NTPC captive mines caught up in knots

India's largest power producer NTPC may once again falter in bringing its captive coal mines under production even as a revised production schedule was finalised by the company early this year.

 

The work on company's Pakri-Barwadih captive coal block has remained suspended since February last year due to law and order issues and the company officials do not see an early resolution of the problem for the work to resume.

 

After numerous delays with regard to all its captive coal blocks that also attracted the wrath of both the coal ministry and the Prime Minister’s Office, NTPC expedited work and and intended to reach 3 million tonne per annum of coal production this fiscal from its first block. But with only three months for the year to end and no clarity on resumption of work at Pakri-Barwadih, officials believe that they would be lucky even to have some token production from this block.

 

“We can start mining activities at Pakri Barwadih coal mine within 48 hours of receiving the requisite support from the Jharkhand government in resolving the law and order problem at the mine site. But the problem has dragged for last several months and we are keeping our fingers crossed,” said an NTPC official asking not to be named.

 

NTPC was allotted six coal blocks (with 3 billion tonne of coal reserves) earlier and all these mines have been facing delays due to lack of statutory clearances and other land related issues. Recently, the government allocated another four blocks with 2 billion tonnes of reserves to the company. Barwadih block was supposed to reach an annual production of 15 mt in two years. However, all work has been suspended as an organisation supported by local MLAs for project affected persons (PAP) damaged mining machinery and prevented start of work.

 

“Slow disbursement of land compensation payment by the district administration has also aided local politicians to create law and order problems at Pakri-Barwadih mine site. NTPC has requested the formation of a Special Land Acquisition Cell exclusively for its land acquisition and at its own expense. But the progress is slow,”

 

Said a power ministry source aware of the development.

 

For NTPC, starting operations at the Pakri Barwadih block will be a major breakthrough as it has been been facing law and order problems on all its blocks in Jharkhand. The public sector producer has been allocated four blocks — Pakri Barwadih, Kerandari, Chhatti Bariatu and Chhatti Bariatu-II — in Jharkhand to feed its power stations.

 

The company has a appointed a Mine Development Operator for Chatti-Bariatu, while the process is on for the Kerandari block. The Talaipalli block is proposed to be developed jointly by Singrani Colleries and NTPC. In case of Dulanga, however, land issues need to be resolved.

 

“We have fast-tracked work on all of our captive blocks. We hope to increase production from them by 12 million tonne each year to reach 40 mt over the next four years, so that 25% of the company's fuel requirements are met through its own mines by 2017,” the NTPC official said.

 

The company's coal-based capacity is expected to rise to 52,000 MW by 2017 and production from captive blocks will help it eliminate dependence on expensive imported coal.

 

NTPC currently needs 160 million tonne coal to run its coal-based capacity of about 35,000 MW. About 16 million tonne of this coal is imported at prices that are almost two-and-a-half times the average coal price of R1,400 tonne offered by Coal India. In the first six months of 2013-14, NTPC imported 7.3 mt of coal, an increase of 68% against over the corresponding period of previous year. It had incurred a capital expenditure of R1,536 crore until the first quarter of 2013-14 to develop these mines.

Tata Power plans to raise up to Rs 5,000 crore in next 3 years

The country's largest private power producer Tata PowerBSE 1.13 % is exploring various options to raise around Rs 5,000 crore in the next three years.

 

Tata Power, which has an installed generation capacity of over 8,500 MW, has also embarked on ambitious expansion plans, including setting up projects in Vietnam and Georgia.

 

For raising funds, the power utility has said that it is studying all possible options.

 

"Everything is being studied, what is likely and what is not likely, something which we have not reached the decision as yet," Tata Power told analysts in November.

 

According to the transcript of analysts' call, the company's fund requirement is about Rs 4,000-5,000 crore over a three-year span.

 

The company's comment came in response to a query about the quantum of funds the company was looking at through various measures.

 

The fund raising options include possible sale of equity. Without providing specific details, Tata Power told analysts that it would look at all funds, "including debt funds but today we are quite stretched as far as date is concerned".

 

At the end of September this year, the company's long term borrowings stood at Rs 32,842.24 crore.

 

"We have funds as of today probably till the first quarter of next year provided all our consumers pay us on time," the company said.

 

For the six months ended September, the company posted a net loss of Rs 39.73 crore. In the year-ago period, it had a net profit of Rs 62.13 crore.

 

These figures are after considering tax, minority interest and share of profit of associates.

 

Tata Power generated 22,738 million units of electricity in the six months ended September, much higher than 14,029 million units produced in the year-ago period.

NHPC to commission over 3,800 MW of delayed projects by 2018

Inching closer to becoming a 10,000 MW utility, the country's largest hydro power producer NHPCBSE 1.65 % plans to commission over 3,800 MW of projects over the next five years, a company official said.

 

"The projects, which were envisaged earlier but got stuck due environmental or contractual issues, will now come up by March 2018," a senior NHPC official told PTI.

