In a major interim relief to DLF, the Securities Appellate Tribunal (SAT) allowed the realty giant to redeem mutual funds worth Rs 1,806 crore to meet working capital needs and service debt payments. DLF had sought permission to redeem money locked in mutual funds after being slapped with market regulator Sebi's ban last month that bars it from accessing the capital market for 3 years. The final hearing in DLF's main appeal against the Sebi order would commence on December 10, prior to which Sebi and the company will have to file their replies with SAT. As an interim measure, SAT has allowed the company to redeem mutual funds worth Rs 767 crore in the current month and further funds worth Rs 1,039 crore in December. "Sebi order did not ban DLF from continuing its business, but only barred it from accessing the capital markets for three years," a three-member SAT bench said. "It can be reasonably concluded that the appellant (DLF) should be allowed to use its own funds to meet its every day needs and other working capital requirements, including meeting its obligations to the creditors," it said. "Accordingly, this tribunal justifies the demand for the appellant to redeem Rs 1,806 crore from mutual funds and also allow its lenders to de-freeze/invoke the pledged shares of its subsidiaries as and when required," presiding officer J.P. Devadhar said. Seeking permission to redeem mutual funds, DLF had submitted before SAT a list of 10 subsidiaries that need the cash along with the parent firm, as also the bank details of the funds to be redeemed from the mutual fund investments worth Rs 2,118 crore. Out of this, the company needed Rs 1,806 crore till December. DLF's counsel submitted that the money was needed as its 10 subsidiaries are not in a position to service their commitments to banks and financial institutions. Due to the peculiar nature of its business, DLF collects all the surpluses from the subsidiaries and has a consolidated bank account. The tribunal noted that the Sebi counsel Rafique Dada did not object to the interim relief. Dada said, "Sebi is not opposing the interim relief as it does not want the company to be crippled at the same time, it has to be underlined that the tribunal makes it a point that this case and the interim relief does not become a precedent for others. We are not opposing the plea for interim relief presuming that the tribunal is satisfied with the case made out by the appellant and not that we agree with all the points made." To this, Devadhar said, "We want to make it a point that this case sets a paradigm for future Sebi rulings so that it gives out more unambiguous orders." The SAT, a quasi-judicial body, will begin its final hearing on December 10 on DLF's main plea against Sebi order. At an earlier hearing on October 30, the SAT had asked DLF to specifically mention the time-frame, the requirements as well as the end use of the fundS apart from till what time it needs the interim relief. The SAT has further asked Sebi to file its reply to the DLF petition by November 30 and directed the petitioner to submit its rejoinder by December 8 and posted the matter for final hearing on December 10. Last month, Sebi banned DLF and six of its senior-most officials, including founder-Chairman K .P. Singh, from capital markets for three years. The company had challenged the ban in SAT and sought an interim relief on October 22. The Sebi took action against DLF for not disclosing the details about three of its 353 subsidiaries and associate companies in its 2007 IPO filing. Sebi has barred DLF and others for "active and deliberate suppression" of material information at the time of 2007 IPO, which fetched its Rs 9,187 crore, the biggest IPO at that time. While promoters own 74.93 per cent stake in DLF, foreign institutional investors have close to 20 per cent and retail shareholders have about 4 per cent, among others. This was one of the rare orders by Sebi in which it barred a blue-chip firm and its top promoter and executives from market. (PTI)
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Delhi, reeling under high temperatures and an acute electricity shortage, will get additional gas supplies from NTPC and Dabhol to increase power generation and help meet demand in the national capital.While the Power Ministry has assured fuel supply from NTPC to generate power to the tune of 400 MW, the government has decided to divert natural gas from the Dabhol power plant in Maharashtra to stations in the capital to help produce an additional 218 MW of electricity.Power Minister Piyush Goyal also promised that the Bawana-Rohini power transmission line, which was damaged by the storm in the capital and adjoining states on May 30, will be restored by tonight."Hopefully, we will be able to meet the peak demand of today," he added. All other transmission lines will be repaired in the next 15 days, he said.Delhi's current requirement of power is 5,800 MW against which availability is 5,300 MW, Goyal said.State-owned NTPC has agreed to release gas to the Bawana project in Delhi, Goyal told reporters here after a two-hour meeting with Delhi Lieutenant Governor Najeeb Jung."The total generation capacity of the Bawana gas-based plant is 1,500 MW but at present 290 MW is being generated.NTPC has consented to release gas as much as required by the plant to generate more power," Goyal said.State gas utility GAIL India Ltd has proposed to divert 0.9 million standard cubic meters a day of domestic gas from the now-shut Dabhol power plant to units in Delhi, a top oil ministry official said.Goyal said getting