Nod to 4000 MW Banka Ultra Mega Power Project in Bihar…

 

The Centre has cleared the proposal for a 4,000MW ultra mega-power project (UMPP) in Banka, a project designed to take care of Bihar’s energy requirements by the end of this decade.

The project is expected to be commissioned by 2019-20. The state would get 2,000MW from the plant as the Centre has allocated 50 per cent share from the plant to itself.

“We received a letter today (Wednesday) from the ministry of power giving its nod to set up a ultra mega-power project at Banka. We are happy that the Centre has acceded to our long-pending demand as the state would get 2,000MW power from this plant,” energy minister Bijendra Prasad Yadav told The Telegraph.

Any power project with an installed capacity to generate 4,000MW or more is deemed as an ultra mega-power project.

The state government had, on November 23, 2013, written to the power ministry seeking early approval of the project.

The state government said it would press the Centre to provide coal linkage to the project at the earliest.

“The state government is responsible for providing land and water for the project. We have made that available and accordingly informed the ministry of power. Now, the Centre has to provide coal linkage to the plant,” Yadav said.

Bihar at present gets around 1,500-1,600MW against the total scheduled allocation of around 2,000MW from the central sector.

The state also purchases 400MW from the open market besides getting 110MW from its own source from Muzaffarpur Thermal Power Station. The state government has set a target of providing at least 3,000MW in the coming summer and 4,000 MW by the end of the year.

The central decision on power comes close on the heels of the cabinet clearance to two railway projects in Bihar — at Madhepura and Marhowra — that had been gathering dust for a long time.

Central Electricity Authority (CEA), a nodal agency under the ministry of power which advises the government on energy issues, had in March 2013 approved the setting up of the ultra mega-power project at Kakwara in Banka district.

A team from CEA and Power Finance Corporation (PFC), along with state government officials, visited two sites to assess the project’s feasibility.

The team went to Kakwara in Banka and Rajauli in Nawada. The Kakwara site, about 260km from Patna, prima facie, appeared to be suitable for setting up the project, sources said, adding that there are no environmental issues related to it.

The project would require 2,500 acres of land and 120 cusecs of water.

Sources said the site at Kakwara in Banka fulfils all parameters such as easy availability of land, water and coal linkage. They said coal for the project could be transported easily by rail from neighbouring Jharkhand.

The site is also 65km away from Sultanganj from where the plant could draw 120 cusecs of water from the Ganga for power generation.

The clearance of the project is a big boost to the Nitish Kumar government which claims to have drastically improved the power situation in the state.

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Korean power firm ties up with Jinbhuvish for Rs 3450-cr Maharashtra power project…

 

Korean South-East Power Company (KOSEP), a subsidiary of Korean state-owned power generator Korea Electric Power Corporation, today signed an initial agreement with Mumbai-based Jinbhuvish Group for technical support for its Rs 3,450 crore project in Maharashtra.

The 600 Mw power plant, being set up in Yavatmal district, is likely to be commissioned in 2016. KOSEP holds a 40% equity stake in the coal-based project. Lenders for the venture include Rural Electrification Corp (REC) and Power Finance Corp (PFC) and PTC India Financial Services (PFS).

“The Yavatmal venture is one of the few thermal projects in India being set up in a JV with foreign investment. All major clearances have been received and the construction activities will commence soon,” Jinbhuvish Group Chairman Manish Mehta said.

Seoul-headquartered KOSEP owns and operates thermal projects with a combined capacity of 8,396 Megawatt, around 12% of total electricity sales in Korea.

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OIPL drafting PPA for Odisha UMPP...

 

The Odisha Integrated Power Ltd (OIPL), a fully owned subsidiary of Power Finance Corporation (PFC) is in the process of preparing the draft power purchase agreement (PPA) for the first ultra mega power plant (UMPP) in the state.

The maiden UMPP with a capacity of 4,000 Mw is coming up at Bhedabahal in Sundargarh district. OIPL is a special purpose vehicle formed for implementing the UMPP. Odisha would get 1,300 Mw as state share from this power project. The project will be implemented as per the terms and conditions of the PPA.

