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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Private power producer Tata Power on Thursday (13 August) reported a consolidated net profit of Rs 241.33 crore for the quarter ended June 30, helped by higher revenues. The company had reported a net loss of Rs 111.30 crore in the corresponding quarter of the previous fiscal, Tata Power said in a regulatory filing. The total income from operations during the quarter was at Rs 9,234.58 crore, an increase of 6.05 per cent. The total income from operations in the year-ago period was Rs 8,707.53 crore. The company's other operating income (net of excise duty) during the quarter increased over four-fold to Rs 123.08 crore as against Rs 28.75 crore in the year-ago period. Commenting on the Company’s performance, Anil Sardana, CEO & Managing Director, Tata Power said, “Tata Power continues to report improved operational performance and has consistently maintained strong performance across its various businesses. Most of the projects and subsidiaries of the Company continue to perform well despite very challenging circumstances. With an operating base of 8669 megawatts as of June 30, 2015, the Company’s distribution business has crossed 2 million connected customers, 14 lacs in Delhi and 6 lacs in Mumbai, reinforcing its position as India’s largest integrated power company. As we celebrate Tata Power’s centenary year, we are committed to nation building and providing sustainable power to all.” Tata Power's revenue from the power business increased to Rs 6,802.99 crore as compared to Rs 6,568.38 crore in the same quarter of the previous fiscal. It further said that in the case of Coastal Gujarat Power Ltd (CGPL), a wholly-owned arm of the company, the Supreme Court has stayed the orders passed by CERC and APTEL granting compensatory tariff. The company, it said, has been legally advised that it has a good arguable case. It said that CGPL has reviewed and reassessed the recoverability of the carrying amount of its assets at Mundra and has concluded that no further provision for impairment as at June 30, 2015 is necessary. "In view of the estimation uncertainties, the assumptions will be monitored on a periodic basis by the management and adjustments will be made if conditions relating to the assumptions indicate that such adjustments are appropriate. Certain financial covenants in respect of loans taken by CGPL had not been met," it said. The management has requested lenders to extend the existing waivers. "Accordingly, the long-term loans continue to be classified as long-term loans," it said. Shares of the company today closed at Rs 69.20 per scrip, up 2.44 per cent.
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State-run power equipment maker Bharat Heavy Electricals Ltd (BHEL) on Friday (7 August) reported a 82.48% plunge in standalone net profit at Rs 33.89 crore for the quarter ended June 30, due to lower sales.The PSU firm had reported a net profit of Rs 193.50 crore in the corresponding quarter of the previous fiscal, BHEL said in a regulatory filing.Net sales during the quarter were at Rs 4,280.76 crore, registering a decline of 15.5%.The company's net sales in the year-ago period stood at Rs 5,067.59 crore.BHEL's revenue from the power sector declined to Rs 3,357.13 crore during the quarter from Rs 4,144.16 crore in the year-ago period."The company has an outstanding order book position of about Rs 1,16,200 crore at the end of Quarter 1/2015-16," the company said.BHEL had signed three agreements with Kazakh companies during Prime Minister Narendra Modi's recent visit to the country.The first pact was signed with JSC Samruk Energy, the national power utility of Kazakhstan which has a major share in Kazakh's power sector, BHEL said in a statement last month.Company's shares were trading at Rs 258.00 apiece on BSE in late afternoon trade, down 8.58%.(PTI)
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It will be sometime before the light shines on the country’s power sector. A Crisil report says that 46,000 mw of thermal capacities face viability risks; and that the sector will be constrained by discom’s weak financial health and coal-block auctions. Worse still, it says nearly Rs 75,000 crore of loans — or nearly 15 per cent of the aggregate debt to power generation companies — are at risk of turning delinquent in the medium term. And close to Rs 1.9 lakh crore of loans to six weak discoms, for which the moratorium ends in the next 18 months, are at risk if timely support is not extended by the central or state government.What went wrong? Exactly a year after Crisil warned on the state of affairs of the power sector, on 5 October 2012, the centre announced a financial restructuring package (FRP) for discoms under which short-term debts were converted to long-term loans backed by state government guarantees. The FRP was for regular tariff hikes and reduction in AT&C (aggregate technical and commercial) losses. “While tariff hikes were high in the first two years following the FRP, things have fizzled out since then. On the AT&C front, there has hardly been any progress,” says the Crisil report.It lists how a vicious cycle was set off. Because discoms remain financially fragile, they are chary of committing to long-term power purchase (PPA)agreements; lower power purchases by discoms, and