Major News in the Power Sector s1

MAJOR NEWS IN THE POWER SECTOR August 1st to 15th 2007

TATA POWER

Tata Power all set for nuclear power foray Awaiting Govt nod; alignments with equipment suppliers ready

Tata Power Company Ltd could enter the nuclear power arena provided the Union Government gives the approvals. Tata group companies have made considerable homework for the venture stated Mr. Ratan Tata, Chairman of Tata Group at the annual general meeting of Tata Power. Tata Power has a capital expenditure plan of Rs 2,600 crore for the current year and Rs 10,000 crore over the next three years. By 2012 the company would be producing 10,000 MW of power. In the wind sector too Tata Power plans to add another 40 MW and expand its footprint to States such as Karnataka and Gujarat. Currently Tata Power has two wind farms in Maharashtra with a combined capacity of 45.1 MW. Mr. Tata said that Tata Power along with Tata Chemicals and Tata Steel was keen to invest in Bangladesh but the projects are currently in limbo although the caretaker Government has showed some interest. Tata Group has plans to invest $2 billion in Bangladesh.

(The Hindu Business Line, Aug 09, 2007)

(Also appeared in The Economic Times, Business Standard, Financial Express, Mint, Hindustan Times, The Indian Express, Asian Age, The New Indian Express, Free Press Journal, Deccan Chronicle, The Tribune, Sakal, Andhra Jyoti, Dainik Mahamedha and Vaartha)

Tata Power ties up with Toshiba for turbine gensets

TPC signed an engineering, procurement, construction (EPC) contract, for supply of five 800 MW steam turbine generators, with Toshiba Corporation for the 4000 MW ultra mega power project (UMPP) at Mundra in Gujarat. Toshiba Corporation’s work includes design, manufacture, testing and supply of equipment related to the steam turbine generator packages for the five units of 800 MW each. It will also be associated with supervision of commissioning of the turbines. TPC has already signed a contract for boiler island scope on EPC basis with Doosan for Mundra UMPP. The contract for complete Boiler Island includes super critical boilers for the five units of 800 MW each, based on super critical technology required for such large sized units, thus bringing in the first 800 MW unit to India and taking the country into the era of 800 MW super- critical technology.

(Financial Express, Aug 11, 2007) (Also appeared in The Economic Times, Business Standard, Hindu Business Line, Mint, The Times of India, Hindustan Times, The Indian Express, DNA, Mumbai Mirror, Asian Age, Free Press Journal, Deccan Chronicle, The Hindu, The New Indian Express, Financial World, Hindustan, Jansatta, The Tribune, Rajasthan Patrika, Dainik Bhaskar, Divya Bhaskar, Hari Bhoomi, Prabhat Khabar, Central Chronicle, Swatantra Bharat, National Herald, Sandesh, Maharastra Herald, Bharat Mitra, Daily Excelsior, Dainik Mahamedha, The Political & Business Daily, Hindmata and The Times of India – Kanada)

Local cos to help Barclays refinance Tata Power loans

The British bank Barclays is roping in Indian lenders to refinance the $950 million bridge loan taken by Tata Power to acquire the Indonesian thermal coal producers, PT Kaltim Prima Coal and PT Arutmin Indonesia. Export Import (Exim) Bank of India, ICICI Bank, The State Bank of India (SBI) and Bank of India (BoI) are likely to join Barclays as consortium partners. The bridge loan was given by Barclays. Tata Power has picked up 30% equity in PT Bumi Resources – the holding company that controls the two Indonesian entities. The local financial institutions will lend $100 million to $150 million each to Tata Power.

(The Economic Times, Aug 11, 2007)

Jharkhand power plants in limbo over coal blocks ArcelorMittal, Tata Power, Jindal among Cos in fray

The fate of mega power projects by ArcelorMittal, Tata Power, Jindal Group in Jharkhand hinges on pending coal block allocations. The meeting of the inter-ministerial screening committee, which was to decide on such block allocations, has been deferred by several weeks. The Jharkhand government has signed MoUs with 24 private players for generating 31,040 MW. DVC and NTPC together propose to add 5,000 MW of fresh capacity. Maithon Power, a JV between Tatas and DVC, plans to build a 1,000 MW thermal power plant at Maithon. The coal ministry has made it clear that priority on allocation of coal blocks be accorded to power projects with more than 500 MW capacities.

