Draft guidelines issued by the Central Electricity Regulatory Commission (CERC) on December 6, 2013, resulted in the fall in exchange rates of power generations companies. But utilities are confident that the regulations can be negotiated.Power companies are up in arms against the Central Electricity Regulatory Commission (CERC)’s draft regulations which will decide power tariffs for five years from 1 April 2014. Analysts placed the impact of these guidelines anything between 3-7 per cent decline in profits for companies like NTPC and NHPC. This led to panic in the stock market and shares of power generation and distribution firms declined following the announcement - NTPC (down 10.33 per cent), Adani Power (down 2.96 per cent), Power Grid Corporation of India (down 2.27 per cent), GVK Power & Infrastructure (down 2.77 per cent), Tata Power Company (down 2.08 per cent), Torrent Power (down 2.2 per cent),The draft seeks to tighten operating norms for generators, including parameters governing heat and oil consumption and links incentives to the plant load factor (PLF). Generators will be incentivised for higher generation reflected in PLF. There is also a disincentive to be levied if plants are available for less than 85 per cent of the time. The stricter guidelines imply “profitability squeeze”, explains Kameswar Rao, Leader Energy Utilities and Mining, PwC India.But the largest power producer says there is no need to panic as “These are just draft guidelines and there are many positive aspects as well that are not being counted.” The negatives we will be further discussed with the regulatory authority explained NTPC Chairman Arup Roy Choudhary, who is confident that in return the company will receive some relief.According to NTPC, the fact that Return on Equity (ROE) of 15.5 per cent remains unchanged, additional ROE of 0.5 per cent on early completion of project remains unchanged, special allowance for operating station after useful life has been enhanced to 7.5 lakh /mw/year from 5 lakh /mw/year in 2009-10, water charges to be excluded from O&M expenses and will be pass through separately, annual escalation on O&M expenses to 6.35 per cent from 5.72 per cent. Compensation allowance (Rs lakh /mw/year) has been enhanced, during R and M of units O&M expenses and interest on loan will be pass-through, rate of late payment surcharge increased from 1.25 per cent to 1.5 per cent per month, debt equity ratio remains the same, pay revision recognised as pass through.These guidelines are only applicable to power generators not granted under competitive bidding process and who supply electricity to more than one state therefore will have little impact on the private power developers immediately explains Kameswar Rao. But he cautions against the long term impact of these norms as they could mean a reduction in surplus and equity therefore impacting growth. According to him, “Large companies like NTPC use surplus to set up new plants and with stricter norms there will be less surplus and little equity to expand... it is not like the government will put in money to set up new plants.”mmatbworld@gmail.com
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State-run gas utility GAIL India is in talks to buy a stake in the Tanzanian assets of British oil explorer Ophir Energy Plc, the Indian company's marketing head said.Ophir had offered to sell a 40 per cent stake in the Tanzania gas field, half of which has already been sold, said Prabhat Singh."There are various options. We are negotiating with them," Singh told reporters, without elaborating how much stake GAIL plans to buy.(Reuters)
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Reliance Industries may be allowed to hike rates for its gas from April after it offered financial guarantees to the government to settle any claims against it over a shortfall in its gas output, the petroleum minister said.In June, India approved a move to higher, market-related rates for locally-produced gas from April 2014, but the finance ministry later said prices for Reliance should be capped because the company's gas production from the offshore D6 block was far below its supply commitment.Reliance, which operates the D6 block off India's eastern coast, has reported a sharp decline in gas output since 2010. Reliance and partner BP have cited geological complexities for the fall in output, but the oil regulator believes they failed to drill enough wells.Falling output had already prompted the government to disallow proportionate cost recovery to Reliance, leading to arbitration proceedings over the issue."They have come forward with the proposal for bank guarantees. There are some arbitration proceedings pending. Till that is settled, they will submit bank guarantees," Petroleum Minister Veerappa Moily told reporters at