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August 25, 2011

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

image 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…

image 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
82.75
-00.78%
-00.65
Vol:501252 shares traded
NSE
82.80
-00.48%
-00.40
Vol:1567353 shares traded
 
 
 
 
 
 
 
 
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Jharkhand State PCB shuts 22 mines of Coal India…

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According to news, The Jharkhand State Pollution Control Board has ordered shutting down 22 open-cast mines of Coal India world’s largest miner.

A subsdiary of Coal India, called Bharat Coking Coal Ltd (BCCL), is having around 22 open cast mines in Jharia in Dhanbad District, Jharkhand. The output of these mines account for a 20% of output of Bharat Coking.

Spark learnt that on August 24, the Jharkhand State Pollution Control Board has order to shut down these mines and ordered the company to get mandatory clearances from the Union ministry of forests and environment.

 

As per some unofficial sources, Coal India reportedly failed to respond to a show-cause notice issued to it by the Jharkhand body.

Spark estimates that the closure of 22 out of Bharat Coking’s 103 mines can bring down production by about 35,000-40,000 tonne a day.

Out of Coal India’s 2010-11 production of 424.50 million tonne, Bharat Coking contributed 29.29 million tonne, the only subsidiary among its eight arms to exceed target.

 

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Essar Power to terminate 800 MW PPA with GUVNL…

image Spark learnt from the reports that the Essar Power Limited has issued one week notice for terminating its PPA singed with GUVNL for supplying 800 MW of Power for next 25 years.

Essar Power has earlier signed a PPA with Gujarat Government for supplying 800 MW for Power for next 25 years at the tariff of Rs. 2.80 per unit. However, it seems that currently Essar Power does not want to continue with the arrangement and has issued a one week termination notice to GUVNL.

 

As per the Essar Power statement,  "This (PPA termination) decision follows the failure by GUVNL to satisfy certain conditions under the PPA within the required timescale."

However, as per the Spark’s analysis, the increasing imported coal prices have made many power projects (including Essar’s) unviable. Essar Power is commissioning 1320 MW of imported coal based project at Salaya in Saurashtra region of Gujarat.

Meanwhile, Essar Power stated that the company remains committed to the Salaya power project and will be reviewing its options with regard to power sales. Proposed project is currently scheduled to commission in Q1 2014.

 

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Adani Power to raise $1.8b abroad by September…

image According to the Market Buzz, Gujarat based Power major Adani Power is on the verge of raising foreign currency funds of USD 1.8 Billions (Rs. 8232 Crs) by September 2011 .  

This move of Adani Power is quite significant considering the present time when most firms in India face difficulties in raising funds abroad due to unfavorable economic conditions and tight liquidity. Further, the move to take loans from abroad comes at a time when Indian banks have reached the limit of exposure to power sector debt and are wary of the credit risk involved in power projects that use imported coal, besides a fall in merchant power tariffs that could upset revenue and profit projections of power producers.

As per the sources, the loan of around USD $800 million (Rs 3,658.70 crore) has been raised at interest rate of 350-360 basis points above Libor.

 

Spark believes that the funds would be used to finance the Mun­dra Power Project and part-finance the Adani Power’s Maharashtra project where the company is implementing a 1,980 mw thermal power project in Tiroda.

The 4,620 mw project in Mundra is on track and the company has already commissioned 2,640 megawatts, including four units of 330 mw each and two units of 660 mw each with supercritical technology. The remaining 1,980 mw is under construction and is expected to be operational by the end of this financial year. The company also plans to synchronise two more units of 660 mw each, based on supercritical technology, at Tiroda this year.

According to Spark, Adani Power is comfortably placed of achieving about 6,000 mw operational capacity in 2011-12 out of the total planned capacity of 16,500 mw that is under development across Gujarat and Maharashtra.

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August 24, 2011

Can CSP Settle in India ?

An insight from Renewable Energy World.

