Major News in the Power Sector

MAJOR NEWS IN THE POWER SECTOR August 16th to 31st 2007

TATA POWER

S&P lowers Tata Power’s rating

Global rating agency Standard & Poor’s (S&P) lowered corporate credit rating on Tata Power to ‘BB-‘ indicating non-investment grade from ‘BB+’ with stable outlook. The weakening financial profile is accompanied by some erosion in the company’s business profile, as recent investments are in more competitive environments where the company will potentially face higher counter party risks and a reduction in the proportional contribution of its relatively protected licensed operations.

(The Financial Express, Aug 25, 2007) (Also appeared in The Hindu Business Line, The Indian Express and The Telegraph)

Tata Power offloads 4.2% in PTC for Rs 50 crore

Tata Power has sold 4.2% in PTC India in the open market for about Rs 50 crore. Tata group’s power generation arm was one of the early investors in PTC, formerly Power Trading Corporation. The partial stake sale comes at a time when PTC has announced it will raise Rs 1,200 crore from the market to fund expansion plans. As per stock exchange disclosures, Tata Power held 10.47% till March 2007. The company diluted its holding marginally during the April-June quarter. Thereafter, it sold an additional 3.35% in the open market over the past six weeks. As per the average market price of TPC share during the time of the sale, Tata Power is expected to have fetched close to Rs 50 crore out of which about Rs 40-42 crore would have been generated in the current quarter.

(The Economic Times, Aug 17, 2007)

Ultra mega power projects may have to speed up

It would be mandatory for companies executing ultra mega power projects (UMPP) to commission a minimum one unit (about 660 MW) in the 11th Plan (2007-12). The government is considering a mechanism to catch up with the lost time on account of delays in awarding the controversial Sasan project. The proposal would be applicable to all nine UMPPs. Tata Power, that has won the bid for Mundra project, has agreed to add two units by the end of the Plan period. If all the nine projects commission one unit in 3- 4 years, over 6,000 MW of operational generation capacity would be added by 2012.

(The Economic Times, Aug 23, 2007) COMPETITION/ CONSUMERS

 RELIANCE ENERGY LIMITED (REL)

Reliance Energy bags green award

Reliance Energy (REL)’s power stations at Dahanu and Goa have bagged the GreenTech gold and silver awards for excellence in environmental governance for 2007. It is the third time in a row for REL to bag this award, instituted by GreenTech Foundation, a non-profit organization into environment protection and other social activities. Gigambar Kamat, chief minister of Goa, presented the award to REL.

(Business Standard, Aug 30, 2007) (Also appeared in The Indian Express)

6,000 people to lose land to Sasan project

Though Sasan will soon be dramatically transformed to house the country’s largest thermal power project that will supply power at the lowest cost, about 6,000 people will lose their land and homes once the Rs 20,000 crore project takes off. Though everyone in the area is well aware that Reliance Power Ltd (RPL) has bagged the project, it is hard to miss the concern in their eyes about their future. The five villages that make up Sasan with a population of 10,000, spreading over an area of 3,000 acres of land, are to be used for the project. As elsewhere in India, displacement and compensation are issues for land losers. Most farmers and daily labourers whose house and land are inside the proposed project area have expressed concern and demanded jobs in the plant along with monetary compensation. So far the villagers have not received any formal communication from local administration regarding resettlement and rehabilitation (R&R).

(Business Standard, Aug 27, 2007)

Sasan tariff impact other projects

The tariff at which power will be supplied from the 4,000 MW Sasan ultra mega project in Madhya Pradesh – Rs 1.196 per unit – is expected to have a ripple effect on the tariffs that the developers are negotiating with the power purchasers. Industry experts say the Sasan tariff has become an important milestone. There are some unique characteristics of Sasan, which are unlikely to be replicated in another plant. The project has now been awarded to Reliance Power Ltd, after the disqualification OF Lanco bid, at the same tariff of Rs. 1.196 per unit. Much has changed in the last six months in terms of interest rates, price of cement (used in the construction of plants), equipment etc has gone up. These changes affect a promoter directly and hence the price of power is quoted after considering all these factors.

