UMPP Coal usage rules may be revised…

The government may amend the rules governing bids for ultra mega power projects (UMPPs), where the usage of excess coal from captive mines meant for these large-sized plants may have to be clearly specified upfront. This is being done to usher in transparency and, hence, avoid any potential controversy.

The move to amend the standard bid documents (SBD) for future UMPPs comes in the backdrop of a legal challenge by Tata Power Co. Ltd. It has appealed to the Supreme Court against a decision by a so-called empowered group of ministers (eGoM) in 2008, to allow the winning bidder, Reliance Power Ltd, to use excess coal from captive mines allotted to it for the 4,000 megawatts (MW) Sasan power project for another project it has. Earlier, the Delhi high court had upheld the government’s decision.

“This issue has been raised. Whenever coal reserves are worked out, they are estimated quantities. To assume that there will be a matching quantity is wrong. If it is more, then what is to be done with the coal? It can be used for other projects that have been awarded through the competitive bidding route. There have been discussions. In such a situation some decision should be taken,” said an official associated with the UMPP award process, who did not want to be identified. “Such a condition may be incorporated in the SBD in the next set of projects, which will be awarded after the ones in Chhattisgarh and Orissa,” the same official added.

“We are looking at it,” said a senior power ministry official, who also requested anonymity due to the sensitive nature of the issue.

To be sure, the eGoM had in November 2010, after the decision allowing usage of excess coal from the captive mines at the Sasan UMPP for another project, moved to make this the rule. Accordingly, it asked the coal ministry to issue necessary instructions after getting it legally vetted; however, this is yet to happen.

The UMPP programme has had its share of problems, weighed by ecological concerns and local resistance. Developers, procurers of power—the states —and bankers met on 19 July to discuss changes that need to be made in the SBD. Such a move will also generate greater developer interest in future UMPPs and also bring tariffs down.

“Any such move which enables availability of additional coal resources would certainly help the sector. It is only important that such conditions should be transparently known to every participating developer. Therefore, making resources available will definitely be a welcome move. Once the terms and conditions are transparent and it’s a fair play, the developers would consider such availability to generate extra power and sell at market rates, which is not part of bid quantity and, hence, developers may be in a position to reduce tariff for the bid quantity of power,” said a Tata Power spokesperson.

“Based on the eGoM decision, ministry of coal has granted its approval for utilizing the incremental coal from the captive coal mines allocated for Sasan in the other project of the company, with certain stipulations,” said a Reliance Power spokesperson.

Reliance Power has been the most successful company in terms of UMPPs. Of the four UMPPs awarded till date, it has been the successful bidder for coal pithead projects at Sasan and Tilaiya in Jharkhand, and the imported coal-based project at Krishnapatnam in Andhra Pradesh. The imported coal-based project at Mundra in Gujarat was won by Tata Power.

Expert opinion over the move was mixed.

“For a competitively bid coal mine or integrated coal mine and power project, it appears prudent to allow optimal utilization of coal, particularly in light of the growing gap in demand and supply of coal, as it will allow unlocking of value of scarce resources and may lead to further aggressive tariff bids,” said Dipesh Dipu, director of consulting, energy and resources, and mining at Deloitte Touche Tohmatsu India Pvt. Ltd.

However, Anish De, chief executive at Mercados EMI Asia, an energy consulting firm, argued: “It is a fairly difficult decision to take because it could result in inadequate supplies to the power projects in the latter part of their operating life. Since the reserves are not precisely known at the time of award of project, any decision in this regard will be based on imperfect information, which could later backfire.”

The government wants to set up 16 UMPPs to meet the needs of the world’s second fastest-growing major economy after China. India has a power generation capacity of 180,000MW and expects to add 62,374MW by 2012.

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CIL to replace R-Cap on Nifty…

State-run Coal India (CIL) will replace Anil Ambani Group firm Reliance Capital in the National Stock Exchange’s Nifty index from October 10. Earlier this month, CIL had replaced another Anil Ambani Group firm Reliance Infrastructure from BSE’s blue chip index Sensex.

