Shares of power cos take a beating as bank loans to discoms dry up…

• Alarmed by the critical financial condition of state-owned power distribution companies, investors have started dumping shares of power companies putting downward pressure on their prices. The decline in power companies' share prices is much steeper than the general fall in stock prices. This is evident if one goes by the NSE's infrastructure index which comprises power companies.
• The hardest hit are companies engaged in power trading business. The poor finances of state utilities have led investors to sell off stocks of power companies as a precaution, which has resulted in decline in prices. For example, the share price of PTC India fell by as much as 32% between August 22 and November 22 at the NSE. Lanco Infratech's share price declined 27% during the same period. Adani Power's stock price declined 12% while NTPC's lost 11% during the period. While PTC India is directly exposed to risks in the power trading business, Lanco, Adani and NTPC undertake power trading business through subsidiaries. Share prices of Reliance Power and PowerGrid have not seen any sharp declines during the period but their scrip has remained under pressure.
• Power trading companies like PTC India and NTPC Vidyut Vyapar Nigam are unable to get timely payment from states like Tamil Nadu and Uttar Pradesh, where discoms' losses have reached unmanageable levels. These discoms owe more than R1,000 crore to PTC India alone for power supplied by it. This has forced power traders to raise fresh capital for meeting their working capital requirement.
• This despite the fact that in a watershed development, state electricity regulatory commissions (SERCs) have recently given undertaking to ensure annual tariff revision ,if necessary, by using their suo motu powers. The apex electricity regulator Appellate Tribunal for Electricity has also ruled that SERCs do have suo motu powers to revise tariff and they must exercise that authority. Tamil Nadu discom has sought 38% hike in tariff, which should lead to additional cash flow of R8,200 crore to the discom. Uttar Pradesh has assured bankers that it would increase tariff by more than 30% once assembly polls are over.
• Industry experts say that investors have overreacted in panic as the fundamentals of the sector remain robust despite the problems in power distri bution. PTC India has been trading power since 2000. Till March this year, it was able to recover 100% of its R4,000 crore dues. "Financial health of discoms will improve due to the recent policy and regulatory initiatives," Pramod Deo, chairman, central electricity regulatory authority, said. "Policy makers have begun work on structural solutions to pressing issues. But these could take a while to implement," RBS Bank said in a recent update to investors.
• "Share prices of power companies are under pressure as payment to private power generators from discoms is not smooth. However, the scenario could change if reforms are implemented by states in the true spirit," HD Khunteta, chairman and managing director, Rural Electrification Corporation, said. "Scenario regarding concern on account of receivables from distribution utilities should soon change in view of SERCs taking steps to increase tariff. Also, APTEL's judgement, based on power ministry's r equest, exhorting SERCs to suo motu initiate proceedings for tariff revision in case there is delay in tariff filing is very welcome step in this regard," Tantra Narayan Thakur, chairman and MD, said. Due to pressure from state governments, discoms are reluctant to approach regulators for tariff revision.

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Private sector drives power capacity additions - Adds more than the Central and State utilities combined…

• Fuel shortages and funding woes notwithstanding, private sector developers accounted for much of the power capacity addition that has taken place so far this fiscal. During April-October 2011, the private sector added 4,301 MW, more than what was added by the Central and State sector utilities put together. The continued hold-up at the near-complete Kudankulam nuclear power units, though, could ensure that the actual capacity added could be well short of the 17,716 MW target for the current fiscal, which is the terminal year of the current Plan period.

• Key private sector generation units commissioned during the fiscal include Adani Power's 660 MW Mundra (second unit), Tata Power-DVC's 525 MW Maithon project (Unit 1), two 300 MW units at JSW Energy's Ratnagiri project and Sterlite Energy's 600 MW Orissa unit. The strong private sector perform ance is in line with the progressively improving trend of private developers to capacity addition during the first four years of the current Plan period. And this is despite most of these projects not having firm power purchase agreements, difficulties in getting site clearances, problems in open access, lower preference in allocation of fuel linkages, and impediments such as the need to furnish bank guarantees for getting transmission corridors built.