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India, possessing great potential and more than enough suitable land with sufficient solar resources, is well-placed to allow CSP to make a very major contribution to its national energy supply. A new IT Power report looks into the encouraging factors and the barriers for deployment.

Coal dominates the Indian power sector currently, with a large portion of the fuel supply being imported; however, there is diversification to natural gas. Biomass use, for cooking and heat, has traditionally been a large fraction of primary energy, but is essentially static in absolute terms and so is becoming a decreasing part of the total. Oil consumption, largely for the transport sector, is growing at a commensurate rate and the country is heading towards relying on imports for 90 percent of its oil. Natural gas consumption is also growing; it is understood that domestic sources are constrained and imports now account for approximately 25 percent of consumption.

SOLAR RESOURCES

Maps from NASA and Meteonorm show a range of approximately 1800-2200 kWh/m2/year for DNI across India, an annual DNI resource comparable to the best European sites such as Spain, though lower than the best sites in the USA and Australia. Abengoa Solar considers sites with an annual average DNI above 1900 kWh/m2/year as potential sites for CSP plants.

The northwest of India is widely recognised as having the best sites in the country. Jodhpur, on the edge of the Thar desert, is almost exactly comparable on an annual average basis to Granada, one of the best Spanish sites at which the Andasol power plants are located. However, the impact of the annual monsoon season is noticeable with July to September being the months of lowest DNI.

ENABLERS FOR CSP DEPLOYMENT

India is one of the world leaders for installed renewable generation with a total capacity of almost 17.6 GW as of June 2010. (This figure does not include about 37 GW of large-scale hydropower.) There is a thriving renewable energy sector with strong growth in PV manufacturing that offers opportunities for synergy with the CSP sector. The Electricity Act of 2003 reformed the power market to encourage competition and allow for open network access for renewable generators. India's existing capability and potential for innovation is supported by a well-educated, professional and skilled workforce.

The country has the world's first Ministry for New and Renewable Energy (MNRE) and the Indian Renewable Energy Development Agency (IREDA), administered by MNRE, was established in 1987 to operate a revolving fund for development and deployment of new and renewable sources of energy. MNRE also administers national institutions such as the Solar Energy Centre (SEC) and the Centre for Wind Energy Technology (C-WET).

CLIMATE CHANGE POLICY

The National Action Plan on Climate Change (NAPCC, 2008) includes the main enabler for PV and CSP projects, the Jawaharlal Nehru National Solar Mission, which has a target of 20 GW of grid-connected solar to be installed by 2022. This is generating interest from all the major international players. State based RPOs and feed-in tariffs (FiTs) are emerging to also assist in building renewable energy industries. The overall environment is assisted by a small tax on coal and by the Clean Development Mechanism (CDM).

The Solar Mission promotes the use of PV and CSP generation for both grid-connected and off-grid locations. In its first phase, 1 GW of grid-connected solar is targeted for 2013, with an approximate 50:50 split between CSP and PV expected. Manufacturing capabilities in PV, CSP and low temperature thermal are to be built with the help of incentive packages, soft loans through IREDA and mandating a level of technology transfer for government and private procurements of foreign technology. R&D is to be supported via a proposed Solar Research Council.

The guidelines for phase 1 of the Solar Mission include a 30 percent local content requirement and the need for technology to have been demonstrated in operation at a scale of at least 1 MWe for at least 12 months. A tariff cap of Rs.15.3/kWh (approximately US$0.34/kWh) is on offer, with a reverse auction system required if proposals with more than the capacity target are offered. The Request for Selection closed in September 2010. In October 2010, the Hindu Business Line website reported that 77 CSP proposals totalling 1815 MW were received. In November 2010, The Indian-Commodity website reported that seven CSP proposals had been selected totalling 470 MW with significant tariff discounts of up to Rs.4.82 (more than 30 percent).