Hindalco, TPC join hands for coal block

The AV Birla flagship Hindalco Industries and Tata Power Company (TPC) will jointly develop a coal block in Jharkhand that will feed both the companies’ upcoming power projects in the state. The two companies will form a joint venture to develop the mines. Hindalco will hold 70% of the venture, with TPC holding the rest. The development, according to industry observers, is another instance of two corporate houses coming together to meet raw material needs at a time when demand is fast outstripping the supply.

(The Economic Times, Aug 07, 2007) Reliance, Tata eye Punjab

Reliance Energy and Tata group have evinced interest in the Punjab government’s proposed three power plants of 5,000 MW, a move that will make the state power surplus within three and a half year. The state government has decided to install three power plants of 5,000 MW to make the state a power surplus one.

(Hindustan Times, Aug 07, 2007)

Tata Power: Margin Pressure

Tata Power sold increased units of power on y-o-y basis in the June 2007 quarter, but a rising operational cost structure put pressure on operating profit margins. As a result, operating profit (excluding other income) declined 2.2 per cent y-o-y to Rs 252.4 crore in the last quarter, while net revenues grew 10.5 per cent to Rs 1511.5 crore. Its operating profit margin also fell 220 basis points y-o-y to 16.7 per cent in Q1 FY08. Tata Power sold 4.056 billion units in the last quarter, a growth of .5 per cent y-o-y. its realizations were estimated at Rs 3.67 per cent in Q1 FY08, compared with Rs 3.52 per unit a year earlier. The company is implementing several expansion projects currently, which will come up after a few years. However for the short term, Tata Power’s ability to manage input costs will remain crucial.

(Business Standard, Aug 07, 2007)

Mundra SPV deviated norms: CERC

The Central Electricity Regulatory Commission’s (CERC) has ruled that the Coastal Gujarat Power Limited (CGPL), a special purpose vehicle formed by the Power Finance Corporation for 4,000 MW Mundra project has deviated provisions of the power ministry’s guidelines pertaining to the power purchase agreement (PPA) while finalizing documents. CGPL, which has been taken over by the Tata Power Company (TPC) who has bagged the project, should have obtained the CERC’s approval before finalizing the PPA. CGPL has nominated Gujarat Power Limited as the lead producer on behalf of all producers. CERC in its ruling on the petition filed by the CGPL on tariff for the supply of electricity from the Mundra UMPP has said that the guidelines were explicit that PPA was to be signed with the successful bidder, Tata Power Company. CERC has asked the applicant to take necessary action for removal of defects pointed out by CERC in its order and approach it.

(The Financial Express, Aug 10, 2007)

COMPETITION/ CONSUMERS

 RELIANCE ENERGY LIMITED (REL)

Reliance Power to get LoI for Sasan today Sasan Power Ltd, the special purpose vehicle floated by Power Finance Corporation for the 4,000 MW project, will tomorrow issue the Letter of Intent (LoI) to Reliance Power Ltd – two days after the ADA GROUP Company won the project by quoting the lowest bid of Rs 1.19 per unit. Reliance Power, a subsidiary of Reliance Energy, outbid NTPC Ltd and Jaiprakash Associates to bag the project. Sasan project, to be set up in Madhya Pradesh with an investment of Rs 20,000 crore, was the first of the nine such mega projects to be set up by private players through a tariff-based competitive bidding process.

(Also appeared in The Economic Times, The Hindu Business Line, The Financial Express, Mint, The Times of India, The Indian Express, DNA, Asian Age, Free Press Journal, The Hindu and The Pioneer)

Reliance Energy set to bag DVC project

Reliance Energy Ltd (REL) is on a power drive all right. Just a day after it was declared a winner of the Sasan ultra mega power project bid, the company has emerged the sole bidder for the 1,200 MW (2*600 MW) Purulia power plant of Damodar Valley Corporation (DVC). REL, in tie-up with Shanghai Electric Company, quoted roughly Rs 4,800 crore for the engineering, production and construction contract.

(DNA, Aug 01, 2007)

REL plans to invest Rs 850 crore in Orissa

Reliance Energy Ltd (REL) which has acquired three power distribution companies (discom) in Orissa is planning to invest Rs 850 crore in the state to strengthen the distribution network. The three discoms – Wesco, Nesco and Southco – have kick- started upgradation of the distribution infrastructure with an immediate project outlay of Rs 50 crore. The target of the project was to supply quality power to upcoming industries and high value customers in Orissa.

