India's Adani Group is in talks with Japan's Softbank and Foxconn, maker of Apple's iPhone, to secure investment in a $3 billion project to make solar cells and panels in the country, two sources with knowledge of the matter said. Prime Minister Narendra Modi's government expects clean energy to yield business worth $160 billion in India in the next five years, based on the country's power generation targets. Softbank, Foxconn and Bharti Enterprises have already pledged to invest about $20 billion in solar projects in India. A new deal with Adani, one of the country's largest conglomerates, would boost Modi's efforts to promote manufacturing and create sorely needed jobs. One of the sources, who is involved in the negotiations, said that over the past few weeks, the billionaire founder of the mines-to-power Adani Group, Gautam Adani, had held talks with Softbank Chairman Masayoshi Son and Foxconn head Terry Gou. "(Adani) are talking to Softbank, they are talking to Foxconn. They may partner with both of them. Something will be finalised in the coming few months," the source said. Both sources said the deal was yet to be finalised. Under the current discussions, Softbank and Foxconn, which have a string of planned and executed in investments in India, could directly inject money into the project. Foxconn Technology Group, Softbank and Adani all declined to comment. One of the sources said the talks had gathered pace after Adani and U.S. solar power company SunEdison two months ago ended a $4 billion agreement struck earlier this year, on a similar project. "That deal could not mature," said the India-based source. "They were charging too much on the technology fee." A SunEdison spokesman declined to comment. Here Comes The SunUnder the planned project, Adani is looking to set up a plant to produce 3 gigawatts (GW) of solar cells and panels, probably in Modi's home state of Gujarat by 2020, said the source. Adani is based in the state and is said to be close to the prime minister. The first phase of 1 GW will be completed by 2018 and the company has already started buying equipment for it. India is relying on renewables to fight climate change rather than committing to emission cuts like China, arguing that any target could hinder economic growth vital to lifting millions of its people out of poverty. Modi has set clean-energy targets including raising solar capacity fivefold to 100 gigawatts (GW) by 2022, as India's peak power demand doubles over the next five years from about 140 GW now. But most of the investment in the sector is expected to come either from foreign investors or companies such as SunEdision, Trina and First Solar. (Reuters)
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Strong Indian imports of petrol, boosted by a shift towards petrol car sales, are expected to underpin Asian margins for the fuel at least for the rest of the fiscal year to next March, industry sources say. India has surplus refining capacity, but there has been maintenance at some plants and petrol demand has risen after a cut in diesel subsidies increased the attractiveness of petrol cars. Petrol imports from April to June were the highest in more than four years, official data showed. As a result, Asia's average petrol profit margin for refiners, or the crack, in the first seven months of 2015 was $12.60 a barrel, the highest for the period since 2009, based on Reuters data going back to the second half of 2008. "Petrol imports are there as we are seeing a robust growth in demand," said B. Ashok, chairman of Indian Oil Corp (IOC), the country's biggest refiner, which undertook maintenance at its Koyali refinery from March to April. In the first six months of the year, India's petrol demand grew 14.17 percent, official data showed, and trade sources expect growth this year to reach 17 percent. Although India still exports more petrol than it buys, a government source said state refiners would continue importing at least until the end of this fiscal year to March 31 2016. Higher domestic demand meant that total petrol exports for January-June 2015 fell about 5.2 percent to 7.2 million tonnes or 337,400 barrels per day (bpd), while imports have spiked to about 23,400 bpd from about 2,850 bpd. For all of 2015, consultancy JBC Energy expects India's petrol surplus to fall to around 310,000 bpd and drop below 300,000 bpd in the next few years, versus 345,000 bpd in 2014. IOC, the key importer of petrol, has sought almost 700,000 tonnes for March-September delivery. State refiners also buy petrol and diesel from private firms Reliance Industries and Essar Oil, but since they charged more for coastal supplies an IOC source said his firm had switched to imports. Further tightening the market, has been a switch by some north Indian states to less polluting Euro IV petrol. IOC's Panipat refinery is only able to meet 75 percent of demand for Euro IV, the IOC source said. India's strong petrol demand comes as major consumers Japan and Australia shut refining capacity and switch instead to imports. Overall demand is also growing. ESAI Energy research agency expects global petrol consumption to grow by 50,000 bpd to 420,000 bpd this year. (Reuters)
