for the residential colony has been acquired to a large extent. 
• It may be mentioned here that  transfer of land needed for mining the associated Moher and Moher Amlori extension coal blocks, is yet to be made by Northern Coalfields Limited (NCL). 

Power evacuation issues, tardy land acquisition hampers Tata Power's Mundra UMPP

Coastal Gujarat Power Limited (CGPL), the special purpose vehicle floated by Tata Power Limited, is having a tough time coping with hurdles at its 3,960 MW Krishnapatnam UMPP. Notably, completion of the 400 Kv Mandra-Bachahau-Ranchodpuraline D/C power evacuation line is not likely before September 2011, owing to delays in receipt of right-of-way (RoW) and forest clearance. The transmission project was earlier scheduled for completion by January 2011.

• Also, the developer has lately made absolutely no progress in acquiring land required for the project. Till date, Tata Power has acquired 3,140.33 acres of land, out of the 3.224.6 acres required. 
• On a positive note, though, the Tata Power-subsidiary has managed to light up the boiler and commence steam blowing in Unit-1. Also, boiler hydro test in Unit-3 has been done. Some progress has also been seen in Unit-5, with the TG deck casting completed. 
• Tata Power bagged the Mundra project in 2007 through the international competitive bidding route. The project entails an investment of over Rs 17,000 crore, which is being funded via a debt and equity ratio of 75:25.

Reliance falters on Krishnapatnam, Tilaiya UMPPs

With absolutely no progress over the last few months at its 3,960 MW Krishnapatnam and Tilaiya UMPPs, it is unlikely that Reliance Power Limited will be able to adhere to the stipulated deadlines.

• Various milestones, such as land acquisition and pre-construction activities, at the project have seen no movement at all for some time now. The Tilaiya UMPP, for instance, has only 470 acres of land available, out of the 2,407.7 acres required for the project, a figure that has not changed over the past few months. While Krishnapatnam UMPP is better off, with 97% land acquired, expeditious completion of this milestone remains doubtful, given the absence of any activity for quite some time. 
• The Tilaiya UMPP, being executed by the Reliance Power`s subsidiary, Jharkhand Integrated Power Limited (JIPL), is a pit head coal fired thermal power project at Tilaiya village in Hazaribag district of Jharkhand. As per the commissioning schedule proposed by the company, the first unit of the project is due to be commissioned during May 2015, while the five remaining units are expected to go on steam at successive intervals of five months until June 2017, when the entire project would be operational
• The Krishnapatnam UMPP is imported coal-based, located in Nellore district of coastal Andhra  Pradesh. Reliance Power bagged this project back in November 2007, beating Larsen & Toubro and Sterlite Industries, in a global competitive bid. Notably, the UMPP was originally planned to be on steam by September 2013, when the first 800 MW was expected to be operational. Following recent developments, the project is likely to be fully commissioned only by February 2015.

Coal market eyes growing China, India demand

As China tries to cope with what may be its worst power shortage in years, coal demand from the world's biggest consumer is likely to take centre stage at one of Asia's largest coal industry gatherings in Indonesia next week.China will face stiff competition for coal shipped by Indonesia, the world's biggest exporter of thermal coal, from India where demand for electricity is rising in an economy seen growing around 8.5 percent.

"With domestic prices rising so strongly -- they are basically on par with import prices now -- the likelihood of China being strong importers of thermal coal over the summer is extremely high," said Daniel Hynes, director of commodity research at Citigroup in Sydney.Chinese domestic coal prices rose to the highest level in more than two years last week as utilities stocked up ahead of the summer months, making imports more attractive.Chinese buyers have already been on the hunt for Indonesian cargoes as well as some Australian coal over the last few weeks to fill requirements.

If Beijing lifts restrictions on how much coal-fired power plants are permitted to charge more for electricity, as it has already done in some provinces, import demand could grow even higher as utilities burn more coal.Indian demand for Indonesian coal is also on the rise, and India's short-term and long-term demand is likely to be a focus."Over the last couple of months, you're actually seeing the share of India coal imports from Indonesia, increasing... India has made a lot of progress with imports, with year-on-year growth. People will want to see where they are at the moment," said one Indonesia-based analyst who asked not to be named.