The selection of bidder is being done as per the tariff based competitive bidding guidelines issued by the Central government on design, build, finance, own and transfer (DBFOT) basis.

The Request for Qualification (RFQ) for the UMPP was issued on September 25. OIPL has received applications from nine prospective developers — Adani Power Ltd, CLP India Ltd, Jindal Power Ltd, JSW Energy Ltd, Larsen & Toubro Ltd (L&T), National Hydro Power Corporation Ltd (NHPC), NTPC Ltd, Sterlite Infraventures Ltd and Tata Power Ltd.

The award under Section 11 (of Land Acquisition Act) for private land measuring 2,733.54 acres was issued by the Sundargarh collector from August 8-10 this year in all affected villages- Kandabahal, Kirei, Rupidihi, Kopsingha, Lankahuda and Bhedabahal.

OIPL had deposited the land compensation amounting to Rs 634.92 crore with the Odisha Industrial Infrastructure Development Corporation (Idco) on June 21 this year. Idco, in turn, deposited the same with the Sundargarh district administration in August 2013.

Till December 19, compensation of Rs 125 crore has been disbursed.

The district administration, meanwhile, is processing 36 cases of alienation of non-forest, government land measuring 512.43 acres. The UMPP needs 3,100 acres of land in all.

Three coal blocks — Meenakshi, Meenakshi B and dip side of Meenakshi with combined deposit of 838 million tonne have been allocated for the UMPP. Presently, Central Mine Planning & Design Institute (CMPDI) is demarcating the coal blocks. Notification under Section 11 of Coal Bearing Areas (Acquisition and Development) CBA Act has been issued for the Meenakshi coal block.

OIPL has submitted a revised proposal for environment clearance in October 2013 . The proposal is under consideration of the Union ministry of environment & forests (MoEF).

Two more UMPPs are set to come up in Odisha. It has been decided to set up the second UMPP at Bijoypatna in Chandbali tehsil of Bhadrak district and third UMPP at Narla under Kesinga sub-division in Kalahandi district. The sites have been selected after field visits by PFC. Two subsidiaries — Sakhigopal Integrated Power Company Ltd and Ghogarpalli Integrated Power Company Ltd have been formed by PFC for executing these two UMPPs. The second and third UMPPs would contribute 2,000 Mw each to the state grid.

Source: Business Standard

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PFC Consulting Ltd Transfers wholly owned subsidiary to Techno Electric and Engineering Company Ltd....

 

PFC Consulting Limited (a wholly owned subsidiary of Power Finance Corporation Limited) has transferred on November 13, 2013, its wholly owned subsidiary namely "Patran Transmission Company Limited", incorporated for development of Independent Transmission System for Patran 400 kV S/S to "Techno Electric and Engineering Company Limited", successful bidder selected through "Tariff based Competitive Bidding Guidelines for Transmission services" issued by Ministry of Power, Government of India.

Shares of Power Finance Corporation Ltd was last trading in BSE at Rs.148.80, up by Rs.4.40 or 3.05%. The stock hit an intraday high of Rs.150 and low of Rs.145.10.

The total traded quantity was 2.58 lakhs as compared to 2 week average of 2.98 lakhs.

Shares of Techno Electric and Engineering Company Limited was last trading in BSE at Rs.85.55, up by Rs.0.85 or 1%. The stock hit an intraday high of Rs.86.40 and low of Rs.83.05.

The total traded quantity was 818 as compared to 2 week average of 0.11 lakhs.

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RPower knocks PFC’s doors again for funding the samalkot ant Tato Projects...

 

Reliance Power Ltd (RPower) has once again approached Power Finance Corporation Ltd (PFC) for loans totalling Rs 5,000 crore for its two projects — Samalkot (Andhra Pradesh) and Tato-II (Arunachal Pradesh).

The Anil Ambani group company has sought Rs 2,500 crore for the 2,400-MW Samalkot gas-based station and Rs 2,584 crore for the 700-MW Tato-II hydro power project.

