Damodar Valley Corporation power project stares at dead end...

 

Damodar Valley Corporation (DVC) was one of Jawaharlal Nehru's 'temples of modern India'. But decades of conflict with beneficiary state governments and mismanagement have turned the eastern powerhouse into a 'temple of doom', presiding over a financial dead end.

In a confidential report to the power ministry, Arup Roy Choudhury, chairman of India's biggest generation company NTPC, said the government should either give the company a complete makeover or consider pulling the plug. Roy Choudhury was last month given additional charge of DVC.

"A total paradigm shift is required if DVC has to survive," Roy Choudhury said, putting four posers: Does the original philosophy behind forming DVC still hold good? Should DVC give up the activities that are in conflict with state government's role? Should DVC become just a generator and distributor only for bulk power? Is it a good time to reverse the 1943 initiative and wind up DVC?

DVC was set up under a special Act with the aim of controlling the wild and erratic Damodar flowing through West Bengal and Jharkhand. The two states are stakeholders along with the central government.

"When DVC was formed, probably the Centre-state and state-to-state dynamics were totally different. Today, the main stakeholders for whose benefit it was created do not feel that DVC is working for their benefit... Somehow, today it (DVC) is stepping on each others' toes and not synergizing with any beneficiary," Roy Choudhury said in a telling commentary on the company.

No wonder, the states have stopped acting as stakeholders. But Roy Choudhury also blamed the management, which went for expansion without observing the golden rule of first securing land, water, environmental clearance, coal linkage and power purchase arrangements. As a result, most of the projects are stuck.

Such carelessly planned expansion and lack of corporate vision have put DVC in dire straits: Arrears of Rs 6,880 crore, mostly from Jharkhand; negative cash flow of Rs 110 crore per month; IDC (interest during construction) liability rising to Rs 2,941 crore on account of delays and no recovery of even fixed costs of 1,100 mw in the absence of power purchase agreements.

The future too appears grim. New plants have an average tariff of Rs 4.5 per unit, which would make it tough for them to get merit order — a queue in which plants with lower marginal cost are called to switch on first for meeting demand.

Roy Choudhury also found fault with the mining foray, saying the coal tariff agreed with the mine operator had been vitiated in the absence of contractual safeguards due to changes in the coal pricing policy.

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Analysis: Indian Power sector sees return of investors...

 

The Piramal Group led by Ajay Piramal is scouting for investment opportunities in the Indian power sector, in a move that is as much an indication of the intentions of a conglomerate with money to invest as it is of growing investor interest in the business.

“The Piramal Group is looking at investment options and is evaluating opportunities. It has the resources and the appetite,” said a Mumbai-based power sector analyst who spoke on condition of anonymity.

A Piramal Group spokesperson, in an emailed response, said: “We evaluate opportunities across sectors including conventional power,” and added: “As a matter of business policy, we do not comment on specific opportunities.”

The power sector analyst cited above said several transactions were in play and cited investments made or interest evinced by foreign entities such as JPMorgan Chase and Co.’s asset management unit, Sembcorp Industries Ltd of Singapore and France’s GDF Suez SA, among others.
JPMorgan Asset Management invested $150 million in the Bhaskar Group’s Diliigent Power Pvt. Ltd in May 2013; Nagarjuna Construction Co. Ltd has been reported to be in talks with Sembcorp to sell a stake in a power plant; and Meenakshi Energy and Infrastructure Holdings Pvt. Ltd has agreed to sell a 74% stake in a 1,000 megawatts (MW) coal-fired power project to GDF Suez.

The debt-laden Jaypee Group is close to selling two of its three operating hydroelectric projects to a consortium led by Abu Dhabi National Energy Co. PJSC, known as TAQA.

The analyst explained that reasonable valuations have played a part in reviving investor interest in the power sector, as has the rupee’s depreciation, which has sweetened such deals for foreign buyers. The rupee has depreciated 11% against the dollar this year, making Indian assets cheaper for foreign buyers to acquire.