inadequate coal and gas supplies, have led to suboptimal plant load factors at generating companies, especially the new projects. Further, tariff aggression shown during competitive bidding has resulted in poor cash flows, which has cramped their ability to service debt despite lower cost of imported coal. The weak generating companies with no long-term PPAs defeat one of the objectives of FRP, which is to progressively reduce short-term power purchases by state discoms.It also highlights the “winner’s curse” in coal block auctions. Post the de-allocation of coal blocks by the Supreme Court in September 2014, the centre went in for auctions where companies bid very aggressively for the nine coal blocks that had fuel to fire around 6,500 mw. “This approach showed strategic fuel security had become more important than profitability,” notes Crisil. Bidders who had agreed to a zero fuel charge in their PPAs, thus foregoing mining costs, also agreed to pay a forward premium of Rs 100 to Rs 1,010 per tonne to the concerned state government. With mining costs and forward premiums not recoverable through the variable charge component in PPA, bidders were exposed to the risk of under-recovery.All this will now come home to roost in the financial sector. The Reserve Bank of India’s Financial Stability Report released in June had given a heads-up: Rs 53,000 crore of loans to seven state electricity boards have a “very high probability” of turning into dud-loans at end-September 2015. Acche din, indeed!— Raghu Mohan(This story was published in BW | Businessworld Issue Dated 24-08-2015)
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The state government will keep a 50% stake in the joint venture in exchange for the land that it will provide for the solar parks to be set up on, reports Simar SinghA proposal, clearing the path for investments worth Rs. 1.56 lakh crore in the Rajasthan’s solar energy sector was passed by the state’s cabinet on Tuesday (28 July) . These investments will be made through a joint venture with four private players- Adani Enterprises, Reliance Power, Essel Infra Projects and Infrastructure Leasing & Financial Services (IL&FS). ”We gave approval for investment proposals worth Rs.1,56,000 crore for solar power production of 26,000 MW in Rajasthan,” said Rajendra Singh Rathore, Parliamentary Affairs Minister, Rajasthan at a press conference. The state government will keep a 50 per cent stake in the joint venture in exchange for the land that it will provide for the solar parks to be set up on. The planned projects will aim at generating 26000 megawatts and the chief secretary will be the chairman of the company. The government has already signed a few MoUs for the same. Rajasthan recently, according to data released by the Ministry of New and Renewable Energy, overtook Gujarat as the leader in solar energy generation in India. The state receives the highest amount of radiation in the country and has enough barren space, which increases its suitability for this land intensive green energy programme. Adani is expected to install one park of 10000 MW, Reliance one of 6000 MW and IL&FS and Essel Infra are expected to set up parks with the capacity of 5000 MW each.
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There is a serious crisis looming over the power sector in the country. It is a crisis of tariff, of bankrupt state owned distribution companies being unable to pay for power or even to sign new power purchase agreements. In turn, this threatens the financial viability of new power projects with a combined capacity of 46,000 MW. Tied up in these power projects is debt in excess of Rs 75,000 crores that might become stressed unless power generation companies get a viable return on their investments. To add to this is the mess in power generation companies that depend on gas supplies because of a continuous and steep decline in gas supplies from the Krishna Godavari basin. All this and much more was revealed in a report on the power sector released by the ratings outfit Crisil today. Some weeks ago, there was a controversy when the Union Power and Coal minister had claimed that the real problem in India was not shortage of power but the willingness and ability of distribution companies-both state owned and private-to buy the power. Many states where power cuts have been crippling during this summer reacted strongly against this. But in reality, the facts do suggest the same. For instance, the latest statistics released by the Union Ministry reveals that peak hour power shortage during 2014-15 had come down to all time low of a little more than 3.7 per cent. So actually, the days of crippling power shortages overall have gone; like the one in 2012 when the entire power grid in North India had collapsed. The root problem is the financial mess of discoms. Take the state of Rajasthan for example. The state owned electricity board there simply doesn't have the resources to repay Rs 90,000 crores in dues and debt. Total outstanding debts to discoms have reached Rs 4.4 lakh crores as of March 31, 2015. According to the Crisil report, the only way of staving off this looming crisis is to allow an increase in tariffs and reduce transmission and distribution losses. But then, both are politically sensitive subjects and industry insiders are waiting with bated breath to see how this pans out.
