GAIL wants to boost its liquefied natural gas (LNG) portfolio to 20 million tonnes a year in the next seven years through acquisitions and supply deals so that it can beef up trading of the super-cooled gas, Chairman B.C. Tripathi said.Tripathi's comments to Reuters in an interview late last week mark the first time GAIL (India) Ltd has detailed its long-term LNG goals and show how the state-run pipeline monopoly is diversifying its business mix to gain from a surge in demand for the cleaner fuel at home and overseas.The first Indian firm planning to carve a niche in LNG trading, GAIL has already tied up supplies for nearly 15 million tonnes a year. But supply agreements on some of that capacity is set to expire in the next few years, meaning it will have to strike fresh deals to replace that."Overall (in its) portfolio, GAIL will have 20 million tonnes by 2020," said Tripathi, who has steered GAIL's transformation from its focus on domestic pipeline operations since he took the helm in August 2009.Tripathi did not say how much GAIL will be spending to achieve its LNG ambitions but added that its trading team in Singapore will treble to six from the current two as of June.GAIL, in which the Indian government holds a 57.4 percent stake, runs about 10,000 kilometres of gas pipelines in the country. It also operates one of India's three LNG terminals.The company currently sells 6.5 million tonnes per annum (mtpa) of LNG locally, sourced from Qatar's Rasgas under a long-term contract and through small deals with GDF Suez and Spain's Gas Natural Fenosa (GNF) which end in 2015.From 2017, a 20-year deal with Russia's Gazprom to buy 2.5 mtpa LNG will commence.In 2011, GAIL became the first Asian buyer to lock in LNG supplies with prices linked to the U.S. gas market and it now plans to have half of its purchases based on U.S. prices by 2017, according to Tripathi. The U.S LNG exports are likely to start in 2016/17, he said."Almost 50 percent of LNG in our basket will be JCC (Japan Customs Cleared Crude) linked in 2017 and 50 percent will be (U.S.) Henry Hub-based," the GAIL chairman added.US Assets TargetedLNG is expensive in Asia, at more than $15 per million British thermal units (mmBtu), as it is linked to oil, while a boom in U.S. shale gas output has pushed down prices there to just over $4 per mmBtu.GAIL plans to buy about 6 mtpa Henry-Hub linked LNG from the United States. It already has 3.5 mtpa on a free-on-board (FOB) basis for 20 years from Cheniere Energy beginning in 2017.The company has also booked capacity to export another 2.3 mtpa at U.S.-based Dominion Energy's Cove Point liquefaction plant from 2017.Tripathi said that GAIL hopes to acquire more gas exploration assets in the United States as it wants half of the volume that will be liquefied at Cove Point to come from its own production and the remainder through long-term deals.He said GAIL is looking at buying an equity stake in a U.S. asset which is heading into production by 2016/17. GAIL is evaluating several offers, he said, but declined to give details.Earlier this month, Tripathi said the company was in advanced talks to buy U.S. shale gas assets.U.S. gas exports are likely to start sometime in 2017 and GAIL could either bring supplies to India or trade them.To transport gas from the United States, GAIL wants 9-10 LNG carriers and plans to float a tender by July for them, Tripathi said, adding his company has yet to finalise specifications.GAIL could consider an equity stake in the carriers or charter only, or a combination, he added.(Reuters)
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For a few years now, wind energy company Suzlon, and its chairman, Tulsi Tanti, have been struggling. A series of problems — a deflated global economy, cracked turbine blades, top-level exits and working capital issues — eroded most of the company’s value. Now, Tanti is trying to get the company back up and running. Suzlon Energy started as a captive power plant for a textile unit in 1995. By 1999-2000, Tanti moved entirely to wind energy. Within a few years, he had orders from the US; and was foraying into newer markets. Suzlon became one of the largest wind energy players, with 90 per cent sales in the lucrative and under-served Indian market. In 2005, Suzlon went public — not to raise funds but to create an enterprise value to participate in global tenders, and acquire companies abroad. The IPO was on the aggressive side — at 12 times book value and 29 times its 2005 earnings per share (EPS). The company mopped up Rs 1,400 crore. The immediate concern was how to use the funds, say sources close to Tanti. The company set up office in Amsterdam; hired expat executives for top posts; and acquired Hansen Transmissions in Belgium, and REpower Systems in Germany. It also built a green corporate centre at Hadapsar in Pune, which cost the company Rs 450 crore, say sources.But Tanti, the ‘wonder boy of the wind world’, soon faced serious problems. The 2008 global financial downturn sucked away a lot of his