The proposed sale of power assets of Jaiprakash Power Ventures (JPV) has been making news for over a year now.The latest development is that the company has entered into a binding agreement with Sajjan Jindal-owned JSW Energy to sell its power plants, which have a combined generation capacity of 1,891 megawatts (mw). The bouquet includes the 300 mw Baspa-II Plant, the 1,091 mw Karcham Wangtoo (KW) Hydro-electric Plant and the 500 mw Bina Thermal Power Plant. Before the MoU for this deal was signed, two other companies had shown interest in JPV’s hydro assets.One of them, PJSC or Taqa — a consortium led by Abu Dhabi National Energy Co. — withdrew from the agreement to purchase two of JPV’s hydro plants for Rs 9,689 crore on 24 July 2014. The other was Anil Ambani-owned R-power, which entered into a non-binding MoU with JPV to buy its three operational hydro power plants for Rs 12,000 crore. The deal fell through in just two months.Irrespective of whether JPV proves lucky this time with JSW Energy, the failed deals will definitely raise some tough questions. The first being whether there was something that sent away the previous prospective buyers. And if there was something, was it a problem specific to the project or symptomatic of the larger issues plaguing India’s energy projects.While Taqa said its decision to pull out was triggered by a change in the business strategy and priorities of the group, R-power never gave any official reason for its decision to backtrack.All that is known is last month the Central Electricity Authority issued a show-cause notice to JPV for violation of Techno Economic Clearance (TEC) conditions granted to KW project, casting a shadow over the future of the plant. The KW project, marred by tariff issues, was part of the bouquet of plants that JVP was selling in all the three MoUs it signed.While the valuation of the power assets looks good, lack of clarity on the future revenue stream of the KW project could make it difficult for the prospective buyer to arrange finances for the deal.JPV did not reply to BW’s queries seeking clarity on the proposed deal.Valuation of power plants in India has always been tricky. There are underlying regulatory, financial and fuel issues that have to be taken note of. And JPV is no different. neeraj@businessworld.in@neerajthakur2
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India will sign an agreement with China this week under which Beijing will provide a feasibility study into building a 1,750 kilometre, high-speed rail line between Delhi and Chennai, a spokesman for India's Ministry of Railways said on Tuesday. Agreement for the feasibility study, which China will pay for, follows the signing of a memorandum of understanding in September for China to help develop India's railways. "The (railways ministry) team is in China now. We expect them to sign the agreement this week," the spokesman said. The high-level team of officials from Rail Vikas Nigam Limited led by Satish Agnihotri arrived in China on Monday and held talks with China's High Speed Rail Corp to build the Delhi-Chennai line. The proposed corridor could be the second largest in the world after China's 2,298-km-long Beijing-Guangzhou line which was launched last year. Running at a speed of 300 km per hour, it covers the distance in about eight hours. The Delhi-Chennai high speed line could cost around $32.6 billion, state-run China Daily quoted Chinese officials as saying. India is considering two corridors for high speed trains. While Japan is conducting feasibility study for the bullet train project in Mumbai-Ahemdabad corridor, China will do the same for the Delhi-Chennai route which expected to begin by early next year. Under the agreement, China has agreed to provide training in heavy haul for 100 Indian Railways officials, redevelopment of existing railway stations and establishment and establishment of railway university in India. The training was expected to begin soon. The two nations have also agreed to cooperate to identify the technical inputs required to increase speed on the existing railway line from Chennai to Mysore via Bangalore. The Delhi-Chennai route is part of the proposed Diamond Quadrilateral project, which aims to build a high-speed train network between different cities, including Delhi-Mumbai, Mumbai-Chennai, Chennai-Kolkata, Kolkata-Delhi and Mumbai-Kolkata. Rajdhani Express at present covers the distance between the two cities in 28 hours and as per the plan, the proposed bullet train at 300 km per hour speed will reduce the travelling time to six hours. China Rail BidsThe Indian bullet train project could be a major gain for China, which is making an aggressive pitch to market its high speed train technology outside the country. On November 20, China signed its largest overseas project worth about $11.97 billion with Nigeria to build a railway line along the African country's coast. The