NEW DELHI: A ministerial panel on mining in forested areas is likely to take into consideration Coal Minister Sriprakash Jaiswal’s concerns regarding the location of National Thermal Power Corporation’s (NTPC) proposed North Karanpura project in Jharkhand, which he says is situated too near to a huge reserve of dry fuel and if the plant is not shifted, then the reserves could be damaged.
Official sources said that the matter could come up for discussion during the panel’s meeting on Wednesday, as it is said to be listed in the agenda of the GoM’s deliberations, which is also likely to clear Mahan (belonging to Essar Power and Hindalco) and Chhatrasal (belonging to Reliance Power) coal blocks, as reported by The Pioneer on Tuesday.
Though the Group of Ministers (GoM) headed by Pranab Mukherjee had, during its March 1 meeting, decided that the 3×660 MW power project is not required to shift its location from North Karanpura, Jaiswal last month had written to Mukherjee, urging the panel to ask the power PSU to first seek his ministry’s permission before building any structures there.
Jaiswal’s main concern is that if the project comes on the location, it would sterilise around 600 million tonnes of coal reserves, which are situated underneath.
Driven mainly by this concern, both the Coal as well as the Environment Ministries had been opposing the coming up of the NTPC plant atNorth Karanpura. However after the GoM gave its green signal for the project to come up at the said location, Jaiswal is learnt to have said in his letter to Mukherjee that though his ministry respects the panel’s decision, NTPC should be urged to seek their (Coal Ministry’s) permission before they start the construction.
Jaiswal is said to have cited several issues like danger to coal reserves due to blasting and extensive underground mining activities, which would be undertaken in order to set up the plant.
According to sources, the minister is said to have brought to Mukherjee’s notice that movement of heavy machinery in and around the area, could damage the reserves located beneath the proposed plant’s site.
Keeping these aspects in mind, Jaiswal has urged the panel to ask NTPC to seek Coal Ministry’s permission before starting work on the plant, so that safety related aspects can be discussed.
Though the foundation of NTPC’s proposedNorth Karanpuraproject was laid in 1999 by then Prime Minister Atal Bihari Vajpayee, it failed to take off due to the differences between Coal India Ltd (CIL) and the power major over the dry fuel reserves situated beneath the location.
COAL MINISTRY SAYS ISSUES WITH TCI COULD BE SOLVED AMICABLY
NEW DELHI: The Coal Ministry today said there was no need for arbitration with The Children’s Investment Fund and the issues could be solved amicably, amid the London-based hedge fund alleging violation of international treaties related to its investments in CoalIndia.
“I think matter can be solved without arbitration and amicably,” Coal Secretary Alok Perti said.
The development follows The Children’s Investment Fund (TCI), a minority shareholder in Coal India (CIL), serving notice to Indian government for alleged violations of international treaties.
“I have told TCI if they have any issues they can send us representation. In case of commercial issues like pricing, they should talk to CoalIndia,” Perti said after a meeting with a TCI official.
In March, TCI had said in a letter to the Finance Ministry that: “TheRepublicofIndia’s recent conduct with respect to CIL has seriously impaired the business activities and operations of CIL and has contravened each of the treaties”.
TCI is the biggest foreign investor in CIL and has a minority stake of over one per cent in it. It has been accusing the PSU of not protecting minority shareholders’ interest and harming the company by not opposing fuel supply pacts.
The Minister of State for Coal, Pratik Prakashbapu Patil, earlier this month had said in a reply to the Lok Sabha that TCI had indicated it would take legal action against CIL board for breach of fiduciary duties.
The allegations by the hedge fund against CIL include under-pricing of coal in the fuel supply agreement compared to the market level and tardy progress in setting up of washeries, among other things.
“The allegations levelled against CIL are relating to operational matters of CIL and CIL needs to address them as per the framework set up by the company to handle investor grievances,” the minister had said.
TCI’s investments in CIL are through TCI Cyprus Holding Ltd and Talos Capital Ltd.
The hedge fund had also requested for formal negotiations with Indian government on the issue for amicable settlement of the claims.
“Failing such settlements within six months, we reserve our rights to initiate arbitration” in accordance withCyprusandUKtreaties, TCI had said.
COAL INDIA ISSUE: INVESTMENT FUND TCI FIRM ON ACTION; MINISTRY SEES NO NEED FOR ARBITRATION
LONDON/NEW DELHI: The Children’s Investment Fund Management (TCI) and the Government of India failed to reach a consensus on the question of violation of Bilateral Investment Promotion and Protection Agreements (BIPA) in Coal India.
TCI said it would continue with its action against the Government over its investment in CoalIndia, and launch a separate law suit against the company, following a meeting with the Coal Secretary, Mr Alok Perti, on Tuesday.
Meanwhile, the Coal Ministry said there is ‘no need for any arbitration’ with the London-based investor fund. “Why should there be arbitration? There is no real need. Issues can be sorted out amicably,” the Coal Secretary told newspersons after meeting TCI representatives.