• In 2010-11, despite slippages, a record power capacity addition of 12,160 MW had been achieved, higher than the previous record for generation capacity commissioned in a single year of 9,585 MW in 2009-10. To put things in perspective, the capacity added during just two years of the Eleventh Plan (21,745 MW added during 2010-11 and 2009-10) was higher than the cumulative capacity addition achieved during the entire five years of each of the last three Plan periods. The country had seen a capacity add ition of 20,950 MW in the Tenth Plan (2002-07), 19,119 MW in the Ninth Plan and 16,423 MW in the Eighth Plan.

• With the capacity addition last fiscal tipping 12,000 MW, and if a similar figure is achieved in the current fiscal, an overall capacity addition of around 48,000 MW is seen as a possibility during the Eleventh Plan, another record by a wide margin. This is, however, going to be well below even the downward revised target of 62,000 MW pegged for the current Plan period, which started with a target of 78,700 MW.

• The overall capacity addition achievement during 2009-10 was about 66 per cent of the target (9,585 MW against a target of 14,507 MW). It was 31 per cent in 2008-09 (3,454 MW against a target of 11,061 MW) and 57 per cent in 2007-08 (9,263 MW against a target of 16,335 MW). According to Government data, of the 9,263-MW commissioned in 2007-08, the private sector accounted for only about eight per cent. This improved to 25 per cent in 2008-09 (883 MW out of the 3,454 MW commissioned that year) and to 45 per cent during 2009-10 (4,310 MW out of 9,585 MW).

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India plans to sell 500MW electricity to Pakistan : Two countries scheduled to meet next month to finalise tariff and grid connectivity…

• India plans to sell 500 megawatts power to Pakistan, according to an Indian newspaper. Officials of the two countries are scheduled to meet next month to finalise the t ariff and grid connectivity. Electricity trading with Pakistan is part of a larger plan of a South Asian transmission link, which will help countries in the subcontinent harness energy potential of the region, it said. "The two countries have reached a formal understanding on the sale of electricity. The finer points are being worked out. The grid connectivity across the border would help Islamabad tide itself over outages," the report quoted senior Indian Power Ministry officials, as saying.

• The officials said that both the sides are considering setting up transmission infrastructure in a joint ownership to wheel around 500MW via Amritsar. As Lahore has complete transmission lines and grids and is near grid in Punjab, it will be economical to transfer power through Amritsar, they said. The tariff would be a crucial issue to be discussed during the meeting, scheduled for early December, they said. "There is a political will among the leaders of the two nations to enhance trade ties and this would work in early solution of issues," the officials said.

• South Asian electricity trade is being seen as a major area of cooperation among the countries that will bring prosperity to the subcontinent by providing power to the deficit parts of the region. "South Asia is a major hub of fast-growing economies, having 25 percent of the world's population. There is an ongoing shift in focus from agriculture to manufacturing. No South Asian country can meet its energy needs entirely from within its own domestic resources. We need to integrate entire region with a robust power grid," Indian State Minister for Power, KC Venugopal, said.

• India will need around 250,000MW by 2017, a fivefold increase, to sustain its economic growth. A South Asian grid will give the region 100,000MW to trade and help India tap hydropower and natural gas reserves of its neighbours, he said. The grid model connecting Norway, Denmark, Sweden and Finland and another linking South Africa, Botswana and Zimbabwe are being studied. "The energy and electricity cooperation are non-traditional areas of trade relationship development. Bhutan has managed to balance its trade with India with large exports of hydroelectric power. Similar potential exists for Bangladesh and Nepal," according to a study conducted by the Confederation of Indian Industry.