contract is its single largest overseas project, China Railway Construction Corporation Limited (CRCC) said. Earlier this month, CRCC lost a $3.7 billion contract to build a high-speed rail link in Mexico after the country's legislature raised concerns about the nature of the bidding process. Commenting on the India-China High Speed train deal, Feng Hao, a researcher at the Institute of Comprehensive Transportation, said if the deal is made, the project opens the door for Chinese companies to provide new railway design, tracks made of durable materials, automated signalling for faster trains and modern stations in India. India has added 11,000 km railways track in 67 years since its independence while China, whose operating rail mileage exceeded 100,000 km by the end of 2013, including 10,000 km of high-speed railroads, is pushing for a bigger share of the lucrative high-speed train market in India and other parts of the world, the China Daily report said. Besides cooperation in Railway development, China has agreed to invest about $20 billion in two industrial parks in India during Xi's visit. India is pushing China to step up investments in the country to address the huge trade deficit which officials say averaged to $35 billion a year in the last few years in favour of China. (Agencies)
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India is targeting up to $1 billion of private investment by 2017 to build rail lines linking ports and national networks to ease growing congestion, which has delayed coal imports for power plants and contributed to a power supply crisis.Such investment would more than double the $400 million that India's state-owned railways have attracted in the decade since they allowed limited private participation and help fund crucial "last mile" links to ports.Cash-starved, India's British-built rail system has added just 11,000 kilometres of track in the 67 years since independence, and the network has come to symbolise the poor state of India's infrastructure. China has managed 14,000 km of new lines in the five years to 2011.Over-crowding at ports has been delaying much-needed coal deliveries to Indian power plants and supplies of iron ore for steelmakers at a time when there is already a shortfall.Prime Minister Narendra Modi wants private companies, which have held back from investing in freight lines because of the struggle to win the necessary approvals, to build more of the last mile links where bottlenecks bite the most.Companies will now be allowed to part-own new rail lines for variable periods of time rather than a fixed number of years, said Mukul Saran Mathur, an executive director at the Ministry of Railways. The railways will also take on more of a project's financial risk, Mathur said, without giving further details."We have put in place the appropriate policy. Demand is rising," he said, adding that the government had given approval to domestic infrastructure companies such as Navayuga and Balaji Infra to build up to 316 km of lines within two years.The ministry also wants foreign operators which own stakes in Indian ports, like Denmark's Maersk, to invest but so far none had shown any interest.Where Are The Wagons?The government estimates port operators will spend $8 billion over the next two years to expand capacity to meet rising imports.That rapid expansion worries port operators, who say the government's proposed $1 billion worth of last mile railway links won't help with bottlenecks on the wider network.On a critical line between the eastern coast and the capital Delhi, demand exceeds capacity on four of every 10 kilometres. That forces cargo onto clogged roads and raises transport losses, which consultancy McKinsey says could cost India $140 billion in 2020.Essar Ports, a large port operator, wants to build new rail lines to help meet an expected doubling of its cargo handling capacity to 200 million tons in the next few years.But the state-owned railways, which have a monopoly on the provision of goods wagons, are failing to provide sufficient wagons to service the extra cargo, said Essar Ports CEO Rajiv Agarwal."We can build our own rail lines but there is this major shortage of wagons," he said.Wagons are largely made by domestic companies Texmaco Rail & Engineering <TEXA.NS> and Titagarh Wagons, who would benefit if the railways' finances improve and more wagons are bought.Most Indian ports only have access to two-thirds of the wagons they need, and the shortage is one reason why ships have to wait for two days more to get berthed and unload than the international average, according to Deutsche Bank."Most of the time we face a shortage," said G.P. Biswal, deputy conservator at the busy eastern port of Paradip, where in September a surge in coal imports left twice as many vessels waiting than there were available berths. "We're taking up the case with railways to increase their capacity."