“The Tato-II case was discussed by PFC Board on November 8, while the one for Samalkot is under examination,” an official privy to the development told Business Line.

But no final decision has been made till now, he added.

RPower had, in the past, too, approached PFC for funding for the Samalkot project. But for want of a bank guarantee it was not accepted. PFC had asked RPower to furnish a bank guarantee, as there was uncertainty over availability of domestic natural gas.

“Reliance Power did not give the bank guarantee at that time,” the official added.

POOLING MECHANISM

Though the situation as far as availability of gas is concerned has not changed much, PFC is still considering the loan request, as RPower has cited the Government’s initiative to make gas available through pooling mechanism for power projects that are stalled.

The company has also requested the Power Ministry for its support while seeking these loans.

“No special dispensation will be given while considering their request. Every lender will appraise the project and fund it based on commercially viable decisions,” a senior Power Ministry official told Business Line.

RPower did not respond to Business Line’s queries seeking details on the loan applications.

The Samalkot power station will cost nearly Rs 11,000 crore. Of this, Rs 3,300 crore will be equity funding and the remaining Rs 7,700 crore will be debt. Till now, RPower has tied up loans of about Rs 3,000 crore.

The Tato-II hydro project would cost about Rs 7,400 crore, comprising Rs 2,200 of equity and the balance in debt.

CONSOLIDATED DEBT

“Reliance Power has a consolidated debt of Rs 27,000 crore as of March 2013. The company has a net debt-equity ratio of 1.3, while gross debt-equity ratio of 1.5,” said Rupa Shah, Research Analyst (Institutional Equities) at Prabhudas Lilladher Pvt Ltd.

“Till net debt-equity ratio of 1.5 is reached, not much concern would be raised,” Shah added.

It is believed that RPower is also seeking loans of more than Rs 4,500 crore from Rural Electrification Corporation.

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PFC to raise Rs.1.5 Billion through bonds

 

 

India's Power Finance Corp invited bids on Wednesday to raise at least 1.5 billion rupees ($24.43 million) through an issue of subordinate tier II bonds, a termsheet showed.

The firm has sought bids for coupon rates for its proposed 12-year bonds, as per the document.

The issue is scheduled to open and close on Nov.7. ($1 = 61.3900 Indian rupees)

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Reliance Power's 4000 MW Tilaiya UMPP need to receive PSU status to get exemption for compensatory forestation requirement...

 

Reliance Power Limited's (RPower) 4,000 MW Tilaiya Ultra Mega Power Plant (UMPP) is required to receive a Public Sector Undertaking (PSU) status from the Central Government in order to be exempted by the Jharkhand Government from providing non-forest land in return for diverting forest land for the proposed mega power project.

 

As per the rules of diversion of forest land, the projects of state run companies are exempted from providing compensation in cases where forest land is diverted for the projects.

The Tilaiya Ultra Mega Power Project was an Special Purpose Vehicle (SPV) set up by the state run Power Finance Corporation (PFC) which is the nodal agency for Ultra Mega Power Projects in the country.

Later on the project was awarded to Reliance Power Limited and the SPV was transferred to it.

However, as per the Jharkhand Government, the decision is yet to be made by the Central Government on whether the Tilaiya plant will be considered a private company plant or a government plant. Based on that, they will or will not compensate for the land acquired for the plant.

 

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More literature on this topic...

http://economictimes.indiatimes.com/news/news-by-industry/energy/power/jharkhand-awaits-centre-decision-on-psu-status-for-rpower-plant/articleshow/21597560.cms

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PFC to ease pre disbursement conditions for power projects…

As the power plant developers are finding it difficult to get finances for their projects due to stringent loan conditions, Power Finance Corporation has eased some of its eligibility conditions for loan disbursals to power projects. This is an effort to revive the power sector which is passing though various crucial issues including scarcity of funds.

Earlier, in view of the challenges faced by the sector, PFC had set strict pre-conditions for loan disbursals to reduce its risks on loans that were already sanctioned. Since April 2011, the state-run lender had been disbursing loans to only those power projects that had signed power purchase agreements with procurers and also had assured fuel supply for the plant in place.