Asked if TCI would still go for an arbitration, Mr Petri said, “I would not know that. We have discussed with them the issues and also asked them to send us further presentations if they have more issues and we will reply to them.”
Contacted by Business Line, Mr Oscar Veldhuijzen, partner at TCI, who attended the meeting by telephone fromLondon, said TCI would be launching the case against CoalIndia, putting a “large financial claim” on individual board members, making them liable if they don’t act in the interests of shareholders.
“We have a strong legal case. There has been a clear abuse of minority shareholders,” he said. TCI had waited till after the meeting to make the decision on the legal case, Mr Veldhuijzen said, “We wanted to give them a chance.”
TCI, the largest shareholder after the Government, has been vocal in its criticism over pricing of coal and fuel supply agreements. These caused a shortfall in profits of around $19 billion for CoalIndia, he estimates.
Mechanisms for keeping prices artificially low would “encourage corruption,” he said. Mr Veldhuijzen, however, described Tuesday’s meeting as “extremely productive.” “The Government made it very clear that Coal India is free to set coal prices and that the Ministry is committed to washing coal, and those are two things that are most important.”
“We are very happy to drop our case if they are willing to publicly commit to our pricing of all coal to the market in the forseeable future and commit to coal washing.”
“They are in denial.” He added, “The Ministry has not indicated how they will compensate us for the damage it has caused by interfering in coal pricing.”
“As far as BIPA is concerned, the Government has not discriminated against any investor. On other commercial issues, we told TCI that it will have to speak to CoalIndiato resolve them,” the Coal Secretary said.
TCI wants the Government to interfere more in the company affairs of CoalIndia. “We said that would not be appropriate as far as the Government is concerned. There has been no difference in what has been happening in CoalIndiapre or post IPO,” Mr Perti said.
COAL BLOCKS: WHY REVENUE IS NOT A PRIORITY
The basic objective of the proposed auction of captive coal blocks is not to raise revenues but to increase transparency in allocation process, the coal ministry has said to clarify its position on the MMDR Act Amendment Bill. The ministry’s clarification assumes significance in the context of the Comptroller and Auditor General’s recent audit observation that the government’s failure to adopt auction for allocation of captive coal blocks resulted in undue benefit of R1.8 lakh crore to private companies between 2004 and 2009.
The ministry has also clarified that putting a market value on captive coal does not make any sense as captive coal is meant for meeting end uses and not for commercial sale. The ministry has also clarified that no captive bloc was offered after the Bill was placed before Parliament in 2008. Excerpts of the ministry’s clarifications are carried below:
Allocation of coal blocks to private companies for captive use began in 1993 after the Coal Mines (Nationalisation) Act, 1973 was amended. This was done with the objective of attracting private investments in specified end uses. Initially there was not much demand for such allocation and the applicants themselves used to identify the coal blocks and seek allocation.
As the economy grew in size, the demand for coal also grew, particularly due to expansion in the energy sector. It was felt that Coal India Ltd alone would not be able to meet the growing demand and, therefore, the option of giving a bigger role to the private sector was explored. It is in this background that we should appreciate the reasons for allocation of coal blocks to private parties for captive use during this period.
While allocation of coal blocks began in 1993, it was only in 2004, for the first time, the idea of making allocations through competitive bidding was mooted and in 2005 the government initiated a proposal to amend the Coal Mines (Nationalisation) Act. The delay of three years between initiating the process of legislative changes and introducing the amendment Bill in Parliament was mainly due to the time taken in consensus building among divergent views of the various stakeholders. State governments such as Chhattisgarh,West Bengaland Rajasthan were opposed to the amendment as they felt that it would increase the cost of coal, adversely impact value addition and development of industries in their areas and would dilute their prerogative in selection of an allocatee. The ministry of power, too, felt that auctioning of coal may lead to enhanced cost of coal. Legal issues of whether amendment was required in the Coal Mines (Nationalisation) Act or Mines & Minerals (Development & Regulation) Act (MMDR Act) were to be carefully examined. It was only through multilayered consultations and discussions that these issues were finally resolved and the amendment Bill could be introduced in the Rajya Sabha in 2008.
Meanwhile, keeping in view the rise in applicants for coal blocks, the government evolved a consolidated set of guidelines to ensure consistency in allocation. In September 2005 the system was further improved, bringing in greater transparency. In the improved system applications were invited through open advertisements against an identified list of coal blocks.
Even as the process of switching over from Screening Committee procedure to competitive bidding was initiated, it was felt that the required legislative changes would be time consuming. On the other hand, imperatives of economic growth required large capacity addition and this issue was deliberated at length in the meetings of the Energy Coordination Committee that had recommended allocation of coal blocks to prospective power producers.