fortunes. Suzlon had to spend $100 million on repairing turbine blades in the US. Then, though the company had a strong order book, high steel and raw material prices curbed its flight. Cash flow stagnated because of delays in executing orders. And, as interest rates rose, the company could not service its debt. As pressure built, many expat executives quit, and the management headquarters was shifted to Pune. The Tulsi Tanti-led Suzlon’s Rs 9,500-crore debt recast plan comes with stiff ridersNow, Suzlon is known more for being the third-biggest wealth destroyer in India. Raamdeo Agrawal, joint managing director of Motilal Oswal Financial Services, says Suzlon has wiped out Rs 27,600 crore since 2007, given the difference in share price in the past five years. In 2012, Suzlon defaulted on its foreign currency convertible bonds (FCCB). The total debt went up to over Rs 10,000 crore, despite a few paybacks. Suzlon got a fresh lease of life when, in January, its bankers cleared a corporate debt restructuring (CDR) for a Rs 9,500-crore domestic loan. In addition, it has an order book of $7.7 billion (two-thirds of which comes from REpower). Little Room LeftSuzlon plumbed the depths when it defaulted on the $221-million FCCBs on 11 October 2012. At a meeting in London a day earlier, bondholders were asked for a four-month extension on two series of FCCBs, but they refused. “It is somewhat disappointing that the bondholders’ meetings did not achieve consensus” was what Kirti Vagadia, the company’s CFO, said after the meeting.Suzlon, which had posted losses for three consecutive years in the run-up to the FCCB default, slowed order execution because of a shortage of working capital. The company, which had declared profits of Rs 1,017 crore in March 2008, has already posted a net loss of over Rs 2,800 crore in the first nine months of this financial year. Under the CDR, it has had to close down manufacturing units at Puducherry.After announcing the third-quarter results, Vagadia said Suzlon was facing a textbook case of conflict in allocation of resources. “While we have made tremendous progress on the liability management front, our business performance has been hit due to our abnormal operating environment, leading to a significant loss...”Critics say the fault lies with Suzlon’s management. “Tanti was over-ambitious and bit more than he could chew,” says Arun Kejriwal, director, KRIS Capital, an investment advisory firm. “Suzlon has been financially over-leveraged and expanded beyond capacity. The management failed to anticipate the global economic crisis and failed to tackle the situation.” The criticism stems from the way the management spent on expansions. In 2008, Suzlon was talking about 3,000-MW capacity expansion at Rs 3,000 crore, plus forging facilities of 70,000-metric tonne (MT) capacity and foundry facilities of 120,000 MT. It expanded in Asia, Australia, Europe, Africa, North and South America; installed over 21,500 MW in 30 countries; and created a workforce of over 13,000. BIG HEADACHE: Suzlon’s bad run abroad led to the firm moving most of its staff to its Pune head office (Bloomberg)“Suzlon is the victim of market conditions. To grow fast, it went for greenfield expansions and acquisitions, and became cash-negative. It thought order execution would increase the cash flow that would service the debts,” says Deven Choksey, CEO of KR Choksey Securities. But it is also true that Suzlon didn’t take adequate measures to insulate itself from currency movements and a negative market environment.To execute orders worth close to Rs 42,000 crore and pay off interest, Suzlon’s profit was far from sufficient, prompting it to push for a CDR. The State Bank of India-led 19-bank consortium approved its proposal to rejig the Rs 9,500-crore debt on 22 January. SBI Capital Markets drafted the CDR plan. SBI, alone, has a Rs 3,500-crore exposure to the company. The CDR proposal involves a 10-year, door-to-door, back-ended repayment plan with a reduced interest rate. With a 3 per cent cut on interest, the effective interest will be around 11 per cent. There is also a two-year moratorium on principal and term-debt interest payments, apart from a fresh working capital loan of Rs 1,800 crore with a six-month interest moratorium. During the two-year moratorium, interest to the tune of Rs 1,500 crore will be converted into equity. Also, the lenders will get fresh equity shares worth Rs 1,451 crore in lieu of interest. “The approval of our CDR proposal is a key step towards normalising business. That, along with the enhanced working capital facilities, and Project Transformation (under which we are reducing operating expense and manpower costs), will enable us to focus on execution,” says a Suzlon spokesperson. break-page-breakSuzlon has to raise Rs 2,200 crore from the sale of its components manufacturing subsidiaries in the next 12-24 months. On the block could be non-critical assets such as SE Forge, SE Electricals and its China manufacturing units, but critics feel these won’t fetch the