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Coal futures have fallen to 12-year lows, hit by soaring production and a slowdown in global buying, including from India and China which until recently have been pillars of strong demand. Benchmark API2 2016 coal futures last settled at $52.85 a tonne, a level not seen since November 2003. The contract is now over 75 percent below its 2008 all-time peak and more than 60 percent below its most recent high following the 2011 Fukushima nuclear disaster in Japan. The steady and sharp fall in coal prices has knocked down shares of big mining companies like BHP Billiton, Glencore and Rio Tinto, and it has seen many financers exit the sector. The price fall follows a rise in output from exporters like Australia at the same time as a sharp slowdown in overseas orders from major importers like the United States, and now also China and India. "Indian coal imports are now under pressure ... Both thermal and met coal imports ran at their weakest annualised rates since October 2014," Australian bank Macquarie said on Wednesday. "Such a fall might not be just a temporary blip. On the thermal coal side we have seen power plant inventories reach record high levels, domestic production growth improve significantly and demand growth slow," it added. Thermal coal is used in power plants while metallurgical coal is used to make iron ore. Demand from China has also slowed as its economy grows at its slowest pace in decades and the government has started a fight against rampant pollution, to which coal contributes significantly. In the United States, soaring natural gas from shale formations has made gas much cheaper, eating into coal's U.S. power generation share, and the government also plans to move away from coal for environmental reasons. Demand in Europe has been flat as energy efficiency improves, renewables take increasing shares of the power mix and many of its economies struggle to grow. Yet at some point the low coal prices could also start to stimulate demand as it has made the fuel super-competitive against its main competitor, natural gas. Reuters calculations show that the revenues from selling electricity generated from coal in Germany are around 20 euros per megawatt-hour higher than those produced from natural gas. Emerging markets which have yet to provide blanket electricity to its households and need cheap energy to develop their industry also still mostly rely on coal as their main fuel as they prioritize low costs over environmental concerns. (Reuters)
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To clip the wings of the private sector, it is important to have companies compete with each other, writes Neeraj ThakurThe Comptroller and Auditor General of India (CAG) audit report of the electricity distribution companies or discoms has upheld the allegations of Delhi chief minister Arvind Kejriwal that these companies have overcharged the Delhi consumers for over a decade. While the report vindicates Kejriwal and his party’s stand against Sheila Dixit led Congress and the BJP who mocked the current CM for questioning the accounts of the discoms, it would be important to see how the Kejriwal government punishes the guilty companies. Kejriwal in the past has said that if he comes to power he will take away the contracts from the companies that are found guilty, but, such an action is not practical because claims of a CAG report can be challenged in the court. However, If Kejriwal really wants to solve the problem of the electricity distribution sector for once and for all, then he must use the system to weed out corrupt practices rather than expecting the discoms to be honest. In a monopoly, the government sector becomes inefficient and lethargic while the private sector unleashes its profiteering tendencies. So, when the electricity distribution sector of Delhi was handed over from the government run DESU or Delhi Electricity Supply Undertaking to the private sector players like Reliance Infra owned BRPL and BYPL and Tata Power owned TPDDL, these companies used all the means to make profits. The CAG audit report on power discoms says, “RA (Regulatory Assets) of three discoms which stood approved as on March 31, 2013, were Rs 13,657.87 crore. However, audit findings contained in various chapters of this report indicate that the RA of the three discoms were inflated by at least Rs 7956.91 crore”. To clip the wings of the private sector, it is important to have companies compete with each other. This keeps the price of services delivered by them down. In this regard, a path-breaking idea is buried in the files of the union power ministry that seeks to segregate the business of providing electricity wires from the business of supplying electricity to consumers. In such a scenario, there could be more than two companies that would compete to install their meters at the customers’ home to supply electricity. This would force them to be competitive in sourcing electricity from power producers. Currently, the same company is responsible for providing electricity as well as wires that carry the electricity to the doors of a consumer. While this idea was proposed ahead of the Delhi state assembly elections in 2015 by the BJP-led front, Kejriwal should not shy away from implementing it in his state if he wants to bring the price of power down through competition, because that is the only full proof way to achieve that end. Kejriwal has been pressurising the discoms to re-negotiate their power purchase agreements with the power producers, but he wields no real power to actually force the private companies. But as the head of the state he can introduces the segregation of the wire and the electricity supply business by inviting bids for both the segments. While the CAG report can lead to punishment of the power discoms, but the only way to bell the private sector cat is by creating cut throat competition so that only the most efficient and competitive survives.
