CERC sets up fund to promote renewable energy projects…

According to reports, the Central Electricity Regulatory Commission (CERC) has set up a renewable energy fund (REF) to promote projects in India. This fund is aimed at compensating states if they fail to meet the target given under their schedule of renewable energy (RE) projects. All RE projects are required to provide a schedule of generation to CERC from 2012.

Officials explained REF would bear charges imposed on states hosting RE projects that fail to comply with their supply commitments.At present, only wind energy projects without sale arrangements with states are required to give declarations forecasting their generation to state load despatch centres. CERC allows 30 per cent deviation in the supply commitments, beyond which penalties are levied or incentives offered. The Electricity Act, 2003, and the National Action Plan on Climate Change (NAPCC) provide a roadmap for increasing the share of RE in total generation capacity. Under this plan, every state has to purchase five per cent of total power requirement from renewable resources like wind, solar or water.

The power purchase obligation is fulfilled by trading of RE receipts, which is a tradable receipt representing a value of one megawatt hour (MwH) of power injected into the grid through renewable resources. From 532 RE certificates issued in March, total issuances till date have gone up to 352,0260. Under the proposed fund, deviation beyond 30 per cent is proposed to be shared among all state distribution companies in a ratio of their peak demand met in the previous month. The states, in turn, would be compensated for these charges out of the renewable regulatory fund. Explaining this, an official said if a state proposed to provide 50 Mw of RE power but could supply only 40 Mw, then the state in which the project is located have to draw 10 Mw power from central pool and supply. This is termed as unscheduled interchange and is charged at a higher rate.

This extra cost will be borne by all state distribution companies, which would be compensated by REF. The logic is that some states like Gujarat, Rajasthan or Tamil Nadu are preferred to set up RE projects due to abundance of energy resources like wind or water or sunlight. Thus, the contribution of that particular state in the central pool becomes higher, whether or not it is prepared to commit such supply.

“In case there is short supply, it has to make good the shortfall by drawing power from the central pool. Since the state is naturally endowed with such a resource, it is unfair to expect that it compensates for individual projects’ shortfall. Therefore, such a compensation plan is worked out to promote power projects in states, where there is natural endowment of resources,” they added.

This facility for REF will be applicable for wind energy farms with collective capacity of 10 Mw and above, at connection points of 33 Kv and above. This is irrespective of whether the project is connected to the transmission or distribution system of the state or to the inter-state transmission system, and who have not signed any power purchase agreement with states or union territories. Similarly, for solar generating plants, the cutoff for REF eligibility will be a capacity of 5 Mw.

Read More...

SunEdison puts seven India projects on the block…

According to reports, SunEdison, a solar power developer and a subsidiary of the US poly-silicon major MEMC, is looking to sell 49 per cent stake – the most allowed under the power purchase agreements – in seven of its solar projects in India. (Each project is under a company and SunEdison wants to sell 49 per cent in each.)

Sources close to the development say that a US-based company is in talks with SunEdison for this.

Sources among investment bankers have told Business Line that these seven projects total to a capacity of 52 MW. The biggest of the seven is the 25-MW project in Patan, Gujarat. The others are: three in Surendranagar (Gujarat), Sirohi and Jodhpur in Rajasthan and Jhansi in Uttar Pradesh.

SunEdison estimates that over the lives of these projects, they would earn $140.69 million net cash, i.e., tariff and carbon credit revenues minus development costs, maintenance costs and taxes. Forty-nine per cent of this works out to $68.94 million.

Projects other than Patan (25 MW), Sirohi (1 MW) and Jhansi (1 MW) are jointly-owned. While IDFC is the co-owner of the Jodhpur project (5 MW), OPIC, a part of the US government and L&T Infra Finance are the co-investors of the Surendranagar projects.

Incidentally, only last week did SunEdison announce raising $110 million in debt from OPIC, L&T Infra and IDFC.

These seven projects are in various stages of completion. All of them will be generating solar electricity by January 2012.

How the stake-sale pans out is a matter of great interest to the solar industry globally. This is because India is a very recent entrant in the solar power generation sector but is a big and growing market.

With sunshine all through the year, India is a promising solar nation, where the panels are expected to produce more than in, say, Europe or the US.

However, there are other issues such as difficulties in project implementation, and the absence of solar irradiance data. SunEdison’s success in putting through the stake-sale deal will kind of become a benchmark for others

Read More...