Growing demand for Indonesian coal by India, to fill the widening gap between domestic coal output and demand, is likely to continue, the analyst added, resulting in intense competition between India and China for tonnage.Indian and Chinese companies are also seeking to acquire stakes in Indonesian coal mines to secure their supply, with Coal India , the world's largest coal miner, in advanced talks to buy up to 40 percent of Indonesian low-grade coal producer Golden Energy Mines for up to $1 billion, three sources with direct knowledge of the deal said.[ID:nLDE74P1TQ]

Although India is home to 10 percent of global coal reserves, it is plagued by a shortfall in local supplies as demand has grown rapidly with the increase in coal-fired power plants.

Indian power output up by 6pct YoY in April as the county lifted its generation capacity to help bridge a shortfall

Reuters reported that India's power output rose an annual 6.78% in April 2011, as the county lifted its generation capacity to help bridge a shortfall in the world's second fastest growing major economy.

The Central Electricity Authority said that about 9.2% to capacity a year to April 2011 to 174.36 GW. Electricity generation last month was 71.66 billion kilowatt hours versus 67.10 billion kilowatt hours in April 2010.

In March 2011, India's electricity generation rose an annual 7.56% to 75.50 billion kilowatt hours. India needs to significantly raise its power generation capacity to reduce peak hour power shortages and provide electricity to millions of rural households. But the Asian nation will miss its target to add 62 GW of capacity over a five year period ending March 2012.India's peak power deficit, the shortfall between supply and demand in peak hours, in April widened to 10.8% from 10.3% in March. Thermal electricity, which accounts for about two thirds of India's power generation and includes using coal, gas and liquid fuel, grew an annual 5.85% in April as gas fired plants operated at lower rate on less demand from clients.

Coal based power generation grew by 9.22% in April from a year ago as 28 power stations had coal stocks of less than 7 days. India aims to import 35 million tonnes of coal in the current fiscal to March 2012, same as year ago.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.

RPower expects to raise its power generating capacity over eight times to 5,000 MW from 600 MW in the next 18 months

Reliance Power Ltd (RPower), the Anil Ambani group company, expects to raise its power generating capacity over eight times to 5,000 mega watt (MW) from 600MW in the next 18 months.

The largest power generating company in the private sector has said the first unit of its long-awaited Sasan mega power project will be commissioned next year.

Declaring its fourth-quarter numbers today, RPower said it had put its plans in place to produce the feedstock for the Sasan project.

According to the company, work has commenced at the Moher-Amlohri coal mines, which will feed the Sasan power project with mining equipment from Bucyrus of the US due to arrive at the site next month.

Meanwhile,it is learnt that RPower is one of the firms shortlisted for the auction of diversified industrial group Wesfarmers Premier coal mine in Western Australia.

RPower reported a net profit of Rs 186.63 crore in the fourth quarter ended March 31, a rise of 102 per cent over Rs 92.41 crore a year-ago period.

Total income stood at Rs 598.18 crore (Rs 82.56 crore).

Net profit during the full year rose to Rs 760.44 crore (Rs 683.89 crore).

Reliance Power short-listed for auction of diversified industrial group Wesfarmers' Premier coal mine in Western Australia

Reliance Power is believed to be one of the firms short-listed for the auction of diversified industrial group Wesfarmers' Premier coal mine in Western Australia.According to a report in 'The Australian' daily today, Wesfarmers chief Richard Goyder put the asset on the auction block in March.The move was prompted by a number of interested parties approaching the company in the wake of the 800 million Australian dollars deal that was signed last year between India's Lanco Infratech and collapsed miner Griffin Coal for a western Australia mine -- neighbouring the Premier mine -- last year.The Griffin coal mine had also attracted interest from Reliance Power, besides GMR Group and Adani Power.

Indicative bids for Premier were submitted about a week-and-a-half ago and Wesfarmers and its advisers at Gresham and UBS started the second stage of the process this week, the report said.

The auction was expected to be dominated by Indian and Asian players seeking coal for energy.Besides Reliance, GVK Infrastructure and Lanco are also believed to have evinced an interest in Premier.

Premier has estimated reserves of more than 100 million tonnes of sub-bituminous thermal coal.Earnings before interest and tax from the mine have been estimated at just USD 30-35 million -- about 5 per cent of the company's total resources income.While Wesfarmers would love a sale at similar prices to Griffin, analysts have estimated the value of the asset at USD 400 million-plus.