It would not have been prudent to disrupt the momentum of accelerated investments in the coal sector, especially as it was felt that it would take time in bringing about the required legislative and the consequent procedural changes. If the coal blocks were not made available between 2005 and 2010, it would have resulted in higher imports causing outflow of foreign exchange and would have had a deleterious effect on large investments in crucial sectors like power and steel. These were the main reasons for continuation of allocation of the captive coal blocks. Moreover, it may also be noted that no coal block was offered for allocation after introduction of the Amendment Bill in Parliament. Whatever allocations have been made after 2008, are as a result of culmination of the process initiated before the introduction of the Bill.
The allocation of coal blocks was never looked upon as a potential source for generating revenue for the central government. The government’s intent was to induce rapid development of infrastructure which was so very essential to keep the economy on a high growth trajectory. Hence the question of maximising revenue does not arise at all. The idea of introduction of bidding cropped up only in the wake of increasing demand for captive coal blocks and the consequent necessity of putting in place a process which is demonstrably more transparent.
The government’s intent was to involve the private sector to invest in identified infrastructure sectors in the interest of the country and its economy and, to this end; this developmental process was resorted to. The allocation of coal blocks to private sector companies is only for captive use and not for sale or commercial use of coal. Since the blocks are allocated to private companies only for captive purposes for the specified end-use the question of linking the blocks to the market price of coal does not arise.
The coal blocks for captive end use were allotted on the basis of recommendations of a Screening Committee, which followed a fair and transparent procedure, giving equal opportunity to all applicants. The Committee was a broad-based body with representation from state governments at the level of the chief secretaries, concerned ministries of the central govt and the coal companies. The procedure adopted for allocation involved wide consultations with all stakeholders.
The parameters and the norms for allocation were duly notified and followed by the committee while evaluating the applications. Comprehensive details about the applicant/the group, its performance, financial strength, etc. were placed before the committee enabling it to assess the comparative merits of the applicants and make fair and just recommendations.
Details of each application were shared with the concerned state and the line ministry. The applicant was also provided an opportunity to present his case before the Screening Committee. The Committee assessed the applications on matters such as techno-economic feasibility of the end use project, status of preparedness to set up the project, past track record in execution of projects, financial and technical capabilities of the applicant companies, recommendations of the states and the administrative ministry concerned.
The process of allocation of blocks was equitable, fair and just which is borne out of the fact that there has never been any serious allegation against the working of the screening committee. The move to introduce competitive bidding is to make the selection process demonstrably more transparent.
GOM TO DISCUSS CLEARANCES TO MAHAN, CHHATRASAL MINES
NEW DELHI: An inter-ministerial panel on coal is likely to review clearances given to Mahan and Chhatrasal coal mines at its meeting likely tomorrow.
The Group of Ministers (GoM) on coal in its last meeting in March had asked the Ministry of Environment and Forests to form an expert panel to evaluate the impact of mining in the two mines on environment.
“The expert committee of Environment Ministry in its report had suggested conditional clearances to both Mahan and Chhatrasal coal blocks,” an official in the Coal Ministry said.
“The seventh meeting of the GoM … To be held on May 30, 2012 … (will) review the clearances to Mahan and Chhatrasal coal projects,” said Agenda note of the meeting.
“The committee constituted by the MoEF to review the clearance of Mahan and Chhatrasal coal blocks has submitted its report,” it said.
The inter-ministerial panel would also consider the draft report relating to the policy on allocation of alternate coal blocks to captive coal miners.
Certain issues raised by Coal Minister Sriprakash Jaiswal with respect to GoM’s decision on permitting NTPC to buildNorth Karanpurapower plant at the proposed site will also be discussed in the meeting.
“North Karanpurapower project relocation issue was resolved by Chaturvedi Committee. The GoM accepted option-I, as recommended by the committee. Minister of Coal wrote a letter addressed to Chairman of GoM raising certain issues on the decision of GoM to allow NTPC to build power plant at the proposed site,” it said.
Other issues to come up for discussion include relaxation of FRA (Forest Rights Act) norms for power transmission lines, proposal to constitute more than one Advisory committee for faster forest clearances among others.
The Mahan coal block was jointly allocated to Essar and Hindalco for thermal power plant in April 2006, while the Chhatrasal block was given to Anil Ambani group firm Reliance Power to feed its 4,000-MW ultra-mega power project at Sasan, in Madhya Pradesh in October 2006.
The 12-member GoM was constituted in February last year to sort out environmental issues hurting coal production.
NLC TO ADD 15,000 MW OF POWER BY 2022
CHENNAI: Navaratna company, Neyveli Lignite Corporation Limited (NLC), is planning to add 15,000 Mw of power with an investment of around Rs 90,000 crore, of which 30 per cent will be infused as equity.
AR Ansari, chairman and managing director of NLC, said that the proposed addition will be completed before 2020-22. “For now, we have reserves of Rs 6,000 crore. We will infuse Rs 30,000 crore as equity from own reserves in the next 10 years,” he said.