To be sure, valuations have become reasonable because many Indian promoters are looking for investors (if not to sell out altogether). Their problems include the domestic economic slowdown, high borrowing costs, delays in land acquisition and environmental clearances, and fuel shortages.
The Piramal Group itself is flush with funds after a 2010 deal in which it sold its pharmaceutical business to US drug maker Abbot Laboratories for Rs.17,000 crore.

Piramal Capital, which has a structured investments business unit, has invested Rs.550 crore in Navayuga Road Projects Pvt. Ltd, the road development arm of Navayuga Engineering Co. Ltd, and another Rs.500 crore in infrastructure company Green Infra Ltd. Piramal Capital picked up about a 10% stake in the Chennai-based vehicle loan company Shriram Transport Finance Co. Ltd for Rs.1,652 crore in May.

Analysts and experts say the evidence on hand does suggest a return of investor interest in the power business.

“There are some transactions that are happening. There are distressed assets; with valuations being depressed, it make sense,” former power secretary Anil Razdan said. “For the sector to fully recover, more financial closures need to be done for which the fuel issues need to be resolved. The projects need to run on full capacity to earn revenue.”

Power plants have been operating below production capacity because of fuel shortages. Things seems to be improving with the utilities tying up fuel supply agreements for 157 units totalling 71,000MW till November.

“Also, with the elections approaching, the demand for power will go up and to that extent there will be more power procurement by the state governments with state resources being deployed for the same,” Razdan added.

Indeed, trading in electricity saw a spike as the five states of Madhya Pradesh, Rajasthan, Chhattisgarh, Delhi and Mizoram, fearful of political backlash, bought additional power to avoid outages (and consequent voter outrage) in the November-December state assembly elections.

“We have to also keep in mind the fact that these asset sales are happening in projects that are operational or will soon start commercial operation. This mitigates the risk of land acquisition, approvals, clearances and project development. This appeals to foreign investors,” the power sector analyst mentioned in the first instance said.

Sambitosh Mohapatra, an executive director at PricewaterhouseCoopers Pvt. Ltd, said: “India is witnessing a revival of interest in investments, especially of international operators and investors from the Middle East, Europe and Japan, especially in the areas of renewables, conventional power generation (with advanced construction stage or operational) and electrical equipment.”

“It’s on the back of a positive outlook on the changing contours of the economy and expectations of improved governance. It also marks a phase of consolidation with the entry of large strategic operators bringing in synergies buying out small local players more interested in the EPC (engineering, procurement and construction) play,” Mohapatra added.

India’s ambitious bailout plan for state government-owned distribution companies announced in September last year is also expected to help improve the finances of state electricity boards and hence their ability to procure power.

“The scheme has been successfully implemented in Tamil Nadu, UP (Uttar Pradesh), Rajasthan and Haryana. FRPs (financial restructuring plans) have also been finalized for the states of Bihar, Jharkhand and Andhra Pradesh. Rationalization of tariffs has already been carried out by 24 SERCs (state electricity regulatory commissions)/JERCs (joint electricity regulatory commissions),” the power ministry said in a statement on Monday.

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The sun, a school and a farewell to power cuts in Tamil Nadu...

 

Students and teachers of Ramaratnam Nursery and Primary School in Mylapore have not had to bear the brunt of power cuts for almost one year, all thanks to the solar power plant installed on the roof of the building.

The school housed in the Madras Sanskrit College has installed an ‘On Grid’ type solar plant in which electricity produced during the day is directly converted into AC power and distributed to the electricity grid of Tangedco. S. Harish, CEO, Future Renewable Energy Infrastructure Private Limited, said under the ‘on grid’ system, the solar power produced could not be stored like the ‘off grid’ system, where it could be stored in a battery. The former was suggested to the school authorities because the school functions during day time. Also, the ‘on grid’ system is 30 per cent cheaper than the ‘off grid’ system.