 MAHARASHTRA STATE ELECTRICITY BOARD (MSEB)

MSEB unions to go on strike

Protesting against several pending issues, the various unions of the Maharashtra State Electricity Board (MSEB) have threatened to go on a silent morcha in the occasion of August Kranti Din. Unions including Subordinate Engineers Association (SEA), Workers Federation, Bharatiya Mazdoor Sangh, Tantrik Kamgar Union and Kamgar Sena have decided to take the morcha from MSEB’s office at Prakashgad in Bandra upto Prakashganga. The union members also plan a 72-hour strike from August 22 to 24, followed by an indefinite strike.

(DNA, Aug 09, 2007)  NATIONAL THERMAL POWER CORPORATION (NTPC)

NTPC lines up Rs 13,792 crore capex plan

State-run NTPC Ltd has chalked out a multi-pronged strategy to increase its generation capacity to over 75,000 MW by 2017 from the present level of 27,904 MW. NTPC’s market share would rise to 25% by the same year. The company would increase its generation capacity with investments in greenfield projects, brownfield expansions, joint ventures / acquisitions. It would also consolidate its position in the hydro sector, coal mining and power trading besides diversifying into oil/gas exploration, liquefied natural gas (LNG) value chain, renewable and non-conventional power projects and add at least 2,000 MW of nuclear capacity by 2017. The company has lined up a Rs 13,792 crore capex plan for 2007-08.

NTPC asked to transfer 10 projects to BHEL

Power minister Shushilkumar Shinde and his ministry recently received a quick lesson the need to put long-term national interests ahead of all concerns. The ministries of power and heavy industries have been locked in an impasse over the efficacy of power generating major, National Thermal Power Corp (NTPC), giving a specified number of projects to Bharat Heavy Electricals (BHEL) on a negotiated basis to ensure that domestic power equipment manufacturer is able to carry out a technology transfer programme for super-critical units.

NTPC to buy coal mines in Australia, Indonesia

State-run power producer NTPC is looking to invest in either Indonesian or Australian coal mines as early as next as part of efforts to secure long-term supplies. NTPC, which produces 27 per cent of India’s total electricity generation, plans to almost double its generating capacity to 50,000 MW by 2012 from the current 27,400 MW. The company currently buys most of its coal from Indonesia. NTPC’s plans come after a $1.3 billion deal in April by Tata Power to buy stakes in two Indonesian mines – highlighting growing concerns among Asian utilities over the security of long-term coal supplies.

KESCO may be given to NTPC

After failing to attract investors in power distribution sector, the Uttar Pradesh (UP) Government is contemplating to hand over the power distribution utility in public sector KESCO, based in Kanpur, to the National Thermal Power Corporation (NTPC). This proposal was supposed to be placed before Prime Minister Manmohan Singh during his visit to the State capital on August 8, which was cancelled. The State Government would urge NTPC to take over the ailing power distribution utility KESCO. (The Pioneer, Aug 15, 2007)

NTPC to infuse additional equity in Dabhol project

NTPC Ltd, which currently holds 28.3 per cent equity in the 2,150 MW Dabhol plant of Ratnagiri Gas and Power Pvt Ltd (RGPPL), is considering an infusion of Rs 500 crore as an additional equity into the project to part-finance the completion of the liquefied natural gas (LNG) terminal. The LNG terminal requires Rs 1,200 crore for its completion. NTPC, along with other stakeholders of RGPPL – GAIL India and MSEB – was asked by the Empowered Group of Ministers (EGoM) to work out the options for completing the LNG terminal.

(Business Standard, Aug 13, 2007) (Also appeared in The Hindu)

NTPC kicks off work on India’s largest hydel project

NTPC is planning a big push to its renewable energy foray with a 4,000 MW hydel project – billed as the country’s largest – on the anvil. The company’s proposed Etalin hydro project in Arunachal Pradesh, to be set up at an estimated cost of Rs 14,069 crore, would entail the construction of sixteen 250 MW units. NTPC, which is carrying out necessary survey and investigations work for the project at the site, is looking to complete the detailed project report preparation by June 2009. The 1,500 MW Nathpa Jhakri project is currently the country’s largest hydel project.

(The Hindu Business Line, Aug 15, 2007)

INDUSTRY

 STATE / GOVERNMENT/ REGULATOR / POLICY

Krishnapattnam to become energy hub

Krishnapattnam in Nellore district is all set to become an energy centre on the east coast that can potentially meet the requirements of the coastal industrial corridor being actively promoted by the Andhra Pradesh government. The port town is expected to house close to 10,000 MW thermal power projects both in the public and private sectors, a little less than the existing installed capacity of the state, in the next 5-6 years. The ongoing development of the Krishnapattnam port, one of the three port facilities to be privatized in Andhra, is the main reason for locating these power projects there as they either depend on imported coal from countries like Indonesia or from coalfields in Orissa, which can be brought through the sea route to Krishnapattnam port.