Shares of CIL have been doing well since the company was listed in November last year and has become the third most valued firm after Reliance Industries and ONGC. Apart from S&P CNX Nifty Index, there would be changes in CNX Nifty Junior Index, CNX 100 Index, S&P CNX 500 Index, CNX Midcap Index and sectoral indices among others.

The changes were announced on Thursday by India Index Services & Products (IISL), a joint venture between National Stock Exchange and Crisil for managing Nifty.

The decision to revise constituents of various NSE indices was taken by the Index Committee of the Exchange during its periodic review. Meanwhile, the BSE also announced launch of futures and options trading in CIL with effect from August 26.

BSE said in a circular that it had received approval from market regulator Sebi for introduction of F&O contract on CIL. Subsequently, F&O contracts of CIL would start trading on BSE with effect from August 26.

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Germany’s SMA Solar eyes 1.4GW of business from India…

Germany’s SMA Solar, the world’s largest maker of solar inverters, expects that in 2014 its Indian unit will win about 40 per cent of a market it forecasts will reach 3,500 megawatts, an official of the domestic unit said.

“We are going with the pace of the Indian industry … but our objective is to be in leadership position in India as we are globally,” Rakesh Khanna, general manager of SMA Solar India, said. The firm, which derives close to 56 per cent of its revenue from exports, has been active in the Indian market since October 2010, has 200 Mw worth of business in the country now and announced establishment of its India unit.

“We strongly believe that India will become, or could become, one of the largest PV markets in the world,” said Marko Werner, board member and Chief Sales Officer, SMA Solar Technology AG. Many global solar firms are expanding their presence in India as the country plans to develop solar power capacity to 1,000 MW by 2013 and grow that to 20 Gw by 2022, with an overall investment of close to US $70 billion.

The strong demand in overseas markets had pushed the German firm to post forecast-busting second quarter profit, while providing an ambitious outlook for 2011. SMA’s competitor and No. 2 solar inverter maker Power-One Inc could offset weakness in its European markets as it expanded into the United States, China and India.

Solar panel maker Canadian Solar Inc recently forayed into India, while India has prominent domestic solar equipment makers such as Tata BP Solar, a joint venture between India’s Tata Power and BP Plc and Moser Baer.

With about 250-300 clear sunny days in a year, India’s solar power reception is about 5,000 trillion kilowatt hours per year, meaning just 1 percent of India’s land area could meet the country’s entire electricity requirements until 2030. The peak power deficit, the shortfall between supply and demand at peak hours, was 10.3 per cent in the last fiscal year to end March.

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India targets over 50,000 Mw of Nuclear Power by 2030…

India plans to import light water reactors from Russia, US and France to boost its nuclear energy generating capacity to 50,000-60,000 Mw by 2030, said former Atomic Energy Commission (AEC) chairman M R Srinivasan.

Delivering the first Homi Sethna Memorial Lecture on ‘Future of Nuclear Power after Fukushima’, the nuclear scientist said  the country would need around 1,300 Gw of electricity by 2052.

Forty per cent of this requirement is expected to come from coal-based plants, 40 per cent from nuclear facilities and 20 per cent from renewable sources like solar or wind, he said.The present power generating capacity of India’s 20 nuclear units is small, most of them having a capacity of up to 220 Mw. The indigenously designed Tarapur 3&4 are the largest with a capacity of 540 Mw, he said. In a couple of months, the first 1,000 MW nuclear plant, built with Russian help, will start at Kundankulam, Tamil Nadu.

In last one year, the country has started construction of four indigenously-designed reactors of 700 Mw each — two each at Kakrapar, Gujarat, and Rawatbhata, Rajasthan. There are plans to have similar reactors in Madhya Pradesh, Haryana, and possibly even at Kaiga, Karnataka, Srinivasan said.