The lignite-based power major is now betting big on coal and 80 per cent of its upcoming projects will be based on coal. These include 2,000 Mw each in Uttar Pradesh and Orissa, and one in Sirkazhi, Tamil Nadu. “We may go up to 4,000 Mw in these sites,” he said.
“We will require 4.5 million tonne of coal for every 1,000 Mw. We have sent a team toAustraliato scout for resources,” Ansari said, adding that the company had also requested the central government to allocate a coal block for it to to mine. Besides, coal and lignite, the company is looking at renewable energy. It is planning to set up a 50-Mw wind farm and a 10-Mw solar farm in Tamil Nadu.
Meanwhile, NLC is in the process of replacing its thermal power station (TPS) at Neyyeli, which is the oldest power plant in the country, While BHEL and Korea-based company Doosan are in race for the turbine and generators, a consortium led by Ansaldo and Czech-based Vitcovice is in fray for the boilers.
The 600-Mw thermal power station is currently using Russian equipment. The 50-year-old plant is operating at 80 per cent plant load factor (PLF).
COAL INDIA SAYS READY TO REVIEW FORCE MAJEURE IN FSA
NEW DELHI: Under pressure from the power utilities, state-run Coal India (CIL) is open to the possibility of reviewing certain aspects of the force majeure clause in the Fuel Supply Agreements (FSAs) being currently inked with power firms.
This change, however, of stance will not be at the cost of the company’s overall commercial interests, a senior official said.
“We are open to reviewing certain clauses in the FSAs, which the power producers feel are hurting them,” the official said.
The argument is that when the company’s production target has been pegged at 470 Million Tonne, against which it is being asked to supply 520 MT, it should tread cautiously.
Possible signs of a thaw was visible after a recent meeting between CIL chairman S Narsing Rao and NTPC CMD Arup Roy Chowdhury, wherein Rao understandably endorsed NTPC’s contention that CIL can have a re-look at the force majeure provisions.
Differences had already emerged between the power producers and CIL on the issue of penalty clause in the FSA, wherein CIL has inserted a clause under which, a penalty of 0.01 per cent for failure to supply the contracted amount of coal would only kick-in after three years.
The force majeure clauses has triggered concerns among electricity producers, with power minister Sushilkumar Shinde writing to the Principal Secretary to the Prime Minister Pulok Chatterji that CIL has diluted the penalty in a manner that it serves no purpose of being a deterrent.
Besides issues like force majeure and automatic sampling are heavily loaded against power producers and will create uncertainty and confusion, Shinde told Chatterji in a letter on May 9.
The force majeure provisions of the draft FSA includes breakdown of equipment, failure of contractors to deploy machinery or spare parts, shortage of explosives and even power cuts.
In the event of these exigencies CIL can claim immunity from liability. Sources said breakdown of equipment and paucity of spare parts could be couple of provisions, which can be reviewed.
“We have legacy issues which have led to the current spate of problems in coal production. Since our production target is 50 MT short of the expectations, as a precautionary measure we inserted these provisions,” a source said, and added that fresh discussions may be held with the coal ministry on the issue.
GVK OBTAINS STATE NOD FOR A$9.9-BILLION AUSTRALIA COAL PROJECT
MUMBAI: GVK, a diversified Indian infrastructure player, has received environmental clearance for the Alpha Coal and Rail Project inQueensland,Australia, said a company statement after receving the Queensland Coordinator General’s Report on the same.
In 2010, GVK purchased a controlling share of Hancock Prospecting’sGalileeBasincoal mines inAustralia, and 100% of the rail and port assets. GVK invested in three mines (Alpha, Alpha West and Kevin’s Corner) with total resources of 8 billion tonne of thermal coal in addition to the rail and port facilities, said the statement. In 2011, GVK Hancock delivered the first (and onlyGalileeBasin) bulk samples from its Alpha site to power stations inSouth KoreaandChina, it added.
The Alpha Coal Project consists of a 30 million tonne per annum (mtpa) mine, a 495-km standard gauge railway with 60mtpa approvals and a terminal and two berths at Abbot Pointm catering to at least 60mtpa of thermal coal destined for Asian markets.
GVK said in a statement, “The Alpha project (mine, rail and port) alone, will create, during construction, over 4,000 jobs at peak, at the mine site, 50 km northeast of Alpha township, on the railway and at the port at Abbot Point, 25 km north of Bowen. The $10-billion project will generate 1,800 permanent jobs across the mine, rail and port”.
POWER TRADING PRICES UP 20-25 PER CENT
NEW DELHI: With the mercury rising this month, short-term power prices have seen an increase of 20-25 per cent, with the highest price at which power was traded touching Rs 5 per unit.
The average for power trading was Rs 3.5-4 per unit. “Due to mismatch in demand and supply, the prices are expected to increase further but it will not reach too high a level,” Rajesh Mendiratta, the India Energy Exchange’s senior vice-president for business development, told Business Standard.