BARRIERS TO DEPLOYMENT

The Indian Renewable Energy Status Report notes that there is no established capability in India for CSP manufacture and there is a gap in Engineering, Procurement and Construction capability for setting up and running CSP plants. In examining the barriers to technology transfer for renewable energy technologies for India, the report identifies: product suitability to Indian conditions, difficulty in accessing market information for foreign companies, limitations in infrastructure availability, and difficulty of financing.

There are a range of sources of data available on insolation; however, like many places in the sunbelt regions of the world, there is not as much accurate ground-based data as investors desire. Predictions of future plant performance can probably only be made to an accuracy of 10-15 percent.

Published cost estimates for India vary by a factor of nearly 80 percent from lowest to highest. High current costs are an immediate barrier. India, with its exemplary and ambitious Solar Mission, has indicated that it intends to take a leading role in adopting policy settings that lead to the necessary deployment.

Prior to the closing of the Solar Mission's phase 1 applications in December 2010, potential developers suggested that the Solar Mission CSP tariff was not sufficient. The fact that the Request for Selection was oversubscribed and that the shortlist of developers offered discounts on the tariff ranging from around Rs.3 to 5 off the Rs.15.3/kWh cap would suggest that some developers believe that cost is not an insurmountable barrier. However, until these projects achieve financial closure and begin construction, there remains the major concern that the discounts have been offered to speculatively secure a place in a competitive process and that the projects may turn out to not be viable.

The World Bank's analysis of CSP costs versus the Solar Mission phase 1 tariff cap concluded that with either tower or trough technology and either wet or dry cooling, projects would not be viable even under the maximum allowed tariff. If this is the case, then cost remains a large barrier to CSP in India. On a positive note, a range of financial and regulatory incentives were analysed and it was concluded that all measures taken together were sufficient to make projects viable. Also, India's large-scale renewable energy support initiatives are just beginning to take effect. If the other factors needed to make India an attractive investment proposition are in place, it should be feasible to attract investment and see the levels of investment growth that the EU and US had in 2004-2006.

CONCLUSIONS

Whilst the grid in India is extensive, there are many regions where the load density has not justified the necessary substations for full grid connection. Within these non grid-connected areas there are industrial sites with captive power generation in the MW range that would be candidates for small off-grid CSP systems.

The Solar Mission is a visionary and inspiring policy measure that has the potential to be a leading example for the world. Features like the eligibility requirement that CSP technology must have been demonstrated for at least 12 months at a scale of 1 MWe or above are sensible and should be maintained. No doubt many lessons will be learned as the phase 1 process unfolds. The reverse auction approach to tariff determination carries considerable risk of allocations being made to 'adventurous' bidders who may ultimately be unable to deliver, and various stakeholders have indicated that the timelines for obtaining financial close, construction and commissioning under phase 1 are likely to be almost impossible to meet. It remains to be seen how this unfolds.

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Coal India slips to third slot in market valuation league…

image Coal India on today (August 24, 2011) slipped to the third position after Reliance Industries and ONGC on market valuation charts, as it lost further ground after losing the top slot to Mukesh Ambani-led corporate giant yesterday.

Shares of Coal India today slumped by 4.6 per cent at the Bombay Stock Exchange (BSE) to close at Rs 373.85, giving the company a market valuation of Rs 2,36,137 crore. This made Coal India the third largest company in the country after RIL (Rs 2,49,142 crore) and ONGC (Rs 2,38,783 crore).

The stock performances of RIL and ONGC were relatively better in a weak market. As against a 1.3 per cent decline in the benchmark Sensex, ONGC was nearly flat with a 0.02 per cent decline to Rs 279.10, and RIL fell 0.6 per cent to Rs 760.95.

RIL yesterday regained its position as the country's most valued firm, pushing Coal India to second position, while ONGC was ranked third.

Coal India had dethroned RIL as the country's most valued firm on August 17. Since then, there have been many twists and turns in the market valuation charts, especially in the top three positions.