‘China has the biggest nuclear plant construction programme at present,’ Srinivasan said. ‘While they will review their safety practices after the Japanese experience, they will probably continue to develop nuclear power in a big way.’

Since availability of electricity is a serious constraint for both industry and agriculture, India will build 800 Mw supercritical coal-fired units for many more years. ‘But if we have to cut down carbon emissions, we must build a significant nuclear capacity,’ he said.

India is currently producing a small quantity of enriched uranium. ‘We expect to be in a position to build a commercial uranium enrichment plant between 2020 and 2030,’ Srinivasan said. Explaining the slow-paced nuclear power development in India, Srinivasan said the country had limited uranium. ‘Not only is the quantity small, the ore concentration is low, making extraction more costly here,’ he said.

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Suzlon arm REpower gets 50 MW wind turbine order in Canada…

According to reports, Suzlon Energy‘s German unit REpower Systems has won a contract from WindWorks Power Corp to deliver 25 wind turbines for five projects in Ontario, Canada.

The wind farms will generate total output of over 50 mega watt, as per the Suzlon’s statement on Thursday.

The turbines are scheduled to be delivered in the spring of 2013 and put into operation in summer of 2013, it said.

Andreas Nauen, REpower’s CEO said the company has now been able to conclude contracts for total of eight wind farms in Ontario.

Just last month REpower had announced plans to deliver 15 turbines for projects run by WindWorks in Ontario, the company said.

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Guidelines for bidding of 350 MW Solar PV projects under Indian Solar Mission released…

 The guidelines for bidding of 350 MW of Solar PV projects under National Solar Mission in India has been released.

Some of the key highlights of the guidelines for developers:

Capacity

• The capacity announced tentatively is up to 350 MW and the capacity available will be disclosed at the time of short-listing.
• The Project capacity shall be at least 5 MW + 5% in case of Solar PV Projects and the maximum capacity of the Project shall be up to 20 MW± 5%. The plant capacity shall remain in multiples of 5 MW.
• The total capacity of Solar PV Projects to be allocated to a Company including its Parent, Affiliate or Ultimate Parent-or any Group Company shall be limited to 50 MW.
• The Company, including its Parent, Affiliate or Ultimate Parent-or any Group Company may submit application for a maximum of three projects at different locations subject to a maximum aggregate capacity of 50 MW.

Net Worth

• Net Worth of the company should be equal to or greater than the value calculated at the rate of Rs 3 Crore or equivalent US$ per MW of the project capacity upto 20 MW.
• For every MW additional capacity, beyond 20 MW, additional net worth of Rs. 2 Crore would need to be demonstrated.
• The computation of Net Worth shall be based on unconsolidated audited annual accounts of the company.

Shareholding Pattern

• The Company developing the project shall provide the information about the Promoters and their shareholding in the company to NVVN indicating the controlling shareholding before signing of the PPA with NVVN.
• No change in the shareholding in the Company developing the Project shall be permitted from the date of submitting the RfS till the execution of the PPA.
• However, this condition will not be applicable if a listed company is developing the Project.
• After execution of PPA, the controlling shareholding (controlling shareholding shall mean more than 50% of the voting rights) in the Company developing the project shall be maintained for a period of (1) one year after commencement of supply of power. Thereafter, any change can be undertaken under intimation to NVVN.

Financial Closure

• The Project Developer shall report Financing Arrangements within 210 days from the date of signing Power Purchase Agreement.
• Developer would furnish within the aforesaid period the necessary documents to establish that the required land for project development is in clear possession of the Project Developer (minimum 2ha per MW) and the requisite technical criterion have been fulfilled.
• The Project Developer would also need to specify their plan for meeting the requirement for domestic content.
• In case of delay in achieving above condition as may be applicable, NVVN shall encash performance Bank Guarantees and shall remove the project from the list of the selected projects.