The 7 Kilo Watt (KW) solar power plant, including the inverter, cost Rs. seven lakh (including the subsidy of Rs. 2 lakh) with the school likely to recover the investment within seven years, Mr. Harish added. The solar power plant has not only helped the school authorities deal with power cuts, but has also brought down power consumption by 30-40 per cent.

Subramaniam, manager of the school, said the institution, which used to previously consume an average of 2,500 units in two months managed to save around 1,000 units after the plant was installed.

B. Madhavan, a trustee of the school, said the solar plant was installed mainly to ensure students’ comfort. He said by going solar, the school was also able to fulfil its social responsibility.

Going by the success of the solar power plant installed in the school, the trustees of the Madras Sanskrit College have proposed to install an off-grid system on its premises.

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Mytrah Energy adds 150 MW wind power capacity in 3 States...

 

Mytrah Energy Ltd has added wind power generation capacity of about 150 MW in three southern States of Andhra Pradesh, Karnataka and Tamil Nadu.

This has increased its installed wind power generation capacity from 309.9 MW to 459.9 MW.

The wind power generation company based in Hyderabad and listed on the Alternative Investment Market of (AIM) of London Stock Exchange is implementing wind farms with total capacity of 238.2 MW at three locations at Burugula (37.4 MW) in Andhra Pradesh, Savalsang (100.3 MW) in Karnataka and Vagrarai (100.5 MW) in Tamil Nadu.

The company has commissioned the additional capacity at these sites. All the three projects are being commissioned on a rolling basis with the stabilisation process being conducted throughout the first quarter of 2014. With the completion of these three projects, the installed capacity of Mytrah Energy will go up from 309.9 MW now to 548.1 MW.

According to the company listing in the AIM, the entire new capacity will be able to capture the benefit of 2014 wind season.

Burugula and Savlsang are Mytrah’s first two self-development projects constructed on the company’s land with Gamesa. This provides the company with diversification when combined with its turnkey agreement with Suzlon.

The other project in Tamil Nadu at Vagarai is another self-development project with Regen and will be Mytrah’s first project where the output will be sold under third-party sale agreements.

Vagarai is expected to be one of the Group’s highest performing sites with an expected plant load factor of 31 per cent.

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BHEL wins Rs 1,023 cr contract from Neyveli Lignite Corp...

 

State-run BHEL has bagged a Rs 1,023 crore contract from Neyveli Lignite Corporation for supplying turbine generator package at a thermal power project in Tamil Nadu.

"Valued at Rs 1,023 crore, the order has been secured by BHEL from Neyveli Lignite Corporation Limited (NLC), for their upcoming 1,000 MW Neyveli New Thermal Power Project (NNTPP) at Neyveli, Tamil Nadu," BHEL said in a statement.

BHEL's scope of works includes manufacture, supply, erection, testing and commissioning of steam turbine generators & auxiliaries along with associated civil works.

BHEL has earlier secured orders from NLC for their 2x500 MW Tuticorin, 2x250 MW Neyveli and 2x125 MW Barsingsar projects, the statement said.

BHEL has established the capability to deliver power plant equipment of 20,000 MW per annum.

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CERC to hear Sasan commissioning case tomorrow...

 

Electricity regulator CERC, will tomorrow, hear Western Region Load Despatch Centre's petition challenging Reliance Power's claim of commissioning the first unit of its Sasan ultra mega power project, in Madhya Pradesh.

CERC (Central Electricity Regulatory Commission) will hear issues related to commercial operation of Sasan plant, according to information available on the regulator's website.

The Western Regional Load Despatch Centre (WRLDC), which operates the power grid in the region, had questioned the start date of commercial operations at the Sasan plant, where the first 660-MW unit was commissioned in March.

Based on a petition filed by the WRLDC, the CERC had set aside a certificate issued by the independent engineer for declaration of commercial operations at the Sasan plant.