 

Five projects with a combined capacity of 3,810 MW are behind their original commissioning schedules.

 

The 2,000 MW Subansiri Lower project in Assam, which was expected to be commissioned by December 2012, is now likely to become operational by December 2017. It had been delayed since December 2011, after the local people raised issues related to its safety and downstream impact.

 

"Parbati-III in Himachal Pradesh, which was stalled due to contractual issues, will now be commissioned in March 2014, delayed by over three years from its original schedule of November 2010," he said. The project's capacity is 520 MW.

 

The Teesta Low Dam Project-IV in West Bengal (160 MW) and Kishanganga in Jammu& Kashmir (330 MW) will be completed by November 2014 and November 2016, respectively.

 

Parbati-II (800 MW) will be commissioned in March 2018. It had been scheduled to be ready by March this year.

 

The company's Uri-II (240 MW) project in J&K was commissioned last month.

 

NHPC generates 5,702 MW electricity from 17 hydel stations in the country. As many as seven power stations with a total capacity of 4,095 MW, including the five delayed projects, are under construction.

 

Tata Power set to make acquisitions by fiscal-end

Tata Power Co Ltd is evaluating renewable energy projects totalling over 2,800 MW for acquisition.

 

In October, the company had acquired a 39-MW wind farm in Gujarat, and since then, the country’s largest private sector integrated power company has been flooded with offers.

 

In an interview with Business Line, Rahul Shah, Chief, Business Development, India Business and Renewables, said the company has received offers to take over 2,500 MW of hydro power, 300 MW of wind and 80 MW of solar energy units, spread across the country.

 

Edited excerpts:

 

You are getting so many offers. Are they distress sales?It is basically due to the financial stress in the system. For some, it is more of a distress sale, where their main or parent business is under stress.

 

For others, it is rationalisation — whether they want to be in renewable energy or not.

 

Some others, who had invested for accelerated depreciation and enjoyed the benefit, now want to capitalise their assets. More than 50 per cent of the wind farms for sale fall in this category.Why the financial overhang? After all, promoters must have planned for repayments…

 

Lenders and financial institutions have over-exposure to the power sector and now are scrutinising the credentials of the promoters, which they were not looking so stringently earlier.

 

In an under-construction project, one needs to keep bringing in equity, else lenders and financial institutions will not provide the balance.

 

The hydro projects on sale — of 2,500 MW — appear to be large…More projects were allotted to people outside the power sector than to those within.Of the total, operational projects for sale are more than those under construction.

 

They are in the North and North-Eastern States — Himachal Pradesh, Uttrakhand and Sikkim.

 

Are you close to inking any deal?

 

It is a question of whether the value you offer is something that the exiting party finds reasonable. We hope to close a few deals by the end of this fiscal.

 

Your top management has made it categorical that it will not undertake large investment projects until it gets compensatory tariff for its 4,000 MW Mundra plant…

 

We have to be selective, but then we have to evaluate everything.This is the time when there is stress and opportunity as well. There is a huge number of assets doing the rounds, and nobody seems to be having the money.

 

Why is your solar portfolio small?

 

We have about 29-plus MW of solar. We have been a little cautious where we build the plant, who we sell to and also the tariffs we are selling at.

 

We had been called conservative, but now people accept we were prudent. In wind power, we have about 437 MW in India.

 

What about the National Solar Mission?

 

We did not participate in the past as we did not have land and were circumspect about the sale of power and payments.

 

Now that these issues have been addressed over the last two years, and with land with us, we are evaluating the options.

Power companies like Tata Power, Adani Power, Reliance Power and others breathe easy as government plans loan recast

A big relief is on the cards for power companies such as Tata Power, Adani Power, Reliance PowerBSE 2.02 % and Essar Power whose plants are in trouble, and their lenders who are worried about loans worth Rs 2 lakh crore to the sector. The government is working out a plan to restructure the loans, extend repayment deadlines by three years and waive penalties, officials said.

The private sector, which has invested heavily in recent years and accelerated capacity addition, is struggling with fuel scarcity and distribution bottlenecks. Large capacities of plants based on coal or gas are stranded because of fuel scarcity while many are facing delays in clearances.

 

The proposal aims to help plants with 65,000-70000 mw capacity that have suffered in the last four years due to reasons like shortage of fuel, lack of regulatory clearances and rupee depreciation. The rejig was necessary to prevent the loans from becoming non performing assets (NPAs) till the plants generate regular cash flow, officials said.

 

Power minister Jyotiraditya Scindia is likely to meet finance minister P Chidambaram next week to discuss the proposal. "Private power generating companies have come under severe stress over the past four years due to conditions outside their control. Domestic coal and gas shortage, price volatility in imported coal, weak distribution utilities, problems in land acquisition and regulatory clearances, higher interest burden and forex exposure have adversely affected thermal plants. There is a need to restructure loans of these companies to prevent the plants from becoming NPAs," the official said.