Suzlon Energy signs first South African deal for supplying turbines and is in talks with four more clients in country

Indian wind turbine manufacturer Suzlon Energy has signed its first South African deal for supplying turbines and is in talks with four more clients.

Suzlon is also looking at South Africa as a possible manufacturing base to join the ones it already has in India, China, Germany and Brazil, but chief executive Tulsi Tanti said it was still too soon to provide further details of this.

Tanti was in South Africa to ink the deal with African Clean Energy developments (ACED) for a proposed wind farm in the small rural town of Cookhouse in Eastern Cape Province.

The deal is conditional to the Cookhouse project developers concluding an agreement to purchase the power generated at the tariffs for renewable energy being offered by South Africa.

Once the power purchase agreement has been signed, the Cookhouse project would take about 12-15 months to complete.

There was great optimism about the Cookhouse project because it is among few to have received the nod from the Ministry of Environmental Affairs.

Silas Zimu, chief executive of Suzlon's South African subsidiary, called the Cookhouse venture "arguably the lead project in South Africa in terms of quality and development timelines".

Tanti said Suzlon was keen to play a part in South Africa's objective of generating 8,400 MW of wind power by 2030 and is in talks with four more clients.

"South Africa is a rapidly growing economy and a very important market for us. The country has immense wind energy resources and the government has demonstrated praiseworthy vision and leadership to exploit this abundant renewable resource to power the nation's growth: green jobs, energy generation and inclusive, sustainable growth.

"South Africa can install at least 10,000 MW of wind power by 2020, creating at least 20,000 direct and 200,000 indirect jobs," Tanti said, adding that the country's total wind resource potential was enough to power 7 million homes.

The turbines to be supplied for the Cookhouse project would also present opportunities for local manufacturers of the required components, such as towers, while the financing of the venture would include a large broad-based black economic empowerment ownership component.

The ACED deal is for the supply and full EPC for 76 of Suzlon's S88 - 2MW series turbines, with an option for ACED to acquire an additional 124 turbines for the Cookhouse Wind Energy Facility.

Thomas Donnelly, Managing Director of ACED, said: "Suzlon has demonstrated a clear commitment to the South African market, and to local economic development and job creation, two key objectives of the Cookhouse Wind Energy Facility".

BHEL annual profit up 40% at Rs 6,053 cr

State-run Bharat Heavy Electricals (BHEL) today posted a nearly 40% jump in consolidated net profit at Rs 6,053.36 crore for the forth quarter ended March 31, 2011.

In the year-ago period, it had a profit of Rs 4,326.92 crore.The company's total income on a consolidated basis rose to Rs 43,678.62 crore from Rs 34,498.51 crore in the same period a year-ago, the company said in a filing to the Bombay Stock Exchange (BSE).

The bellwether's board of directors recommended 179% dividend, amounting to Rs 17.90 a share for the year 2010-11. This would be in addition to an interim dividend of Rs 13.25 a share.

BHEL also announced splitting of stocks of face value Rs 10 into five shares having a value of Rs 2 each.

"The impact due to change in the accounting policy for the year 2010-11 is increase in turnover by Rs 2,772.79 crore, provision for contractual obligation by Rs 2,077.31 crore and profit before tax by Rs 695.48 crore," the filing noted.

On a standalone basis, the entity saw its profit in 2010-11 climb 39% to Rs 6,011.20 crore. This is in contrast to Rs 4,310.64 crore in the same period a year-ago.

Standalone total income was recorded at Rs 43,379.89 crore as against Rs 34,198.47 crore in year-ago period.

BHEL made a profit of Rs 2,798.04 crore for three months ended March 31, a 46% rise over the year-ago period. In comparable three months, profit was at Rs 1,909.58 crore.

Govt formulating price pooling mechanism for coa

With a view to mitigate power generation costs in the country, the government is formulating a policy to “pool” international and domestic coal prices in order to ensure uniformity in the rates of the essential raw material across the country.

A committee under the chairmanship of the Central Electricity Authority (CEA) chairperson was set up earlier this month to look into the matter.“The committee will work toward pooling of international and domestic coal prices so that the cost of production does not rise... as international coal is expensive and also domestic coal is not sufficient for the plants,” a senior Power Ministry official said.