Suzlon eyes $1-billion worth of new orders every quarter…

Wind power major Suzlon Energy, which recently took complete control of its German subsidiary REpower, has said it will focus on value engineering to remain competitive and has set a target of bagging USD 1 billion worth of new orders every quarter for the next few years.
"We are working on value engineering by introducing new products like the S9X series of turbines that will not only enable us reduce cost, but also give us a competitive advantage in the market. With the new technology, we aim to bag orders worth USD 1 billion every quarter, every year," Suzlon Energy chairman and managing director Tulsi R Tanti told PTI in an interview here.
Currently, the Pune-based world's fifth largest wind turbine maker's order-book stands at USD 7 billion and has a topline of USD 5 billion.
The company has created the S9X suite of low wind speed turbines - S95 and 7, with a 2.1 MW rating for all markets, which is an advancement over the successful S88 wind turbines.
"The smart S9X innovation and comprehensive design increases energy yield by 14-19 per cent, improves service ability and ease of maintenance," Tanti said.
The 2 MW-class turbines come in two variants of 90-m and 100-m hub heights and the rotor diameter of 95 m and 97 m.
"The wind industry is rapidly evolving. The center of gravity has shifted to emerging markets, which are re-shaping the renwable energy sector. This shift is also dictating the direction of technology development, as more moderate and low wind sites become available in these new markets. The S9X suite of turbines has been developed to take advantage of these emerging opportunities," Tanti said, adding Suzlon has already received orders for 800 MW for its this new turbine.
Suzlon has also started working on manufacturing products in the 9X suite, with a capacity of 3 MW and 6 MW. While the 2 MW turbines are designed for developing markets, the 3 MW will cater to the developed markets and the 6 MW for the offshore markets, he said.
"By brining in these new technologies, we expect to bring down material consumption in all the three platforms by 10 per cent each. The S9X product suite is designed to provide higher return on investment for our customers through higher generation, greater efficiency and improved technology," the company chairman said.
"We are working on bringing down further the cost per energy through the technology. We expect to reduce the cost per energy by 25 per cent over the next two years through technology," Tanti said.
On its USD 1.28-billion order from Britain's Caparo Group to generate 1000 MW, he said, "500 MW worth of capacity will be commissioned in this fiscal, while another 500 MW will be commissioned within the following year." Suzlon to save Tanti has also said with REpower coming fully under its control, Suzlon expects to shave off 200 million euros from its overall cost structure next fiscal, which primarily involves sourcing more components from India and China.
"Nearly 65 per cent of our spends are on components, a majority of which comes from Europe. But given the current scenario, we plan to concentrate on the domestic market as well as China for components. This will help in reducing our material cost by nearly 100 million euros in FY13 and another similar amount from other heads," Tanti said.
The cost-saving will be on the back of acquisition of the REepower. "With the successful acquisition of the complete stake in REpower, we see ourselves well-placed in the market. We will be focusing on market positioning, joint procurement and joint technology development for all our current and future projects. REpower, which was otherwise buying components from Europe will now import it mostly from India," Tanti added.
Suzlon, present in 32 markets with an installed capacity of 18,000 MW (7000 MW in the country), recently bagged USD 6.5-billion worth orders for the next three years, making it the biggest order in the area.
It can be noted that Suzlon stocks fell nearly 40 per cent in the past one week. Capping lack of investor confidence was the report that promoters sold 2 per cent stake to address margin calls to bankers.
When asked about this, Tanti said, the current debt of nearly Rs 9,000 crore is not a problem, considering our healthy order-book of USD 6.5 billion. "With a USD 7 billion order-book and USD 5 billion topline, USD 2 billion in debt is not a big deal."
On whether the company will be in a position to pay back the USD 550 million FCB redemption due for next June and September, he said "Of course. I am not seeking any extension."
The company has Rs 10,000 crore debt, out of which, around Rs 6000 crore is working a capital loan, and Rs 4000 crore is a long-term debt, which is to be re-paid over 5-7 years. Over the next 12 months, it has a repayment obligation is USD 750 million.
Tanti said, "As of the September quarter, the net debt to equity ratio is 1.6 times, which we want to bring down to 1.4 by the end of the year and by March 2013, it will be be at 1:1, and that too, without raising any equity."

Read More...

