Indian Power Sector

The Andhra Pradesh government has decided to utilise the vacant space at the three existing thermal power plants to generate an additional 2,400 MW of power at a cost of over Rs 12,000 crore.

At present, the state is struggling with a power shortage of more than 2000 MW daily. Were the three new thermal projects to be expedited and completed in a short time, it would come as a great boon to power consumers. The three new units are expected to be commissioned by next year.

If reports are to believed, the new technology requires less area compared to the older versions of thermal plants and that, it was learnt, has prompted the government to increase the capacity at the Vijayawada, Krishnapatnam and Kothagudem thermal power stations.

Vijayawada plant at present has a generating capacity of 1760 MW. Apart from the vacant space at the plant, Genco has asked the Vijayawada municipal corporation to provide another 50 acres of wasteland adjacent to the present site so that an 800 MW unit can come up.

Currently, Kothagudem thermal station produces 1720 MW of power. Now that the space available at the site has been surveyed, it has been confirmed that another unit of 800 MW capacity can come up there.

Lanco Infratech, currently busy with a 1,200 mw thermal power project in Udupi district of Karnatka with an outlay of Rs6,000 crore, has failed to make the repayment due on January 15 to its lenders.

Company officials argue it isn’t a default, but a delay in repayment. The project, being developed by its subsidiary Udupi Power Corp (UPCL), carries a debt of about Rs4,500 crore.

“As CRISIL mentioned in its ratings rationale for its January 4 downgrade of UPCL’s long-term debt and bank guarantees, a default on the January 15 debt repayment could trigger another rating downgrade, fanning concerns of potential bankruptcy and, once again, denting stock price performance,” Nomura analysts Anirudh Gangahar, Ivan Lee and Ankit Kumar said in a report dated January 13.

A senior Lanco official reportedly reasoned that about 90% of the power produced by the plant is offered to distribution companies, or discoms, of the Karnataka government, which owe it about Rs500 crore.

Lanco had earlier completed the first unit of the project with a capacity of about 600 mw. However, the second unit, of another 600 mw, was delayed as the transmission lines to evacuate the power got stuck in environment clearances.

The Coastal Energen Private Limited, the power generating flagship company of the Coal and Oil Group, is planning to cater to the severe power shortage in Tamil Nadu.

Ahmed A.R. Buhari, founder president and CEO of Coal and Oil Group, said, “Our first priority is to provide power to the state-run Tamil Nadu Generation and Distribution Corporation Limited (Tangedco).”

Ahmed said 80 per cent of civil infrastructure requirement for the plant was complete, while about 85 per cent of boiler, turbine and generator (BTG) equipment had reached the site.

“We are positive about commissioning the two units of phase-I before March next year,” he said, adding that the company would begin phase-II and phase III after 1,200 MW from phase I gets fully placed in the market. The plant has provision for expansion up to 3,600 MW.

“We are waiting to strike a deal with Tangedco before looking at other options to sell power including exporting to other states,” Ahmed said.

Reliance Power Ltd said it expects to start commissioning its 3,960-megawatt power project in the central state of Madhya Pradesh in January 2013.

The company said it is developing two coal blocks–Moher and Moher-Amlori Extension–attached to the project and is targeting to start production of the dry fuel from there in 2012. The project has six units of 660 MW each.

Reliance Power said it is hopeful of a positive decision on allowing mining in the Chhatrsal coal block, also allocated to it for the project. The mine, in a forest zone, was later classified to be in a no-mining belt.

Just days after the PMO stepping in to play a direct role in sorting out the fuel woes faced by coal-fired power project developers, a meeting of empowered group of ministers (EGoM),is set to take place soon.

It is expected that decisive actions would be taken by way of diverting gas supplies from “non-priority” sectors such as refineries, petrochemical and steel units to power and fertiliser rojects.

Upcoming gas-based power projects are faced with a serious fuel crunch amid lower-than-expected output from key domestic gas fields. Half a dozen gas-based power units that are either in advanced stages of commissioning or have started operations are to be considered for fuel allocation in the meeting.