Pooling refers to the process in which domestic and international prices of material are averaged out to enable uniformity of rates for all consumers, irrespective of where they are sourcing the material from.The committee comprises officials from the Power, Coal and Environment Ministries, the Planning Commission and State government officials.The report of the committee on the issue is expected on Wednesday.

The move of the government comes amid concerns that rising international coal prices and insufficient availability of the raw material in India will hurt power generation activities.The pooling of coal prices is likely to be based on the same price pooling principle adopted by the government for LNG. In the case of liquefied natural gas, the price of LNG sourced through long-term contracts at a cheaper price is pooled with the rates for more expensive LNG sourced from the spot market to ensure that consumers across the country avail of an uniform, average price.

The Power Ministry is exploring every opportunity possible to make coal available to companies at a low price so that electricity generation does not suffer and power tariffs are not driven up.It has set an ambitious target for adding 1,00,000 MW of power in the XII Five-Year Plan (2007-12) from all sources of energy.

Price pooling of domestic, international coal in pipeline

The government is formulating a policy to balance international and domestic coal prices by "pooling" the rates with a view to contain the rising costs of the vital raw material used in power generation.A committee under the chairmanship of the Central Electricity Authority (CEA) chairperson was set up earlier this month to look into the matter."The committee will work toward pooling of international and domestic coal prices so that the cost of production does not rise... as international coal is expensive and also domestic coal is not sufficient for the plants," a senior Power Ministry official said.Pooling refers to the process in which the domestic and international prices of material are averaged out to enable uniformity of rates for all consumers, irrespective of where they are sourcing the material from.The committee comprises officials from the power, coal, environment ministries, the Planning Commission and state government officials.The report of the committee on the issue is expected on Wednesday.

Interest rate subsidy for power

The government is likely to come out with an interest subsidy scheme to push distribution reforms in the power sector. The performance-linked subsidy would be given to distribution companies to create infrastructure.

With the aim of bringing more areas under the reform process, the subsidy would only be available to distribution companies not being covered under the existing distribution reform programme. The scheme would be enforced through creation of a national electricity fund (NEF).According to a senior power ministry official, the ministry of finance has given its go-ahead and the power ministry is likely to move a Cabinet note for approval. The government would also decide on the executing agency for the new scheme.

“It could either be Power Finance Corporation (PFC) or Rural Electrification Corporation (REC), or both,” the official said.

The existing R-APDRP (Restructured Accelerated Power Development and Reforms Programme) is also meant to improve distribution systems and minimise transmission and distribution losses in the sector through loans that are converted into grants on the completion of the reform process.

The idea of an NEF was first proposed in the 2008-09 Budget to help the perennially bankrupt state electricity boards (SEBs) improve finances and reduce distribution losses.

Subsequently, a committee headed by Planning Commission member B K Chaturvedi was set up to work out the details. The Commission suggested an interest subsidy mechanism, wherein the Centre would bear a part of the interest cost of funds raised by a state utility for power distribution projects.

Though the corpus for the fund is yet to be decided, the power ministry official said the requirement would be met through budgetary support. Under the Restructured Accelerated Power Development and Reforms Programme, the government provided a budgetary support of Rs 1,831 crore for 2011-12, of which Rs 1,756 crore is being given as loan to PFC which finances distribution companies.

Projects under the scheme are taken up in two parts in urban areas and cities with population of more than 10,000 in special category states and 30,000 in other states. The objective of the programme is to facilitate reduction in Aggregate Technical and Commercial (AT&C) losses to 15 per cent.

The distribution of electricity was identified as the “weakest part” in the country’s power sector by the Planning Commission in its mid-term appraisal last year, owing to heavy AT&C losses. The losses, which touched a record high of Rs 40,000 crore in 2009-10, ensured the disability of most SEBs to raise money or to do so only at very high rates of interest.

KG-D6 shortfall begins to bite: Government directive violative of GSPA, claims Essar

Essar Steel has requested the petroleum ministry to allocate D-6 gas to firm customers on pro-rata basis as per the laid down ratio and not in order of priority as outlined in the directive issued in April, 2011. Alternatively, the company wants that the matter be placed before the EGoM for an expeditious decision in order to mitigate further losses to the customers. In April, the government had directed RIL to first meet the gas requirements of the four priority sectors, namely fertilizers, power, CGD and LPG, and only after that gas should be supplied to other priority sectors such as sponge iron and steel. 