KEC International sees 20% uptick in revenue…

Buoyed by the growth prospectus in the power sector in domestic as well as international markets, infrastructure EPC major KEC International said it is eyeing 20 per cent annual growth in revenue this year.
"Currently, the power sector is witnessing a slowdown in the domestic market, but there is huge demand in the international market. Since we are present in both, we expect to grow 20 per cent every year," KEC International managing director and chief executive Ramesh Chandak told PTI here.
KEC, the flagship company of the RPG Group, which operates in five verticals, including power transmission, power cables, telecom, railways and water, has businesses in 40 countries and an order book of over Rs 8,400 crore.
"All the five sectors, in which, we are operating are quite promising. Despite the challenging global economic environment, our strong global presence and diversified business portfolio has helped us in securing new orders," he said.
Transmission is the core business of the company with nearly 70 per cent revenue contribution.
"We expect more orders coming from this sector over the next one year, even as the other sectors will slowly grow," he said.
On the domestic power sector scenario, Chandak said, "We are bullish on its growth here. Though there is a slowdown on the generation side due to uncertainty on fuel availability and other challenges, we expect the situation to get better over the next year. But the transmission sector has not been affected as we continue to get orders from the PowerGrid."
While 60 per cent of its orders come from the international market, 40 per cent is contributed by the domestic market, he said.
"Since we have presence in so many countries, KEC is well placed for achieving its growth targets," Chandak said.

Read More...

PSBs have Rs 2.97 lakh cr loan exposure to power sector…

Public sector banks have extended loans worth over Rs 2.97 lakh crore to the power sector at the end of September quarter, with maximum credit doled out by State Bank of India.
Official figures show that 26 state-run banks have a total exposure of Rs 2,97,762.53 crore to the power sector, which is currently grappling with acute fuel shortages and mounting losses of electricity distribution companies.
Country's leading public sector lenders State Bank of India (SBI) and Bank of India accounted for nearly Rs 87,000 crore of the total loans given to the power sector till September 30.
SBI's exposure stood at Rs 47,880.89 crore while that of Bank of India was Rs 39,078 crore.
Another major lender to the power sector is Punjab National Bank, whose exposure stood at Rs 20,410 crore.
Amid worsening health of power distribution companies and stranding of projects due to fuel shortages, there are rising concerns about possible default on loans extended to the power sector.
Maharashtra, Gujarat and Rajasthan are among the states that have been high amount of loans in the power sector from public sector banks, official data showed.
Going by reports, banks are exercising caution in lending to the power sector.
As per estimates, the aggregate debt of state power utilities stood at Rs 3,10,912 crore in FY'10.
Power sector is expected to see a capacity addition of nearly 1,00,000 MW in the 12th Five Year Plan (2012-17).
A recent report by rating agency Fitch said that losses of power entities in the states of Rajasthan, Tamil Nadu, Madhya Pradesh, Uttar Pradesh and Bihar, alone accounted for over 70 percent of the overall loss incurred by state power utilities (SPUs) nationwide in fiscal year 2010.

Read More...

Coal min opposes proposal for sale of coal by block holders…

The Commission, in a letter to the Ministry last week, had suggested that incentives could be provided to block holders for the development and production from the mines by allowing them to sell coal.

"The value of the mineral held by the captive coal holders is very high in terms of today's prices and block holders will be unduly benefited if permitted to sell coal. If the suggestion of the Planning Commission is agreed to it... will pave the way, allowing captive block holders to make huge profits," coal ministry has said in reply to the Plan panel.

Sources said the issue is likely to come up in a meeting of coal and power ministries tomorrow on ways and means to meet the growing demand for coal in the power sector. It is scheduled to be chaired by Prime Minister Manmohan Singh.

Contending that only 28 coal blocks out of 193 alloted to various power, steel and cement firms in the past 18 years for captive use have come to production, the ministry is of the view that if they are permitted to sell coal they would not show interest in bringing up their end use plants.

"...If a part of these reserves are diverted... Block holders would again turn to government for making available equivalent amount of reserves for meeting their requirements sometime in future after extracting profit from reserve...If they start selling coal, they would never show interest in bringing up end use plant," the coal ministry said.

Contending that the block holders were alloted mines free of cost for power generation, it added that the proposal of selling coal will not only lead to government's criticism but would allow firms to take undue advantage of the allocation.

Arguing that any such move will be violative of the provisions of the Coal Mines Nationalisation Act, the Ministry said, if the government believes that the coal sector should be opened for commercial mining, it would be prudent to pass the pending Coal Bill 2000.

"We have already delayed this decision and the Bill has been pending in Parliament since 2002," it said, adding that this is all the more important to attract large scale investments.

The Ministry also disagreed with the panel's suggestion of increasing the prices of domestic coal to partially meet the high generation cost, saying "it will go against the spirit of power sector reforms."

Read More...