• An integration of electricity grids across South Asia will reduce the power cost and enhance manufacturing competitiveness of all the members. Nepal, Bhutan, Afghanistan and India have huge hydroelectric potential, which can be tapped for intra-regional power trade, the study revealed. While a transmission link with Bhutan is in place, there are plans to tweak existing line to enable imports up to 5,000MW into India by 2020. Indian firms are working on hydel projects of 10,000MW in Bhutan and 1,000MW in Nepal to be able to share power from these projects. New Delhi is setting up a link with Bangladesh. Plans are underway to set up transmission link to exchange up to 1,000MW with Sri Lanka, the report added.

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Chhattisgarh to stay power-cut-free state for 20 yrs: Raman Singh, Chief Minister…

• Providing the cheapest energy to consumers, mineral-rich Chhattisgarh will remain a no-power-cut state for the next 20 years, Chief Minister Raman Singh has said. "There is no power cut (today) and there will be no power cut in Chhattisgarh in the next 20 years - be it industry, agriculture or domestic sector," Singh said. The young state, which was created out of Madhya Pradesh eight years ago, would add power generation capacity of 3,000 MW every year for the next two-three years, he said.

• "In 2012-13, we are adding 3,000 MW... say around per year 2,000-3,000 MW," Singh said. The state is expected to add over 20,000 MW by 2016. It has the potential to produce up to 50,000 MW. Per capita power consumption is one of the key indicators of development. This is where Chhatisgarh has shown a marked improvement, the Chief Minister of the BJP-ruled state said. "Per capita power consumption in 2001 was 600 units. Now, it is 1,560 units, which is better than Delhi and next to Gujarat," he added.

• As the state electricity board levies minimal wheeling charges, it can transport and sell power to deficit areas in any part of India, Singh said. The country's largest power producer NTPC, which has a generation capacity of over 35,000 MW, operates two of its biggest thermal power plants in the state - Korba (2,600 MW) and Sipat (1,660 MW). The advantage with the state is that the power producers can source coal right at the pit, as it has rich coal reserves. This is also the main reason for the cost-effectiveness of generation activities in the state.

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Power situation improves in Orissa, yet 3-hour cut must…

• The deficit energy situation in the State leading to unscheduled and frequent power cuts has, in the meantime, improved to some extent with the Energy Department now holding that to manage the situation for a few days more it has to continue with minimum three hours of power cut daily - two hours during day time and one hour at night. The problem started with drastic reduction of power generation at the thermal power units including the NTPC at Kaniha due to shortage in coal supply resulting from reduction in the production level of coal for various reasons. On the other hand, coal price in the international market has gone up, putting pressure on the power generating units. Although the Coal India has stuck to its price level, its subsidiary, the Mahanadi Coalfield, has effected a change on the plea of higher production charges.

• This is a major fact or which has influenced power generation at the thermal power plants that made up three-fourths of the State's total energy requirement. This apart, dependable hydro-power plant sources like the Balimela, Indravati and Upper Kolab plants have gone lean on production, generating only 10 mw each. However, after two units of the Ib Valley Project, The Sterlite Energy and the NTPC at Kaniha agreed to provide 160 mw, 320 mw and 150 mw more, the deficit has slid to 300-350 mw, promising some improvement in the grim situation. The Energy Department has also asked the captive power plants of various industries to generate power to their full capacity which may help tide over the crisis completely.

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'Civil nuclear deal key to India-US prosperity'…

• Observing that completing the civil nuclear deal is central to the long-term prosperity of India-US relationship, the Obama Administration said ensuring a level-playing field for its companies in India's civil nuclear industry is its top priority. "Completing the US-Indian civil nuclear cooperation partnership is central to both our nations' long-term prosperity and India's future energy security," the State Department said yesterday in a written response to a question being asked by Indian journalists for the past several days. "Ensuring a level-playing field for US companies to invest in India's civil nuclear industry remains a priority for the State Department," the state ment said.

• "We are continuing to study India's regulations on civil nuclear liability," the statement said in reference to the recent gazette notification by the Indian Government in this regard. Given that it is almost over 10 days now after the Gazette notification was issued, informed sources familiar with the deliberations said that the United States is not at all happy with the notification as it feels that US companies would be at a disadvantage and its core issues have not been addressed. However, despite being repeatedly asked by journalists at the daily press briefings of the State Department, its officials are reluctant to publicly air their differences with India on this particular issue.