There is a shortage of about 9,000 Mw in overall demand from the grid, at a little over 100,000 Mw. The country’s biggest power exchange, IEX received purchase bids for 77,000 Mw and of 72,000 Mw for sale today. Traded volumes on the exchange have risen to 45,000-50,000 Mw/hour this month on a daily basis from 35,000-40,000 Mw/hour in April, he said.
Last year, in the same period, the average rates were 2.9 per unit. (There was a particular problem in October, when the coal shortage crisis sent short-term power prices and volumes haywire at the exchanges, with average rates surging to Rs 7-7.5 per unit, from Rs 2.5-3.5 and traded volume fell to 35,000 Mw/hr on a daily basis from 100,000 Mw/hr).
Jindal Steel and Power, Lanco Infratech and JSW Energy are among the largest traders in merchant power. According to an expert, merchant power rates will remain on the higher side till the issues in demand and supply as well as coal shortage are addressed. Also, every year in the summer, the prices move upwards.
The power industry has been facing inadequate coal supply for some time, as the production of government-owned CoalIndia, the near-monopoly producer, is unable to match their rising need. Demand for coal inIndiahas grown at an annual rate exceeding 8.4 per cent over the past five years. That of annual supply has been nor more than 5.4 per cent during the period. For 2011-12, while India’s coal demand is estimated at 696 million tonnes, 554 mt is likely to be available, leaving a gap of 142 mt to be met through import.
Data from the Central Electricity Authority also shows about 30 plants are at a critical level, with coal stock of less than seven days. This might aggravate the power supply problem. There are 95 thermal power plants with a total capacity of 91,487 Mw. Inadequate coal allocation and less import are the major factors for the decreasing level of stocks at the power plants. Last year, issues such as heavy rain disrupting coal supply, a workers’ strike at CoalIndiaand the Telangana agitation in the south had snapped fuel supply at many power stations.
After a directive from the Prime Minister’s Office and later a Presidential directive, CoalIndiasigned some fuels supply agreements (FSAs) for commitment of at least 80 per cent supply. However, some power companies have refused to sign the FSA because of various clauses they’ve objected to.
MINISTRY OF ENVIRONMENT AND FORESTS MAY ASK HYDEL PROJECTS ON GANGA TO RUN AT LOWER CAPACITIES
NEW DELHI: The Ministry of Environment and Forests is considering asking hydel projects on theGangato run at up to half their capacities in the interest of the flow of the sacred river. A movement against the environmental pollution and impact of the flow of the river from dams projects, led by fasting sadhus, has been raising its pitch.
“We are exploring the legality of such a measure,” said Environment and Forests Minister Jayanthi Natarajan. The ministry believes in the interest of the ‘Aviral dhara’ or continuous flow of theGanges. It could call on the environmental protection act and ask all such projects to cut down on operations.
According to the ministry, this could impact 70 such projects: (17 constructed, 14 under construction and 39 that are in the pipeline). States complaining of power shortages are also likely to resist such measures. Ministry says that it is not just hydroelectricity that claims its share of the river. A series of canals also draw away water for agricultural purposes. And domestic effluents, which can be controlled at state levels, greatly contribute to polluting theGanges.
POWERGRID Q4 JUMPS 37 PER CENT TO RS 1,031 CRORE
NEW DELHI: Central transmission utility PowerGrid Corporation of India today reported a 37.35% increase in net profit to Rs 1,031.69 crore for the quarter ended March 31, 2012 on higher income from operations.
The company’s net profit for the period under consideration last fiscal stood at Rs 751.12 crore, the company said in a regulatory filing.
For the year ended March 31, 2012, the company’s standalone net profit stood at Rs 3,254.95 crore, higher by 20.69% from the the year ago period when it stood at Rs 2,696.89 crore.
On a consolidated basis, the net profit stood at Rs 4,689.66 crore for the year ended March 31, 2012, as against Rs 3,829.29 crore in the year-ago period.
During the year, the company has paid an interim dividend of Rs 0.80 per share for the year 2011-12. The board if directors has declared a final dividend of Rs 1.31 per share.
The total dividend for the financial year 2011-12 is Rs 2.11 per share.
PowerGrid said that inclusion of Foreign Exchange Rate Variation (FERV) as per accounting policies has resulted in the latest annual profit falling by Rs 84.43 crore.
In the previous year, the increase in profit due to the same factor was Rs 4.48 crore.
This amount being the difference of Rs 78 crore included in other incomes and Rs 73.52 crore included in interest and other expenses, it added.
BHEL COMMISSIONS FIFTH 250 MW UNIT OF PARICHHA POWER PROJECT
NEW DELHI: State-run BHEL today commissioned the fifth 250 MW unit of Parichha thermal power project in Uttar Pradesh, which would feed 6 million units of power to the National Grid.
“BHEL has commissioned a 250 MW unit at Parichha Thermal Power Station (1,140 MW), in Uttar Pradesh. With this, 6 million units of electricity will be added to the grid of the power deficit state, every day,” a company statement said.