required amount. A company spokesperson counters, “We are confident of raising the desired funds.”A silver lining could be the $1 billion (about Rs 5,400 crore) released by the CDR package, which will allow the company to get on with executing orders. But the CDR proposal is expected to be implemented only by the end of March. As part of the plan, Suzlon promoters also sold a 6.19 per cent stake for Rs 240.40 crore on 28 February. This reduces promoter holding to 44.46 per cent; of this, around 98 per cent is pledged. Troubled MarriageThe way Suzlon managed its foreign investments has a big role to play in its current state of affairs. The company got a chance to acquire Belgian gearbox manufacturer Hansen Transmissions. Raising funds from London, Singapore and Boston, Suzlon acquired it for €465 million in cash in 2007-08. This ensured gearbox supply, which was running short at that point. But Tanti never wanted to stay with Hansen for long, and started selling it in pieces, raising nearly $1 billion to repay debts. If the Hansen deal was smooth, the REpower takeover was anything but. Formed in 2001 by bringing together four wind turbine companies in Germany, REpower’s takeover was meant to give Suzlon an opportunity to access its product range (turbines with rated outputs of 1.5-6.15 MW) and a footprint in Europe. But the taleover was torturously long and expensive.Fritz Vahrenholt, a leading German politician and a former federal minister, was REpower’s CEO at that time. He had the vision and contacts to bring adequate capital to REpower. That’s how French nuclear major Areva and Portugal’s Martifer also bought stakes in the company. Tanti teamed up with Martifer to bid for REpower’s management control. But Areva decided to counter the offer. After five months of intense negotiations, Suzlon finally paid €1.35 billion (about Rs 7,314 crore) to get nearly 75 per cent management control.Along the way, there were apprehensions that the Indian company would milk REpower dry and take away its technologies. “Vahrenholt began to show his true colours and did everything possible to make sure that the takeover was as difficult as it could be,” says a company insider. In addition, German laws are stacked against competitors taking full control of a local company. Besides, as per German law, the chairman of the supervisory board (Tanti in this case) — who is usually from the majority shareholder — cannot sack the CEO or the CFO of a German company. So, even though Tanti, his brother Girish, and Vagadia were on the supervisory board, they could not do much for over a year. Suzlon, however, did manage to increase its shareholding to over 75 per cent by buying out Areva and Martifer’s stakes. Suzlon’s troubles did not end there. The laws stipulate that a domination agreement be signed between the owner and the management board, for which the statutory authorities are the CEO and CFO. Also, that such an agreement would spell out which of the Board’s instructions the management would or would not follow. Eventually, Suzlon managed to replace Vahrenholt in 2008 with Per Hornung Pedersen, a Dane by origin. But it still had to contend with the CFO. “He would virtually veto everything the Board suggested,” say insiders.Suzlon tried to get around the German laws by setting up Renewable Energy Technology Centre, a 50:50 joint venture between REpower and Suzlon. By 2011, Suzlon fully acquired REpower by squeezing out the minority shareholders. Tanti allowed REpower to function independently, and ring-fenced its finances so that it was not burdened by the parent’s troubles. However, a merger process that was to start by September 2012 did not take off as planned. The REpower brand is owned by Swiss energy company Ratia Energie, whose licence was to expire by December 2012. But it has since been extended to the end of 2013.One positive result of the joint venture was that it helped Suzlon improve blade design and tweak the S-88 (its flagship turbine) to come out with improved windmills that had longer blades and better output.Exodus of TalentSuzlon has also had trouble with the constant churn in its top posts. Initially, Tanti and his three brothers — Girish, Jitendra and Vinod — were running the show. Girish played a key role in acquiring technology from Südwind and in building a vendor base for imported components. He was responsible for operations and was an executive director besides being the vice-chairman of REpower. He is now a non-executive director.Jitendra is now the MD of Synefra Engineering and Construction (formerly Suzlon Infrastructure, a family holding company), which built Suzlon’s Pune headquarters. He is not on the board of Suzlon. Vinod, another non-executive director, is now REpower’s COO. break-page-breakFollowing the acquisitions in Europe in 2007-08, Suzlon had got former GE executive Andre Horbach as CEO and Patrick Krahenbuhl from ABB as the group CFO. Krahenbuhl left by March 2008, and Horbach two months later. The next CEO, Toine Van Megen, left within a few