Power sector needs around Rs 10 Lakh crore in 11th Plan

The power sector will require Rs 10,31,600 crore investment during 2007-12 to add generation capacity, besides creating and upgrading transmission and distribution networks. The working group on power for the 11th Plan has estimated a total fund requirement of Rs 10,31,600 crore for the power sector. For creation of projected capacity addition, fund requirement has been assessed at Rs 4,10,900 crore. Of the proposed capacity addition of 78,500 MW during the 11th Plan, 1,870 MW has been commissioned and another 50,975 MW is under construction stated power minister Sushilkumar Shinde.

Power ministry submits draft hydropower policy to Cabinet

The power ministry has circulated a draft Cabinet note on hydroelectricity power policy, which aims at attracting greater private investment in the hydel sector. The draft hydro policy has been sent to the Cabinet for its approval, stated power minister Sushilkumar Shinde. The government has been mulling over the revised policy to attract private players.

Bids invited for 1,500 MW power plant at Bawana

Pragati Power Corporation Ltd – PPCL (under the Delhi Government) invited bids for setting up the 1,500 MW gas-based Pragati Power plant at Bawana. For the first time, international bidders are also expected to be in the fray for the largest generating plant to be set up in the Capital. Intending to take advantage of the custom duty exemption available for mega projects, PPCL is seeking ‘mega project’ status for the Bawana plant, as it is more than a 1,000 MW project. This will be the most challenging generating project for the government till date. The last major generating project in Delhi was Pragati I with the capacity of 330 MW, which was commissioned in 2002.

(The Indian Express, Aug 01, 2007)

Power plants short of buyers to get CERC incentive

Thermal power plants that do not find buyers, the Central Electricity Regulatory Commission (CERC) has proposed an incentive scheme based on plant availability. Under the present scheme, coal-fired and gas-based units get incentives on the basis of actual generation or the plant load factory (PLF). The plants declare their availability and capability annually, along with expected actual generation for the full-year period, to recover their fixed cost. The new scheme is aimed at aiding the plants that are functional but do not find buyers due to less demand or high cost.

Maharashtra expresses inability to draw Ratnagiri project at Rs 4.50 per unit

The power starved Maharashtra has indicated that it would be impossible for the drawal of 2,000 MW of power from the Ratnagiri power project, previously Dabhol project at the per unit tariff of Rs 4.50 for 25 years. Maharashtra has argued that the procurement of such costly power may be done in exceptional cases but not for 25 years. In view of the Maharashtra’s inability to cough up more money, the power generation of 350 MW at the Ratnagiri project has come to a halt. (The Financial Express, Aug 03, 2007)

 BHARAT HEAVY ELECTRICAL LIMITED (BHEL)

BHEL to hike hydro power generation

The 50th Hydro Product Committee (HPC) meeting was inaugurated at BHEL, Bhopal, recently. Executive director R.K Singh, who inaugurated the proceedings, asserted that hydropower is one of the most environment-friendly powers. The company intends to change the outlook from product to project concept as a hydel power station involves a multi-product discipline. In a view of the potential available with hydro business, facilities are being enhanced proactively.

(Hindustan Times, Aug 04, 2007)

UP, BHEL sign deal for 1,600 MW project

In yet another major breakthrough in the power sector, the Uttar Pradesh government has firmed up a deal with BHEL for setting a 1,600 MW thermal power project at Obra. BHEL has given in-principle approval for 50 percent equity participation in the project and the rest of the cost would be borne by the state government. The new thermal plant, called Obra C, will have two units of 800 MW each. The cost of the project is estimated to be Rs 6,400 crore or Rs 4 crore per MW. The project is scheduled to be completed in 36 months from the date of the award of the contract.

BHEL bags contract for Haryana power project

Bharat Heavy Electricals (BHEL) has won a Rs 29 billion ($713 million) order for the supply and installation of the ‘main plant package’ of a power project in Haryana, also aimed at supplementing supply during the 2010 Commonwealth Games in New Delhi. The upcoming Jhajjar Super Thermal Power Project involves three units of 500 MW each. Valued at over Rs 29 billion, it is the highest value boiler and turbine generator (BTG) package contract for a single project ever received by BHEL.

(The Economic Times, Aug 11, 2007) (Also appeared in Hindustan Times)

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