Gas-hit Lanco seeks govt help to save AP power project...

 

Invoking its rights under the company laws, infrastructure major Lanco has rushed to the ministry of power and the corporate affairs ministry, urging them to suspend two key provisions in the accounting standards (AS) to save its gas-based Kondapalli power project in Andhra Pradesh, which has come to a standstill after a complete stoppage of supplies from Reliance Industries' KG-D6 block.

Lanco Kondapalli Power (LKPL), an independent power producer of the Lanco group, has written to the government seeking changes in the accounting norms that would allow the company to capitalise its borrowing costs and other expenses being incurred in the project pending completion of the commissioning activities that are delayed due to stoppage of KG-D6 gas supplies.

"We are seeking intervention of the corporate affairs ministry to suspend two key accounting standards dealing with 'accounting for fixed assets (AS-10)' and 'borrowing cost - suspension of capitalisation (AS-16)' citing unprecedented fuel and regulatory challenges beyond the control of the company. Once approved, the changes would benefit not only us, but close to 9,300 MW of gas-based power that are ready for commissioning but are without any gas," LKPL director and CEO, P Panduranga Rao.

Apart from Lanco, around 12 other gas-based projects, totalling a capacity of close to 8000 MW and investment of about Rs 45,000 crore, are under an advanced stage of construction and ready for commissioning but are without any gas allocation.

All these projects were constructed on promise of domestic gas allocation.

The projects are owned by companies such as GMR, Beta Infratech, Torrent, Reliance Power, GSECL.

As per AS-10, if the interval between the date of a project is ready to commence commercial production and the date at which commercial production actually begins is prolonged, all expenses incurred during this period are charged to the profit and loss statement. LKPL wants a relaxation in AS-10.

Similarly, the company wants a relaxation in AS-16, which states that the capitalisation of borrowing costs should be suspended during extended periods in which active development in interrupted.

According to LKPL, the disruption in gas supplies has delayed the commercial operation date of its 742 MW Kondapalli Stage III (the company has got project commissioning date extended by lenders from January 2013 to January 2015) by two years but the company expenses are being treated under revenue head subject to tax liability and this should be relaxed.

The Rs 2,610-crore project has a debt component of Rs 1827 crore financed by six lenders with Axis Bank as the lead lender.

Under Section 211 (4) of the Companies Act, 1956, a company on its own can also apply to the government to seek modification to the applicability of any requirements of the Act regarding matters to be stated in its balance sheet and profit and loss account, Kumar said.

 

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Tamil Nadu takes Centre to SC for not re-classifying forest land for 1,500 MW thermal power...

 

The Tamil Nadu government has approached the Supreme Court against the Centre for not re-classifying forest land for a 1,500-Mw thermal power project at Tuticorin.

The project is joint venture between the Tamil Nadu Electricity Board (TNEB) and Neyveli Lignite Corporation (NLC).

Chief minister J Jayalalithaa said the Congress-led government at the Centre was not letting the project's progress.

Speaking on the power supply in the state, Jayalalithaa said: “Soon Tamil Nadu will become power surplus. When I said this last year, many scoffed at (the claim). When it is said now, everybody believes as 99 per cent of the target has been achieved, while the remaining would be achieved before this year”.

While studies are under way for setting up a 2,000-Mw hydel power plant in Nilgiri district with an outlay of Rs 7,000 crore, the preliminary work on a 1,600-Mw thermal plant in Uppur was under progress, she said.

The state would soon finalise tenders for 1,320 Mw thermal power plants at Udangudi to be set up at a cost of Rs 9,000 crore with coal jetty; Ennore Special Economic Zone costing around Rs 8,000 crore and a 660-Mw power plant here involving Rs 4,000 crore.

Jayalalithaa said the state had signed long term agreements (15-year tenure) with power producers to procure 3,330 Mw. A bulk of this would be from Odisha and Chhattisgarh.