Two days later on August 19, RIL briefly fell behind ONGC to third position in the market valuation charts, but returned to the second slot before the market close that day.

However, Coal India shares have come under tremendous pressure in the past few days and in today's intra-day trade, it touched a low of Rs 371 -- its lowest in a week.

Coal India's market value has fallen by more than Rs 5,000 crore since August 17, when it became top-ranked company with a valuation of Rs 2,51,296 crore.

At the same time, RIL's market value has risen by about Rs 2,000 crore even in an overall weak market in this period. ONGC's market value has also grown by about Rs 1,500 crore since August 17.

When Coal India topped RIL on August 17 to emerge as the country's most valued firm, it had ended the private sector corporate giant's over four-year reign at the top of the market valuation charts.

RIL had first toppled ONGC to become the country's most valued firm way back in late 2006, but the state-run energy giant later reclaimed its top position, albeit only for a brief period. RIL has managed to stay on the top since February, 2007, except for a few days last week.

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Stunted growth pushes Tata Power to look overseas for biz…

Power major Tata Power is looking abroad as it faces challenges in India. Addressing the Tata Power AGM in Mumbai today, Tata Group chairman Ratan Tata said that the company was seeking opportunities overseas to fulfill the needs of its shareholders.

Ratan Tata raised some points at the AGM, where he said that there are certain issues that remain as far as the growth of the power sector in India is concerned and they are related to coal supplies and linkages relating to coal. There are delays in environmental clearances and also the supply of gas. These are the issues that have made companies, like Tata Power look at international operations in a big way. They will seek international projects and seek them as their main growth drivers for the future.

Tata spoke about the transmission sector in India which he said has been growing at a rate of 6-7% per annum. He said that has to grow and take an even higher percentage as far as growth is concerned. The power distribution sector is something that needs a significant reform, according to him. He said, “It is still facing losses to the tune of 35-40% and that needs to be worked upon where alternative models for distribution, particularly, decentralized generation using renewable resources or energy should be utilized.”

He mentioned that the company is actively looking at international operations, seeking opportunities to acquire energy resources across the globe to de-risk the domestic operation challenges that the company is currently faced with.

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Tata Power looks weak as per the Market Sentiments…

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As per the market sentiments, it seems that Tata Power is getting weak.

Report says that Tata Power has been going weak for the last 15 days since probably their Mundra Ultra Mega Power Project, which is likely to get commissioned in next 6 months is going to see the cost escalation because of the rise in the imported coal and the whole project has been structured on that basis only and they are not likely to see the improved realization on that front.

Considering the development of Mundra UMPP along with the negative perception of the power sector because if you take the pure power play stocks like Adani Power , JSW Energy , they also have all corrected quite a bit. Reliance Power has been languishing quite weak.

Considering all these, Tata Power must have problem of Mundra Ultra Mega Power Projects where they are likely to see problems in time to come.

 

Stock prices of Tata Power on BSE and NSE  as on August 24, 2011. (Courtesy Moneycontrol)

 

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IMFA plans Rs 6,600 Cr power plant in Orissa…

image Spark discovered from various sources that, Indian Metals & Ferro Alloys Ltd (IMFA) is thinking on to set up a 1,320 Mw power plant in Orissa with a planned investment of Rs 6,600 crore over the next five years.

IMFA, India’s largest produce of ferro alloys, currently produces power for its own captive use as a part of its backward integration strategy. With the establishment of the proposed plant it will become a commercial power generator.

A seperate SPV will be floated called Utkal Power Ltd to carry out project execution. The Project will consists two units of 660 MW each.

IMFA produced 180,000 tonnes of ferro chrome in 2010-11 from five of its six arc furnaces at Cuttack and Choudwar in Orissa. It operates 108 Mw captive power generation capacity, as electricity accounts for 40 per cent of the cost of production. It would expand its captive power capacity to 258 Mw by March 2012.

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