 

The proposal includes shifting commissioning deadlines of projects, particularly gas-based plants, whose debt has already been restructured. Power secretary PK Sinha confirmed the development. "We are working one such proposal along with banks, the finance ministry and other ministries," he told ET.

 

The proposal includes shifting commissioning deadlines of projects, particularly gas-based plants, whose debt has already been restructured. Power secretary PK Sinha confirmed the development. "We are working one such proposal along with banks, the finance ministry and other ministries," he told ET.

 

Thermal plants in the country have been operating at record low level at about 63%. Gas-based power plants are running at less than 25% capacity and around 8,000 mw is idling for want of gas allocation.

 

Sinha, however, said the country's power deficit has come down to record 3.5% in October as against 8.9% in the same month previous year. He said this was because of improved hydropower generation, less demand due to favourable weather conditions, high capacity addition and policy initiatives taken by the government.

 

Over the past few months, the government has taken many decisions in favour of power companies like directing Coal India to supply coal to power firms for 20 year, and passing cost of imported coal to consumers, approving compensatory tariff to Tata PowerBSE 1.13 % and Adani PowerBSE 1.12 % and bailing out state distribution companies.

 

The measures are expected to benefit power companies in the next 18-20 months.

8 power biggies in race for Rs 24,000-crore TN UMPP

Eight power firms, including private players like Adani Power, GMR Energy and L&T, as well as state-owned NTPC, have expressed interest in bidding for the R24,000-crore Cheyyur ultra-mega power project (UMPP) in Tamil Nadu, according to Power Finance Corporation (PFC).

 

Technical bids for the project, proposed to be fired with imported coal, were opened on Thursday. Jindal Power, JSW Energy and Sterlite Infraventures and Hong Kong-based CLP are the other private players who have evinced interest in the project.

 

Tata Power and state-owned NHPC, which are in the bidding race for the domestic coal-based Orissa UMPP, have not shown interest to bid for the Cheyyur project.

 

Significantly, Tata Power has the country's first imported coal-based UMPP at Mundra.

 

On the other hand, GMR, which has acquired large-sized coal mines in Australia, has come forward to bid for the Tamil Nadu UMPP after giving the Orissa UMPP bidding a miss. According to PFC sources, environment, forest clearance and water linkage for the project are in place and process is under way for acquisition of land.

 

“The response from renowned and reputed applicants in the prevailing investment scenario in the infrastructure sector highlights the high degree of comfort and confidence the investors perceive owing to the state of preparedness of the project,” PFC expressed satisfaction at investors' response to the Cheyyur UMPP.

 

PFC will undertake an appraisal of the received technical bids and based on that, invite price offers. Bidding for the Orissa UMPP is also underway and nine players are in the race. Bidding for the two projects is being conducted by PFC on the basis of revised guidelines, which vest ownership of project land in discoms buying power from the project rather than the developer. However, developers will have contractual lease of project land for 40 years as against 25 stipulated earlier.

 

PFC initiated bidding for the two projects in September after a gap of more than five years.

 

All UMPPs have the standard capacity of 4,000 MW. So far, four UMPPs at Sasan, Tilaiya, Mundra and Krishnapatnam have been auctioned out. Of these, the Mundra a nd Krishnapatnam UMPPs are based on imported coal while the other two are to be fired with domestic coal.

Lanco future uncertain as banks split on recast

With the Reserve Bank of India (RBI) chiding banks for having been too lenient with borrowers and suggesting that they’re evergreening loans, banks now appear to be taking recast proposals more seriously. The R7,500-crore debt recast plan for Lanco Infratech has been put on hold with several lenders in the 27-bank consortium not comfortable with sanctioning additional loans.

 

Lanco Infratech, the construction arm of the Lanco Group, wants an additional R3,000 crore to be able to restart some of its operations. But lead banker IDBI Bank is dead against taking on more exposure to the infrastructure company as are others including Punjab National Bank and Dena Bank.

 

Their discomfort is understandable since Lanco’s finances are in a shambles. The firm reported a loss of R580 crore in the second quarter of this fiscal with sales falling 23% year-on-year to R2,451 crore; in the first quarter, the loss reported was R579 crore. With cash flows strained, consolidated net debt at the end of September had risen to a whopping R35,700 crore as its gearing hit 10X. One reason for this is the high receiveables at close to R3,000 crore, some of it from state electricity boards including those of Karnataka and Uttar Pradesh.

 

Credit Suisse expects the company to post losses in both FY14 and FY15 and believes that some power purchase agreements may have been wrongly priced. Under the circumstances, although the corporate debt restructuring (CDR) cell has called for details on why Lanco needs additional funds, it seems unlikely that banks will want to add to their exposure.

