Coal India seeks advice from PMO for the Fuel Supply Agreements with the power plants post January 2012…

Power India found that Coal India Ltd (CIL) is planning to seek advice from the Prime Minister’s Office (PMO) for signing Fuel Supply Agreements with the Power Plants which are commissioned after January 2012.

 

Currently CIL is signing FSAs with the power plants which are commissioned on or before December 2011.

 

However, the PMO had earlier asked Coal India to sign in FSAs with the power plants which have commissioned after April 2009 and which are to be commissioned by March 2015.

 

As said by Coal India Chairman

"We will ask the government on how to go about signing FSAs with plants that have come up after December 2011 and will be put up till March 2015. We will send our queries to the coal ministry which may take it up with the PMO's office,"

As of now plants that have already commissioned after December 2011 is being supplied coal on the basis of memorandum of understanding that was signed with Coal India. This will continue till FSAs are signed with these plants.

 

The CIL management is, however, not sure if the same of set of FSAs that it is signing with existing power plants can be used for the new ones or if it will have to prepare another set of FSAs.

 

More Literature on this topic:

http://economictimes.indiatimes.com/news/news-by-industry/indl-goods/svs/metals-mining/coal-india-to-seek-pmo-advice-on-fuel-supply-agreements-with-power-units/articleshow/12973836.cms

 

 

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DERC sanctioned Fuel Price Adjustment charges for TPDDL, BRPL and BYPL…

 

 

Power India found that the Delhi Electricity Regulatory Commission (DERC – Power Regulator of Delhi) has sanctioned the Fuel Price Adjustment (FPA) charges to three Distribution Companies (Discoms) of Delhi.

 

As per the notification posted on DERC’s website, the FPA Charges sanctioned to the Discoms are as under:

• Tata Power Delhi Distribution Ltd (TPDDL) / NDPL : 4.0%
• BSES Rajdhani Power Ltd (BRPL): 6.0 %
• BSES Yamuna Power Ltd (BYPL): 7.0%

 

Power India further found that TPDDL/NDPL, BRPL and BYPL has in the month of April 2012 have asked DERC to sanction FPA at the rate of 4.67%, 7.27% and 9.23% respectively.

However, DERC after reviewing the applications and other details have reduced the FPAs requested by the companies.

 

The above FPAs will be levied only on energy charges will be in effect from May 1 to July 31 for the period of 3 months.

 

 

More Literature on this topic:

http://zeenews.india.com/business/news/economy/power-bills-under-bses-to-go-up_46946.html

http://www.derc.gov.in/ordersPetitions/orders/Misc/2012/FPA%20For%20Qtr%20Jan-Mar,%202012.pdf

 

 

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Mines Department issued notices to 9 coal mines of MCL…

Power India found that the Mines Department had served notices to nine mega coal mines of Mahandi Coal Fields (MCL) for not updating the “Consent to Operate” from the State Pollution Control Board (SPCB).

 

The notices were served on nine out of 11 coal mines at Talcher Coalfield. The other two mines named Balaram and Talcher Colliery have valid consent.

 

As said by Deputy Director of Mines, BP Rath:

“The consent to operate nine mega mines expired on March 31 and according to the law, these mines cannot operate till the renewal of the consent from SPCB. Considering the bitter experience in Keonjhar iron ore mines, we cannot be a party to the delay in getting consent. Hence, closure notices were� served on these mines of MCL. The notices were served with the consent of the Director of Mines.”

 

However, the MCL Director A K Singh has described the action as “unwarranted and uncalled for” and said

“Though the consent to operate has not been renewed after the expiry on March 31, the earlier consent is valid as we have applied for the renewal to the SPCB on time. Since our application has not been rejected by the SPCB, the consent stands valid and there is no problem in running the mines as per the law. MCL has already paid all the dues to the SPCB for consent for five years in 2010. “If required then we will move the court against the notice,” he added.

 

SPCB Regional Officer SK Sahu said he had already inspected the mines and submitted a report to the board for further action.

 

 

Source: http://ibnlive.in.com/news/9-coal-mines-in-talcher-get-closure-notice/254421-60-117.html

 

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Promoters of Greenko Group increased their share holding in the company to 14.4%…

Power India found that two executive directors of Greenko Group PLC (Which is a listed entity on London Stock Exchange (AIM)) – Mr. Anil Chalamalasetty & Mr. Mahesh Kohli – by utilizing “Long Term Incentive Plan Option Award” have increased their combined shareholding by 6,798,924 new ordinary shares which is roughly 4.5% of the current share capital of the Group.

 

The said investment has been carried out by ACMK Enterprise Limited ("ACMK"), a company wholly owned by  Anil Chalamalasetty and Mahesh Kohli.