 

However, in the last three months, PFC has started disbursing loans based on the real development at the project. Instead of demanding for both fuel supply agreements and power purchase agreement, PFC is now considering the request even if one of these conditions are fulfilled.

 

The move was due to developers were not able to fulfil these conditions because state distribution companies are not inviting bids for PPAs and therefore changed the preconditions.

PFC has a target to sanction 45,000-crore loans, and disbursed loans worth 35,500 crore in 2011-12. The company would announce its results on May 22.

According to PFC:

Even if a power plant gets 50% of its fuel supply, lender would not have a default. Now with Coal India committing 80% supply, and projects running at 70-75% efficiency, there's no worry for lenders.

 

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More Literature on this topic:

• http://economictimes.indiatimes.com/news/news-by-industry/energy/power/power-finance-corporation-relaxes-loan-norms-to-boost-sector/articleshow/13183801.cms

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PFC formed an SPV (Deoghar Mega Power Ltd) for 4000 MW UMPP at Jharkhand…

Power india found that State-run Power Finance Corp  has formed special purpose vehicle, Deoghar Mega Power Ltd, for developing a 4,000 MW ultra mega power project in Jharkhand.
 
Deoghar would be the second ultra mega power project (UMPP) in the state after Tilaiya, which is being executed by Reliance Power, the company informed the BSE.
Power Finance Corporation, the nodal agency for UMPPs in the country, has awarded four such projects so far.
 
Three UMPPs — Sasan (Madhya Pradesh), Krishnapatnam (Andhra Pradesh) and Tilaya (Jharkhand) were bagged by Reliance Power and one at Mundra in Gujarat is being developed by Tata Power.
 
The first round of bidding for the Bedabahal UMPP in Odisha, which was held in July last year, witnessed interest from 20 bidders. The second or the final round would take place after the government completes the amendments in the standard bidding documents (SBDs) for the UMPPs.
 
The Requests for Qualification (RFQ) or the initial bids for the Sarguja UMPP in Chhattisgarh are likely to be invited in June this year.
 
The preliminary bids for this UMPP have been delayed many times in the past on account of environmental clearance.
 
The government plans to add close to 1,00,000 MW in the next five years, of which a lion’s share would be contributed by these UMPPs.
 
 
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Power Ministry asked PFC and REC to lend more to power projects…

The power ministry has written to the Cabinet Committee on Infrastructure to mandate a uniform 50% risk weight to bank loans for state-owned Power Finance Corporation (PFC) and Rural Electrification Corporation (REC), a move which could lead to banks doubling their exposure to these companies if it finds favour with the Reserve Bank of India (RBI).

The power ministry has proposed a uniform risk weight of 50% for these two infrastructure financing companies (IFCs).

 

At present, banks assign low risk weight only to top-rated IFCs, while others attract 100% risk weight. The proposal also seeks to raise the overall exposure limit of banks to PFC and REC to 25% of their capital funds. As per existing norms, bank exposure limit to non-banking finance companies in infrastructure is set at 20% of the total capital fund (capital and reserves).

 

Risk weight is the proportion of loans which is counted towards total assets against which banks have to maintain statutory reserves. A high risk weight discourages lending by increasing the capital requirement for lenders. Under current norms, banks are allowed to assign risk weight as per their own internal assessment.

 

“The note to CCI addresses the key issue of increasing funds for the power sector to narrow the widening energy deficit in the country. Once the committee takes a decision, it will be for the RBI to notify the new norms,” said a power ministry official asking not to be named.

 

In the proposal, the power ministry has said that banks could be advised to consider only 50% of their total funding to PFC and REC as power sector exposure while determining the industry exposure decided by each bank. This could be done by lowering the risk weight on loans extended these two IFCs. By doing so, banks could either double their exposure in PFC and REC or use the released capital to increase their overall funding to the power sector while staying within specified industry exposure norms.

 

“We attract 100% risk weight by banks and its lowering would definitely help to mobilise more funds for the sector,” said an REC official.