 

Lanco’s power plants have been starved for fuel. Both the Amarkantak-II and Kondapalli-II plants have been suffering, while the Udupi project operated at a plant load factor of 47% in the second quarter of this fiscal. And although the company has been talking of asset sales for more than a year now, it has met with little success. Bankers close to the development expressed concern that unless the company is able to restore some balance to the gearing by bringing in equity, it might be risky for lenders to take on more e xposure.

 

The firm’s market capitalisation has come off from Rs 3,106 crore a year ago to Rs 1,394 crore now.

 

For a debt recast package to be approved, it must be agreed to by 60% of the lenders by number and 75% by the value of the exposure. Along with IDBI Bank, the consortium includes banks like State Bank of India, ICICI Bank, Allahabad Bank and Punjab National Bank, apart from financial institutions such as LIC, IDFC, Srei Infrastructure and Tata Capital.

 

At a recent banking forum, RBI deputy governor KC Chakrabarty admonished banks for approving CDR requests too liberally, adding that there were signs of evergreening of loans through this window. Chakrabarty, among other things, suggested that there should be independent oversight of the activities of the cell. The CDR cell is a forum of bankers that helps in easing repayment conditions for eligible corporates finding it difficult to repay their loans due to adverse external or internal factors.

 

In October, the CDR cell saw loans worth Rs 22,269 crore being referred to it, the largest in a single month, while only Rs 4,935 crore was approved by it. In the first six months of this financial year, referrals touched Rs 24,859 crore and cases worth Rs 22,007 crore were approved. Bankers expect referrals to touch Rs 1 lakh crore by the end of FY14.

 

To curb the ever-increasing line for debt restructuring and related losses, banks have tightened their grip on corporates. Punitive measures such as higher promoter contribution to measures of intimidation like threatening to change the management seem to be the preferred techniques for bankers now.

NTPC invites EoIs from foreign companies for coal supply

India's leading power producer, has invited expression of interest from foreign suppliers for inking a 10-15 year contract for 12 million tonnes coal that the company plans to import for its proposed 4,000 mw coal-fired plant at Pudimadaka near Anakapalle in Andhra Pradesh.

 

The company is looking to get the first consignment of coal from this contract by 2018, by when it hopes to commission the plant which has been delayed due to the protests over Centre's decision to grant statehood to Telangana. The proposed coastal power plant will run entirely on high quality imported coal.

Coal India had earlier tried to import coal on behalf of NTPCBSE -0.61 % through a similar long-term contract a few years ago but the deal did not work out because the suppliers asked for a premium on the price for supplying coal on an uninterrupted basis for such a long period. NTPC found the prices higher than what it was paying for importing coal and Coal India shelved the plan.

 

NTPC intends to import coal directly from mine owners, lease holders and suppliers that have experience in long-term supply. The supplier will be required to handle transportation of coal from mine to port, clearing and forwarding of the consignments, storage, coordination with port of country of origin and loading of coal consignment into vessels arranged by NTPC for shipping to India.

It is looking for premium quality coal with just about 20% ash and 5,300-5,800 kilo calories of energy content in each kilogram. Domestic coal, in contrast, has 40% ash content and less than 3,000 kilo calories of energy content per kg. Indian boilers are made to handle coal with 40% ash content. However, the proposed plant will be made to handle such high energy content.

Discoms resume payments to power traders on debt recast

Equipped with stronger cash flows after restructuring of their short-term debt by lenders, discoms, especially those from states like Uttar Pradesh and Tamil Nadu, have managed to pay R3,500 crore of their outstanding dues to power traders like PTC India, Lanco Infratech and NTPC Vidyut Vyapar Nigam. Payments have resumed in the second quarter of this fiscal and more dues are to be cleared in the current quarter, sources said.

 

However, the discoms are yet to step up electricity purchases from the open market to meet their power shortfalls.

 

Four states—Rajasthan, Haryana, UP and Tamil Nadu, which accounted for more than 60% of R1.9 lakh crore debt of the state power sector estimated as at the end of March last year — have completed restructuring their discom loans, inspiring confidence in banks and financial institutions to resume lending to them.

 

Besides, these states have also hiked electricity tariffs by 20-37% since 2012 to access the benefit of financial restructuring plan (FRP) offered by the Centre, which has led to a sizeable increase in their discoms’ revenues. Significantly, the FRP stipulates timely revision of tariff by discoms to meet their expenditure-revenue gap in a time-bound manner.

 

Kameswara Rao, leader, energy utilities and mining, PWC said: “Judging from discoms' payment pattern, it appears that their cash flow position has materially improved.”

 

Salil Garg, an analyst with India Ratings, a credit rating agency, concurred. “Implementation of FRP by some states has not only improved their discoms' cash flows but has also proved positive for utilities' operations as they are required to revise tariffs on a regular basis,” Garg told FE.