This order was placed on BHEL by Uttar Pradesh Rajya Vidyut Utpadan Nigam Limited (UPRVUNL).
BHEL’s job in the contract involves manufacture, supply, erection, testing and commissioning of the main plant package along with associated auxiliaries and civil works for the main plant package for this power project, it said.
The equipment for the project has been supplied by BHEL’s Haridwar, Trichy, Ranipet,Hyderabad,Bangalore,BhopalandJhansiplants, while BHEL’s Power Sector, Northern Region, is undertaking erection and commissioning of the equipment.
The company has established the capability to deliver power plant equipment of 20,000 MW capacity per annum.
Meanwhile, BHEL recently commissioned another 500 MW unit at NTPC’s Rihand thermal power plant in Uttar Pradesh. The unit has been commissioned for Stage III of the Rihand Super Thermal Power Station.
For NTPC , BHEL is also presently executing contracts at Barh (2×660 MW), Jhajjar (1×500 MW), Vallur (2×500 MW), Rihand (1×500 MW), Mouda (1×500 MW), Vindhyachal (2×500 MW), Bongaigaon (3×250 MW), Muzaffarpur (2×195 MW) and Nabinagar (4×250 MW).
RETHINK NOD TO NTPC’S JHARKHAND UNIT: JAISWAL
MUMBAI: Coal minister Sriprakash Jaiswal has urged a Group of Ministers (GoM) to re-consider its decision to allow NTPC to proceed with its 1,980 MW power project in Jharkhand’s North Karanpura, stating that the move would eventually block coal reserves of nearly 6 billion tonnes (BT).
Ahead of the GoM’s meeting on May 30, wherein the matter is listed as a key agenda, Jaiswal has written to finance minister, Pranab Mukherjee, heading the GoM that if power and other projects are allowed to come up in coalfields, it would trigger serious implications for the coal sector and generate further scarcity of coal.
Acting on BK Chaturvedi Committee (set up by the GoM) suggestions, the inter-ministerial group, in its meeting on March 1, recommended that NTPC be allowed to continue atNorth Karanpurafor 25-30 years and thereafter hand over the site to Coal India (CIL) for unlocking the reserves. But coal secretary Alok Perti had earlier argued that the power major’s project implied blocking reserves with economic value worth between $87.5 billion and $540 billion.
CIL and NTPC have been fighting a turf war over the location of the project. While CIL contends that the plant will sterilise 6 BT of coal which can fire power turbines to produce over 50,000 MW of electricity, the power firm argued that it has already invested over Rs 250 crore in the project and therefore cannot withdraw.
Though the GoM has asked NTPC to scale down the size of its land by nearly 40 per cent, but this has failed to pacify either CIL or the coal ministry.
In his letter the coal minister pointed out in the case of NTPC’s plant, the heavy blasting and the adverse effects on the proposed plant structure, threat of inundation of low-lying mines arising out of flash floods in the proposed Garhi reservoir, huge areas involved for conducting power evacuation corridor and material supply corridor etc have not been adequately appreciated by the BK Chaturvedi panel.
Jaiswal said in meetings with the Planning Commission, his ministry’s officials have explained the difficulties on simultaneous mining and functioning of the proposed thermal plant in view of various technical and safety related issues.
ALSTOM T&D EXPECTS MORE CONTRACTS FROM STATE-RUN POWERGRID
NEW DELHI: Alstom T&D India, an arm of French power equipment major Alstom, expects to bag a major chunk of state-run PowerGrid Corp’s proposed transmission network contracts in the next five years.
“PowerGrid has plans to add 80 more sub-stations in the 12th Plan, it is their target, they always sub-contract it to other players,” a source in the know told PTI.
“Typically, a sub-station accounts for 40 per cent of the total transmission network’s investment,” the source said adding that Alstom T&D should be able to do a fairly good amount of those 80 sub-stations.
As many as 28 sub-stations in different parts of the country have Alstom T&D’s technology.
Bullish on the country’s power sector, Alstom T&D expects to see good business opportunities in the power transmission segment.
Recently, the Country President and Managing Director of Alstom T&D India, Rathin Basu, had said that the prospects for power transmission sector are looking good.
“The reasons are that in the past five years we have added 54,000 MW in the (national) grid which was more than double of Xth Plan i.e. 22,000 MW.
“When you add such a huge amount of power to the grid, it has to be transported, it can only be done through transmission system,” Basu pointed out.
According to him, about 70,000 MW power generation capacity is in different stages of construction. These projects would also result in demand for transmission networks in the coming years, he added.
Further, Alstom T&D expects to get business from the government’s proposed initiative of connecting the Southern grid with the National grid.
“PowerGrid has built the National grid. … it is not connected to the Southern grid … once that happens, the whole ofIndiashould be running on one frequency,” Basu added.