 

Brief profile of Greenko

• Greenko Group is one of India's fastest growing Independent Power Producers, focusing on developing clean energy assets in India to meet Indian's ever increasing demand for power.
• The group is listed on the London Stock Exchange's Alternative Investment Market (AIM), having its asset base in India.
• Currently the Group operates 183 MW of contracted capacity including 7 hydro, 6 biomass and 1 gas/liquid fuel based plant and has 628 MW of licenses under various stages of development.
• Greenko has created a de-risked portfolio through broad geographic presence, diversified clean technologies and multiple revenue streams such as long term power purchase agreements, short term merchant sales, power and carbon trading platforms. The group has acquired projects at various stages of project lifecycle and has successfully added value to these projects.
• Greenko aims to build a portfolio of clean energy assets of approximately 1000 MW generating over 3.5 billion units annually by 2014-2015.
  

 

The diversified projects’ list of the Group is as below:

 

 

Share Holding Pattern

 

• The combined holding of the two executive directors - Anil Chalamalasetty and Mahesh Kohli – through their holding entity ACMK Enterprise Limited has increased to 13.1 per cent stake as a part of fresh share issue under a long term management incentive plan announced in 2008.
• The promoters holding will further increase to 14.4 per cent after they bring in £5 million ($8.12 million), on or before June 28, 2012, as per a company disclosure. This is part of a larger equity fundraising issue worth £50 million ($81.3 million) announced last year.
• With this, the co-founders may become the largest shareholder in the company. The key shareholders of the firm as of September 2011 include Prudential Plc (12.6 per cent) and early investor Aloe Environment Fund (11.87 per cent). Other investors in Greenko include TPG Growth (8.57 per cent), Impax Asset Management (5.87 per cent) and Capital Group (6.27 per cent).
• ACMK also has a further 5.1 million options under 2010 scheme which are subject to a target of 500MW of operational capacity with suitable profit level and milestone related to share prices.

Acquisition Of Hydro Assets

In March, Greenko acquired two hydro power assets with combined 56 MW capacity for $57 million. The twin acquisition was funded through mix of existing cash reserves and project debt already in place.

 

One cluster of 32 MW in Himachal Pradesh is operational under long term power purchase agreement with local electricity board. The other 24 MW asset is located in Karnataka and is currently under development with completion targeted of 2014.

 

Greenko Group's Mauritius Unit had raised $70 million from Standard Chartered Plc in a structured deal in December 2011 before which it raised $50 million from GE Energy Financial Services for its wind energy business.

 

 

 

More Literature on this topic:

http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail.html?announcementId=11187936

http://www.greenkogroup.com/business/

http://www.vccircle.com/500/news/greenko-group-promoters-hiking-stake-to-144

http://panchabuta.com/2012/05/02/greenko-group-promoters-hiking-stake-to-14-4/

 

 

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Mahindra Solar & Kiran Energy to get $26 Million from IFC for 50 MW of Solar PV Projects…

Power India found that the Mahindra Solar One Private Limited and Kiran Energy Ltd. are planning to get around $26 Million from the International Finance Corporation (Investment arm of the World Bank) for the three Solar PV Projects.

 

The list of projects:

The proposed project involves the construction of three greenfield solar power plants in Rajasthan, India

• a 20 MW solar photovoltaic (“PV”) plant wholly-owned by Mahindra Suryaprakash Ltd. (“Mahindra Suryaprakash”, a wholly owned subsidiary of Mahindra Solar One Private Limited (“Mahindra Solar One”), an existing IFC client).
  
• a 10 MW solar PV plant , also wholly-owned by Mahindra Suryaprakash.; and
  
• a 20 MW solar PV plant wholly-owned by Solarfield Energy Two Private Ltd. (“Solarfield Two”, a wholly-owned subsidiary of Kiran Energy Ltd. (“Kiran Energy”)
  

For evacuation of the power to the grid, existing transmission line (24km, 33kV) shall be used, which was commissioned in January 2012 as part of Mahindra’s 5 MW project and is now successfully evacuating power to the grid. Proposed Projects will therefore involve construction of only internal power transmission cables / lines up to the existing line.

 

The construction of the Projects is expected to commence in June/July 2012 and the power plants are expected to be commissioned in early 2013.

 

All the above three plants are being developed on adjoining tracts of land, and will utilize similar technology.

 

They have been awarded similar tariffs and will enter into identical power purchase agreements (“PPAs”).

 

Kiran Energy is also a shareholder of Mahindra Solar One, and the two companies are developing these 3 plants in close cooperation. IFC has previously provided a loan to a greenfield 5MW solar power plant developed by Mahindra Solar One, located very close to the proposed sites for the Projects. The 5MW project has been commissioned successfully and is already generating revenues.

 

Some more Literature on this topic:

http://www.ifc.org/ifcext/spiwebsite1.nsf/ProjectDisplay/SII32031

http://www.bloomberg.com/news/2012-05-02/mahindra-kiran-energy-may-get-ifc-loan-for-india-solar-project.html

 

 

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Power Ministry to link tariffs of new power projects with the fuel prices…

Power India found from a news article on Economic Times that the Power Ministry is planning to allow power producers to raise tariffs if the fuel costs of new projects rise; this move may hurt consumers but will rescue the huge investments being made in the power sector.