• Describing the government`s decision to supply D-6 gas to core sectors in order of priority as "arbitrary" and "discriminatory" in nature, Essar has claimed that this directive is in direct conflict with the commercial arrangement executed by RIL with the customers. The clause 5(h) of the Gas Sale and Purchase Agreement (GSPA) between RIL and Essar clearly provides for cuts in supplies of gas on pro rata basis on the laid down ratio, if gas is insufficient to meet the firm allocation of all customers significantly without making any distinction of which so ever nature between consumers of various sectors. 
• Essar has argued that if the government`s decision is implemented by RIL, it would not only be in breach of the provisions of the GSPA, but also, induce breach of contracts made by Essar with various customers on supply-or-pay basis causing substantial financial losses. 
• Essar has further stated that the petroleum ministry should not direct the sellers to supply gas up to firm allocations to customers of only few of the prioritised sectors by totally ignoring the firm allocations of customers of remaining prioritised sectors. According to the company, the EGoM has not defined "core" or "non-core" for the purpose of allocation and supply of gas to the customers and therefore, it cannot be a valid ground for the petroleum ministry to issue directives of the nature stated in its letter dated March 30, 2011.
• Essar Steel has the country`s largest gas-based facility to manufacture sponge iron at Hazira in Gujarat, with an installed capacity of 7.28 MMTPA. The facility requires 5.50 MMSCMD of gas as feedstock to manufacture sponge iron. Around 65%, up to 3.20 MMSCMD, of this requirement is met by supplies by RIL. The company claims that this quantity was allocated by EGoM after recognising steel sector as a priority sector. 

Nitish Kumar calls for Centre's help: Wants 15% of power from CGS in region

Rising shortages of electricity in Bihar, resulting in protests and ultimately taking an ugly political turn, has forced Nitish Kumar, the Chief Minister of the state, to seek help from the Ministry of Power (MoP). The minister has sought allocation of 15% power under the unallocated quota from the central sector generating stations (CGS) in the region. 

8While Bihar has a daily requirement of 2,200-2,500 MW, it hardly generates 45-50 MW of power. The central government supplies around 750 to 900 MW, which leaves the state with a power deficit of about 1,000-1,200 MW a day. 

8Nitish has requested that the Centre make good the shortfall from NTPC`s Farakka, Barh and Kahalgaon super thermal power stations. In addition, he has called for allocation of 600 MW power from NHPC`s Subansiri HEP. 

8That apart, he has asked for allocation of 75% firm power from Nabinagar Power Generating Company Private Limited`s 3x660 MW plant, as well as the entire power from Kanti Bijli Utpadan Nigam Limited`s 390 MW expansion project. Not only this, he has also asked for additional power in lieu of the mandatory supply that it is bound to make to Nepal and railway traction. 

Grid connected Solar Projects under JNNSM-I: Proposed technology configurations

The Ministry of New and Renewable Energy (MNRE) has brought out the proposed technology configurations for grid connected solar power demonstration projects under the Jawaharlal Nehru National Solar Mission (JNNSM). The ministry intends to set up such projects based on advanced technology configurations so as to make solar power cost effective (through higher efficiency and capacity utilization factor) and achieve parity with grid power by 2022.

8The following technology configurations have been proposed:

 --Up to 50 MW capacity with air/hybrid cooling; the minimum capacity would be 20 MW

 --50 MW capacity with up to 30% gas hybridization

 --50 MW capacity having operating temperature over 500 C

 --Solar Augmentation of the existing coal thermal power plant

 --Solar - biomass hybrid plant of 1- 3 MW capacity

 --Base load capacity solar stand alone plant of up to 10 MW capacity; the minimum capacity would be 3 MW

8The MNRE plans to set up about 10 power plants through project developers. Projects shall be awarded to the developers based on global tariff Case 1 bidding. The project based on solar augmentation with an existing coal thermal power plant shall be awarded once a coal power plant has been identified.