months. After that most of the Indian executives returned to India. Vivek Kher, principal consultant at management advisory firm Ü. Brepman Partners, and a former executive in Suzlon’s Amsterdam team, says the exodus was not on account of the promoters. “Unfortunately, the team was unable to steer the group during its most critical period, 2008-09. The CFO and CEO left in quick succession. The next CEO, too, left within a few months.”Sources say the key heads are now REpower’s CEO Andreas Nauen (former CEO, Siemens Wind Power) and Vagadia, the CFO. In September last year, Suzlon brought back Rohit Modi from Gammon India to be CEO of India and Emerging Markets. In August 2008, Suzlon brought in Sumant Sinha, former CEO of Aditya Birla Retail, as COO, and Robin Banerjee as group CFO. They helped in converting foreign currency loans to rupee loans, in reducing the loan burden, and in pulling off the blade retrofitting programme in the US. For some time, Tanti and Sinha shared the CEO’s role. Sinha stepped down in June 2010; Banerjee left two years later, to be replaced by Vagadia. BLADE BLEMISHIn 2004-05, Tanti sensed a trillion-dollar opportunity in the US for onshore wind power. Of the top 10 global manufacturers, six (Vestas, GE Energy, Gamesa, Siemens, Acciona and Nordex) were setting up manufacturing facilities in the US. Suzlon decided to enter that market in a big way with its flagship product — the S88 (2.1 MW) turbines. The product was a couple of years old and had been tested at Suzlon’s wind farms in Kanyakumari for a year or so.Soon, Suzlon set up a manufacturing facility at Pipestone, Minnesota, with the support of the local government. Partnering with John Deere Wind Energy (JDWE), it had invested in several Minnesota wind power projects since 2003; it now expanded to Texas and Missouri. Another major client in the US was Edison Mission Group (EMG), which is yet to pay Rs 1,100 crore for the wind farm. Suzlon is taking legal action against the firm. But by the end of 2007, its turbine blades developed cracks. To be fair to Suzlon, many other leading manufacturers also faced problems. For example, in 2007, Vestas withdrew an entire series of its V90-3MW turbines for problems with the gearbox.Navigant Consulting concluded that the S88-V2 blade’s design had a weakness in the transition area — about 6 metres from the root of the blade (the blades are 43 metres long and weigh 7 tonnes). Also, blade-testing standards designed by the certification agency, Germany-based Germanischer Lloyd, were found inadequate. On March 2008, Suzlon announced a blade-retrofitting programme for 1,251 (417 sets) blades. The massive programme (which involved bandaging the vulnerable spot on the blade with a strip of reinforced fibreglass) went on for six months, and cost $100 million.Suzlon also undertook operational improvement initiatives with the help of the Boston Consulting Group. “This is a very complex business, operating out of different parts of the world. Over and above the financial issues,most of the managers were not able to cope with these kinds of pressures,” says a source. Where Is It Headed?The wind market has weakened and project economics have become complex. “Project developers are facing capital-raising issues to fund their equity part, but the return is only 14-15 per cent,” says Sanjay Sethi, senior executive director and head of infrastructure at Kotak Investment Banking. “This has affected equipment manufacturers and they are not getting the same amount of orders that they were getting two years ago,” he adds.Suzlon’s traditionally strong markets are no longer in its favour. The US has become unpredictable. The government has extended the production tax credit for one year. But orders were already put on hold. The Chinese market exploded but its laws favour local players. “Given Suzlon’s investment and plans in China, it was an expendable asset. They were not able to make much headway. Getting a few 100 MW in a market of gigawatts is nothing,” says a source. Now Suzlon’s main markets are India, South Africa and Brazil, while REpower continues to have a grip in Europe, the US and Canada. Tanti hopes REpower will help it through these tough times. Without it, Suzlon will not have much value, says one analyst. The German company had revenues of €626.1 million and an operating profit of €27.8 million in the first half of 2011-12. In the first nine months of this financial year, its revenues grew by 58 per cent. Getting its finances in order requires cutting input costs. “At one point, Suzlon’s non-operating working capital was 30-40 per cent, compared to 5-10 per cent among industry leaders. It continues to hover around 25 per cent even now,” notes a source.Suzlon must also inspire confidence in customers that orders will be executed on time. The Rs 1,800-crore working capital allocated will help, but it is unclear whether it will be sufficient to execute orders worth nearly $2 billion that Suzlon India has on its books. Moreover, talent needs to be retained and