an industry event on Tuesday in Mumbai.Gas from D6 was earmarked for strategic domestic industries including fertiliser production, cooking gas and power, but has fallen so much that only some fertiliser plants now get supplies from the offshore block."We will put up a cabinet note in 10-15 days. Our ministry is concerned because we are keen to close the issue," he added.A spokesman for Reliance, controlled by India's richest man, Mukesh Ambani, declined to comment on the matter.The minister did not disclose the amount of guarantees, although media reports have earlier estimated them at $135 million per quarter.India, which imports nearly 80 per cent of its oil and a quarter of its gas requirement, hopes to launch a new round of auctions for oil and gas blocks by mid-January, Moily said.(Reuters)
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Reliance Industries may be allowed to hike rates for its gas from April after it offered financial guarantees to the government to settle any claims against it over a shortfall in its gas output, the petroleum minister said.In June, India approved a move to higher, market-related rates for locally-produced gas from April 2014, but the finance ministry later said prices for Reliance should be capped because the company's gas production from the offshore D6 block was far below its supply commitment.Reliance, which operates the D6 block off India's eastern coast, has reported a sharp decline in gas output since 2010. Reliance and partner BP have cited geological complexities for the fall in output, but the oil regulator believes they failed to drill enough wells.Falling output had already prompted the government to disallow proportionate cost recovery to Reliance, leading to arbitration proceedings over the issue."They have come forward with the proposal for bank guarantees. There are some arbitration proceedings pending. Till that is settled, they will submit bank guarantees," Petroleum Minister Veerappa Moily told reporters at an industry event on Tuesday in Mumbai.Gas from D6 was earmarked for strategic domestic industries including fertiliser production, cooking gas and power, but has fallen so much that only some fertiliser plants now get supplies from the offshore block."We will put up a cabinet note in 10-15 days. Our ministry is concerned because we are keen to close the issue," he added.A spokesman for Reliance, controlled by India's richest man, Mukesh Ambani, declined to comment on the matter.The minister did not disclose the amount of guarantees, although media reports have earlier estimated them at $135 million per quarter.India, which imports nearly 80 per cent of its oil and a quarter of its gas requirement, hopes to launch a new round of auctions for oil and gas blocks by mid-January, Moily said.(Reuters)
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Oil prices stabilised on 26 November after the previous session's slide as traders questioned how quickly the Iranian nuclear accord could translate into higher supplies, while Asian shares got off to a cautious start.The yen regained some poise following Monday's steep decline to a six-month low against the dollar and a four-year trough versus the euro.US crude prices added 0.2 per cent to above $94 a barrel, pausing after the previous session's 0.8 per cent decline following a weekend deal between the West and Tehran to halt Iran's most sensitive nuclear activities in exchange for some relief from crippling sanctions."The interim six-month 'freeze' agreement just reached on Iran's nuclear programme should not have any impact on oil prices, aside from short-term sentiment, because core sanctions on oil and banking have not been touched," Societe Generale said in a note."We see a greater than 50 per cent chance that a comprehensive agreement will be successfully reached within six months....If and when that happens, it could take Iran three to nine months to recover the one million barrels per day in production lost since 2011."MSCI's broadest index of Asia-Pacific shares outside Japan inched up 0.1 per cent, adding to a 0.3 per cent rise in the previous session on the back of the Iranian deal.Thai assets looked set to come under further pressure on heightened political uncertainty as anti-government protesters forced their way inside the country's Finance Ministry and burst through the gates of the Foreign Ministry compound, in a bid to oust Prime Minister Yingluck Shinawatra.On Monday, the Thai SET index fell for a fifth straight session to an 11-week closing low and the baht tumbled to a two-week low versus the dollar.Citigroup said the Iranian nuclear deal could be a "get-out-of-jail-free card" for current account deficit countries, such as India, Indonesia and Turkey, which face a liquidity drain when the Federal Reserve eventually