 Jawaharlal Nehru National Solar Mission (JNNSM) was launched by the Prime Minister of India in January 2010 with an aim to promote ecologically sustainable growth while addressing India’s energy security challenge. The objective of the JNNSM is to establish India as a global leader in solar energy, by creating the policy conditions for its diffusion across the country as quickly as possible. Implementation of the Mission is envisaged to adopt a 3-phase approach. Policy framework under Mission is to create the necessary environment to attract industry and project developers to invest in research, domestic manufacturing and development of solar power generation and thus create the critical mass for a domestic solar industry. During first phase, a target of 1000 MW capacity for grid connected solar power projects has been set by 2013.

New private power projects may not get coal this fiscal - Move aims to prevent a sharp spike in electricity rates

New private power projects, that plan to sell output in open market, will not get any coal this fiscal. The move, that aims to prevent a sharp spike in electricity rates, would hamper capacity addition by the private sector which has a key role in building new plants in the country. 

The government has allocated one-fifth of available coal to power projects that would be commissioned in the current fiscal, giving priority to projects where tariff is determined by the old cost-plus system or with competitive bidding, government officials said. 

The balance coal would be rationed among power projects commissioned during 2009-10 and 2010-11 that have signed supply contracts with states, a senior power ministry official said. 

"Even if projects based on cost-plus basis fully pass on fuel cost , electricity tariffs would rise marginally. Coal India sells the fuel at almost one-third of international prices," the power ministry official said. 

Projects based on competitive bidding absorb increase in fuel cost. Private power producers opposed government's decision of giving last priority to plants that sell power in open markets. About 20% of the new capacity added during 2009-12 will come from such plants, commonly known as merchant power projects. 

Lanco Infratech, Monnet Ispat, Adani Power, Torrent Power and Jindal Power are among companies that plan to sell power in open market. A Lanco Infratech official said the government should decrease coal supply to power projects under fuel supply agreements. "The move to provide coal to only a few companies would create obstacles in the government's capacity addition programme," he said. 

"The government assured coal linkages and blocks to merchant power projects in 2007 when the concept was introduced," an official in Jindal Power said. 

Ashok Kumar Khurana, director-general of Association of Power Producers, a lobby group of private developers, said the government should give first priority to developers who invested funds based on coal supply commitments by Coal India. 

Coal India will supply 347 million tonnes coal to power sector during 2011-12, of which 306 million tonnes stands committed under legally enforceable fuel supply contracts. Thus against requirement of over 95 million tonnes, only 41 million tonnes coal is available for projects commissioned after March 31, 2009. Of the 41 million tonnes coal, 8.5 million tonnes has been kept for new units to be commissioned during 2011-12. The balance 32.5 million tonnes will be distributed among new generating units commissioned during 2009-10 and 2010-11, the power ministry official said. 

Additional coal available from Coal India during 2011-12 is inadequate for meeting needs of new generating units commissioned in 2009-12, he said. 

"If there is any balance left, that may be distributed proportionately among merchant capacity. We would pursue Coal India for 15 millon tonnes additional coal," the official said. The power ministry would keep a close watch on performance of the projects that would be allocated coal and make modifications commensurate with their performance, he said. 

Coal Minister may visit 3 European nations next month seeking technology for underground coal mining

Coal Minister Sriprakash Jaiswal is likely to make a 10-day visit to three European nations next month, seeking technology for underground coal mining.

"The minister, along with his delegation, is likely to visit Czech Republic, Belarus and Poland in June seeking technology for underground mining," an official in the Coal Ministry said.The 10-day visit is likely to begin from June 22, the official said. The high-level delegation is expected to consist of Coal Secretary C Balakrishnan, Coal India Chairman NC Jha among others.

The Coal Minister also made a visit along with his delegation to South Africa in the beginning of this year and sought modern technology for underground coal mining.

India had also sought cooperation for technologies on underground coal gasification and coal benefication from South Africa.

South African government had also offered the expertise of its companies in setting up coal washeries, deep coal mining technology and clean coal technology while inviting investments in the South African coal sector.

Besides, both countries had agreed to exchange research and development initiatives in the area of extraction of coal-bed methane before exploiting coal resources.

During the visit, India had also sought the cooperation of the South African government to enable Indian companies to acquire coal assets there.

Jaiswal had said Coal India was interested in acquiring coal assets in the South African nation and had said that cooperation with the South African government was aimed at bridging the growing domestic demand-supply gap.

