Coal blocks not developed for want of clearances: JSPL, Monnet...

 

Slamming the decision to de-allocate their coal blocks, Jindal Steel and Power and Monnet Ispat and Energy have blamed lack of government approvals and external factors like Naxal activities for not making enough progress in their mines.

The two companies, whose 4 blocks figure in the list of 11 to be de-allocated, said that they are being punished for no fault of theirs.

The de-allocation is seen as a major setback to both as the blocks were supposed to be the captive raw material source for their upcoming/existing steel and power plants. Jindal’s Rs. 80,000-crore mega venture of Coal-to-Liquid project is likely to be hit.

The two companies have together invested over 11,000 crore so far on development of their end-use plants.

“At the outset, we are shocked and surprised to hear the recommendation made by IMG (Inter-ministerial group), it seems that everybody in the policy making/monitoring wants to avoid a pragmatic decision in view of the media hype,” Monnet Ispat spokesperson said in a statement.

The JSPL spokesperson said the company’s coal blocks are being de-allocated “despite best efforts made by the company and no fault on part of the company.”

Last week, the Coal Ministry decided to de-allocate 11 captive coal blocks to various companies. JSPL’s three — Ramchandi promotional block, Amarkonda Murgadangal and Urtan North (jointly with Monnet) — figure in the list. Monnet’s one more block, Rajagamar Dipside (jointly with Topworth Steel), is also part of the list.

The Monnet spokesperson further said 450 hectares of the block, out of total 650 hectares, is over-lapping with a block of the South Eastern Coalfields Ltd (SECL) and SECL needs to surrender title of the land and transfer it to Monnet.

He also accused the Coal Ministry of violating its own conditions (clause 17 of General Condition Of Allocation), saying that the caluse “clearly stipulates that any delay in transferring the land by a government company to the coal block allocatee can be claimed as grace period.”

“If IMG has recommended for de-allocation, then they are violating the published guidelines of MoC,” the spokesperson said, adding that Monnet can start development of the block immediately as it needs “to acquire only 5 acre of land for making an entry.”

According to the JSPL spokesperson, the company has made 4 attempts for carrying out exploration at Amarkonda Murgadangal block since April, 2009 but could not do it due to “large amount of extremist/Naxal activities” and “illegal mining” supported by extremists/anti-social elements.

“State government had further agreed to extend the validity of PL (prospective licence) by 2 years 4 months and 8 days under force majeure conditions on June 5, 2013 and we are in the process of starting our fifth attempt to carry out drilling operations in this block,” he said.

The spokesperson of Jindal Steel and Power (JSPL) said its employees, officials and contractors were assaulted or made hostage many times at the site and equipment were damaged.

He added that many complaints and FIRs have been filed on these issues and state and central governments have been informed about it.

Talking about the to be de-allocated Ramchandi promotional block, he said JSPL’s application for prospecting licence is pending with Odisha government for more than three years and the state government has not yet “executed PL on one pretext or the other in spite of a number of reminders.”

“In the circumstances, company could not start exploration activities for no fault of the company,” he said, while noting that the company has already completed various initial work, including detailed feasibility study, for the project and has invested Rs. 74 crore on it.

The Ramchandi block, which has estimated 1.5 billion tonnes of coal reserves, was allocated for ambitious Coal-to-Liquid project in February, 2009 and JSPL had already announced investment Rs. 80,000 crore on the venture.

On Urtan North block, the third to be de-allocated block (jointly allocated with Monnet), JSPL spokesperson said that its Mine Plan is pending for final approval from Coal Ministry for more than six months now. The delay in Coal Ministry’s approval has led to further delay in securing Environment Clearance (EC) as well.

“Expert Appraisal Committee (EAC) of MoEF, GoI has already considered grant of EC and is mainly pending for submission of Mine Plan approval letter. The Mine Plan approval letter is pending for issuance with Ministry of Coal for more than six months,” the company said.

Monnet, which is also a partner in the block, also echoed the same. It the spokesperson said that grant of EC is in the “final stage” and the company is hopeful that it will be cleared by EAC in their “forthcoming meeting” to be held later this month.

For Monnet, Urtan North and Rajagamar Dipside blocks are supposed to be the captive raw material source for its over a million tonne steel plant in Chhattisgarh’s Raigarh, which is now in final stages of commissioning. The company said it has invested over Rs. 6,000 crore to develop the end-use plant.

The Urtan North block is also critical to JSPL’s plans as it was supposed to meet 10-12 per cent of the coking coal needs of its already operational Raigarh steel plant in Chhattisgarh. The company said has invested Rs. 3,416 crore on its development.