 

Sources said after restructuring its debt, UP Power Corporation Ltd (UPPCL) has cleared entire R750 crore of power purchase dues to PTC India. The payment was due for more than a year. UPPCL has also started clearing its dues to NTPC Vidyut Vyapar Nigam (NVVN) and Lanco Infratech. NVVN sources told FE that the UP discom has cleared entire dues to the company. Lanco Infratech's total receivables on account of power supply to discoms have come down to R2,939 crore in the second quarter from R3,285 crore in the first quarter. Of this, R250 crore came from UPPCL alone, company sources said.

 

Industry sources said after recast of their debts, Tamil Nadu and Rajasthan discoms have also become more regular in making payments for power purchased from traders. Tamil Nadu Generation and Distribution Corporation (Tangedco) has paid R250 crore out of R600 crore owed by it to PTC India. NVVN and Lanco Infratech executives also expressed satisfaction at the regularity of payment from Tamil Nadu and Rajasthan discoms.

 

During April-October, Tamil Nadu, Rajasthan and Haryana have seen noticeable improvement in their power supply. However, UP continues to battle with high power deficits even after restructuring its discom's loans. But despite the state facing peak power shortage to the tune of 13.9% during the period, its discom did not step up its power purchase from the spot market. The discom also did not bother to take advantage of the low price of R2.5 a unit at Indian Energy Exchange, (which accounts for 97% of electricity volume traded through exchanges in India), compared with the average price of R3.5 under long-term contracts. UPPCL purchased 311 million units of electricity from the IEX during the period, just 1% higher than the quantum bought by it a year ago. Tamil Nadu's power purchase from the IEX declined 60% during this period. Haryana and Rajasthan now have surplus power and so they do not have to buy electricity from the spot market.

Peak power deficit in October at 3%: CEA

Peak power deficit in the country shrunk to 3% in October, as against 9.4% in the same month last year, helped by higher hydel generation due to heavy rains and lower industrial growth.

“Less agricultural load and more hydel generation due to heavy monsoon are the prime reasons for reduced peak power deficit. Also the industrial sector did not grow as expected leading to a reduction in demand,” a Central Electricity Authority (CEA) official told PTI.

 

Peak power deficit or shortage in electricity supply when the demand is maximum for October stood at 3,845 megawatts (MW), or 3%, as per the CEA data.

 

The total peak power demand in October 2013 was 1,30,022MW of which 1,26,177MW was met.

In October last year, the total peak power requirement stood at 1,34,045MW of which 1,21,473MW was met leading to a shortage of 12,572MW or 9.4%, the data added.

 

Western region emerged as the best performer in October this year, registering just 0.1% deficit.

Total power demand of the western states including Gujarat, Madhya Pradesh, Chhattisgarh and Maharashtra stood at 37,411MW, and 37,371MW was met, the data said.

 

The peak power deficit of the western states was 1.5% in October 2012.

The total electricity requirement of the Northern region comprising Delhi, Haryana, Punjab, Himachal Pradesh, Uttarakhand, Uttar Pradesh and Rajasthan was 41,154MW, and supply 38,385MW. It recorded a peak power deficit of 6.7% or 2,769MW.

 

This number stood at 4,338MW or 10.6% in October 2012, the data said.

The peak electricity shortage in the Northeastern states of Assam, Manipur, Meghalaya, Arunachal Pradesh, Mizoram, Tripura and Nagaland grew to 4.3% in October this year, as against 3.3% last year.

The total power demand of these ‘seven sisters´ states, in October 2013, was 2,140MW of which 2,048MW was met, the data showed.

 

Southern region showed the most improvement by posting a deficit of 2.2% in October 2013 as compared to a whopping 18.7%, last year.

 

“This improvement is primarily because of new capacity addition in the region,” the official added.

The total power demand of the southern states, in October 2013, was 33,702MW of which 32,968MW was made available.

 

Peak power deficit of the eastern region states—Bihar, Jharkhand, West Bengal, Sikkim, Odisha and Andaman and Nicobar Islands—in October, this year was 210MW or 1.3%.

Power supplied to these states was 15,405MW as against the demand of 15,615MW. PTI

After nuclear deal, India takes a relook at strategy on Iran

Caught unawares by the Iran nuclear deal, the National Security Advisor held an emergency meeting on Tuesday to calibrate India’s strategy on fears that Tehran may now harden its position with New Delhi.

NSA Shivshankar Menon ticked off external affairs ministry officials for plodding their feet on economic projects in Iran, mainly development of Chabahar port, despite it being outside the purview of the US sanctions.

 

He pulled up ministry officials for the project continuing to be on the inception stage despite an announcement in May that India would pump in $100 million for the upgrade of the Iranian port.

Menon’s fear is that dilly-dallying could veer Tehran away from India and prompt it to backtrack on its past offers as had been sounded out by new Iranian oil minister Bijan N Zangeneh in September.

 

Zangeneh had then conveyed that Iran was withdrawing all oil and gas concessions that had been promised to India by his predecessor. He informed that Tehran would not accept entire payment for crude oil imported by India in rupees as agreed in July and would also disallow a production sharing contract for Farzad-B as agreed in January.