A number of Indian firms have evinced interest in buying assets in South Africa, including CIL, which accounts for over 85% of the domestic coal production, NMDC, MOIL and Tata Steel.

Power firms seek diversion of e-auction coal to tide over fuel crunch

Ahead of Thursday's review meeting on the coal shortage situation called by the Prime Minister, private power developers have stepped up the pressure on the Government to mitigate the impending fuel crunch.Amid the looming possibility of stranded generation capacity, they have suggested a two-pronged solution to tide over the immediate crisis. This includes diverting coal from the e-auction process to upcoming projects and liquidating the coal stock lying at pitheads. These steps could free some 80-100 million tonnes (mt) of coal for immediate use.In a petition, the Association of Power Producer (APP) — representing private developers including Tata Power, Reliance Power, Essar, Lanco, Jindal Power — has suggested diversion of Coal India's e-auction sales, specifically to projects that are coming up on assurances of fuel from the state-owned coal mining firm. During the quarter ended December 2010, it is estimated that Coal India sold around 48 mt or nearly 12 per cent of its production through the e-auction platform.

Private developers are willing to buy the coal at the price discovered through the e-auction process to ensure that Coal India's profits are not impacted. Besides, they estimate 50 mt is lying at the mine pitheads that cannot be transported for want of rail rakes. The private players have called for immediate steps to transport this stock to consumption points.The capacity that could be directly impacted immediately by the coal shortage is around 22,120 MW, which could go up to 42,000 MW by 2016-17. “Inaction could result in stranded power capacity, leading to default on term loans, which could have a cascading impact on the financial sector as well,” a power utility company executive said.

Back to profits for wind energy equipment maker Suzlon Energy with help from accounting policy

It's back to profits for wind energy equipment maker Suzlon Energy, after several quarters of losses that first began in June 2009. While there are clearly tailwinds aiding the company compared with a year-ago, the profits for the quarter ended March 2011 have been propped up by foreign exchange gains as well as higher profits as a result of a decision not to align accounting policies of its foreign subsidiary REpower with itself. Even without this, however, the company has posted a turnaround. Lower realisations and as a consequence, tepid profit margins may, however, continue to bother earnings for a few more quarters.

ACCOUNTING TREATMENT

For the quarter ended March 2011, Suzlon's consolidated sales expanded by 20 per cent to Rs 7,276 crore compared with a year-ago, while net profits stood at Rs 431.5 crore, from losses earlier. However, till the December 2010 quarter, the recognition of sales for one of the company's major subsidiary REpower, was aligned with the group's accounting policy on revenue recognition. Based on the differential nature of contracts of the subsidiary compared with the parent, the company has now taken a decision not to align the policies and present the numbers as they are booked by the subsidiary. This resulted in an increase in the profit after tax by Rs 109 crore; which is one-fourth of the total net profits. While this change will be recurring in nature and not one-time, the quarter's profits were elevated given that this was not considered a year ago.

Foreign exchange gains on a consolidated basis, arising from accounting for subsidiaries too inflated profits.

Leaving these out, even as the company has made efforts to reduce costs, pressure on realisations and shortfall in delivery arising from postponements are issues that may continue to dog the performance of Suzlon. Sales per MW for the standalone unit, for instance, declined 4.3 per cent from Rs 6.38 crore per MW to Rs 6.1 crore per MW. While this may not seem stark for now, it does cause concern at a time when Suzlon is facing increasing competition locally from global players such as Gamesa. The recovery in the developed markets too has not been encouraging. In fact, sales for the standalone unit declined in the March quarter, as a result of lower volumes and realisation; even as subsidiaries such as SE Forge have seen strong topline growth.

High debt (net debt of Rs 9,760 crore) and pressure of generating cash flows to be able to repay at least a part of the debt (other than FCCBs) also remain as challenges.

STRONG ORDER BOOK

The key silver lining for FY-11 though, is the record order flows witnessed by the company, although the March quarter saw tepid inflows. Order book of over Rs 30,000 crore (4,639 MW), is up 60 per cent year-on-year in volume terms. Guidance of 2,500 MW of delivery in FY-12, if not disrupted by postponements, could ensure that the momentum of the current quarter is maintained.