Government officials involved in the exercise reportedly said the EGoM, which had last met on July 28 last year, is likely to take up the issue of allocation of gas to the power units on a priority basis so that all of them can be commissioned within the Eleventh Five-Year Plan period ending March 2012.

OM Metals Infraprojects Ltd has informed BSE that the Company has secured a contract for setting up of 70MW Lignite based Thermal Power Project in the Distt. Bikaner (Rajasthan) on BOOT basis.

The Company has won this order in Joint Venture with SPML Infra Ltd.

The order entities the Company to engage in the generation of power on long term basis for a period of 25 Years to be sold to state utilities.

Fitch Ratings has predicted that a slew of factors, including pricier fuel and higher interest rates, will result in a slowdown in the launch of new power generation projects in 2012.

In its ’2012 Outlook: Indian Power’ report, global ratings agency Fitch said the power sector would remain exposed to both fuel availability and price risks during 2012.

‘Launch of new generation projects will slow down in 2012 because of lower investor interest over fuel availability, softening of merchant power prices, higher fuel costs, higher interest rates and slow progress on reforms at distribution level,’ Fitch said. About 8,000 to 10,000 MW of new capacity is expected to be added this year.

‘Fresh investment is unlikely to pick up (power sector) in 2012,’ Salil Garg, the director of ratings agency Fitch’s Asia-Pacific Utilities team, said.

Furthermore, access to capital would be ‘restricted’ for weaker entities, including State Power Utilities (SPUs) and greenfield projects, the report said.

According to the report, domestic fuel availability would be low compared to the rising demand from power projects on account of environmental and land issues faced by Coal India.

Against this backdrop, power project developers would be increasingly dependent on imported coal.
‘… However, the cost of imported coal and boiler design will play an important role in deciding the overall use of imported coal and hence, the overall capacity that can be commissioned,’ the report noted.

Singareni Collieries Company will complete the balance of the plant for its 2X 600 MW coal fired thermal power station, which is coming up in Adilabad by March this year.

The project coming up in Jaipur mandal of Adilabad district is the first power venture for SCCL.

SCCL chairman and managing director S Narsing Rao said, “We will finalise the BOP by March. The process relating to it is already on.”

The project is estimated to be Rs 5,685 crore. About 70 per cent of it (Rs 3,980 crore) will come from Power Finance Corporation and about Rs 350 crore has already been extended to SCCL, which will get the remaining 30 per cent of the project funding from its internal accruals and some debt.

The Balance of Plant is expected to cost around Rs 1,000 crore. The civil works are already on.

Essar Power is planning to make its foray into the electricity distribution business and has applied for licences in Maharashtra and Bihar.

“Power distribution is an area we have been evaluating and while we have applied for a Mumbai licence, this process is in its preliminary stage and only after a detailed analysis of this opportunity will we make any binding commitment towards this,” an Essar Group spokesperson was quoted as saying.

The company had applied to the Maharashtra Electricity Regulatory Commission (MERC) for a licence to supply power in Mumbai. The company is also looking at distribution licence in other cities.

“We have been evaluating opportunities being offered by state governments under the distribution franchisee model. We have submitted bids in the past for opportunities in Maharashtra and Bihar,” added the spokesperson.

Coal India Ltd’s flagship company Mahanadi Coalfields Limited (MCL), will set up a 1600 MW power plant with super critical technology at its Basundhara area in Sundargarh district in joint venture.

MCL would be the only coal company in the country to venture into power generation. It intends to utilise its huge undespatchable coal reserve in Basundhara and invest its own surplus funds creatively.

A special purpose vehicle (SPV) Mahanadi Basin Power Limited has been formed last year. The Director Finance of MCL, Kulamani Biswal, has been appointed as the chairman of the Public Limited Company.

According to Biswal, the proposed coal-based power plant would be the first of its kind in the coal behemoth and is estimated to cost around `9000 crore. It will have two 800 MW units of super critical technology, Biswal added.

“The power project will be funded with debt-equity ratio of 70:30 where MCL will be holding 26 per cent of the stake. It may go up to 49 per cent. However, the management will be under a private partner,” Biswal said.