Time to improve technology in coal-based industries: BHEL chief...

 

The time has come to look for ways to improve technology in coal-based industries as India is having more than 70% coal-based power stations, a situation that would continue for at least the next 10 years, said A V Krishnan, the executive director of BHEL Trichy.

Participating at the two-day conference on clean coal, carbon capture and storage technologies that has been organized by the Trichy Regional Engineering College Science Technology Entrepreneurs Park (TREC-STEP) in partnership with BHEL, Krishnan said that in a country like India where more and more coal-based power stations were bound to come up in the coming years, lessening the carbon-related emissions was of paramount importance.

Krishnan said different technologies needed to be used for different coals. For instance, he said that BHEL was successfully using the newly-developed integrated gasification combined cycle (IGCC) technology that would greatly improve the efficiency level, that is to say a measure of how much heat energy embedded in coals was converted into electricity. Funded by the European Union, the project aims at disseminating the latest carbon capture and storage technologies among the Indian thermal power players as the anticipated growth in energy demand is expected to widen the usage of coal in energy sector in the coming years. To reduce the consumption of goal, and emissions (carbon, hydrogen, sulfur related), the IGCC would be one of the future technologies for green power generation, Krishnan said. In fact, BHEL has taken it up as a project and working hand in hand with TREC-STEP for the last three years, visited a number of power plants in the country to study what kind of technology was used at present, and what would be better-suited for the Indian conditions.

Speaking on the sidelines, John Topper, CEO of International Energy Agency (IEA) Coal Research Ltd and Environmental Projects Ltd, UK, said that 41% of the global power came from coal and its usage would increase significantly if the current government policies continued. "Most of the additional coal need would be felt in Asia with China and India dominating the scene. Moreover, India is currently number two in coal use and is projected to be number one importer soon surpassing China," Topper said. Coal will be used as it is relatively cheap and plentiful, but the darker side of it was that long-term use of coal will have consequences over environment and climate change, he warned.

Marion Wilde, policy officer, European Commission (EC) directorate general for energy, Belgium said the joint declaration on energy adopted at the EU-India summit in February 2012 renewed firm commitment on both sides to enhance cooperation on energy field, one of the priority areas for mutually beneficial joint activity on the development and deployment of advanced coal mining and clean coal technologies.

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Interaction with ABB's global head of power on India's renewable energy segment...

 

While weak macro-economic situations hamper India’s power infrastructure sector, multinational power products makers, ABB Ltd have evolved a flexible business model to sail through the weakness in domestic market.

In an interaction with Rutam Vora, during the opening of its new transformers factory at Savli, ABB Ltd’s global head of power products division, Bernhard Jucker explains how the company uses India factories as feeder units for its global factories to survive domestic slackness and what the future prospects are in the renewable segment for the company in India. Edited excerpts:

Considering the present power infrastructure scenario in India, what do you think about government policies for power infrastructure sector’s growth?

There are plans and strategies in place for stronger and smarter transmission grids. But it is also important that investments follow the said plans. So, what is needed is known, the technology to do it is also there, it is the implementation and the speed of implementation that is to be looked at now.

It is up to the utilities, which are in-charge of executing those plans to ensure that the transmission corridors are set up and losses are reduced. These elements will help fuel growth of the sector.

When do you see things getting favourable for power infrastructure companies? In the present scenario, how will you plan your investments for India operations?

Can’t say anything about future as the country goes to elections in coming months. A lot depends on elections and the new government. But broadly, in a growing market like India, the key fundamental drivers for power sector’s growth are there. We see new infrastructure capacities coming up, and there is opportunity to built state of the art facilities, reduce T&D losses, and plug the demand-supply gap.

For ABB’s power products, India is one of our biggest manufacturing hubs in the world. We invest in those products which have varied applications like renewable, conventional power generation and also to infrastructure like housing. We have had good success in solar in India, or the power systems.

What potential do you see in renewable segment in India for a company like ABB?

The potential is there. It’s the question of how the countries’ regulators or the politicians deal with it. In wind, it was a booming market till recently but all of a sudden it went down. Similar is the case with solar. There is growth at present, but let’s see what happens now onwards. In India, it depends more on the regulator, on the subsidies offered and how the market dynamics play.