 

Menon instructed the ministry to “actively engage” with Iran and send a delegation to Tehran for renegotiating the oil and gas concessions. Tehran would also be told that India remained “involved” in the transnational Iran-Pakistan-India natural gas pipeline.

 

As a sweetener, Iran would be told that India —which has so far bought nearly five million tonnes of crude oil from Iran until October — would be pursuing a purchase of 11 million tonnes in fiscal 2013-14 ending March 31, 2014 from Iran. India bought 13 million tonnes in 2012-13.

 

As for outstanding dollar payments, it was decided at the meeting that India would await US instructions on the quantum of money to be released to Iran and the country appointed for the transfer.

Jaitapur nuclear project talks stuck over cost-sharing

The 9,900-Mw Jaitapur nuclear power project in Maharashtra is caught in a cobweb of mandatory legislative requirements due to the civil nuclear liability regime, slow decision-making, a surge in cost due to the weak rupee and more safety applications.

 

The negotiations between the state-run Nuclear Power Corporation (NPC) and French nuclear reactor supplier Areva, which started after they signed an early work contract in December 2010, are progressing at a snail’s pace as cost sharing has become a major bone of contention.

 

A Department of Atomic Energy official, who did not want to be identified, told Business Standard: “The Jaitapur project is to be developed by NPC on 80:20 debt equity ratio. Raising 80 per cent debt during the current slow down, especially in the wake of the weak rupee is a real challenge for the NPC. This apart, cost escalation is quite obvious due to the inclusion of additional safety applications in the plant. The project is being developed under the inter-governmental agreement between the Indian and French governments. One thing is clear that competitive cost will be the most crucial factor on which both the parties need to agree.” 

 

Industry sources have pegged up the per megawatt capital cost at Rs 25-30 crore from Rs 10-20 crore when NPC and Areva started negotiations. The per unit tariff is also estimated at Rs 6-7 from Rs 3.50-4. The NPC spokesman declined to comment on the issue.

 

S K Jain, chairman, Indian Atomic Industrial Forum (which represents both Indian and foreign companies) said when the negotiation started, the rupee was at 47 and now is 63 to a dollar. The inflation in European countries has surged to 5 per cent from two per cent.

 

“NPC is expected to develop Jaitapur project on 40:60 ratio of indigenous and foreign supplies. Debt funding cost has gone up significantly. The interest rate to be charged by French lender is bound to increase,” he noted. He suggested both NPC and Areva would have to find short term funding to minimise cost. Besides, a mechanism to provide insulation from foreign exchange fluctuations would have to be worked out.

 

Moreover, Jain said that confusion prevails over the definition of supplier under the civil nuclear liability regime. “Foreign vendors, including Areva, are not really in a position to decide as to how much additional expenditure they would have to incur to cover their liability arising out of the provision of recourse in the Nuclear Liability Act.

 

The amount will be loaded on the cost of the plant. There is no instrument available in the country to give coverage to cover recourse risks especially when the project is executed in a hybrid scenario with the involvement of large number of agencies, contractors and organizations. In this scenario, a great part of the job is done by the operator (in case of Jaitapur it is NPC) and therefore it will be difficult to identify the agency responsible for nuclear damage," he observed.

Bailout for state electricity distribution companies extended to three states

Extending its ambitious plan to bail out beleaguered state electricity distribution companies (discoms), the government on Thursday cleared a special package for three more states—Jharkhand, Bihar and Andhra Pradesh.

 

The move to reduce the debt overhang of Rs.2 trillion owed by all discoms in the country is likely to benefit private power producers as the discoms will now be able to procure electricity to meet additional demand. At present, power producers are unwilling to supply them power as they fear they will not be paid.

 

At the same time, it will provide comfort to lenders as the state government will take over the debt burden and also provide guarantees. It would unlock resources for fresh lending. Indian banks’ loans outstanding to the power sector rose to Rs.3.4 trillion as of July 2012 from Rs.2.9 trillion in July 2011, up 17.2%, according to Reserve Bank of India (RBI) data.

 

The cabinet committee on economic affairs (CCEA) on Thursday approved amendments to the scheme for Financial Restructuring of State Distribution Companies approved by it on 24 September 2012 to enable the financial turnaround of the state distribution companies for their long-term viability.

Accordingly, the cutoff date for determining the eligible amount of short-term liabilities for issuance of bonds or rescheduling of loans with lenders has now been fixed as 31 March 2013 for these states; earlier it was 31 March 2012.

 

With this, Jharkhand, Bihar and Andhra Pradesh come onboard a scheme that already covers Tamil Nadu, Rajasthan, Uttar Pradesh, Haryana and Himachal Pradesh.