tapers in the coming months.Tokyo's Nikkei share average was likely to take a breather, with futures pointing to a weaker open after it climbed 1.5 per cent on Monday to within sight of a 5-1/2 year peak reached in May.The Japanese currency, which typically falls when share price rise, was up 0.2 per cent at 101.52 yen to the dollar and up 0.1 per cent at 137.27 to the euro.The euro was little changed at $1.35195, having fallen 0.3 per cent overnight."We remain bullish on the dollar heading into 2014 but remain tactically cautious on establishing longs, with a number of U.S. dollar pairs already trading at the high end of their ranges and data unlikely to be consistent enough to support expectations for an early tapering," analysts at BNP Paribas wrote in a note.Data showed on Monday that contracts to buy previously owned U.S. homes fell for a fifth straight month in October, hitting a 10-month low and adding to signs of cooling in the housing market.US stocks ended mixed overnight, with the Dow Jones industrial average posting a slim gain to end at another record high, while the S&P 500 eased 0.1 per cent.(Reuters)
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Oil prices hit the skids on 25 November after Iran and six world powers sealed a deal curbing its nuclear programme, a fillip for global economic growth that found expression in heartier share prices from Tokyo to Seoul.The agreement gives Iran some relief from crippling sanctions and is considered a big step toward a more lasting treaty. While Iran will not be allowed to increase its oil sales for six months, any easing of Middle East tensions tends to lead to lower crude prices.Brent crude oil shed $2.47 to $108.58 a barrel, its biggest daily drop in a month. US oil lost 88 cents to $93.96 a barrel.If sustained, the drop would be a net plus for spending power globally given high petrol prices essentially act like a tax on consumers."Positive growth signals continue to trickle out across the global economy and there is growth convergence between developed and developing economies," said Peter Dragicevich, a strategist at CBA."Our world GDP "nowcasting" estimate points to accelerating global economic growth in the final months of 2013. This is the general trend we expect to occur in early 2014."Attention in Asia was again on Japanese markets as a sliding yen promises to boost exports and profits. The Nikkei sped ahead by 1.3 per cent, having gained almost 11 per cent in little more than two weeks.On Wall Street, the Dow ended Friday with gains of 0.3 per cent, while the S&P 500 added 0.5 per cent for its first ever close above 1,800. Early Monday, S&P 500 futures had added another 0.3 per cent.But with money flooding into developed world assets, emerging markets are getting cold-shouldered. It was notable that MSCI's broadest index of Asia-Pacific shares outside Japan failed to make any headway at all last week, even as Wall Street made new peaks.So far on Monday, the index was up 0.4 per cent, as Seoul shares led the way with an increase of 0.7 percent.Yen Pain Is Euro's GainIn currency markets, the yen remained under pressure as investors use it for carry trades - borrowing the currency at super-low rates to invest in higher-yielding assets elsewhere.The dollar was up at 101.78 yen having cracked the old July top of 101.53. Much of the action was in the euro against the yen, which has had a barnstorming run to reach four-year highs above 137.80 yen.Euro-yen bulls now have their eyes set on a series of peaks from 2009 ranging from 137.43 all the way to 139.18, the top for that year. A break of the 139.18 level would take the euro to territory not visited since October 2008 -- very bullish from a technical point of view.Oddly, the gains have come even as the European Central Bank sounds ever-more dovish on policy.Earlier on Monday, ECB Executive Board member Benoit Coeure reiterated the central bank would take further action should inflation slow further. The single currency was been particularly strong against the Australian dollar, which has been undone by threats of intervention from the Reserve Bank of Australia.The euro leaped almost four full cents last week as the Australian currency crumpled to a three-month trough.Traders said the commodity currency could continue to struggle particularly if tensions between China and Japan grew.China at the weekend suddenly imposed new rules on airspace over islands at the heart of a territorial dispute with Tokyo, prompting Japan and ally the United States to warn of an escalation into the "unexpected".There is no major economic data due in Asia on Monday, while most of the U.S. economic releases will be front-loaded this week ahead of the Thanksgiving holiday on Thursday.The US diary includes figures on housing starts and prices, consumer confidence, durable goods orders and manufacturing in the Chicago area.(Reuters)