power from outside Delhi to supplement electricity generation cannot be done due to inadequate transmission lines.Delhi can absorb only 400 MW, he said, adding that if a better transmission network had been built over the past 10 years, fuel could have been provided for producing an additional 1,100 MW. "BSES and Tata Power Delhi Distribution Ltd, the two discoms in Delhi, have been instructed to become more responsive to power complaints," Goyal said, adding that all their offices will work 24x7 till the power crisis ends.The discoms will provide a three-day schedule of planned outages and issue a daily bulletin of the electricity situation in the capital.The national capital is battling a power crisis amid acute temperatures. The maximum is expected to climb to about 46 degrees Celsius today, according to the MeT department.Yesterday, the maximum was 45.5 degrees Celsius, the highest level in the month of June in 10 years.(Agencies)
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Brent crude oil fell to a more than four-year low near $82 a barrel on Tuesday, after top oil exporter Saudi Arabia cut sales prices to the United States.Front-month Brent crude touched a low of $82.08, its weakest since October 2010, and was down $2.10 at $82.68 a barrel by 1030 GMT.US light crude was down $2.20 at $76.58 a barrel. It touched a session low of $75.84, its weakest since October 2011, as its discount to Brent hovered around $6.The Brent price plunged more than 50 cents below last month's low of $82.60 before recovering."We've been seeing some technical stop loss selling because the price has reached new lows," said Christopher Bellew, a broker at Jefferies in London.The world's top exporter increased its December sales prices, relative to benchmarks, to Asia and Europe on Monday, but lowered prices to the United States, a smaller export market."This is mixed news, and the fact that the positive angle has not made an impact shows that market sentiment is very negative at the moment," said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt.Daniel Ang of Phillip Futures said in a note that the move "signalled Saudi Arabia's intention to fight for U.S. market share and could even show its intention to squeeze U.S. shale producers".But analysts at JBC Energy wrote that the pricing reflected market fundamentals and did not have a political motive."We would strongly advocate against interpreting every month's OSP publication in the context of 'price war' and 'market share battle' stories," they said in a note.The absence of signs that the Organization of the Petroleum Exporting Countries (OPEC) could curb output in a well supplied market also continued to weigh on sentiment.The oil cartel will meet on Nov. 27 in Vienna to discuss its output targets for next year.Members Venezuela and Ecuador are working on a joint proposal to defend oil prices, but the United Arab Emirates oil minister said the group is "not panicking."OPEC's secretary general last week said production next year would not vary much from 2014, and members Iran and Kuwait have said a cut in output at the next meeting was unlikely."The market sentiment will stay negative until OPEC appears to be unified," said Commerzbank's Weinberg. "Everybody is blaming each other but nobody is willing to cut."There is a growing lobby in the United States to lift a 40-year ban on U.S. crude exports which if successful could ease a supply glut in the Atlantic Basin.A stronger dollar was also weighing on oil prices, making the commodity more expensive for buyers using other currencies.The dollar touched a four-year high on Monday, before slipping back slightly on Tuesday.(Reuters)
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Before 10 december 2013, NTPC chairman Arup Roy Choudhury, in all his public interactions, preferred to talk about the plant availability factor (PAF) of his plants rather than the plant load factor (PLF). The reason being incentives for power generation were linked to PAF and not PLF. But all this changed post-10 December when the Central Electricity Regulatory Commission (CERC) came out with its draft tariff regulations for the period 2014-19. The NTPC stock tanked over 11 per cent in a single trading session.Such was the measure of panic that the company called a press conference the day after where Choudhury made an attempt to allay fears about the consequences of the CERC draft. “There is always a significant difference between the draft and the final version of tariff regulations. There is no need to panic,” he told reporters. He added that the regulator’s proposal to link incentives to PLF was a mistake. “Even CERC knows that PLF has no value in our business. We will present our views to the commission,” he said.Famous last words! When the final guidelines came out on 24 February, NTPC along with many other power producers operating on the cost-plus model — where costs of material, labour, overheads are added to a markup percentage — were in for a bigger shock. The regulator had, in addition to a host of stringent norms, withdrawn tax benefits enjoyed by firms that followed the cost-plus model. NTPC’s stock plumbed to a five-year low. NTPC moved the Delhi High Court 10 days later to seek a stay on the order which, according to the company, would make cost-plus generation unviable. Even though the court refused to stay the order, it asked CERC to file an affidavit justifying the regulations. At the next hearing on 19 May, CERC made a plea for more time. A hearing is scheduled for 24 July.NTPC operates 23 coal-fired power plants with an aggregate