Presently, we deliver the main components to renewable segments. For wind we supply everything electrical inside a windmill including generator, inverter convertors and medium voltage switchgears and transformers. For solar, except the cell, ABB has the whole value chain of power products which fit or support the application in renewable. So, we are prepared to serve the renewable solutions in India and we have all the products lined up.

How have you managed to sustain the current weakness in the India’s power infrastructure business?

In the power products segment, we have been able to increase portion in our exports. It is giving additional volume to support the business in India, which is passing through a challenging environment at present. Our world-class facilities operate as feeder units for the other factories globally.

This gives us cushion during any lean spell in domestic market. Currently, our export from India operations is 15% of total sales and they are growing. Because of the feeder factories network, ABB has the flexibility to balance the domestic demand-supply fluctuations with the international demand.

We have products that are totally global. You can say almost single source is India for the globe. We have sent transformers as far as the US. So, we have flexible market to cater to, and that is why it is important to set up world-class facilities in India. The concept works in such a way that the idea is to balance the demand and supply. It’s not like saying that your core market is your domestic market.

Is India moving towards ultra high voltage transformers? What are the prospects for it?

For a strong grid, you need ultra high voltage corridors because higher the voltage, lower the losses. If that is 800 kv or 1200 kv, it depends on topology of the grid you are setting up.

But in a large country like India there is a potential for ultra high voltage transformers like 1200 kv. We have recently delivered one 1200 kv transformer for PGCIL. Looking at the geographic expansion of power grid in India, we see overall trend towards high voltage.

Also, with increasing urbanization, there is a need for space efficient, environmentally friendly and quick-to-install switchgears and distribution transformers.

Gas-insulated switchgears (GIS) cuts down the size of carbon foot print by 90% of that be air-insulated switchgear (AIS) up to 90%. In the distribution transformers, dry-type transformers are safer at places like cinema buildings, hotels, multiplexes etc.

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According to Feedback Ventures, a significant uptick in the power sector ahead…

An interview of Mr. Vinayak Chatterjee, Chairman Feedback Ventures by CNBC-TV18 on the outlook of Indian Power Sector…

 

 

 

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Vinayak Chatterjee, chairman, Feedback Ventures told CNBC-TV18 that he expects to see a significant uptick in the power sector in the next three-four months.

“Out of the number of problems that plagued the infrastructure sector, the reason for hope is that the political leadership has prioritized solving the power conundrum,” he said.

Below is the edited transcript of Chatterjee’s interview with CNBC-TV18. Also watch the accompanying videos.

Q: There was a time a few weeks back where all of us were getting more hopeful because the PMO was getting involved. There were a few statements about speedy clearances of projects etc. But subsequently in the weeks that have followed have your hopes been belied?

A: Not really. We should keep up the hopes for the simple reason that out of the number of problems that plagued the infrastructure sector, the reason for hope is that the political leadership has actually prioritized solving the power conundrum. There are very, very senior bureaucrats in the PMO and other places who have been requested to focus on the power sector.

So whether it is the huge level of interaction with Coal India or calling all the state electricity boards to discuss how to reduce their losses and clean up their balance sheets, there is a lot of background work is going on. So I am still hopeful, while we may have missed the 31st March deadline which was originally proposed, I am hopeful that in the next two or three months there would be a significant uptick in the power sector.

Q: The fuel supply agreements (FSAs) are still stuck, a lot of the power companies seem quite unhappy about the new penalty clause and the ball has gone back to the PMO’s court to try and see how they can resolve it because the power companies and Coal India are not seeing eye-to-eye on that, do you think there will be a resolution?

A: There will be, I think there is no question. We just have to live through this stage of game playing if I may put it that way because we are in a bit of an existential dilemma vis-à-vis Coal India. On the one hand, since it is virtually a monopoly, it is expected to be in public service but post listing it often acts and behaves as if it is a private company.

Clear signals have been given in terms of how it is expected to behave in the national interest. I suspect as soon as this little bit of game playing is over between Coal India and the private sector, I am personally confident that much of the resolution will be in favour of the coal users.

Q: Do you think its Coal India that we will have to blink on this accord?