Looking to capitalise on the potential of the Indian power sector, Alstom T&D anticipates to increase its annual investments in the coming years from the existing level of Rs 70 crore.
Alstom T&DIndiais part of Alstom Grid, a global player in electrical grids.
POWER DISTRIBUTION: GETTING STARTED WITH SMART GRID
Smart meters, the basic building block of the smart grid, could create win-win situations for power utilities and consuming groups. For distribution companies, smart meters could be a self-financing and game-changing idea supporting revenue enhancement from existing customers via (i) process efficiencies, (ii) data analytics, and (iii) consumption management.
Smart meters, once installed, are a rich repository of information–offering two-way flow on the network condition and electricity quantity and quality to both utility and customers. The aggregate data obtained through a utility-wide network of smart meters will offer a wealth of information, which would enable decision-making on every element of utility operations, especially in efficiency improvement and capex prioritisation.
Key challenges with the smart meter include high per device cost (going up to 10 times of an average meter), lack of large-scale implementation experience, unproven benefits and likely tariff impact across all consumer categories. Passing on the cost of smart meters to all consumers in the grid may be a difficult choice for state-level regulators.
While some private distribution utilities have taken the lead in smart meter implementation at the low tension (LT) and high tension levels, it is yet to reach the level of information sharing (with consumers) or supply quality measurement or capex plan.
In LT networks, there exists disaggregated group/network of consumers in the commercial/mixed load category, which often number more than 1,000 connections within a utility. Their operations are 24×7–bank ATMs and branches, medical and retail chains, food chains, telecom towers etc. This set of consumers contributes close to 8 -10% of total annual revenues across utilities. Erratic electric supply forces these consumers to install back-up diesel generators, maintained by the unorganised sector third parties, who often pilfer fuel and inflate consumption.
For some customers, energy contributes to close to 30-40% of their operational costs. So there is a compelling reason for them to manage this cost.
Smart meters can give such customers information on availability of electricity (its duration, quality, etc) and assist them in managing consumption–in controlling DG usage, preventing diesel pilferage, exploring renewable energy sources and open access options, or simply reducing environmental impact. This consumer set can be tapped for financing the cost of smart meters in exchange for sharing metering information with them by the utility. Along with this, meter manufacturers can be drawn as financial partners or as energy managers.
A recent case in point is the interest shown by a telecom tower player to install smart meters across all its 7,000 connections in a government-run utility in the south. Discussions are at an advanced stage and the arrangement may prove to be trend-setter.
The cost of energy (from grid power–18 hours a day; DG set consumption – 6 hours a day) for this telecom tower player is close to R240 crore a year in that utility. Investing R7 crore in self-financing the smart meters scheme (at about R10,000 per meter) makes eminent sense for the company provided the utility shares information from the smart meters with it. Payback can be within a year even if small efficiencies are achieved in controlling diesel usage, ensuring metered consumption or preventing delayed payments.
Smart meters also give a set of information to the utilities which can be priced and shared with interested consumers to generate additional stream of revenues for the utilities. Moreover it can also assist regulators in implementing standards of performance and assist in designing time of day tariffs.
The author is executive director, energy & utilities, PwCIndia.
TATA POWER TARGET PRICE CUT TO R100
Tata Power’s Q4FY12 profit after tax (PAT) was 28% below consensus at R350 crore due to following reasons: 1) 17% q-o-q fall in Indo coal margins as ASP fell 3% q-o-q on weak coal markets. 2) R200 crore loss on start of Mundra UMPP.
We cut our price objective to R100 from R124 on higher FY12 parent debt, reduced coal mine value to factor in weak margins and lower telco subs value.
We cut the stock to non-consensus ‘Underperform’ (16% brokers have sell, per Bloomberg) on limited stock upside (v/s our universe), peaked consol.
Earnings, RoE peak in FY13E on start of a large loss-making UMPP & execution of its delayed capex and rich valuation.
The stock enjoyed premium P/BV – FY13E P/BV of 1.6x vs sector 1.2x on solid coal business, which now has peaked. Hence UPF versus peers.
Key risk is if the government oblige with tariff hike at UMPP – difficult in current environment and rise in thermal coal prices.
1st q-o-q fall in coal ASP is an inflexion point; UMPP losses start. TPC had first q-o-q decline in 12 quarters at Indo coal ASP $92/tn (-3%q-o-q). This coupled with cash cost hike of 15%q-o-q on rising fuel cost led to 17%q-o-q decline in contribution ($45/tn). Also start of its aggressively bid, loss making Mundra UMPP led to 4Q record loss of R200 crore. Our FY13-14E are 19-32% below consensus.
We see TPC adding globalization risk with its strategy to expand abroad, given the slow pace of progress inIndiato reach its goal of 25GW by FY17E vs 4.7GW in FY12. Its 5.4GW of capacity inIndiais reaching advanced stage of execution and may start construction in FY13, which may require cash calls.