(Business Standard, Aug 16, 2007) Ambani’s power plant stayed till next hearing

Bombay High Court stayed Reliance Energy’s 4,000MW power plant, which proposed to be built in Shahpur near Alibaug in Raigad district. The court has asked the company not to commence the project till the next hearing with the state ministry of environment and forest and subsequent orders from the court. According to sources, the plant’s construction was scheduled to begin soon. The court has asked the Maharashtra Pollution Control Board to submit the report of a public hearing conducted on August 4, 2007, to the ministry and has in turn directed the ministry to take appropriate decision in accordance with law by giving a proper hearing to Reliance.

(DNA, Aug 24, 2007) (Also appeared in the Economic Times)

 MAHARASHTRA STATE ELECTRICITY BOARD (MSEB)

MSEB workers to go on strike from Wed night

Consumers of Maharashtra’s state-owned power generation and distribution utility are in for two days of possible disruptions in power supply. Most employees of the Maharashtra State Electricity Board’s three units engaged in energy generation, transmission and distribution, would strike work from August 22 midnight to August 24. The three companies cater to entire Maharashtra except the island city of Mumbai, which is serviced by BEST, Tata Power and Reliance Energy. The three companies have employee strength of around 95,000. In total, 27 unions operate in the state’s energy sector, of which 17 have given notices for strike.

Maharashtra firm on franchisee model for MSEB

Maharashtra government took an aggressive posture indicating it would not succumb to the pressure from over 95,000 employees of the unbundled Maharashtra State Electricity Board (MSEB) on the issues relating to the launch of franchisee model in various parts of the state and the introduction of pension scheme on the lines of the state government employees. The government’s stand is crucial, especially when a large number of MSEB unions have threatened to go on 72-hour strike to press these demands. The government, however, hinted that it was prepared to negotiate with the unions on various other demands, including recruitments on compassionate grounds.

(The Financial Express, Aug 21, 2007)

MSEB fined for power connection mess

In a judgment with long-term implications, the Maharashtra Electricity Regulatory Commission (MERC) has slapped a fine of Rs. 2 lakh on the state electricity board for its failure to refund special charges levied on consumers provided with new power infrastructure. MSEB, in turn, intends to seek a review on the grounds that refunding special charges taken for laying transformers and a cable network from scratch in new suburbs/layouts would only benefit the builders’ lobby. The MERC order has come in response to a complaint filed by the Maharashtra Rajya Veej Grahak Sanghatna which had pointed out that MSEB was asking for an Outright Contribution and cost for meters installed while giving new power connections.

(The Times of India, Aug 24, 2007)

 NATIONAL THERMAL POWER CORPORATION (NTPC)

NTPC aims for second spot in coal production

NTPC is aiming to emerge as the second largest coal producer in the country, next to Coal India Ltd, by the next Plan period. NTPC’s coal consumption is expected to surge to 185-200 million tones annually by the year 2017, up from 112 mt at present. The power major plans to meet up to 25 per cent of its total coal requirement from its own production over the next ten years. NTPC, which has already been allocated eight domestic coal mining blocks, is looking to invest in either Indonesian or Australian coal mines by as early as next year. The company is currently buying most of its coal from Indonesia to tide over the domestic supply deficit. NTPC’s entry into coal mining has been driven by strategic emphasis on ensuring fuel security and deriving economy and stability of pricing.

(The Hindu Business Line, Aug 24, 2007)

Government to divest 4.75% NTPC stake

The government plans to divest 4.75 per cent of its stake in NTPC through a public offer that could fetch it nearly Rs. 6,000 crore. The power ministry, acting on request from the state-run firm, has approached the department of disinvestment in the ministry of finance for approval of a follow on public offer (FPO) of 4.75 per cent shares.

(Business Standard, Aug 31, 2007) (Also appeared in The Financial Express and Hindustan Times)

NTPC plans to enhance Ennore project capacity

Even as preparations for the foundation stone ceremony for NTPC’s 1,000 MW Ennore project are under way, the public sector power producer is planning to enhance the capacity of the project by another 500 MW. The addition of a third unit of 500 MW capacity would help bring down the overheads of the project. The Ennore project, a joint venture with the Tamil Nadu Electricity Board, will be put up with an investment of Rs. 5,200 crore. The project will include a 200 million-litres-a-day desalination plant.