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first unit of the 800 MW at Krishnapatnam Thermal Power Project to be commissioned soon...

 

The first unit of the 800 MW at Krishnapatnam Thermal Power Project will be commissioned this year followed by second unit of 800 MW, Kakatiya 600 MW and Hinduja second unit of 520 MW next year, Andhra Pradesh chief minister N Kiran Kumar Reddy has said.

Speaking at the sixth power awards function on Friday, he said apart from these projects, 255 MW from Tuticorin and 120 MW from central generating stations is also expected during the year. Besides, 500 MW solar and 500 MW wind energy projects are also likely to be added during the year, he said.

The government is planning to add 365 33/11 KV substations during the current year and around 1,800 in the next four years. It has been proposed to add additional one lakh distribution transformers every year in the state in the next 4 years.

The state government has also put in place solar policy with subsidy for roof-top solar cells and allowing net metering facility, the chief minister said.

‘’We encouraged investments in gas-based power plants and ultimately after huge investments in capacities, we reversed the policies stating that power generation using gas is not a national priority. Our state alone has close to 7000 MWs installed capacity and hardly one tenth of it is being used today,’’ he remarked.

‘‘Our transmission and distribution losses have come down to 15.72 p.c from 24.15 p.c.,’’ he said.

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Factor in lifetime costs of power plants while importing from China: CEA

 

Reports say that Indian imports of power equipment from China have hugely shot up and risen to 45% of the market in 2012-13, up from just about 15% in 2005-06.

Now, there are gains from trade, and the power producers can be seen as duly taking advantage of attractive prices and prompt delivery schedules of Chinese power gear.

However, a recent study by the Central Electricity Authority (CEA) has reportedly reiterated, again, that Chinese equipment already installed routinely underperforms on all key parameters, compared to those designed and built domestically. The need is to design incentives to factor in lifetime rather than initial costs.

When it comes to operating ratios, heat rate, auxiliary consumption, forced outages, etc, the imported power systems have been deficient. We need to address the real risks of malfunction and compromised safety at the Chinese-equipment plants.

It is possible that the imported power systems have not been designed to accommodate the various peculiarities of Indian coal and operating conditions. It surely makes a cast-iron case for Chinese equipment makers to mandatorily set up facilities here in India to design, build and maintain power systems.

In any case, about 25,000 MW of installed generation capacity, which is a considerable chunk of the total nationally, is already based on imported Chinese equipment like boilers and turbines, and to service and maintain the systems, local presence ought to be imperative.

Domestic power producers can be encouraged to import equipment provided, of course, that the capital goods meet domestic operational standards in actual working conditions. In tandem, domestic power equipment makers need market access and a level playing field in China.

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CCI intervention likely in RGPPL gas allocation issue...

 

The power ministry may refer the issue of gas allocation for Ratnagiri Gas and Power (RGPPL), formerly the Dabhol Power Company, to the Cabinet Committee on Investment to fast-track the process and prevent lenders’ exposure of R8,500 in the project from turning into a non-performing asset.

A source said while an EGoM on March 28 has approved priority gas allocation (along with the fertiliser sector) to the project, the 1,967-MW plant is non-operational since August 1, 2013. “Involvement of a high-level body to resolve the issue quickly may prevent the project from getting bust,” the source said.

The power ministry has already raised the issue of gas allocation for RGPPL with the oil ministry that is understood to have expressed its inability to give additional gas allocation to the project. Considering the seriousness of the issue, an EGoM meting could also be convened.

Faced with a low outputfrom RIL’s KG-D6 block, the EGoM on August 23 capped gas supply to fertiliser units at 31.5 mmscmd and allowed all additional gas available beyond this upto 2015-16 to the power sector. But this exercise would leave only 1.125 mmscmd of gas for power in 2013-14, 3.980 mmscmd in 2014-15 and 6.895 mmscmd in 2015-16, leaving little for priority allocation for RGPPL.

“...the company is finding it difficult to meet its debt service obligations to lenders who have large exposure in RGPPL of about R8,500 crore,” ICICI bank managing director and CEO wrote to power minister Jyotiraditya Scindia flagging off the issue.

“Immediate supply of at least 2.5-3.0 mmscmd to RGPPL from APM sources as an interim measure is needed in order to bring parity with other gas based power plants which are currently operating at around 25-30% PLF. This would ensure that company is able to meet its debt service obligations without default,” she said.

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New bidding norms to make power tariffs realistic...

 

Why are the new bidding norms so important for the power sector?

Fuel uncertainty over the years has impacted power projects in a big way in the absence of a reasonable pass-through mechanism in the power purchase agreements (PPAs).