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In a major step forward in realising Kerala's dream maritime project, the Congress-led UDF government and Gujarat-based Adani Group on Monday signed the work contract agreement for development of the Rs 7,525-crore Vizhinjam International Deepwater Multipurpose Seaport. First proposed in 1991 during then Congress-led government, the project failed to take off for various reasons till the present Ommen Chandy Ministry took it up after coming to power in 2011 and awarded it to the Adani Group. The concession agreement for the project was signed by Kerala Principal Secretary (Ports) James Varghese and Adani Vizhinjam Port Private Ltd CEO Santosh Kumar Mahopatra in the presence of Chief Minister Oommen Chandy and Adani Group Chairman Gautam Adani at a function in the Secretariat in Thiruvananthpuram. The project is expected to be operational in a record time of less than 1,000 days. Out of the total cost, Rs 4,089 crore would be the PPP component and Rs 1,463 crore was the funded work expenditure to be borne by the state government. The MoU is for granting of licence for construction and operation of the port for a 40-year period, including the construction period of four years. The agreement signing function also had its political overturns with CPI-M led LDF Opposition boycotting it, alleging lack of transparency in awarding the contract to Adani Group. Pro and anti-demonstrations by various outfits in awarding the contract to Adani Group took place in front of the state secretariat. In a bid to reach out to LDF, Gautam Adani visited CPI-M veteran and Leader of the Opposition V.S. Achuthanandan at his residence earlier in the day. Adani also met BJP state leaders, including V. Muraleedharan, before signing the agreement. BJP leaders participated in the function. Speaking at the function, Chandy said government will not allow anything to adversely affect the life of local people in the project area, in an assurance to the fishermen community who had expressed concerns over their rehabilitation. He also said the state government had already taken up with the Centre the cabotage law issue. "I expect a favourable decision from Prime Minister Narendra Modi on the matter." Adani said the company would take steps to complete the project in 1,000 days and would start the actual construction work by November 1 next. He also said they were expecting a favourable decision by the Centre with regard to Kerala's request for relaxation of the cabotage law for the Port. "We will make Vizhinjam one of the world's largest mega transshipment container terminals that will make state of Kerala and nation proud," he said. Cabotage refers to the carriage of goods between two ports in one country by ships registered in that country. As per Cabotage law, it is mandatory to use Indian ships in transportation of cargo to different ports along the country's coast. Foreign ships can be used for carrying goods only when domestic ships are not available after seeking permission from India's maritime regulator. (PTI)
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The idea of Indian Railways acquiring distressed power plants would sound stupid to anybody who understands the power business, says Neeraj ThakurNeeraj ThakurNTPC should get into the business of flying airplanes. Why? Because a lot of its employees need to travel by airplanes and owning an aviation company will help company save costs. If this idea sounds absurd, then, the idea of Indian Railways acquiring distressed power plants would sound stupid to anybody who understands the power business. According to a media report, a panel headed by a former bureaucrat, Ajay Shankar is mulling over Railways buying the distressed power plants and running them to reduce the organisation's operating costs. In a report on the power sector, credit ratings agency Crisil, estimated that 46,000 Mw of generation capacity in the country is facing viability issues due to lack of long-term buyers for electricity, inadequate fuel supply and aggressive bidding to win projects and coal blocks. In 2014, NTPC chairman Arup Roy Choudhury said that his company was in the process of due diligence to buy a few of these projects to expand their portfolio. Interestingly, NTPC with over 45,000 MW of generation capacity has failed to lay its hand on any of these cheaply available power plants for the risk of buying dud assets that may prove to be a drag on the company’s balance sheet. However, if Railways, with electricity component of just 7 per cent at Rs 11,000 crore on the revenue of Rs 1,57,880 crore, wants to buy power plants, then NTPC may as well shut shop and hand over its power business to the Railways. In the past one year, barring a few deals nothing much has happened in the power sector despite big power companies like the Tatas, Adani, and Reliance trying desperately to increase their power portfolio through cheap deals. The biggest problems with these power plants is that they either do not have sufficient fuel supply or there is not enough demand for expensive power that comes out of these plants. In the past one year, the Railways minister Suresh Prabhu has talked about the need to reduce the electricity bill for the Railways. However to buy cheap input material one does not go out buying the companies that produce those commodities Railways can do better by re-negotiating its power purchase contracts with companies and increasing its quotas from the open market as many times the price of power at the exchanges trades at below the long term power purchasing contract prices. In the past one year, the Railways has unveiled plans to set up 1,000 MW of solar power generation capacity. But the Railways minister should understand the difference between a solar and a thermal power plant. While solar power plants need only initial investment and some catchment area to function, running a thermal power plant is a different ballgame altogether. Many infrastructure companies have burnt their fingers in the past by entering this business. This is the reason why there are so many distressed power plants waiting to be bought by someone in the market. That someone can be government owned NTPC; certainly not the Indian Railways.