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Oil prices could plunge to $60 a barrel if Opec does not agree a significant output cut when it meets in Vienna this week, market players say. Brent crude futures have fallen 34 per cent since June to touch a four-year low of $76.76 a barrel on Nov. 14, and could tumble further if Opec does not agree to cut at least 1 million barrels per day (bpd), commodity fund managers say. "The market would question the credibility of Opec and its influence on global oil markets if there was no cut," said Daniel Bathe, of Lupus alpha Commodity Invest Fund. That could send Brent down to around $60, Bathe said. "Herding behaviour and a shift to net negative speculative positions should accelerate the price plunge," he added. Fund managers are divided over whether Opec will reach an agreement on cutting output. Bathe put the likelihood at no more than 50 per cent. The oil price has been falling since the summer due to abundant supply -- partly from US shale oil -- and low demand growth, particularly in Europe and Asia. As a result, some investors believe a small cut -- of around 500,000 bpd -- would not be enough to calm the markets. Doug King, chief investment officer of RCMA Capital, sees Brent falling to $70, even with a cut of 1 million bpd. If Opec fails to agree a cut, prices will drop "further and quite quickly", with US crude possibly sliding to $60, he said. US crude closed at $76.51 on Friday, with Brent just above $80. Dependent on Non-MembersWith member states struggling to balance budgets, many Opec countries will be pushing for an output cut. "Prices below $80 are putting significant strain on the cartel's weakest members such as Venezuela," said Nicolas Robin, a commodities fund manager at Threadneedle. He said a bigger cut -- of 1 million bpd or more -- was an "outlier scenario", but such a move would rapidly push prices above $85. "A move higher would likely be accelerated by the lack of liquidity owing to the US (Thanksgiving) holiday next week," Robin added. Doug Hepworth of Gresham Investment Management said: "A surprise significant cut, say of 2 million bpd, is needed to push prices back up to $80. And that would have to be accompanied by some new-found discipline in the non-Saudi members." Former Qatari Oil Minister Abdullah Bin Hamad Al Attiyah said the 12-member group is dependent on non-members to strengthen the market. "This time, Russia, Norway and Mexico must all come to the table. Opec can make a cut, but what will happen is that non-Opec supply will continue to grow. Then what will the market do?" he was quoted as saying in a report. The market has been awash with conspiracy theories as to why Saudi Arabia has not already intervened. Tom Nelson, of Investec Global Energy Fund, said Saudi Arabia had allowed the price to fall to incentivise the smaller Opec producers, which often rely on the biggest producer to intervene, to join Riyadh in cutting output. "They (the Saudis) want to cut but they don't want to cut alone," Nelson said, adding that a cut of between 1 million and 1.5 million bpd should be sufficient to balance the market. "The market really wants to see that Opec is still functioning ... if there is a small cut, with an accompanying statement of coherence from Opec that presents a united front, and talks about seeing demand recovery, and some moderation of supply growth, then Brent could move up to $80-$90." (Agencies)
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The labour unions of state-run Coal India have called off a strike planned for Monday in protest against a stake sale and opening up of the industry, setting the stage for Prime Minister Narendra Modi to press ahead with energy reforms.Coal India holds a monopoly on commercial coal mining, accounting for more than 80 percent of India's total production.Union leaders met a senior coal ministry official on Saturday and the strike was postponed until a meeting with the power and coal minister, said S.Q. Zama, secretary general of the Indian National Mineworkers Federation.The date of the meeting with the minister has not yet been fixed.Even before Saturday's meeting, the government and Coal India officials were confident any strike would have little impact as one of the company's five unions, close to Modi's Bharatiya Janata Party, had promised not to join. The government's sale of a tenth of Coal India could fetch a third of its $9.5 billion annual divestment target. Asset sales are running behind schedule, pressuring a deficit target of 4.1 percent of GDP for the fiscal year to March.Emboldened by the biggest electoral mandate in 30 years, Modi has also taken steps to let private companies mine and sell coal in India, for the first time in more than four decades.The unions had threatened to fight the measures tooth and nail, but calling off the strike without any concrete assurance from the government shows they may have been weakened by rifts with each other. Last year, they successfully thwarted a stake sale plan by the previous government.Zama, however, said the unions would keep resisting any move that could undermine the position of Coal India. He said competition from private companies would make Coal India a "sick" company, risking the jobs of most of its 370,000 workers."The government might try to bulldoze us because of their strength in parliament," Zama said. "But we will put up resistance to the extent possible."(Reuters)