Part Commissioning

• Part commissioning of the Project shall be accepted by NVVN subject to the condition that the minimum capacity for acceptance of part commissioning shall be 5 MW and in multiples thereof.
• The PPA will remain in force for a period of 25 years from the date of acceptance of respective part commissioning of the project.

Domestic Content Requirement

• The US has been making a lot of noise about the domestic content requirement and we have documented that in detail in our numerous essays including most recently last month when a  US trade official who asked not to be named told an Indian news paper that the United States Trade Representative’s office has recently submitted comments to the government of India expressing its concerns about the “trade-restrictive domestic content mandates”.
• However for the mission, it was mandatory for Projects based on crystalline silicon technology to use the modules manufactured in India in the first batch. For Solar PV Projects to be selected in second batch during FY 2011-12, it will be mandatory for all the Projects to use cells and modules manufactured in India. PV Modules made from thin film technologies or concentrator PV cells may be sourced from any country, provided the technical qualification criterion is fully met.
• Commenting on the guidelines, Madhavan Nampoothiri, Principal consultant Solar of EAI told Spark, “Bidders are likely to resort to more scientific due – diligence before offering the discounts. Serious players are expected to come in with scientific tools and techniques to determine the right tariff that can win in the bidding process.”
• “ We now have limited field data also available that needs to be factored into the discounts in bids,” he added.
• Consulting companies like EAI have developed their niche in renewable energy and are well qualified to provide such sophisticated bid advisory services that goes beyond regular financial or project analysis.
Developers can download the complete set of documents for bids using the following links…

• MNRE guidelines for JNNSM Phase I Batch II [ Dtd. 24 Aug 2011 ]
• Request for Selection(RfS) Document for Solar PV JNNSM Phase I Batch II
• Notice for Request for Selection(RfS) for Solar PV JNNSM Phase I Batch II
• Detailed NIT Document for Solar PV JNNSM Phase I Batch II

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Monthly Report on Indian Power Sector – July 2011

Spark has uploaded the Monthly update of July 2011 on Indian Power Sector by CEA for the Power Professionals.

The report is embedded below. Currently it is not in downloadable format. To download the same kindly contact Spark.

Monthly report on Indian Power Sector by CEA

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GVK Power to buy Australian Coal Mines for $2.2 billion…

GVK Power & Infrastructure has reached a deal to buy two coal mines in Australia, taking a heavy bet which has the potential to put an enormous strain on its finances.

Spark heard on the street that the GVK Power & Infrastructure,  Hyderabad based company is planning to buy coal mines of Australia based firm Hancock Prospecting. The deal will cost around $2.2 billion (about Rs 9,900 crore) and will include mines and the transport infrastructure which will be needed to move the coal at least 500 km to a port.

This move of GVK will assist the company for steady and secure access to the fuel for all its future planes in power sector and will be beneficial for the company as in India the fuel supply gets crimped by environmental holdups and troubles in the Maoist dominated coal producing states.

The deal will give GVK steady and secure access to the fuel for its plans in the power sector as supply in India gets crimped by environmental holdups and troubles in the Maoist-dominated coal-producing areas.

The cost of Coal Mines Alpha coal and Kevins’s corner will be around $1.3 billion and the associated losgistics will be around $900 million.

 

GVK has tied up with ICICI Bank, Standard Chartered Bank and Axis Bank for funding the transaction with Ernst & Young as an advisory.

Hancock is run by Gina Rinehart, Australia's richest woman. The Hancock sale was initiated through an auction in which the bidders included GMR Infrastructure, JSW Energy and Essel Mining of the Aditya Birla Group.

GVK, which operates the Bangalore and Hyderabad airports, three gas-based power projects and the Jaipur-Kishangarh expressway, ended the 2010-11 financial year in March with sales of 1,900 crore and net profit of 155 crore. Its share price has fallen by more than two-thirds in the last 52 weeks, valuing the company at 2,600 crore. On Thursday, the GVK stock fell 4.6% to 16.60.