 

As per RBI data, public sector banks have a total exposure of over Rs 3 lakh crore to the power sector at the end of last financial year. The exposure of India’s largest bank State Bank of India to the sector is over Rs 32,000 crore. The demand for funds, however, is rising sharply with estimates suggesting the power sector may require over Rs 11 lakh crore during the 12th Plan period to commission projects crucial to bridge the country’s widening energy deficit.

 

“We feel that banks lending to IFCs like us should carry a lower risk weight as it qualifies as indirect risk for the lender with a portion of the risk being taken by specialised institutions like us. This would also help increase fund flows to the sector,” PFC chairman and managing director Satnam Singh said.

 

Under current norms, banks are allowed to assign risk weight as per their own internal assessment. “If the new norms are accepted, banks will be able to lend more and the interest rates may also go down,” said an official of a public sector bank.

 

India has a power generation capacity of about 200,000 MW and plans to add close to 100,000 MW during the 12th Plan period. For meeting this capacity addition huge fund is required. While power companies have bee given permission to raise money through ECB route to meet part of funding requirement, larger exposure of domestic banks is also considered important to boost the sector.

 

 

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PFC bonds: Attractive rates come with sector risk

• According to
  Sources,
  Power Finance Corporation (PFC), the largest power sector financer, have floated its first public issue of tax-free bonds only a couple of days after the National Highway Authority of India (NHAI) offer opened.
• The rates offered by the bond of PFC are attractive for investors in the higher tax brackets of 20 and 30 per cent, as the interest paid out is tax-free. PFC is offering an 8.2 per cent annual payout for the 10 year option and 8.3 per cent for the 15 year option, same as NHAI.
• Of the two issuers offering same rates though, PFC carries more risks than NHAI. In spite of secured lending with low non-performing assets (NPA), the huge accumulated losses and high debt levels of the power distribution sector and shortage of fuel for power generation are key concerns for stakeholders in power sector including PFC.
• Fuel supply risk and execution delays are bigger concern for PFC as these directly affect its borrowers who are predominantly power generation companies. Private projects (accounting for 8.7 per cent of the total loan book) are especially vulnerable to fuel supply risk and execution delays, which may put pressure on the asset quality. The risk of payment defaults by the State electricity boards to generation projects is also rising. The respective State governments are supporting the distribution companies in near term. Over the long term, distribution sector reforms such as revising tariffs annually and reducing transmission and distribution losses are expected to improve the financial standing of these electricity boards and reduce the counterparty risk for its borrowers.
• On a positive note, PFC continues to enjoy a credit rating that gives it the highest investment grade', with a capital adequacy of 18.2 per cent as of September 2011. The March 2011 maturity pattern of PFC's loan book shows that 57 per cent of the loans are maturing beyond 2015-16 by which time power sector reforms may start yielding benefits. The gross NPA ratio of PFC was 0.22 per cent as of September 2011. The quasi government nature of PFC, also makes for a very low possibility of default.
• Tax free bonds offers are most suitable for investors in higher tax brackets (20 per cent and 30 per cent). Investors with stomach for risk and high net-worth individuals (investment above R.5 lakh) can consider investing in PFC, given the probability of lower allotment in NHAI. The advantage of PFC is that investors can put lower sums in it than NHAI with a minimum application amount of Rs 10,000 as against Rs 50,000 for NHAI. Investors of PFCs infrastructure bonds (80 CCF) should limit their exposure to this bond issue.
• Even as a couple of more bond issues are lined up, investors can consider locking in at current rates offered. The interest rates offered on tax-free bonds are based on government security yields. The rates offered by tax-free bonds should not be more than 50 bps below government security yields of the same maturity, for a public issue. The 10-year government security yield has peaked in November 2011 and is down by 30 basis points during December. This suggests that future tax-free bond offers may offer lower interest rates.

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Power Finance Corp sets up monitoring cell to keep watch on loan-book…

In the wake up difficulties being faced by the energy sector, state-run Power Finance Corp (PFC) has set up a project monitoring cell to keep an eye on the stressed loan portfolio, a top official said today.