Reliance Power filed an appeal with the Appellate Tribunal for Electricity (APTEL) on the grounds that CERC's order is violative of principles of natural justice and is not tenable in law.

APTEL set aside CERC's order on August 13 and directed it to decide afresh on the matter of commercial operation date.

While referring to the judgement of APTEL, WRLDC in its petition with the CERC said that since the issue of maintainability is linked with the main issue on merits, the commission can consider all issues and then come to a conclusion.

Sasan Power Ltd (SPL) is the wholly owned subsidiary of Reliance Power which is executing the 4,000 ultra mega power project. The first unit started producing power on March 30, Reliance Power said in a BSE filing on April 4.

The company is executing UMPPs in Sasan, Krishnapatnam (Andhra Pradesh) and Tilaiya (Jharkhand).

Source: Business Standard

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Cost of nuclear power proving high, Department of Atomic Energy in a fix..

 

As the cost of electricity generation by nuclear power plants, to be set up with the help of French and American companies, is turning out to be on the higher side, the Department of Atomic Energy is in a fix over how to bring down the cost.

On one hand, it is involved in hard negotiations with the companies and on the other hand, sources said, if the cost per unit turns out to be too expensive, then it may not even pursue the project with collaborators. The estimated cost by the DAE for Jaitapur Nuclear Power Plant (JNPP) in Maharashtra is around Rs 9 per unit while the cost for Mithi Virdhi nuclear power project is around Rs 12 per unit.

Currently, the DAE is in negotiations with French company Areva to build six EPR reactors of 1650 MW each at Jaitapur. Sources pointed out that initial estimates state the cost of the project to be around Rs 27-30 crore per megawatt and the cost per unit to be around Rs 9 per unit in 2021.

Speaking to reporters in Mumbai last month, R K Sinha, DAE Secretary, had said a competitive per unit tariff of Rs 6.50 has been estimated in the year of completion of Jaitapur project in 2020-21.

In the case of Mithi Virdhi project where American company Westinghouse Electric is providing AP-1000 reactors, the cost per megawatt is coming to around Rs 40 crores while the cost per unit is around Rs 12.

Although this project is yet to reach the advanced negotiations stage, the DAE has already signed an Early Works Agreement with Westinghouse Electric.

The DAE is skeptical about the proposal due to its high cost. It states that the cost per unit from the Kudankulam Nuclear Power Plant (KKNPP) unit 1 and 2 is around Rs 3.50 to Rs 4 per unit.

"If we take inflation into consideration, even then the cost is very high. We are also answerable to people. Plus, there is a lot of opposition to nuclear projects where we have foreign collaborators.

If nothing works out, then we will, perhaps, have to back out because of the high electricity generation cost from the project," a senior DAE official said.

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NHPC signs agreement with Odisha Govt, OHPC to form hydroelectric power JV...

 

State-run NHPC Ltd on Monday said it has signed an agreement with Government of Odisha and Odisha Hydro Power Corporation Limited (OHPC).

The agreement was for the purpose of formation of a Joint Venture company for implementation of six hydroelectric projects with an aggregate installed capacity of 1020 MW.

“A Promoters' Agreement has been signed on December 21, 2013 between NHPC Limited, Government of Odisha and Odisha Hydro Power Corporation Limited for formation of a Joint Venture Company for implementation of six hydroelectric projects with an aggregate installed capacity of 1020 MW,” said NHPC in a filing to BSE.

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Realities of renewable energy in India...

 

Recently the Union ministry of new and renewable energy (MNRE) asked the ministry of power (MoP) to make the Renewable Purchase Obligation (RPO) compliance mandatory for states if they want to avail funds for financial restructuring of their utilities.

RPOs, put simply, are the minimum percentages of the total power that electricity distribution companies and some large power consumers need to purchase from renewable energy (RE) sources. RPO creates a minimum market for renewables in the absence of pricing externalities of conventional power generation.