Speaking about TNEB’s financial position, she said the utility’s financial position would improve soon. She alleged the previous DMK-led government was responsible for the loss.

As on March 2011, TNEB had incurred a loss of  Rs 40,375 crore. “The Reserve Bank of India (RBI) wrote to all banks not to lend to TNEB”.

Under the financial restructuring scheme, while 50 per cent of TNEB’s short-term debt will be taken over by the state government, the state had issued bonds worth Rs 6,353.49 crore to the banks.

Already, the state administration has given a guarantee for Rs 22,700 crore for it to raise debt and for restructuring Rs 5,951.43 crore of bank debt, she said.

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India's Power Grid wins tender to manage Ethiopian power co....

 

Ethiopia is to outsource the management of the Ethiopian Electric Power Corporation (EEPCo) to Power Grid Corporation of India Ltd (PGCIL), a company owned by the Indian government.

PGCIL has won the tender floated by Ethiopia's Ministry of Water, Irrigation and Energy. Gosaye Mengeste, director in the ministry, told IANS that Power Grid Corp surpassed other competitors in the technical evaluation.

The company is currently doing a feasibility study on how it will satisfy customers and meet the expectations of the Ethiopian government.

The company will be paid $16.7 million in two years. It will however only take over the management after the evaluation of the study it will present to the government.

"This (procedure) is because the standards are put to the corporation by the government of Ethiopia aimed at achieving better results, and they should be met", Gosaye told IANS.

The power distribution will be under the authority of PGCIL, for it is becoming cumbersome for the EEPCo to manage the tasks of generation as well as distribution.

PGCIL, India's state-run transmission utility, transmits about 45 percent of the total power generated in India. Its Ethiopian counterpart, however, generates all of the power produced for the national grid and administers all its transmission lines.

The Indian company is also erecting the 1,045-km-long transmission line of the Ethiopia-Kenya interconnection project financed by the World Bank (WB).

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Industry unhappy with govt plans for Chinese power equipment firms...

 

The government’s latest plan to have Chinese companies set up power equipment service centers in India does not seem to have gone down well with the domestic industry.

Indian manufacturers are concerned over losing market share in the absence of what they call “level playing field” to compete with Chinese manufacturers.

“A level playing field would have been created if we had made it mandatory for Chinese companies to set up manufacturing facilities too here. Also, there is a huge trade imba;ance that must be addressed before promoting Chinese competition,” Raj H Eswaran, President, Indian Electrical Equipment Manufacturers Association (IEEMA) said.

During Prime Minister Manmohan Singh's recent official to China, the two neighboring nations signed a Memorandum of Understanding (MoU) in Beijing Wednesday to set up Power Equipment Service Centers (PESCs). China's National Energy Administration inked the initial agreement with India's power ministry.

The service centers will give Indian companies access to spares and after-sales services for equipment imported from China.

“We welcome healthy competition but there should be level playing field to compete with Chinese companies which outbid Indian firms owing to the soft loans provided by that nations government apart from various subsidies that drive down their cost,” a senior executive from Indian Electrical Equipment Manufacturers Association (IEEMA) said.

Chinese firms have supplied equipment with a total capacity of 60,000 Megawatt (Mw) in India so far. Of this, 20,000 Mw has already been set up. The government’s latest initiative comes at the backdrop of a recent study by the Central Electricity Authority (CEA) that raised questions over quality of Chinese equipment.

Also, the Indian government had last year raised Basic Customs Duty (BCD) on import of equipment for mega and ultra mega power projects to 5% leading to an overall duty of 21% including Countervailing Duty (CVD) of 12% and a 4% Special Additions Duty (SAD). Power gear imports attracted nil duty earlier.

“However, this 5% additional duty has not addressed the problem fully. Indian firms are suffering a cost disadvantage of 24% according to the industry’s calculation,” the IEEMA executive said.