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US crude oil fell to its lowest in almost six-and-a-half years on Friday (14 August) as huge stockpiles and refinery shutdowns heightened concerns about global oversupply and slowing economies in Asia.Oil had already tumbled more than 3 per cent on Thursday, driven by a report that stocks at Cushing, Oklahoma, the delivery point for US crude futures, rose more than 1.3 million barrels in the week to 11 August.US crude was down 24 cents at $41.99 a barrel by 1045 GMT. The contract earlier hit an intraday low of $41.35, its lowest since 4 March 2009. Brent crude traded at $49.12, down 10 cents and some way off its 2015-low of $45.19 reached in January. The front month September Brent contract expires today.US crude is much weaker than the North Sea benchmark, partly due to refinery outages sapping US demand. The largest of those refineries - BP PLC's 413,500 barrels per day (bpd) facility in Whiting, Indiana, shut two-thirds of its capacity for repairs that could last a month or more.Robin Bieber, director and technical analyst at London brokerage PVM Oil Associates, said the US crude oil contract, also know as West Texas Intermediate or WTI, had become somewhat dislocated from Brent:"The contracts are not all on the same technical page and this causes a lack of clarity," Bieber said. "WTI could plunge but the rest hold steady."Commerzbank analyst Carsten Fritsch said he didn't expect an accelerated drop in prices, but rather "a slow grind lower":"As long as (Whiting) refinery is out of service this will add to stocks in the US which is WTI's main driver now."Goldman Sachs said that a weaker Chinese yuan was putting downward pressure on all commodity markets, signalling a change in global macro-economic conditions."We believe the net commodity market effects are bearish," it said in a note to clients.Analysts said prices could fall further still unless oil production started to fall, particularly in North America."The lowest crude prices in six years might not be enough to put the brakes on the U.S. supply growth. US shale players are actively cutting costs and some players are profitable at less than $30 per barrel," ANZ Bank said.On the demand side, China's crude oil imports have so far remained strong as authorities take build up strategic reserves and consumers keep spending despite the slowing economy.(Reuters)
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India's top energy explorer Oil and Natural Gas Corp could spend up to $7 billion to develop its block off the country's east coast and expects to begin gas production there in 2018, its chairman said on Thursday. ONGC's block in the Krishna-Godavari basin should produce 77,000 barrels per day of oil and up to 17 million cubic metres a day of natural gas at peak rate, DK Sarraf told reporters, after ONGC reported a 14 percent jump in quarterly net profit. He added that the investment figures were based on preliminary estimates and that the company had "no plan" currently to bring in a foreign partner for the deepwater development. The company, which has struggled to maintain production from its ageing wells off India's west coast, is counting on the potentially large reserves of oil and gas from the KG-D5 block to boost future profits. ONGC, majority-owned by the government, reported a 14 percent rise in net income to 54.59 billion rupees ($839.59 million) in the quarter ended June 30, its fiscal first. The jump was driven by a much lower burden of government-imposed discounts on crude sales to state-run refiners. ONGC's share of the subsidy for the quarter was 11.33 billion rupees, compared with 132 billion a year earlier. India keeps a lid on retail prices of liquefied petroleum gas and kerosene, with upstream companies including ONGC and Oil India offering discounts on crude sales to help cut losses of state refiners. A prolonged period of low crude oil prices coupled with the government's decision last year to deregulate the price of diesel, the country's most widely consumed fuel, has significantly lowered these discounts. That also helped the company improve net realisation, or earnings per barrel of crude, to $58.92 from $47.15 a barrel a year ago. Net sales for the quarter rose 4.4 percent to 226.96 billion rupees. Shares in ONGC, which has a market valuation of $35.59 billion, closed up 0.15 percent on Thursday, largely in line with the broader Mumbai market which closed up 0.14 percent. (Reuters)
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