 

According to the restructuring package, states will enter a tripartite agreement wherein they will, in return for recasting of debt, promise to revise tariffs regularly in step with the escalation of costs, besides reducing power theft and transmission and billing losses. The three states have until 31 December to sign up for the package, which is not mandatory.

 

Shubhranshu Patnaik, senior director at Deloitte Touche Tohmatsu India Pvt. Ltd, said the expansion of the scheme to three more states was a welcome move. “More states included mean they will be bound by the conditionalities put under the scheme, which is good. This will also help address the liabilities outstanding with the banks,” he said.

 

Separately, the cabinet on Thursday approved a proposal for extending the validity of the Central Order, which enables state governments to take effective measures against de-hoarding operations under the Essential Commodities Act, 1955, by fixing stock limits and licensing requirements for rice and paddy.

“This is expected to help in the efforts being taken to tackle the problem of rising prices and also improve the availability of these commodities for the general public, especially the vulnerable sections,” a government statement said.

 

The cabinet took a strong stance on the food security issue that could scuttle a multilateral trade deal at the World Trade Organization (WTO) meeting in Bali.

 

The cabinet mandated the commerce ministry to negotiate a trade deal with a four-year “peace clause” under which no country will sue India if it breaches the WTO-mandated food subsidy limit for the duration the clause is in effect, and will be linked to a permanent solution to the subsidy issue.

 

It also asked the commerce ministry to ensure that no country can challenge India under another agreement under the WTO on subsidies and countervailing measures, an official said on condition of anonymity.

 

A deal at the Bali meet starting 3 December is seen by many as critical to ensure the credibility of the multilateral organization as an institution. A strong stance by India on the food security and subsidy issue may prove a deal breaker.

 

The cabinet put off a decision on relaxing foreign direct investment (FDI) norms for the housing sector and reducing the foreign investment limit to 49% in so-called rare and critical areas of the pharma segment.

The decision on FDI in pharmaceuticals and housing has been deferred, information and broadcasting minister Manish Tewari said after the cabinet meeting in New Delhi.

Govt sets PowerGrid FPO price band at Rs 85-90

An Empowered Group of Ministers (EGoM) headed by Finance Minister P. Chidambaram has set a floor price band of Rs 85-90 a share for the follow-on public offer (FPO) of Power Grid Corporation of India.

 

Retail investors and employees will be given a discount of 5 per cent on the issue price.

 

The issue will open on December 3 and close on December 5 for institutional investors, and on December 6 for retail category and employees.

 

A discount of Rs 4.50 (which is 5 per cent of the top end of the price band) will be available to retail investors and eligible employees on the issue price on allotment.

 

Five merchant bankers — SBI Capital Markets, Kotak Securities, Citigroup, ICICI Securities and UBS — are advising PowerGrid on its FPO for 17 per cent stake sale, comprising 4 per cent stake dilution by the Government and 13 per cent fresh equity by the company.

 

The Power Ministry in a statement had said that 50 per cent of the net issue will be allocated to qualified institutional buyers, 35 per cent to retail investors and 15 per cent to high net worth investors. In addition, 0.38 per cent of the issue would be reserved for employees.

 

After the stake-sale, the Government’s holding in PowerGrid will come down to 57.89 per cent from the current 69.42 per cent.

 

The PowerGrid scrip closed 0.69 per cent higher at Rs 95.05 on Friday on the BSE. At the current valuations, the issue may mop up more than Rs 7,500 crore.

 

The firm had launched its IPO in October 2007. An FPO followed in 2010.

 

Lack of financing for new power projects a big concern: KPMG

The absence of funds for new power projects is an area of big concern and should be dealt
with seriously, according to a report. "A big concern today is a lack  of financing available for new projects. The 13th plan (2017-22) requires Rs  1.27 lakh crore of private sector equity and the project pipeline looks weak,  and if we don't correct the situation immediately, we will be back into a cycle  of high deficits,"  consultancy firm KPMG  said in a report.
There is a strong imperative to bring in strategic and financial investors, it  said. The lack of funds and the poor pipeline are due to the current  stalemate on various projects. Power projects face delays in land acquisition  and environmental approvals and issues related to allocation of coal and passing
on costs of importing the fuel.
"Over 33,000 MW of projects are  operating below 60 per cent plant load factor, mainly due to fuel issues,"  according to the report "This could pose a risk to over Rs 1 lakh crore of bank loans, which could turn  into NPAs  (non-performing assets)."
Delays in environment and forest approvals  are taking a huge toll on projects. Clearances are pending for about 1,03,000 MW  of power projects and 726 million tons per annum of mining capacity, it said. 
Each day of delay for 100 million tons per annum of coal production costs the  nation Rs 42 crore and USD 17 million in foreign exchange due to imports, according to  the report.  KPMG also said that there is need to rope in global  participation in underground coal mining, which is currently less than 10 per  cent of India's coal production.
"Bring in international participation  in underground mining and operational excellence initiatives in mining  companies," the report.Underground mining needs to be given a fillip as it is needed for long-term coal  security, it said. 