GLOBAL RENEWABLE ENERGY M&As AT $21.7 BILLION
NEW DELHI: Around $21.7 billion worth of renewable energy mergers and acquisitions were completed globally in the first quarter this year and more consolidation in the sector is on the cards, Ernst & Young said in a report.
The mergers and acquisitions (M&A) activity increased despite difficult economic conditions, largely because of consolidation, according to E&Y’s latest quarterly report on global renewable energy country attractiveness indices.
The first quarter of this year saw $21.7 billion worth of renewable energy transactions being completed, a rise of 41 per cent over the last quarter of 2011 and going forward it is likely to rise further.
‘The next 12 months are likely to be characterised by further consolidation in the solar and wind supply chain, with a large number of outbound deals expected from Asia,’ E&Y Energy and Environmental Finance Leader Ben Warren said.
Around 38 per cent of respondents expect energy costs to rise by 15 per cent or more in the next five years, which would lead to increased usage of renewable energy, the report said.
While reducing energy costs is often the foremost objective of an energy strategy, a number of other goals are also driving the renewable energy theme such as energy security, carbon reduction, price stability; regulatory compliance and reputational aspects.
Meanwhile, following a record year in 2011, investment flows in clean energy during Q1 2012 were the weakest since 2009.
Financing of new projects witnessed a sharp dip as just $24.2 billion was raised in the first quarter of this year, a 30 per cent decline on the previous quarter and a 7 per cent decline for the same period in 2011.
Warrennoted, ‘Access to capital will remain the single biggest differentiator for companies in both the technology and infrastructure markets for the foreseeable future.’
The short to medium term global sector outlook is generally downbeat, but as more mature technologies move ever closer to grid parity with traditional energy sources, there is good reason for longer term optimism for the global renewable energy sector, the report said.
SOLAR POWER PLANTS IN KASHMIR
SRINAGAR:Jammu and Kashmirchief minister Omar Abdullah and Union minister for new and renewable energy Farooq Abdullah today inaugurated a 18-KW Solar Power Plant atSub-DistrictHospitalat Charar-i-Sharief in Budgam district.
This was the second such solar power unit inaugurated by the two leaders in the past two days. Yesterday, one such plant was inaugurated at the Old Assembly Complex here.
The unit inaugurated at Charar-i-Sharief involved an expenditure of about Rs 50 lakhs, an official spokesman said.
He said the Union ministry of new and renewable energy has approved a total of 69 solar power plants for the State to be installed in as many health institutions as backup power supply units.
This involves an amount of Rs 32.70 crore, the spokesman said, adding, the tenders for 32 such units have been finalized and for the remaining units the process is going on.
During the last three years the MNRE headed by Farooq Abdullah has sanctioned over 50000 solar home systems for the 225 un-electrified villages and hamlets of the State.
As many as 50 water mills have been upgraded, while financial assistance to upgrade 2000 more such water mills for electricity generation and mechanical activities has also been approved, the spokesman said.
He said the Union ministry has also sanctioned 58 micro-hydel projects being installed in remote villages to generate electricity.
It has also sanctioned and installed solar water heating systems at 10 locations, while solar photo voltaic power plants at 69 locations to generate 1.09 MWs have also been approved, the spokesman said.
IREDA INVITES BIDS TO RAISE UP TO RS 3 BILLION VIA BONDS: SOURCES
MUMBAI: Indian Renewable Energy Development Agency, or IREDA, has invited bankers on Wednesday to raise up to 3 billion rupees ($54.15 million) through a bond issue, four bankers said.
The state-run company will borrow through a 10-year vanilla bond, said three bankers who the company is in talks with for the sale.
IREDA is engaged in promoting and financing renewable energy and conservation projects
GERMANY AIMS TO SPEED UP EXPANSION OF POWER GRID
BERLIN May 29 (Reuters) – Germany’s federal power network regulator said on Tuesday it wanted to speed up the switch from nuclear to renewable energy by moving faster to expand the grid, in the hope of avoiding a “power gap” that would hurt Europe’s largest economy.
“We want to speed up the switch to renewable energy and include as much of the whole of society as possible in this procedure,” Jochen Homann, head of the authority called Bundesnetzagentur, said at a joint news conference with Chancellor Angela Merkel.
He added that without an expansion of the grid network, progress made in the renewable energy sector would be lost.
Network operators handed Merkel a plan for grid expansion, which will lead to a binding government proposal by the year’s end.
Since Merkel’s abrupt policy reversal last year to shut more than half a dozen nuclear plants and speed up a full nuclear phase-out after Japan’s Fukushima disaster, her government has failed to set out a clear plan to manage the shift.
Industry has warned of power shortages and companies are experiencing problems with plans for offshore wind power due partly to the insufficient grid.
Inadequate transportation and distribution networks are among the main hurdles in boosting renewable sources. Questions about the liability for delays or damage and over who should bear the burden of the immense up-front financing are deterring potential investors, and the offshore wind sector is a major victim.
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