technology upgraded. On the debt front, Suzlon has to pay some cash upfront to the holders of its FCCBs when it restructures them. Otherwise, the bonds will be junior to similar instruments that are maturing in 2014 and 2016.The company also needs to put up a fight to get back the Rs 1,100 crore it is owed by Edison Mission Group in the US. A spokesperson says, “We have filed a legal motion towards the recovery of these dues… It is important to note that this is fully secured against a wind farm.” Kejriwal of KRIS Securities says the company will take at least 5-6 years to come back to its 2007-08-levels, and that too if everything goes well. The wind market is weak due to recession in the US and the euro zone, and stable fossil fuel prices. Solar energy has managed to attain critical mass. Tanti said in one of his columns recently, “Let’s be honest: the wind sector today seems to have an uncertain future. The times are turbulent...” Wind turbine component prices are stable (thanks to steel prices), but Chinese competition has put margins under pressure. “Wind is never going to be as ‘sexy’ as it was,” says Kher of Ü. Brepman.The next 24 months are crucial. Suzlon needs to be financially disciplined and operationally correct. It also needs the world economy in its favour. If anything goes wrong, Suzlon will have to either sell REpower or Tanti will have to exit as promoter. nevin(dot)john(at)abp(dot)innevinjl(at)gmail(dot)com (at)nevinjl(This story was published in BW | Businessworld Issue Dated 08-04-2013)
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India’s first monorail line is ready to begin commercial runs. Funded at a project cost of Rs 2,460 crore by the Mumbai Metropolitan Region Development Authority (MMRDA), the first phase 9-kilometer line will run between Wadala and the eastern suburb of Chembur. After the second phase is completed in about a year’s time, Mumbai’s monorail system of 20 kms with 17 stations will be the second longest in the world after the 24-km Osaka Mono Rail corridor. Still on trial runs, the gleaming green and pink, 4-rake trains give a bumpy ride; but the L&T-Scomi consortium engineers executing the project have promised to fix that before the line kicks off commercially. Skimming over the city’s buildings, railway yards and mangrove swamps, it will be a visual delight for commuters in Mumbai used to sweaty, sardine-packed local trains. Even though it is over two years behind schedule, the Monorail will offer some relief as a feeder service to a city bursting at its seams. In Picture: Mumbai's Monorail
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Shares of Coal India, the world's largest coal miner by output, tumbled to a more than five-month low on Monday, 18 March, 2013, after government sources said the Indian government was planning to sell a 10 percent stake in the company.The government plans to sell the stake in the next fiscal year, which starts on April 1, although it has not finalised a time frame or method for the sale, said the sources, who declined to be identified because they are not authorised to speak to news media.As of 1:26 p.m., Coal India shares were down 5.5 per cent at Rs 302.35 after falling as low as Rs 299.95, their lowest since October 5. The Economic Times, which first reported the news, said the government was "quickly pushing ahead" with the sale.Coal India officials could not immediately be reached for comment.At the current price, a 10 per cent sale in the company could fetch the government about $3.5 billion.The stake sale would be part of the government's efforts to raise Rs 40,000 crore in 2013/14 through stake sales in state companies to cut down on the fiscal deficit.New Delhi has raised $4.1 billion from divestments so far this fiscal year, and could improve on that if a planned share auction in steelmaker SAIL goes ahead this month.For the next fiscal year, the government's divestment plans include stake sales in top state refiner Indian Oil Corp and a follow-on public offer in Engineers India Ltd.The Coal India sale may take place through a follow-on public offer or a share auction, but a decision will be taken later, said one of the sources. He said the actual offer may be months away as several related issues need to be resolved first.UK-based shareholder The Children's Investment Fund has demanded the state miner raise coal prices to international levels, and issue higher dividends. It has filed lawsuits against the company and its directors.Coal India is also expected to face resistance from workers' unions if the government decides to cut its stake in the company.Coal India debuted on stock markets in 2010 after a record $3.4 billion initial public offering. (Reuters)