The company, which has debt of about 5,500 crore, is building a 540 MW coal-fired power station in Punjab.

The two coal mines that GVK will buy have combined reserves of 7.6 billion tonnes and are located in the Galilee Basin in Queensland province. They can produce 30 million tonnes of coal annually over a life of 30 years.

The deal, when it is signed, will be the third major acquisition by an Indian company of Australian coal mines as local firms venture overseas to overcome supply problems at home.

Adani Enterprises paid about 12,000 crore to Linc Energy and Lanco Infratech agreed to buy the holdings of Griffin Coal earlier this year for nearly 3,500 crore. India is likely to import nearly 100 million tonnes of coal this year.

 
The power sector is one of the largest consumers of the fuel, accounting for 71% of demand, which is met through linkages with state-run Coal India and Singareni Collieries.

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Tata Power to invest Rs 1,000 Cr to lay cables in Mumbai…

 Tata Power, India's largest private power generation company is planning to lay its own distribution cable network in the Mumbai with the investment of  around Rs 1,000 crore over the next three years.

Currently, Tata Power serves around 8 lakh consumers using the distribution netwok of BEST and Reliance Infrastructure. For this, Tata Power is charged wheeling charges by Reliance Infrastructure and BEST which it has to recover from its consumers.

 

Earlier, Tata Power was not allowed to lay parallel network in the Distribution area of Reliance Infrastructure, however after the Supreme Court order they are allowed for the same. Tata Power has put up a proposal to the MERC for laying down the network.

Meanwhile, Spark found that in a recent order of the MERC, the regulator had granted Reliance Infrastructure the license to distribute electricity in the suburbs for 25 years as the company's license was expiring on August 15.

The MERC had rejected the proposals of four other bidders, including Torrent Power, Lanco Infrastructure, MSEDCL and Indiabulls, saying they did not have their own networks in place and in "public interest" it granted Reliance Infrastructure the license.

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Spark’s Update on Reliance Power…

 Reliance Power is in a better position than peers to generate cheaper power, because of high captive coal reserves, lesser logistics expense due to proximity of mines to plants and low-cost debt financing.

• The company has one of the highest captive coal reserves - 65 million tonne at peak production - most of which has got environment clearances.
• Most power plants are close to captive mines, thus lowering cost of logistics.
• Also, the company has raised debt at a much lower rate than industry average.

These factors would enable Reliance Power to produce power at cheaper rates, lowering offtake risk from financially weak state electricity boards.

 
The company, which has 600 MW operational power plant at Rosa in UP, is operating at a high capacity utilization when peers are struggling due to lack of fuel supply and buyers.
For the quarter ended June, Reliance Power, a part of the ADAG, reported a 15% rise in sales, 28% in operating profit and 51% in net profit. Plant load factor, or capacity utilisation, was 91% and plant availability factor, or plants available for production, was 94%, much higher than industry average.

The company is also in a better position with regards to its Indonesian coal mines. Due to Indonesia's tax levy, coal-linked projects of companies such as Reliance Power (Krishnapattam project), Tata Power,

Adani Power would become less profitable. As the Krishnapattam project is in early stages, Reliance Power has stalled all its construction activity for which it will have to pay a penalty of 300 crore, which is less than 2% of the total project cost. If the company doesn't go ahead with this project, it would still be able to sell coal from its Indonesian mines, which is very unlikely for others as they are in advanced stage of project development. Indonesia is among India's largest coal suppliers.

Timely commissioning of its upcoming projects can rerate the stock. The company aims to expand capacity to 5,000 MW by December, 2012 from 600 MW and its plans are on track. At the current market price of 84, Reliance Power's scrip trades at a valuation little higher than its peers and this premium is justified.

Stock prices of Reliance Power on August 25, 2011. (Courtesy Economictimes.com)

 

BSE

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Vol:501252 shares traded

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Vol:1567353 shares traded

 

 

 

 

 

 

 

 

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