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CIL appoints PFC to select a suitable partner and operator for its proposed 1,600-MW power project in Orissa…

• Mining major Coal India said it had appointed the Power Finance Corporation to select a suitable partner and operator for its proposed 1,600-MW power project in Orissa. "We have appointed PFC to identify a partner for management of power plant at a tariff based pricing system," Coal India (CIL) Chairman N C Jha said. "We are looking for a 50:50 JV with the partner," he added.

• CIL had mooted the 1,600-MW coal-based power plant to utilise the coal from Vasundhara coalfields in Orissa. "If we want to raise production, there must also be consumption. We are planning for more thermal power plants at coalfields where there is inadequate evacuation infrastructure," Jha said. He said there were two more such locations where power projects could come up, one in Bandraigarh in Chatttisgarh and the other in North Karanpura in Jharkhand. At present, CIL tries to evacuate coal by selling it through e-auction and already has permission to sell 20 per cent of the coal from these locations through the auction route.

• Coal sold via auction is evacuated by buyers via road. Asked about coal supply to power plants, Jha said the supply to the sector is more than 80 per cent, or 1 million tonnes, a day. "We have already signed a fuel supply agreement for 600 million tonnes and from availability of 250 million tonnes, so how can we supply?" Jha said. Remaining coal has to be imported. Either they import or we can import if there is firm commitment, he said. CIL had already mooted a new JV company with the Shipping Corporation of India for imported coal supply to consumers. Meanwhile, CIL has expressed dissatisfaction with the progress of coal washeries projects due to delay in getting environmental clearances.

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Chhattisgarh to add 1,500 MW by 2012 - To raise its power generation capacity to 3,424 MW from the current 1,924 MW…

• Coal-rich Chhattisgarh will add 1,500 MW electricity by 2012 that will raise its power generation capacity to 3,424 MW from the current 1,924 MW, official sources said on Tuesday. "The work on 1,000 MW power project at Marwa-Tendubhata in Janjgir district and 500 MW Korba West power project are going on at war-footing and both projects will begin generation by 2012. It will raise Chhattisgarh Government's power generation capacity to 3,424 MW," an official of the State Energy Department said.

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Coal India open to utilise up to one-fourth of its projected Rs 600 billion cash reserve as of March 2012…

• Coal India Ltd has told the Union Government that it is open to utilise up to one-fourth of its projected Rs 60,000 crore cash reserve as of March 2012, to help the Centre mitigate the fiscal deficit; provided the company is 'assured' of a return, not less than the existing interest income from such reserves. CIL earned an int erest income of nearly Rs 1,800 crore in the July-September 2011 quarter from a cash reserve of Rs 45,000 crore. The interest income was nearly 70 per cent of the net profit of the company during the quarter.

• With chances of meeting the disinvestment target through public offer getting slimmer due to sluggish market condition, the Union Government recently asked the Central public sector companies to ascertain the cash position. The initiative is reportedly aimed at exploring options such as share buyback by cash-rich PSUs or encouraging PSUs to pick up stake in peers thereby releasing the much needed cash for the Government. "The Government had recently wanted to know about our cash reserves position. We will have reserves of about Rs 60,000 crore by March 2012. We have indicated that we will require three-fourths of it to meet capex requirements," Mr N.C. Jha, Chairman, Coal India, said on the sidelines of a seminar organised by the Confederation of Indian Industry here on Tuesday.

• He, however, clarified that the Government has not issued any directive on possible use of such funds, as ascertained by the company. Sources, however, said that the company in its response clarified that the company could part with the cash against an "assured income". "The cash reserve brings us an assured interest income and is contributing to the net profit of the company. We can part with some cash, if the shareholders so desire, provided, it does not impact our profitability," a source added. Shares CIL closed at Rs 302.55, 1.68 per cent higher than the previous closing, at BSE on November 22.

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