NTPC close to inking contract for gas block in Nigeria

NTPC has moved a step closer to securing long-term gas supplies for its power plants, with a team of officials leaving for Nigeria to finalize a contract for the supply of three million tones per annum. Once operational, the gas supply contract with Nigeria would help NTPC establish itself as an integrated player in the power sector. Further, the Nigerian block will enable the power generation major to procure gas at $3-4 (Rs. 125- 166) per million British thermal unit (mBtu) after investments in gas blocks, liquefaction, regasification and shipping. The company presently pays the spot price of $8-10 per mBtu in the international market. In return for the gas block, NTPC will set up a 700 MW ga-based power plant and a 500 MW coal-based plant in the African country and also renovate a 200 MW unit at the 1,320 MW plant at Egbin. In addition, it will train 30 Nigerian engineers and set up a training institute for engineers in the country.

(Mint, Aug 18, 2007)

New Initiative

NTPC has signed a Memorandum of Understanding (MoU) with Delhi University to set up an information and communication technology-training centre for differently-abled persons. The first-of-its-kind centre aims at empowering physically challenged persons with the latest IT skills. NTPC Foundation will provide all machinery, equipment and software for the centre, while the University would provide the infrastructure to run it on a day-to-day basis by appointing teaching and support staff.

(The Hindu, Aug 22, 2007) (Also appeared in The Times of India and National Herald)

NTPC lines up Rs 6k crore upgrade

NTPC plans to spend Rs. 6,000 crore to expand the 440 MW Tanda power plant acquired from the Uttar Pradesh to 1,700 MW by 2012, and also plans a separate Greenfield thermal power plant in the state. NTPC took over the Tanda facility in 2000. The power major will also sign a joint venture agreement with the UP government to start a 1,320 MW Greenfield thermal power plant to be located at Meja Road, 40 km from Allahabad. NTPC will upgrade the capacity at Tanda to help UP achieve a targeted generating capacity of 10,000 MW by the next decade.

(Hindustan Times, Aug 28, 2007)

INDUSTRY

 STATE / GOVERNMENT/ REGULATOR / POLICY

30,000 MW to be added using imported N-fuel

The Department of Atomic Energy (DAE) plans to add 30,000 MW of power based on imported nuclear fuel in the near future. The site selection committee of the DAE has already identified five coastal sites for setting up the nuclear power plants. Dr. S.K. Jain, Chairman and Managing Director, Nuclear Power Corporation of India (NPCIL) stated that the committee has identified sites in Gujarat, Andhra Pradesh, Orissa and West Bengal for setting up the plants. Each plant would have a capacity of 6,000 MW to 8,000 MW. It would require six large reactors, each having 1,000 MW to 1,650 MW configuration. On the context of India signing the nuclear agreement with the US, Dr. Jain said that the Indian nuclear industry has waited for the last two years for the agreement to be concluded. Now that an important milestone has been crossed, prospects of a major thrust to nuclear power generation capacity look bright.

Ultra mega power projects may have to speed up

It would be mandatory for companies executing ultra mega power projects (UMPP) to commission a minimum one unit (about 660 MW) in the 11th Plan (2007-12). The government is catch up with the lost time on account of delays in awarding the controversial Sasan project. While the government is confident of achieving the target, there are few doubts about a few projects. The UMPPs are now being considered for providing additional generation capacity of 6,000 MW during the 11th Plan. Tata Power, who has won the Mundra project, has agreed to add two units by the end of the Plan period.

Priority to stepping up power generation capacity in 11th Plan

Enhancing the capacity of power plant manufacturers and increasing the number of vendors are the major priorities in efforts to step up power generation capacity, according to Mr. Rakesh Nath, Chairman, Central Electricity Authority (CEA). Addressing a conference organized by the Confederation of Indian Industry on key inputs for the Indian power sector for the 11th Plan and beyond, he stated that during the current five-year plan India planned to set up over 78,500 MW of power generation capacity – a big leap considering that the maximum addition was 22,500 MW in any of the earlier plan periods. The CEA, the CII and the Ministry of Power have together set up a task force to coordinate with industry for the development of the sector.

(The Hindu Business Line, Aug 26, 2007) (Also appeared in The Financial Express)

Renewable Energy to Drive Development

Satara region of western Maharashtra state boasts of Asia’s largest wind farms. While most of the wind farms in India are based in southern state of Tamil Nadu, greening of industry and public environment awareness is key drivers for renewable energy in India. The economy is on an accelerated growth path. Non-renewable energy sources are finite and precious. Against this backdrop, the strides made by the renewable energy industry are heartening to note, keeping in view the country’s long-term energy demand. The challenge for the industry and consumers is to harness the existing resource efficiently, examine captive options and explore alternative sources. Energy Management, in short is the need of the hour. These were the highlights of a national convention organized by CII on the theme.