"Though the idea of monitoring cell was conceived in 2009, we have recently set up a separate cell for this to better check the progress of the projects to which we have lent money,"

Monitoring of the projects would be in a broader sense to see the debt servicing capacity of borrowers, he said. "We will do monitoring in financial terms, which will be different from a typical project monitoring unit that emphasises on execution. We will keep an eye on the critical milestones set by the company and see whether they are met or not."

Currently, financial institutions are worried about the advances extended to electricity boards of Tamil Nadu, UP, Rajasthan, Bihar, Haryana, Madhya Pradesh and Punjab, which according to rating agency Crisil, are the most vulnerable.

As per Crisil, losses of discoms rose 24 per cent to Rs 27,500 crore between 2006-07 and 2009-10, which could have risen to Rs 35,000-Rs 40,000 crore last fiscal, mainly because of problems in utilities, which are not free to revise the already low tariffs. Also, many green-field projects are stuck due to land issues and coal linkage problems.

"Many of the green-field projects are stuck due to coal linkage and land acquisition related issues. Though we don't have any control over these issues, we will try to minimise the risk by diversifying our portfolio," he said.

PFC posted net profit of Rs 419 crore in the second quarter, down 40 per cent from 700.8 crore in the year-ago quarter on the back of forex losses, despite 24 per cent rise in income to Rs 3,142 crore from Rs 2,531 crore.

Gross NPA rose 0.22 per cent in the first half of this fiscal from 0.02 per cent in the same period last year. Net NPA rose to 0.19 per cent during the period from 0.01 per cent a year ago.

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PFC hopeful of over 20% loan growth despite sector woes…

State-owned Power Finance Corporation (PFC) is hopeful of posting a loan growth of over 20 percent in the current fiscal despite the regulatory concerns relating to the energy sector.

"We will stick to our previous guidance and are hopeful that loan disbursements will be healthy in the current fiscal," PFC finance director R Nagarajan told PTI here.

The power finance firm, which posted around 17 percent growth in the loan sanctions in the first quarter of current fiscal, has witnessed a healthy 26 percent jump in advances during the second quarter.

"After a healthy loan growth in the second quarter, we expect the momentum to continue in the second half," he said.

PFC is also planning to disburse around Rs 35,000 crore of loan during this fiscal for which it aims to borrow around Rs 43,000 crore in this period.

Referring to regulatory concerns, Nagarajan said there were some positive actions in the regulatory front and we hope that all issues would be solved in time.

"Announcement of power tariff hike by Tamil Nadu government is a big positive in making state electricity boards viable. So as the tariff is raised by SEBs, the concerns relating to credit default by such entities will not arise," he said.

Nagarajan, however, said the coal linkage problem should be sorted out soon to avoid delays in execution.

Currently, financial institutions are worried about the advances extended to SEBs in Tamil Nadu, Rajasthan, Uttar Pradesh, Bihar, Haryana, Madhya Pradesh and Punjab, which according to the rating agency Crisil, are the most vulnerable utilities.

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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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Power finance companies may be hurt by new NBFC provision norms…

As per the note published by Bank of America Merrill Lynch, the Reserve Bank of India panel's new recommendations on lending and provisioning rules for non-banking financial companies could hurt power sector finance companies such as Power Finance Corp (PFC), Rural Electrification Corp (REC) as well as others like IDFC, Shriram Transport and Manappuram Finance which currently classify NPLs under 180-day norms.

 
Only Indiabulls Financial Services Ltd and Reliance Capital follow the proposed 90-day norm, the note said. In order to comply with the new rules, PFC and REC could have to provide for on standard assets (~25bps), "which could hurt their earnings in the medium term", the Wall Street bank said in a note.

Shriram could see NPLs more than doubling (to+5.3-5.5 per cent) from present and previous cover come-off (82% now), but they could also be allowed to do so in a phased manner "assuming the worst case, if not in a phased manner, then the impact on FY13 earnings for Shriram could be +3-5 per cent," BofA added.

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