While the National Action Plan on Climate Change (NAPCC) has set an ambitious RPO target of 15% by 2020, it is the state electricity regulatory commissions (SERC) that set year-wise targets in their respective states. While 28 out of 29 states have such targets in place for solar and non-solar sources separately, there is an increasing concern over actual compliance. Data for a few major states for the last two-three years reveals that barring utilities in states such as Karnataka, most others have failed to meet their RPO targets.

Reduction of RPO targets to accommodate the concerns of utilities has been a common measure taken by SERCs. After achieving an RPO compliance of 5.78% in Rajasthan in 2011-12, the Rajasthan ERC reduced its earlier RPO target from 8.5% to 6%. Similarly Tamil Nadu ERC reduced its RPO target from 14% to 9% despite the state utility achieving a compliance of 9.59%. Gujarat ERC allowed its distribution licensees to carry forward the shortfall for FY 2011-12 to be met in FY 2012-13. Considering the excess solar generation in Gujarat in 2012-13 (over its mandated RPO), it allowed the state utility to count this towards compliance of the non-solar RPO to remove the burden on the distribution licensee.

For FY 2010-11 and 2011-12, Maharashtra appeared to have achieved its RPO targets of 6% and 7%, respectively. However, the RPO compliance data collated by the designated state nodal agency, Maharashtra Energy Development Agency, seems to have included renewable energy units wheeled under the network under open access (OA) and credited them to the utility’s account. For 2011-12, if one does not consider units wheeled under OA, then the RPO compliance drops sharply to 4.49%. While the regulator did seek the explanation for this counting of wheeled RE towards RPO compliance from Maharashtra State Electricity Distribution Co. Ltd, it did not take any further action in this matter. This issue is bound to come back when the OA consumers’ RPO compliance will be taken up.

Fortunately, there are encouraging signs with some state ERCs (Maharashtra, MP, UTs, Uttarakhand, Punjab, etc.) beginning to flex their muscles against RPO defaulters. For example, besides setting a deadline to cumulatively fulfil RPOs, Maharashtra ERC has explicitly directed that any future non-compliance would result in the ERC invoking the penal clause from their regulations. However, there are many other steps which state ERCs can proactively take to facilitate this process. An effective web-based automated monitoring and verification system for RE generation/procurement is essential to operationalize compliance reporting. While most state ERCs’ RPO regulations indicate quarterly compliance reporting, this is hardly followed up.

While India’s progress in the renewable energy sector has been impressive in the last few years and needs to be sustained in the years to come, effective implementation of the RPO framework is crucial to meet these goals.

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Vikram Solar ties up with GermanPV for supplying modules...

 

Kolkata-based Vikram Solar has tied up with Germany-based GermanPV for supplying solar modules for grid-connected solar park in the European nation.

"Vikram Solar has entered into a tie up with GermanPV, an energy solution company based out of Germany, for the supply of modules required for 2.45 megawatt (MW) grid-connected solar park constructed and commissioned in Germany.

The solar park is located at Osterburg in the district of Stendal, in Saxony-Anhalt, Germany.

The complete set of solar photovoltaic (PV) modules has been supplied by Vikram Solar for this solar park which will generate enough power to sustain the demand of 1,000 households, the statement said.

The project will result in carbon dioxide savings of 1.7 ton per year approximately.

"The decision to work with Vikram Solar for this park was clear for us. Vikram has been a reliable and trustworthy partner from the first point of contact to the final construction of the park. The direct line to decision makers in Europe as well as in India has helped to realise this project on a very tight construction schedule," Tobias Sommer, Director Procurement, GermanPV, said.

"We are proud and thankful to have the chance to work with the Management of GermanPV, a team with more than 10 years of experience in the German PV sector. This park marks a milestone in the long-term partnership of the two companies and in Vikram's presence in the European PV market," Davide Marro, Head of Sales - Europe, Vikram Solar, said.

Source: Business Standard

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