Power project delays put Rs 1 lakh cr of loans at risk: KPMG

Delays in implementing power projects, mainly due to fuel issues, could turn Rs 1  lakh crore of bank loans into NPAs  if prompt action is not taken, according to a study by KPMG.
"Lack of  financing and a poor pipeline is due to the current stalemate on various  projects. Over 33 GW of projects are operating below 60 per cent plant load factor, mainly due to fuel issues. This could pose a risk to over Rs 1 lakh  crore worth bank loans which could turn into NPAs (non-performing assets) if we don't take action quickly," KPMG said.
According to the  consultancy firm, 33 GW of capacity in an advanced stage of readiness is either
tied up or under negotiation for supply based on competitive bidding.The power sector is heavily indebted and has one of the largest exposures from  banks. Their loans to private power companies stood at Rs 1.57 lakh crore as of  FY13, compared with Rs 30,251 crore in FY09, according to KPMG.
That apart, the exposure of banks to state-run distribution companies in the  form of short-term loans stands at Rs 1.9 lakh crore. "For projects  which have entered into PPAs (power purchase agreements) under existing  competitive bidding guidelines, government should allow import of coal for the  quantity equivalent to shortfall in domestic coal supply as per the signed fuel  supply agreements (FSAs).

"These projects may turn into non-performing assets because of non-availability  of fuel," KPMG said. The consultancy firm observed that quick  implementation of government decisions is necessary. "The government  should formulate a guideline on how the decision in respect of select projects  can be implemented quickly. A speedy implementation of this decision will go a  long way in reviving sentiment and the investment cycle," the report said.

KPMG has suggested that Coal India could issue a certificate for the shortfall  quantity and the cost of imported coal procured against this approved quantum  can be made a pass through by the regulator based on the guideline.

Maharashtra govt gives nod to Mundra UMPP rate revision with riders

Maharashtra government today approved an application from Tata Power's 4,000 MW  ultra mega power project (UMPP) at Mundra seeking tariff revision, as  recommended by the Deepak  Parekh panel, but with some riders. The decision was taken at a  Cabinet meeting here, official sources said.
Maharashtra's power  distribution arm MahaVitaran has tied up for getting 800 MW from the coal-fired  UMPP in Gujarat. But the state is currently getting 80 per cent of this and  wants the company to ensure it gets the entire quota.
One of the riders says  once the price of imported coal (used in UMPP) falls, the tariff should be
revised downwards accordingly. Another caveat calls for an undertaking from the  private firm to reduce its return on equity or RoE (a measure of company  profitability) as far as possible, they said.
If the revision  materialises, the power tariff may increase by 59 paise per unit for  MahaVitaran. But according to a state discom official, they expect the effective increase to be 35-45 paise a unit. 
The state government has accepted recommendations of the panel, headed  by HDFC Chairman Deepak Parekh, which had called for a hike in tariff for power  supplied by Coastal Gujarat Power, an arm of Tata Power that runs Mundra UMPP.
Central  Electricity Regulatory Commission (CERC), in April this year, had allowed Tata  Power to pass on to consumers high cost of coal imported from Indonesia for the Mundra unit, which supplies power to five states. The regulator had asked all states which receive power from the project to file an
affidavit in this regard.
According to the MahaVitaran affidavit, Tata  Power should pass on the benefit of any reduction in Indonesian coal prices and  also reduce the RoE as far as possible. It called on financial institutions,
which have funded the project, to reduce their interest rates.  It said even after the entire exercise, if the tariff is unviable, the state  will have the option of cancelling the purchase pact without giving any
compensation.  Punjab and Haryana, receiving power from Mundra UMPP,  have opposed the CERC nod to hike in tariff and have moved the court against the  decision.

Pilot plant to mitigate CO2 at NTPC Faridabad

NTPC have set up pilot plant for Bio-fixation of CO2  from the flue gas through micro algae at NTPC Faridabad. Two conjoining algae ponds of area have been constructed to draw CO2 from stacks at the project. The  inoculation in small pond was done earlier in the month and in bigger pond today
to generate micro algae much ahead of the targeted date of Jan'2014.
This project is part of NTPC's plan to meet environment challenges of 21st cent .and beyond where the company plans to adopt latest environment practices and  protection systems to minimize the impact of power generation on environment.  CO2 is a major green house gas contributing to more than 50% to the total  predicted warming of the earth's atmosphere. NTPC is pursuing the  objective of environment protection as one of its prime responsibilities and  focuses its efforts to mitigate the impact of its operations on surroundings.  Around 12-15 % of the project cost is spent on various environment protection  equipment's.
IOCL (R&D Unit) and NTPC signed an MOU in February 2010  for research in this field with the setting up of algae ponds at NTPC gas  project in Faridabad.Technical support for the project has been  provided by IOCL (R&D Unit) Faridabad and NTPC scientists from NETRA.