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Negotiations between the Department of Atomic Energy (DAE) and French company Areva over the Jaitapur Nuclear Power Plant (JNPP) in Maharashtra have hit a hurdle as DAE has questioned the capacity of reactors to generate electricity and its high cost.The bone of contention between the two is the generation of electricity by the EPR reactor, which Areva is planning to give to Nuclear Power Corporation of India Ltd (NPCIL).DAE sources pointed out that the department has raised objections because the "reference plant", which was agreed upon between DAE and Areva, was a plant that generated 1430 MW of electricity, but it says, Areva now wants a plant with enhanced power generation capacity.A reference plant is a nuclear power plant project that has already been tested, commissioned and which has commercially started generating power.According to a top DAE official, the reference plant for building reactors was one at Flamanville nuclear plant in France, which Areva mentioned with a capacity of 1430 MW. But it has now asked the DAE to enhance the power generation capacity to 1600-1700 MW. The DAE has raised an objection to this, the official said."The problem here is Areva is asking us to enhance the power generation capacity. The reference plant mentioned by Areva has not generated electricity between 1600 MW and 1700 MW with this technology. The EPR technology is first of its kind. More importantly, if the technology has been enhanced, even then the reference plant cannot be changed," the official said. The Atomic Energy Regulatory Board (AREB), whose nod at various stages of building a nuclear plant is mandatory, too has raised concerns about it."Areva has said that it will get an enhancement certificate for the plant from French Nuclear Regulatory Body, but we have doubts about this," he said.According to Areva's website, it is building EPR reactors for nuclear plants in Finland, United Kingdom, China and France.Of these, Olkiluoto 3 in Finland is a 1600 MW project, while two reactors for the Taishan plant in China are of 1660 MW each. The Hinckley Point plant project in United Kingdom has two EPR reactors of 1600 MW each and the Flamanville 3 nuclear plant is 1630 MW.A well placed source in Areva, who refused to be quoted, however, denied it."Flamanville 3 has been a reference plant for the Jaitapur project. From the very beginning of the discussions regarding Jaitapur, Areva proposed its EPR design, which is a 1600 MW plant," the source said.Another factor is the issue of the price per unit.Sources said that the price per unit for the JNPP comes to more than Rs 9 in 2021, which, according to the DAE is very high. The initial capital cost for the project per MW is between Rs 27-30 crore.The cost per unit for the Kudankulam Nuclear Power Plant Project (KKNPP) unit I and II is between Rs 3.50 and Rs 4. The cost for the KKNPP III and IV is also under negotiation."Even if we take inflation into account, this rate is too high. We have conveyed that the maximum cost can be Rs 6 per unit," the official said.He also pointed out that both the sides are negotiating hard, but India has made it very clear that it wont accept this high cost for producing energy."We have made it clear that unless the cost comes down, we would not be able to go ahead. Senior French government officials have assured us that they will look into the matter, so that the cost comes down," the official said.PTI made calls and also emailed a questionnaire to seek response from Areva, but did not receive any response.The JNPP project in five villages- Madban, Karel, Mithgawane, Varilwada and Neveli villages- in coastal district of Ratnagiri in Maharashtra, some 350 kms south of Mumbai, is to have six nuclear reactors with the capacity of 1650 MW each with French cooperation.On ground zero, despite the agreement of few groups to the project, the opposition still exists.According to Pravin Khade, the sub-divisional officer of Rajapur tehsil/ taluka (where the site falls), there are some 2336 Project Affected People (PAPs), of which 1311 PAPs have accepted compensation of Rs 11.20 crore and Rs 3.57 crore is yet to be accepted.As per the new compensation package announced by the Maharashtra government in February 2013, Rs 155.61 crore have been disbursed to 1240 people, while the remaining Rs 55.44 crore is yet to be accepted by people.After the plant is fully commissioned, Maharashtra will be the highest nuclear power producing state with it producing over 11,000 MW of electricity (if combined the JNPP and Tarapur Atomic Power Plant, north of Mumbai), the highest in the country.(PTI)