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India is set to raise about $260 million from a sale of 5 per cent stake in Power Finance Corp Ltd, after the share auction received bids for more than twice the number on offer. New Delhi was selling about 66 million shares in Power Finance as part of a target to raise as much as $11 billion from divestment of its stakes in state-run companies this fiscal year. The sale was subscribed more than 2.3 times, according to stock exchange data. At the indicative price of Rs 254.30 per share, the sale would fetch the government Rs 1,678 crore ($261.24 million). Retail investors will get a 5 per cent discount to the cut-off price. Aradhana Johri, secretary at the government's disinvestment department, told reporters they had received bids worth Rs 3,747 crore for the sale. She said the actual revenue the government will raise from the sale was still being calculated. The proceeds from the asset sale programme are critical for Finance Minister Arun Jaitley's plan to narrow the fiscal deficit to 3.9 per cent of gross domestic product in the 2015/16 fiscal year that began in April. The government has missed its divestment target for the last five years in a row.(Reuters)
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Meeting the energy needs of our fast growing population and industrialisation processes has always been a pain point for any Government in India. One of the growing concerns which the country is grappling today is energy crisis. Electricity has become an essential tool for the sustenance of any economy or country. With the per capita consumption in the subcontinent touching approximately thousand kilowatts and ever increasing; the country has to focus on alleviating the growing concern of energy crisis. Besides, the question of providing this necessity at reasonable prices seems to be unanswered. Today, close to 400 million Indians are completely cut off from grid power, primarily due to inaccessible geography. While renewable energy seems to be a solution, higher investment costs come across to be a huge challenge. In such testing scenarios, innovation can be the polestar addressing the energy crunch of the nation. Inspired by this thinking, researchers at IBM undertook the initiative to ease the power shortage confronted by developing nations. They chose to take responsibility to differentiate themselves from the existing technologies by focusing on another environmental concern- e-waste. As suggested by a study in 2013, the operations of a big multinational IT company in India alone results in more than 10 tons of discarded e-waste. Scientists at India Research Lab, IBM took upon the challenge of turning e-waste into the nation’s advantage. Research scientists at IBM found that discarded laptop batteries still have enough power to keep an LED light on for more than 4 hours a day in a year, when fully charged. From this unconventional solution - UrJar, an IBM India project aims to benefit populations in developing nations where accessibility to reliable power is still a far sighted dream. Adoption of this technology commercially at a large scale can further incentivise the process of organised collection of e-waste. At present, it is estimated that 95 per cent of e-waste collection and recycling in the country is managed by the informal sector involving a network of local garbage dealers, posing safety concerns over disposal of hazardous wastes. Moreover, this solution eliminates the use of kerosene for lighting purposes resulting in reduction of greenhouse emissions by 2.7 kilograms per lamp IBM deployed this innovative solution: UrJar in five street-side shops in Bangalore (which were inaccessible to grid electricity) to understand it’s usability in a real world scenario. The results were gratifying as the users could easily meet their lighting requirements and were pleased by the long duration of backup power provided by the device. We would like to present this solution being a classic case of converting a biggest national challenge to address another; alleviation of energy poverty through reusing e-waste. Two birds with one stone. To conclude, IBM considers UrJar as a vision for not just dissemination but sustenance within the community to compliment the economic enticements with the technological characteristics. It has the potential to channel e-waste towards the alleviation of energy poverty, thus simultaneously providing a sustainable solution for both problems. The author, Vikas Chandan, is Research Scientist & Mohit Jain, Research Engineer, IBM Research Labs, India
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