installed capacity of 42,464 MW. The company accounts for around 18 per cent of India’s thermal power generation. Interestingly, the CERC regulation has brought together — for the first time — two otherwise warring parties, namely, NTPC and the Association of Power Producers (APP) which represents 22 private power developers that also follow the cost-plus model. Though both parties have filed separate writ petitions against the regulator, the high court has decided to take the petitions up together.The Sticking PointsThe CERC order mandates that the station heat rate (SHR) — a term for calculating the amount of heat required to generate one unit of electricity — should be computed on an ‘as received’ basis rather than on an ‘as fired’ basis. “Any arbitrary practice of using ‘as fired’ gross calorific value (GCV) for SHR calculations without proper guidelines for determining the same will only lead to inflated claims of coal consumption,” reads the order.The regulator, to buttress its argument, has quoted from a Central Electricity Authority report which, in turn, bases its findings on illustrations from international publications. The report estimates the maximum loss of just 3 per cent in the calorific or heat value of coal after 10 days storage — or about 3 Kcal/Kg for an ‘as received’ coal consignment with a GCV of 3,500 Kcal/Kg. However, NTPC, in its petition filed before the high court, claims that “it is not feasible to measure the GCV of incoming coal with reasonable accuracy when it is still on the wagons, prior to its crushing and removal of foreign material, etc”. It further states: “The best practices to monitor GCV of coal requires that coal be crushed to below 50 mm size which, on a routine basis, is done in the power plants.”APP, on its part, also points in its petition that the guidelines related to GCV did not form part of the draft issued in December 2013. “The CERC seems to have picked up recommendations of a report prepared by the Central Electricity Authority without consulting stakeholders. How can you bring in the regulation without discussing its impact with the parties involved,” asks Ashok Khurana, secretary general, APP.In its petition, APP claims, “It is pertinent to point out that CERC did not propose the change in methodology of determination of GCV in the Draft Tariff Regulations 2013, published as per the requirements of Section 178 (3) of the Electricity Act to provide an opportunity to the stakeholders to make comments and suggestions.”Khurana goes on to state that “this is the first time that CERC has not come out with a statement of reason (SoR) even a month after issuing its tariff order. Usually, the practice has been to publish the SoR within two to three days of issuing an order”.Anil Razdan, former secretary, Ministry of Power, offers a balanced perspective. “Not giving prior notice may be a reason for re-opening the case. There is merit in the argument of NTPC and other power companies. But there is also merit in the argument of CERC that ‘what you receive is what you receive’. If you allow the quality of coal to deteriorate, then, you should be responsible for it.” On the issue of SHR, the CERC regulation stipulates a reduction of 50-75 Kcal per unit of electricity generated. This is applicable to plants of 200, 500 and 660 MW capacity. A 200 MW plant, for instance, uses 2,500 Kcal at present to produce one unit of electricity. It will now require 2,450 Kcal to produce the same power. break-page-breakNTPC argues that SHR of a power station is a function of PLF. Higher the PLF, better the SHR. In the past two years, PLF of all plants across the country has come down for reasons beyond the control of the power producers. “In the Tariff Regulations 2014, CERC has determined the applicable SHR without providing for any margin and based on an average of actual operational values observed in the last 5 years… In the later years (2011-13), there was a significant reduction in the demand for electricity and the generating stations were operating at a low PLF,” reads the NTPC petition. NTPC’s PLF (see Losing Steam) has come down by close to 10 per cent since 2009. The Central Electricity Authority, while making its recommendations to CERC, had used a weighted average of PLF of NTPC’s best performing plants.NTPC has argued that over the past two years, power producers were finding it difficult to maintain a high PLF because of low fuel availability. Besides, even the new fuel supply agreements being inked assure only 65 per cent of fuel requirement. Further, the burgeoning of solar and wind projects has seen discoms preferring to draw power from them whenever they generate electricity, leading to lower demand from thermal power plants.Another CERC regulation that is worrying cost-plus power producers is the linking of incentives to PLF and not PAF as is the practice. PAF measures the generation capacity available, whereas PLF is based on the actual power that is generated at the plant. According to the new rules, an incentive of Re 0.5/Kwh will be given if the normative PLF is achieved. In case the company does not achieve the PLF, it will be penalised.According to Pramod Deo, former chairman, CERC, the norm will ensure that discoms pay incentives only for the power that they take from producers. This, in turn, will lead to lower tariffs and help improve the financial situation of discoms. However, the regulation will lead to a substantial loss of revenue for power producers. NTPC, for instance, will lose Rs 140 crore a year for every 1 per cent dip in PLF, says Deo.NTPC said the change in