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Stocks in Cairn India surged as much as 5 per cent after the oil explorer said its board would meet on 19 November to consider a proposal to buy back shares.Shares also gained as Brent crude jumped $2 to end at its highest in more than a month on 21 November, fuelled by a sharp run-up in gasoline and gas oil prices on news of dwindling stocks and refinery glitches in the United States and Europe.Higher crude oil prices help increase realisations at oil exploration firms such as Cairn India, which sells crude in dollars. The rupee also weakened, heading for a third consecutive session of falls against the dollar. (Reuters)
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State oil group Petrovietnam and the overseas unit of state explorer Oil and Natural Gas Corp have signed a memorandum on joint exploration of crude oil, the Vietnam News Agency reported on Thursday.The exploration pact between Petrovietnam and ONGC Videsh Ltd would allow activities in Vietnam, India as well as in a third country.Vietnam's Industry and Trade Ministry also signed a memorandum with Tata Power Company Ltd on the construction of a $1.8 billion thermal power plant in Vietnam's southern province of Soc Trang, the agency said.The pacts were signed on 20 November during a visit to India by Vietnam's Communist Party General Secretary Nguyen Phu Trong, the report said.(Reuters)
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The government has slapped an additional penalty of $792 million on Reliance Industries for producing less than targeted natural gas from its eastern offshore KG-D6 block.A notice disallowing $792 million out of the cost already incurred on the Bay of Bengal fields was sent to RIL on November 14, an oil ministry official said here.With this, a total of $1.797 billion penalty in form of cost being disallowed, has been levied on RIL for producing less than targeted output during the past three years.The company has till date spent $10.76 billion on the block, which it can contractually recover from sale of oil and gas. It is obliged to share the profits with the government only after recouping those expenses.It may be remembered that on October 27, the Planning Commission had warned that imposing a second penalty on Reliance Industries for producing less-than-projected natural gas from its KG-D6 fields could impact investment climate in the same manner as retrospective tax amendments.Read Also: Reliance Refuses To Sign Oil Ministry ResolutionRead Also: Double Penalty On RIL To Hit Investment Climate: Plan PanelThe Planning Commission, in its comments on a draft Cabinet note floated by the Oil Ministry seeking to deny higher prices for the currently producing main fields in the KG-D6 block from April 2014, said the move "creates the possibility of potential arbitrariness.""It could impact adversely on the investment climate, in the same way as retrospective tax amendments did," it said.Meanwhile, on 20 November, the official said the cost has been disallowed as RIL and its partners BP plc of UK and Canada's Niko Resources did not drill the committed number of wells, which led to output dropping by over 80 per cent from the main Dhirubhai-1 and 3 (D1&D3) gas fields in the KG-D6 block.D1&D3 fields have in the first fours years of production (2009-10 to 2012-13) produced a total of 1.853 Trillion cubic feet of gas, 1.196 Tcf short of 3.049 Tcf that RIL had committed to produce in the 2006 development plan.But for the first year, the output has lagged the targets in all subsequent years, which has led to a huge chunk of facilities built lying unutilised, the official said.RIL had built facilities to handle 80 million standard cubic metres per day of gas from D1&D3 but the present output is just 8.78 mmscmd.As per the production sharing contract, RIL and its partners BP Plc and Niko Resources are allowed to deduct all of the capital and operating expenses from sale of gas before sharing profits with the government.Creation of excess or unutilised infrastructure impacts government's profit share and this is being sought to be corrected by disallowing part of the cost.According to the approved field development plan, the output should have reached 80 mmscmd last fiscal.The government had previously issued a notice to RIL disallowing$1.005 billion in cost for shortfall in production during 2010-11 and 2011-12. ($457 million for 2010-11 and the rest $548 million for 2011-12).The Mukesh Ambani-run company, which blamed unseen geological complexities for the fall in output, has initiated arbitration against the levy. The new levy would be opposed.The DGH blames RIL for not drilling its committed quota of wells for the fall in production that has resulted in a large chunk of production facilities lying unused or under-utilised.(Agencies)
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