A: Coal India will have to blink.

Q: What exactly is happening with the power companies in terms of their performance anyway? Yesterday one of the private companies indicated that merchant trades have actually improved significantly, but it’s not showing through in terms of their performance yet. It doesn’t look like they have gotten back to the PLFs (Power Load Factors) they had in the past?

A: Merchant rate is a very peculiar animal for the simple reason that it’s a buy versus power cut decision. Towards the en of the fiscal when they all are focused on their balance sheets they resort to large amounts of load shedding. When you resort to large amounts of load shedding you buy less power.

When you buy less power the merchant rates fall. In the beginning of the fiscal, I suspect for various reasons as soon as the buying by the DISCOMs and the consequent reduction of load shedding happens merchant power rates go up. Partly because some of the power plants are going in for maintenance and some have low coal stocks etc. I wouldn’t read too much into merchant power rates going up in the long-term in the months ahead.

Q: What is happening with the other parts of construction, any headway at all because the quarterly numbers don’t seem to indicate there is anything happening in terms of fresh inflow of projects?

A: That is true. It has been well recorded by channels like you as well as the print media, the business papers, a simple statistic tells the tale. For example, the lead indicator in the infrastructure sector is the order book of L&T.

If you read the results yesterday, L&T has very candidly said that their order booking last fiscal was 15% lower than the previous year. That tells you the story that there isn’t enough investment happening to keep the order books of the infrastructure and construction companies in robust health and that is the truth and the reality that we are facing right now.

Q: This brings us to the problem of confidence, because three months back when we spoke we were getting hopeful that maybe because of what the government is saying confidence in CEOs engaged in infrastructure projects might pick up. But it’s actually gone down. If you talk to people today they are saying, we are not investing and that’s showing up in every number in new investments that records economic activity in terms of the investment cycle. Do you see any pick up at all from people that you speak to or are people still very morose?

A: To be frank, the mood is pretty morose and gloomy, but if you look at the two broad sectors, roads is not doing too badly. As per the latest figures, between national highway and state highways, if you add both these segments, India is doing close to about 10 kilometers odd a day, roughly about 3,000-4,000 kilometers per year. It’s not a bad pace.

I wouldn’t crib right now about the road sector, forget the fact that we haven’t done 20 kilometers a day. But 10 is not bad. With this hope on the power sector saying that look if the highest people in the land from the PMO to the cabinet secretariat to coal to power all of them are putting their heads together and trying to get the whole sector cleaned up in terms of fuel linkage as well as the distribution companies, I think the mood that I have gauged from a lot of power CEOs is that they are happy that this focused attention is being given.

Although we are unhappy that it is not being resolved as quickly as we would want it to be, but the fact is that there is so much political and bureaucratic bandwidth going into attacking the problems that there is hope for this sector. But as we are all agreeing that it could have happened earlier.

Q: Also on the liquidity side i.e. the funding side, a lot of people brush that off saying that sorted but it doesn’t seem sorted in terms of how high interest cost still are for some of these companies, the fact that they still do not have access to additional capital?

A: To my mind, the cost of capital today is a less worry than the overleveraging of the balance sheets of practically every infrastructure development construction company. This is part of a larger shift. When across the last 10 years, companies that had very little debt on their books because they were EPC contractors, and/or equipment supplies went into the PPP BOT business.

This means that they had to from their own balance sheet put up a huge level of money upfront, which you recover across 20 years or 30 years. What you see is that extremely high debt leveraging of the balance sheet of development and construction companies. Now that high level of debt has made further financing difficult. This is because from the receiver side, you have hit the capacity of balance sheets to borrow more and from the banking side and from the lending side you have hit many corporate and sectoral caps.

I would worry less about the cost of capital right now as the availability of capital, the ability of financial institution and banks to disburse a fresh clean loans and the ability of the system to absorb more debt. There is somewhere in the system, there has to be a deleveraging.

This deleveraging is also apparent because you will notice that most development companies or infrastructure construction companies are doing two things. Either they are going for CDR or asst sale where a number of their SPVs, their owned assets in roads and power I are in the market. You can see this phenomenon of deleveraging happening. This process needs to carry on till we get back to financial windows being opened once again.

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