incentive payment would only benefit discoms and not consumers. All its capacity addition plans were based on incentives for PAF. In the absence of such incentives, capacity addition would suffer, impacting consumers.Another regulation that hurts cost-plus power producers is the withdrawal of tax arbitrage. Under the new dispensation, discoms will reimburse the tax that producers pay on the applicable 15.5 per cent return on equity (RoE), instead of the normative corporation tax earlier.Currently, some power producers enjoy a tax holiday in certain stations, paying just the minimum alternate tax of 20 per cent instead of the 33 per cent corporation tax. However, they are reimbursed by discoms at the rate of 33 per cent. The new rules will deprive NTPC and other generators of this tax arbitrage. As a result, NTPC stands to lose about 5 per cent in its post-tax return on equity. This would bring its FY15 earnings down by 6-7 per cent.This rule will hurt investors the most. According to Deo, “NTPC was the best bet for investors as it earned more than the mandated cost-plus rule of 15.5 per cent of RoE. So, if the regulator withdraws that amount, they will definitely be hurt.” Razdan, on the other hand, says the regulator had done the right thing in withdrawing the tax arbitrage. “The onus is on the regulator to try and minimise the cost of power. The regulator should look to balance the health of generators, discoms as well as consumers. If only the generators make money, then the discoms as well as the consumers will not be in a position to buy power in future. This will affect the sector in the long run.”According to data from the Power Finance Corporation on the performance of state power utilities from 2006-07 to 2011, the cost of purchasing power forms 61.62 per cent of the total expenditure of discoms. Besides, the purchase cost of power for discoms has increased at a CAGR of 16.42 per cent in the same period. In the case of Delhi’s discoms, the cost of power has gone up by more than 100 per cent in the past three years due to the increased cost of fuel which is passed on by power producers.Says Kuljeet Singh, partner, EY: “The regulator has committed the mistake of bringing in the right regulations at the wrong time. At this point in time, no private player is interested in the power sector because of various hurdles. Bringing down the tax benefits of power developers will only make investors shy away from the sector.”The PhilosophyGirish Pradhan, chairman, CERC, did not speak to BW. His predecessor Deo helped decode the philosophy behind the ‘harsh’ order. “The government wants to encourage companies to take up projects through competitive bidding. NTPC has made enough profits through its cost-plus projects. We need investments in competitive projects that will see investment from the private sector.”On being asked whether future investor sentiment will be hurt by these rules, Deo says: “There is just about 14,000-20,000 MW of capacity under the cost-plus model that is in the pipeline. This isn’t significant. The future is in competitive bidding and the regulator is giving incentives to promote investments in the sector.” (This story was published in BW | Businessworld Issue Dated 30-06-2014)
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Real estate giant DLF has sought the Securities and Exchange Board of India's (Sebi) approval to redeem Rs 1,600 crore from its mutual fund investments as it is facing a three-year ban by the market regulator from accessing the capital market. According to sources, the Delhi-based developer has made the request through an affidavit submitted to the Securities Appellate Tribunal (SAT), which is hearing DLF's appeal against the ban imposed by the watchdog last month on the company and six of its top officials. The submission of the affidavit, which seeks to redeem Rs 1,600 crore from the total MF investments that the company has, follows a direction from the tribunal last Thursday. The SAT, a quasi-judicial body, is expected to pronounce its interim order on the affidavit on Wednesday. The final hearing on the matter will begin on December 10. At the last hearing on October 30, the SAT had asked DLF to specifically mention the timeframe, the requirements as well as the end use of the fund apart from till what time it needs the interim relief. The SAT had further asked Sebi to file its reply to the DLF petition by November 30 and directed the petitioner to submit its rejoinder by December 8 and posted the matter for final hearing on December 10. When contacted, DLF refused to comment on the matter, saying the issue is sub-judice. Its senior counsel Janakdwarka Das, too, declined to comment. The sources, however, confirmed the company has submitted the affidavit for permission to redeem Rs 1,600 crore with the details of funds it needs till December 31, as directed by the tribunal. On October 14, Sebi banned DLF and six of its senior-most officials, including founder-Chairman K.P. Singh, from capital markets for three years. The company challenged the ban in SAT and sought an interim relief on October 22. The Sebi took action against DLF for not disclosing the details about three of its 353 subsidiaries/associate companies in its 2007 IPO filing. This was one of the rare orders by Sebi where it barred a blue-chip firm and its top promoter/executives from market. While promoters own 74.93 per cent stake in DLF, foreign institutional investors have close to 20 per cent and retail shareholders about 4 per cent, among others. (PTI)
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