 

However, currently this is bein planned for the new power projects such as the next Ultra Mega Power Plant (UMPPs) and Gas based Power Plants with a capacity of over 7000 MW which have been built but not operational due to fuel unavailability.

As said by Power Minister

….building new capacity was a priority for his ministry and he was monitoring all new projects, helping the country add a record 20,500 mw of new capacity in 2011-12. He said appropriate policies for fuel supply and tariffs were important to sustain the momentum”

As said earlier the move to link tariffs to fuel costs would not apply to existing UMPPs of Tata Power and Reliance Power, which are suffering because they can't bill customers for the sharp rise in cost of imported coal; however the Power Ministry is considering some solutions for these projects also.

New power projects with a capacity of more than 30,000 mw are idling or underutilised because of acute fuel scarcity and high cost of imported coal. Power Ministry said if fuel costs are passed on to customers, power producers would be able to use existing capacity and build new plants.

Several gas projects have suffered because output from Reliance Industries' KG-D6 block has fallen. The company recently said it was preparing multi-billion dollar investments in new fields but it needs market-linked pricing.

The government has approved a price of $4.2 per unit for KG-D6 gas up to 2014, but the company wants to raise rates before that to help it invest more in new fields, which would not be viable at the old price.

 

 

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REC affirmed with Baa3 Credit Rating by Moody’s…

Power India found that Moody's Investors Service has affirmed the foreign currency long-term issuer ratings of  Rural Electrification Corporation (REC) at Baa3.

“The rating outlook is stable. “

 

What does Baa3 Rating of Moody’s mean?

• Moody’s Credit Rating Baa3 can be
• The purpose of Moody’s ratings is to "provide investors with a simple system of gradation by which future relative creditworthiness of securities may be gauged".
• To each of its ratings from Aa through Caa, Moody's appends numerical modifiers 1, 2 and 3; the lower the number, the higher-end the rating.
• Aaa, Ca and C are not modified this way.
• As Moody's explains, its ratings are "not to be construed as recommendations", nor are they intended to be a sole basis for investment decisions. In addition, its ratings don’t speak to market price, although market conditions may impact credit risk.
• Baa3 ratings belongs to the “Investment Grade” category which is further subdivided into Long Term Ratings & Short Term Ratings:
  • Baa3 (Long Term Ratings) : Rated as medium grade, with some speculative elements and moderate credit risk.
  • Baa3 (Short Term Ratings): Prime 3 -  Acceptable ability to repay short term debt

 

 

Why Baa3 been affirmed to REC?

• The rating is in line with the rating of Government of India (GoI) as REC is underpinned by its linkage with the government as well as the strategic role it plays in the government’s plan for power sector.
• REC operates in a highly regulated industry, where the policies and the level of support provided by the government have positive implications for its cost of capital, financial strength of its borrowers, business growth and overall profitability.
• It is classified as a public-sector undertaking; the government owns 66.8% of the entity and has a representation on its board of directors.
• REC is the key agency that provides financing for the Ministry of Power's Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) scheme, which aims to improve the access and quality of electricity supply in rural areas to ensure rapid economic development in these areas.

 

Baseline Credit Assessment (BCA)

• Moody's has also repositioned the baseline credit assessment (BCA) of REC to 13 from 12, as it better reflects its standalone credit profile (on a scale of 1-21, where 1 represents the lowest level of risk).
• In recalibrating the BCA, Moody's applied the overall analytical framework explained in its Finance Company Global Rating Methodology (March 2012). REC's standalone credit profile includes ordinary and ongoing support from the government, but does not include any form of external extraordinary support which it may receive.
• However, any changes to its exclusive focus on financing the power sector could imply a reduced policy role, which could also adversely affect its foreign currency issuer rating.
• In addition, the majority of its borrowings (more than 50% of gross tangible assets) are secured with receivables, providing less security for unsecured creditors. Any increase in the proportion of secured versus unsecured borrowings will weigh on the standalone credit profile and supported rating of Baa3. REC's asset and liability profile is weak as it relies on refinancing and interest recoveries for repayment of maturing debt since on-balance sheet liquid assets are very low. Any deterioration in the asset and liability mismatch could result in negative pressures on its standalone profile of 13 and the supported rating of Baa3.

Moody's expects the company's financial metrics to remain stable, with capital adequacy ratio at 17.4% and net interest margin at 4.3% as on December 2011. Asset quality is likely to remain a positive factor, with its NPL ratio at less than 1%, though further deterioration in the financials of the state-electricity boards will also pressure the supported rating of Baa3.

 

More Literature on this topic:

http://business-standard.com/india/news/moodys-retains-foreign-currency-ratingpfc-rec/164123/on

http://economictimes.indiatimes.com/news/news-by-industry/energy/power/moodys-retains-foreign-currency-rating-of-power-finance-rural-electrification/articleshow/12968234.cms

 

 

 

 

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