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Petrol price was cut by Rs 2 per litre with effect from midnight on 15 March 2013, the steepest reduction in rates in nine months.While petrol price has been cut by Rs 2 per litre, excluding local sales tax or VAT, there will be no change in diesel rates.After including VAT, the reduction in price of petrol in Delhi comes to Rs 2.40 per litre and the fuel will from midnight tonight cost Rs 68.34 per litre as against Rs 70.74 currently.It was expected that oil firms will also effect the monthly hike of 40-50 paise per litre in diesel rates but they deferred the decision apparently to save the government from trouble in Parliament.When oil firms had last hiked petrol price on March 2, the Opposition parties had disrupted one full day's proceedings.The cut in petrol price follows two rounds of hike in rates since February. Petrol price was hiked by Rs 1.50 a litre on February 16 and then by Rs 1.40 per litre from March 2. Both the increases were excluding local VAT.The reduction in rates was possible as international oil prices have eased. While the slide in international prices of crude oil from $112.73 per barrel to $107.41 enabled reduction in petrol prices, it also helped lower losses on diesel sales.Losses on diesel have come down to Rs 8.64 per litre from Rs 11.26 at the beginning of the month, according to Indian Oil Corp (IOC) which announced the price revision.Oil firms calculate the desired retail price on 1st and 16th of every month based on average imported oil price on the previous fortnight. (PTI)
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Petrol price may be reduced by about Re 1 per litre while diesel price may be hiked by 40-50 paisa a litre from March 15/16.While petrol prices are being cut in step with falling international oil rates, diesel rate increase would be in line with the January decision to raise prices in small dozes every month till all of the Rs 11 per litre losses are eliminated.Sources said the revision in rates of petrol and diesel are likely to be announced as early as tomorrow.The cut in petrol price will follow two rounds of hike in rates since February. Petrol price was hiked by Rs 1.50 a litre on February 16 and then by Rs 1.40 per litre from March 2. Both the increases were excluding local VAT.Petrol in Delhi currently costs Rs 70.74 a litre.Since last revision, international gasoline (petrol) prices have come down to about USD 120 per barrel from USD 131.00 a barrel at the last time last revision. Also, the rupee has marginally appreciated against the US dollar to Rs 54.11.Diesel prices have been since January hiked by over Re one per litre in two instalments and it currently costs Rs 48.16 a litre. Despite the increases, oil firms lose Rs 11.26 per litre on sale of the nation's most consumed fuel.(PTI)
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Crippling power cuts in Tamil Nadu are shutting factories and threatening an industrial debt crisis that is wrecking its second-largest city's plan to become the country's next business Mecca. Electricity shortages are emerging as one of the biggest brakes on India's ambitions to rise up the ranks of the world's major economies, and match regional rival China as a manufacturing powerhouse.Nowhere is this clearer than in Coimbatore, a city of 3.5 million people which once seemed to offer investors looking for the 'new Bangalore' everything they wanted: a long history of manufacturing, an educated workforce and the vision to attract global firms.But bad policy making has allowed one of the country's most promising regions to run into a brick wall, and now Coimbatore businesses selling everything from car parts to IT services are struggling with blackouts that last up to 14 hours every day.Failure to invest in generation and distribution meant that when growth hit double digits and drove up demand during the booming Noughties, the grid was pushed beyond its limit. On average India suffers a 9 per cent peak-time power deficit, but in Tamil Nadu the average is twice as bad, at 18 per cent.The grid's inadequacy is forcing firms to rely on expensive back-up power that drives up export costs at a time they should be reaping the benefits of a weaker rupee currency.Many business owners say they are thinking of moving to one of the handful of Indian states that has reliable electricity.K. Ramasamy owns a company that sells car horns to Mercedes-Benz. Coimbatore is his hometown and, with its agreeable climate and cheap land, was a natural location for his first factory 43 years ago.For years Ramasamy flourished as Coimbatore grew, opening eight subsidiaries. In keeping with the hill town's casual character, he founded a yoga centre. Now he is thinking of leaving for distant western states like Gujarat and Maharashtra.Every day for 15 months, electricity cuts lasting many hours have hit Ramasamy's Roots Group, so to keep working he must power his horn factories using on-site diesel generators that cost him nearly three times the price of grid energy."I don't think this is going to be solved in a year or two," Ramasamy told Reuters, noting he was "seriously considering" offers from officials in Gujarat who guarantee 24/7 electricity. "We can't be waiting all the time, we need to make a move."Last year, though the number of new investment