(Mint, Aug 20, 2007) Himachal to invite bids for six hydro projects

Himachal Pradesh plans to invite bids for six micro and macro level hydro projects in the coming months. Out of the total six, three will be in the range of 100-400 MW and the remaining three would be in the 800 MW range. The project cost in totality in case of all the six hydro projects can be more than Rs. 1,500 crore. The government has set an ambitious target of producing 15,000 MW hydel power by 2012. over the years, 6067 MW of power were harnessed in the state by various agencies. Projects with gross potential of 7,602 MW are under way.

Two power projects may be shifted

The consultative committee of MP’s for the power ministry was informed that the State governments of Maharashtra and Karnataka have been asked to identify alternative sites for locating the Ultra Mega Power Projects (UMPPs). This was done as in both these States the identified sites for setting up the UMPPs – Girye (Maharashtra) and Tadri (Karnataka) – are facing agitations on environmental grounds. The committee was told that out of the nine UMPPs, the bidding process in respect of two projects Mundra and Sasan has been completed. In addition, the bidding process in respect of two more projects, to be located in Krishnapatnam in Andhra Pradesh and Tilaiya in Jharkhand, has been initiated. However for the remaining five projects, final clearances from the State governments are awaited.

(The Asian Age, Aug 30, 2007) (Also appeared in The Financial Express)

Power Grid to float Rs 2,984 crore IPO

The power transmission company owned by the Union government, Power Grid Corporation Of India Ltd (PGCIL), will raise up to Rs. 2,984 crore in an initial public offering (IPO) of 573.9 million shares. The offer, set to open on 10 September and close on 13 September, will be priced between Rs. 44 and Rs. 52 per share. The company plans to use the money that is raised to fund 15 transmission projects worth Rs. 1,272 crore. PGCIL, is the third central power utility to tap the capital market for raising funds after NTPC Ltd in 2004 and Power Finance Corp. The transmission sector requires an estimated investment of Rs. 70,000 crore during the 11th Plan.

(Mint, Aug 29, 2007)

 BHARAT HEAVY ELECTRICAL LIMITED (BHEL)

BHEL embarks on expansion

Bharat Heavy Electricals Limited (BHEL) Trichy, will soon embark on a major expansion programme at an outlay of Rs. 732 crore. The first phase of the capacity augmentation programme, taken up at an investment of Rs. 190 crore, is under progress, and would be completed by the year-end. The second phase, which is also being implemented concurrently, will involve an additional investment of Rs. 732 crore and would enhance the boiler plant capacity to 15,000 MW per annum. The power plant equipment major is investing around Rs. 3,200 crore to enable the corporation to supply over 75,000 MW power generation equipment every five years to meet the nation’s capacity addition requirements.

BHEL bags Rs. 6,500 crore turnkey contracts

DVC has already awarded turnkey contracts for setting up Koderma and Durgapur Steel thermal power stations of 1000 MW each to BHEL. The total contract value is Rs. 6,500 crore. BHEL has won the contracts through international competitive bidding. The projects are slated for synchronization during the 11th Plan and will supply power to Delhi for the Commonwealth Games in 2010.

(The Hindu Business Line, Aug 22, 2007) (Also appeared in Business Standard, The Economic Times and The Times of India etc)

BHEL Ranipet to ramp up capacity

BHEL is set to ramp up the capacity of its boiler auxiliaries plant (BAP) at Ranipet to 10,000 MW in the next two years. The move is part of the corporate plan to scale up the overall capacity to 15,000 MW, which includes contributions towards hydropower and nuclear power besides the thermal power sector. The BAP Ranipet, which manufactures auxiliaries and electrostatic precipitators (ESPs) among others, has already submitted a Rs. 190 crore investment plan in this regard.

BHEL beats European cos to win Rs. 1,900 crore order

Power equipment major BHEL has won a Rs. 1,990 crore order for the supply and installation of steam generator and turbine packages at the upcoming 1,000 MW Vallur Thermal Power Project in Tamil Nadu. The company won the contract outbidding leading European equipment suppliers under an international competitive bidding. The orders for the greenfield power project have been placed by NTPC-Tamil Nadu Energy Company, a joint venture between NTPC and Tamil Nadu Electricity Board.

(The Economic Times, Aug 31, 2007) (Also appeared in The Hindu, The Times of India etc)

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