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Two prominent Indian business houses have received the Nepal government's approval to invest 144 billion Nepalese rupees for setting up cement and hydropower projects in the country. The Nepal Investment Board (NIB), headed by Prime Minister Sushil Koirala, has cleared the decks for Anil Ambani-led Reliance Group for an investment of 40 billion Nepalese rupees ($400 million) in southern Nepal. The NIB has approved the Indian company's proposal for setting up the multi-billion dollar project in Nepal, according to a statement by the board. The Reliance Group will soon conduct the study for constructing the plant in central or eastern Terai region of the southern plain. Similarly, the board has also approved the Project Development Agreement for the construction of 900-MW Arun Third Project being developed by Satluj Jal Vidyut Nigam Limited (SJVN), India. As per the draft agreement, Nepal will receive 21.9 per cent or 197 MW of electricity free of cost from the project, besides revenue and other facilities. The Indian company will invest 104 billion Nepal rupees on the project. Besides, Nepal will get a total economic benefit of $3.5 billion which includes royalty fees, tax and free power from the implementation of the period over the concessional period of 24 years. The formal agreement for developing the project is likely to be signed during the 18th SAARC Summit in Kathmandu in presence of Prime Minister Narendra Modi. (PTI)
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India will spend 253 billion rupees ($4.1 billion) to tackle rampant theft of electricity by rolling out metering in cities and upgrading old distribution networks, the power ministry said late on Thursday. Cutting electricity theft and reducing transmission losses are part of Prime Minister Narendra Modi's efforts to bring uninterrupted power to the whole country, a key policy plank since his election in May. Cheap or free power is viewed as a right rather than a privilege by many Indians, and poor policing and anitiquated transmission lines result in as much as 40 per cent of electricity going unpaid for in some Indian states. As chief minister of Gujarat in 2005, Modi was credited with tackling power shortages by clamping down on theft, and by repairing the finances of local distribution companies hit hard by unpaid bills. Under the scheme, the government will roll out meters on distribution transformers, feeders and consumers in urban areas, the power ministry said in a statement, following cabinet approval of the project. The government will also strengthen sub-transmission and distribution networks. These projects will help cut technical and commercial losses and improve collection efficiency, the ministry said. They will cost 326 billion rupees in total, of which 253 billion will come from the government. (Reuters)
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India will allow locally registered foreign firms to mine and sell coal when commercial mining is permitted as part of the opening up of the nationalised industry after four decades, Coal Secretary Anil Swarup told Reuters. To end a chronic coal shortage that cripples power plants and curb the country's imports of the fuel, the Narendra Modi government will also spend about $1 billion by 2019 to buy railway wagons and transport coal from remote mines, Swarup said in an interview on Thursday (20 November). The government last month made provisions for private firms to commercially mine coal but did not set any timeline for when actual digging will start. The decision will open the door to global giants like Rio Tinto and BHP Billiton and help ramp up output from India's huge reserves - the world's fifth biggest. "Any company registered in India can bid (when a commercial coalfield auction takes place)," Swarup said. "So a foreign company registered in India can also bid, provided they fulfil other conditions." Opening up the industry will increase private coal production to about 400 million tonnes by 2019 from less than 50 million tonnes last year, Swarup said. As of now, only power, steel and cement companies can mine coal for their own consumption. Commercial mining in India is dominated by state-owned Coal India Ltd. Import FreeCoal India is the world's largest miner of the fuel but its unionised workforce resists mechanisation fearing job losses. The resulting inefficiencies are partly responsible for years of missed output targets and India's coal imports. But Swarup said the firm will beat its production target of 507 million tonnes in the fiscal year through March due to new mine output and environmental clearances. Output has lagged targets over the last six years for which data is available. He sought to allay concerns over labour unions, which plan a one-day strike on Monday against sector reforms and the planned sale of a 10 per cent Coal India stake. "Our attempt is to convey our feelings to them that under no circumstances will the interest of Coal India be adversely affected by the decisions of the government," Swarup said. He was also enthused by the likely selection of Sutirtha Bhattacharya, chairman of India's No.2 coal producer, as the next head of Coal India. Though much smaller, Bhattacharya's Singareni Collieries has been able to surpass its output target every year. Swarup said the government will finalise a roadmap by December 15 to more than double Coal India's output to 1 billion tonnes by 2019. The company will buy 260 more trains on top of the 200 under operation to move coal from new mines. Higher production from Coal India and private firms will mean that India, the third largest coal importer, will almost end inbound shipments in four years, Swarup said. (Reuters)
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