projects begun in Coimbatore and nearby district Dharmapuri increased marginally, the figure for abandoned projects rose five-fold, according to data provided by the Centre for Monitoring the Indian Economy (CMIE), an independent research group. Fabric manufacturer VTX Textiles Ltd., whose international clients include Macy's Inc, fears it may soon join the ranks of failed projects after half a century in Coimbatore.The lights flickered off as VTX Chairman and Managing Director A.L. Ramachandra sat in his plush office explaining how his energy costs have doubled. Downstairs, in one of his four factories, the power stayed on because VTX has spent close to $90,000 on battery systems to ensure a seamless transition to generators at his plants when the grid gives out.Even with this makeshift solution, blackouts have cost the company a tenth of its customers and pushed it to restructure its debt. In 2012, according to Ramachandra, VTX lost over $2 million in revenues as a result of air freight delays as energy shortages stopped factory lines running on schedule.Ramachandra said the power crisis as well as a rise in capital costs are hampering Coimbatore's chances of becoming the next Bangalore."Multinationals do not go to the tier II cities; they don't come to Coimbatore," said Ramachandra. "Why would the multinationals come here when the power situation is so bad?"Big City ProblemsSome still believe in the long-term promise of Coimbatore, particularly IT companies that require much less energy than manufacturing industries. Cognizant Technology Solutions Corp, a growing US-based outsourcing firm, opened a site there in 2005, and Microsoft India has launched a research centre.Venugopal R., a vice president with Robert Bosch GmbH, a German engineering firm with a three-year-old campus next to Cognizant, said his company has put growth plans on ice for now, but he anticipated expanding soon, and predicted that larger firms like his will anchor more business growth.But for now, what began as a power crisis is also becoming a banking one, as small companies searching frantically for loans to cover their energy needs teeter on the brink of bankruptcy.In January, M.C. Kumaran, a small manufacturer of automotive metal castings, started making desperate calls to competitors. Afraid of defaulting on a 30 million rupee loan, he was trying to sell his decade-old foundry, where production had shrunk to one-third of its peak. The unit is still on the market."I thought we'd have power shortages for a few months but didn't dream it would continue for two to three years," said Kumaran. "I cannot even run a night shift, it is useless."Kumaran spoke of plans to invest up to 50 million rupees on a foundry in Gujarat, and said he regularly pores over local newspapers crammed with "Invest In Gujarat" advertisements.Coimbatore branches of two national banks admitted to rising loan defaults that spurred them to lobby India's central bank, the Reserve Bank of India, to relax restrictions on multiple loan restructures."This year is a year of concern where things have gone from bad to worse," said one Coimbatore bank official, speaking on condition of anonymity because he was not authorised to comment.Roots Group, which buys a fifth of its materials locally, recently began offering two-year, interest-free loans to half of its 120 Coimbatore suppliers to keep them afloat. Smaller foundries, unable to afford generators, take loans to keep staff and equipment for the precious hours of power.Even the bigger firms are not immune. Elgi Equipment Ltd, one of the city's largest manufacturers, saw its energy costs rise by 10 per cent in the second half of 2012, Manoharan A., a deputy general manager said."We are a debt-free company," he said. "But if this situation continues one more year or so, definitely we'll be trapped in the debt crisis."Analysts who once touted second-rung cities as India's next great growth centres now say low investment in power and other infrastructure means towns like Coimbatore, though far smaller than Mumbai, Delhi and Bangalore, are starting to suffer big city problems."Tier II cities are also beginning to burst through their seams due to haphazard growth," said Mahesh Vyas, Chief Executive of CMIE. "We desperately need to work on building better infrastructure or else this growth will come to a grinding halt."(Reuters)
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Coal India, the world's largest coal miner by output, missed its supply target for the fiscal year 2012-13 by 4.8 million tonnes, it said in a statement. The state-run miner, which produces about 80 per cent of India's coal output, reported offtake (supply) of 465.2 million tonnes for the year, falling short of its target of 470 million tonnes.In February, Coal India said it remained on track to meet its supply target for the year. The company also missed its production target of 464.1 million tonnes for the year by 11.9 million tonnes, it said.(Reuters)
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