This led to abnormally high tariff quotations in the PPAs, which the state distribution utilities battling with deteriorating financial health can't handle. The situation became so difficult that there was a PPA lull since 2010 and for those few that are under the process, or have been signed recently, in states like Rajasthan and UP, the tariff is abnormally high. Going by the PPAs signed recently in Rajasthan, Uttar Pradesh and Tamil Nadu, the developers have quoted prices as high as R5 per unit to the distribution companies and yet won the contracts. These exorbitant prices, apparently beyond the market’s capacity to pay, are mainly due to the uncovered fuel risk in the existing case-1 bidding provisions. The new prices discovered for long-term, up to 25 years power supply, are significantly higher than the price level of R3-3.50/unit quoted by the developers in 2010.

How will the new bidding norms help in solving this problem?

The new framework cleared by the government now allows pass-through of the additional cost of fuel and also safeguards any misuse of the fuel source linked to a power project. The new bidding norms will remove fuel uncertainties associated with quoting of tariff and, in turn, will allow bidders to project realistic tariffs.

Which are the different categories of projects covered by the new bidding norms?

The power ministry has issued model RfQ, RfP and Power Supply Agreement for procurement of power through tariff-based competitive bidding for construction and operation of thermal power stations set up on design, built, finance, own and operate (DBFOO) basis by distribution licensees.

The new guidelines for procurement of power under these documents with effect from November 9, 2013, have also been notified. In terms of guidelines notified in 2006 and amended from time to time, procurement can be done under two categories:

* Case-1: Where location, technology or fuel is not specified by the procurer.

*Case-2: For hydro-power

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NHPC’s Rs 2,368 cr share buyback to begin from Nov 29...

 

NHPC’s buyback of shares worth up to Rs 2,368 crore will start from November 29 and aims at funding the country’s largest hydro power producer’s expansion plans.

 

“The (buyback) process will commence on November 29 and will be concluded on December 12,” said a source.

 

The company plans to buyback up to 123,00,74,277 fully paid up equity shares of Rs 10 each at a price of Rs 19.25 apiece aggregating Rs 2,368 crore from the open market.

Government holds 86.36 per cent stake in NHPC.

The company got listed on bourses in 2009 after the government divested 5 per cent stake. It has also issued 10 per cent fresh equity.

Overall, the government plans to raise Rs 40,000 crore in the current financial year (2013-14) through disinvestment.

NHPC generates 5,702 MW electricity from 17 hydel stations in the country. As many as seven power stations totaling 4,095 MW capacity are under construction.

The company’s scrip closed at Rs 17.65, down 1.67 per cent, on the BSE.

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ICRA reaffirms TPDDL's loan facilities at "ICRA AA-"...

 

ICRA has reaffirmed Tata Power Delhi Distribution Limited's (TPDDL) Rs. 4,500 crore term loans and Rs. 145 crore fund-based limits at "ICRA double A minus". Moreover, ICRA has also reaffirmed a rating of "ICRA A one plus" assigned to the Rs. 725 crore non-fund based limits and Rs. 500 crore short-term debt programme of TPDDL.

According to the rating agency's report, the rating action has factored in the satisfactory working of the cost plus tariff mechanism in Delhi as reflected by significant hike in tariffs allowed over the past three years which has made current tariffs nearly cost reflective.

While the ratings continue to derive comfort from the company’s favourable operating position arising from the cost-plus nature of its core business, ICRA was happy to note TPDDL's ability to meet the stringent operating parameters including AT&C loss reduction measures laid down by DERC.

However, the above ratings are constrained by significant build of receivables on account of revenue under recoveries as power purchase costs increased significantly over the years. Further, lower sale rate for surplus power as against the rates approved by DERC has continued to result in power-cost under-recoveries.

As for the key rating sensitivities, the company has listed out certain factors which include TPDDL's timing of additional tariff hikes and its adequacy to not only cover increasing cost of power but also permit eventual liquidation of past under-recoveries.

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CIL tweaks provision of model fuel supply pacts on disputes...

 

State-owned Coal India Limited (CIL) has tweaked the provision pertaining to the settlement of disputes in the model fuel supply agreements (FSA) for the existing and new State-owned power utilities.

“(There are) modifications in the provisions of model FSAs applicable for the existing and new power utilities (for SEB (State Electricity Board) and state Gencos,” Coal India said in a letter.

CIL further said in the letter that the provision for ‘settlement of disputes’ under the model FSA for both existing and new plants was in accordance with the mechanism of permanent machinery of arbitrators (PMA) issued by the Department of Public Enterprises.

“Recently, the Department of Heavy Industries & Public Enterprises modified the dispute resolution provision, replacing the earlier OM (Office Memorandum),” it said.