He also said the domestic industry has enough capacity to provide after-sales services adding that the Chinese firms have already captured as much as 40% of the domestic market where an opportunity of annual sales of 17,000 Mw capacity exists at present.

India has a current domestic equipment manufacturing capacity of 27,000 Mw. Power equipment worth Rs 130,000 crore was sold in India last financial year. Around 28% of this comprised generation equipment while the rest 72% of the sales occurred in the transmission and distribution sector.

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Power Grid FPO next month...

 

Power Grid Corporation of India is preparing for its planned follow-on public offer (FPO), with a hope that the offer could be launched as soon as next month.

The government-run transmission utility giant on Thursday said that all the required procedures for the FPO had already been completed, and that it was just waiting for Cabinet's nod.

R N Nayak, chairman & managing director of Power Grid Corp, said, "We have completed all the necessary procedures from our side and can launch it as soon as possible. But we are awaiting the approval from the Cabinet Committee on Economic Affairs (CCEA)."

The Navratna firm has plans to offload its 17 per cent stake via the FPO route. Of the total 17 per cent stake, the government will sell 4 per cent stake, while the remaining 13 per cent will be in the form of fresh issue of equity shares.

The company will issue 60.18 crore shares, while the government will 18.51 crore shares as part of its massive divestment program that aims to generate Rs 44,000 crore for the government.

The offer is expected to generate around Rs 1,900 crore for the government, while Power Grid expects to garner nearly Rs 6,000 crore by selling fresh equities.

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Power reforms saved state Rs 1,000 cr a year, says Odisha govt

 

Countering the criticism of failed power sector reforms in Odisha, the state government today said the measures taken to improvise power distribution system has resulted in saving of about Rs 1,000 crore per year.

"When OSEB (Odisha State Electricity Board) was disbanded, it used to get a grant of Rs 250 crore per year then. Considering the power purchase costs and demand today, it works out to Rs 1,000 per year. So we have been able to save this much money by privatising the sector," said Pradeep Kumar Jena, state energy secretary at a seminar organised by the Odisha chapter of Federation of Indian Chambers of Commerce and Industry (FICCI).

Odisha was the first state to privatise power sector in the country, by segregating power generation, trading and distribution business way back in 1996. Out of four power distribution companies (discoms), three are managed by Reliance Infra while the fourth one, Central Electricity Supply Utility (CESU) is currently run by Odisha Electricity Regulatory Commission (OERC).

The state has also pioneered in micro privatisation of the sector, where discoms are allowed to award power distribution franchisee licence to firms for collecting bills and for providing customer support.

Despite these steps, power supply and distribution scenario in the state continues to face difficulties, as discoms failed to curb transmission losses and collect electricity bills, resulting in poor financial health.

Realising that the discoms cannot upgrade the existing power transmission network, the state government recently announced a Rs 2,600 crore plan to build 500 substations across the state from its own revenue.

The government also flayed the Centre's policy disqualifying Odisha from Central grants based on the premise that it had privatised its power sector.

"Odisha is debarred from all schemes of the Centre because we have privatised the power sector. It appears as if we have done a mistake by allowing reforms," said Jena at the seminar titled 'Efficient Sector-Mature Economy'.

"One of the reasons why the state has power supply problem is that the discoms are relying on load shedding and are not willing to buy costlier power from NTPC," said V S Verma, a representative of Central Electricity Regulatory Commission (CERC) at the seminar, hinting at the opposition of Odisha to price pooling of coal and power generated out of it.

The state has been protesting the use of domestic and imported coal in NTPC power plants, citing that it would escalate generation cost despite the fact that Odisha possesses abundant coal reserves, which accounts for 25 per cent of total deposit in India.

"There has been no change in our views (regarding price pooling)," said Jena.

NTPC supplies nearly 1000 Mw power to the state grid, out of total power availability of 2,600 Mw in the state, from its various plants located inside and outside Odisha.

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