“Since earlier OM dated January 22, 2004, has been superseded by the new OM dated June 12, 2013, the FSA provisions...for the model applicable to existing as well as new government/state power utilities, including the corresponding tapering FSA model, will stand modified accordingly,” CIL said.

Coal India Chairman S. Narsing Rao had recently said the PSU has signed FSA for 70,400 MW.

Amid continuous delays, the Cabinet Committee on Investment (CCI) had earlier said that timelines for signing of fuel supply pacts for power projects of 78,000 MW capacity should be met.

Two deadlines set for signing of the fuel supply agreements by CIL with the power producers could not be adhered to.

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Coal ministry de-allocates coal blocks of Jindal, Rathi, Monet Ispat and 8 others...

 

Coming down heavily on firms sitting idle on mines, the coal ministry has decided to deallocate 11 blocks given to companies including Jindal Steel and Power Ltd (JSPL) and Rathi Udyog Ltd. “The coal ministry last evening took a decision to deallocate 11 coal blocks alloted to firms including JSPL and Rathi Udyog Ltd,” a top coal ministry official told PTI.

The inter-ministerial group (IMG) on coal blocks after reviewing the performance of 30 coal blocks had earlier recommended deallocation of 11 blocks given to companies including JSPL and Monnet Ispat & Energy Ltd. “In the case of another 19 mines, the IMG has recommended either imposition or deduction of bank guarantee,” a source had earlier said.

Coal blocks, which were recommended for deallocation, include Ramchandi Promotional block allotted to JSPL, the source had said. These coal blocks were earlier issued show cause notices for delaying production.

Last month, the coal ministry had asked the coal block allottees to make presentation before the IMG on achievement of milestones and reasons for delays. The firms which were asked to make presentation include, Steel Authority of India Ltd (SAIL), NTPC Ltd, JSPL, Tata Power Co. Ltd and Monnet.

JSPL was asked to make presentation with regard to delaying production from its four coal blocks — Amarkunda Murgadangal in Jharkhand, Utkal B1 and Ramchandi Promotional block in Odisha and Urtan North in Madhya Pradesh. SAIL was asked to make presentation for Sitanala mine in Jharkhand, and NTPC for Parki Barwadih mine in Jharkhand and Talaipalli mine in Chhattisgarh.

The government had formed the IMG last year to review the progress of coal blocks allocated to firms for captive use and recommend action, including de-allocation. The panel under the chairmanship of additional secretary in the coal ministry has members from other ministries, including steel and power.

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AERC approves 2.4 pc hike in power tariff...

 

The Assam Electricity Regulatory Commission (AERC) today announced the multi-year power tariffs for the financial years of 2013- ’14, 2014- ’15 and 2015- ’16, which will come into force from December 1.

The Commission has approved of an average tariff increase of 2.4 per cent for the financial year of 2013-’14 and has retained the fixed/demand charges at the existing level for all categories.

However, through its tariff order, the Commission has retained the tariffs of the ‘Jeevan Dhara’ category and the first slab of the ‘Domestic-A’ category (first 4 units per day or first 120 units per month) at the existing levels, with the intention of reducing the burden on these categories, and also since the level of cross-subsidy is within limits.

It needs mention here that the Government of Assam has assured a Rs 200 crore tariff-related subsidy and it has particularly mentioned Rs 1.10 per unit subsidy for the ‘Jeevan Dhara’ category and Rs 0. 70 per unit for the ‘Domestic-A’ category for the first four units per day, that is 120 units per month. This will benefit 11.27 lakh ‘Jeevan Dhara’ category consumers and 15.28 lakh ‘Domestic-A’ category consumers, said AERC sources.

In real terms, the tariff for these two categories will actually be lower than the existing tariff on account of the State Government subsidy being provided to them, the sources said. It has reduced the tariffs for the ‘Public Water Works’ category (both HT and LT) and ‘Public Lighting.’

The Commission has also reduced the tariffs for the ‘Low Tension (LT) General Purpose Supply’ category since this category, which primarily includes premises of charitable organisations, places of worship, small government offices, etc., may not be required to subsidise other categories. Further, the Commission has retained the existing tariff differential in the time of day (TOD) tariffs for different time slots during the day so as to ensure that the demand side management (DSM) and energy conservation measures are continued.

The Commission has approved of a marginal increase, that is 2.4 per cent, in tariffs of certain categories of consumers like high tension (HT) industries, tea, coffee and rubber industries, ‘Domestic-B’ category (above 5 KW- 20 KW load), while keeping in view the overall objective of maintaining the cross-subsidy within the limit of plus-20 per cent, said the sources.

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