BHEL bags big order from GVK Power

BHEL has clinched a contract worth Rs11.55bn for setting up 2x270 MW thermal power generating units at Goindwal Sahib coal plant in Punjab from GVK Power Ltd. The positive news is a welcome respite for BHEL stock which has being hammered down thanks to a volley of bad news of late.

Govt allows 'price escalation clause' for power projects

GoI has approved a 'price escalation clause'for BHEL for their power projects to account for their rising input prices. This is to reduce delays in execution of key projects.

NTPC to kick-off power distribution business

NTPC is on course to take up retail distribution of electricity in upcoming industrial parks in Kerala, after series of unsuccessful attempts earlier. Its wholly-owned subsidiary NTPC Electricity Supply Company Ltd (NESCL) will form a JV with Kerala Industrial Infrastructure Development Corp (KINFRA) for taking on retail distribution of power in a number of industrial parks being developed by the latter.

Electricity distribution is a step towards emerging as a fully-integrated power utility with a presence across the value chain. NTPC is also in discussions with various State Governments for participating in power distribution in designated circles, besides plans to distribute power in the vicinity of its power stations.

NTPC has already entered coal mining to secure fuel supplies and support its aggressive capacity addition plans. In addition, it has entered power trading, hydro generation and equipment manufacturing, with a foray into nuclear power also on the anvil.

NTPC: coal crunch to affect bottomline

NTPC has placed an order with a government agency for importing 8.2 MT of coal to meet the shortfall. The company is facing a shortfall of 10-12 MT of coal per year, and has sought Power Ministry's intervention to resolve the crisis. It has already lost Rs. 940m in the current fiscal year due to low generation at its various plants.

BHEL fails to bag big order

BHEL has lost the Rs. 9,000 crore order for providing equipments to RPL's 4,000MW Krishnapatnam UMPP, over pricing issues. BHEL quoted Rs. 2.6 crore/MW, while RPL stuck to Rs. 1.9 crore/MW. China’s Shanghai Electric Company is expected to get the order.

Chinese equipment are cheaper than Indian ones by 15-20%. However, experts believe that such equipment are not very competitive in terms of technology due to issues with their design, leading to higher operating and maintenance costs

The power ministry has been trying to restrict overseas equipment makers from bidding for domestic projects unless they have a manufacturing base in India, and are also denying coal supply to electricity plants with foreign equipment, applicable to all new power projects in the country effective from 30 April 2008.

We view the news as slightly negative for BHEL in the short-term, due to the ever-increasing concerns of growing competition. However, GoI's increasing focus on restricting Chinese companies, more so after these developments, is likely to improve BHEL's prospects in winning the equipment orders in future.

RIL, Rel-Infra qualify for coal-to-oil project

RIL and Reliance Infrastructure are the only 2 companies out of 22 to have qualified for the $6-8bn project to convert coal-to-oil (CTL), as per the criteria set by the government. Companies have the choice of choosing one of the three coal blocks being offered in Orissa, by the Ministry of Coal.

BGR in talks with foreign cos

According to an interview given by Mr. BG Raghupathy, chairman and managing director of BGR Energy Systems to a private TV channel, the company has announced that it is in talks with a global company for potential tie-ups. The company’s order book is now at Rs. 11,000 crores and will bid for orders worth Rs. 200 billion in the next six months.

BHEL bags another UAE contract

BHEL has bagged a contract worth Rs. 140 crores for supplying two gas turbine generating units of 42 MW each to International Energy Resources, a UAE-based company. This order puts the total size of the order book for the company to Rs. 450 crores specifically from UAE. We view this as mildly positive for the stock with limited upside.

BHEL to profit from Indo-US nuclear deal

BHEL’s Bhopal unit will make equipment for nuclear plants and turbines, and assemble them once the India-US nuclear deal gets through, Minister of State for Power Mr. Jairam Ramesh said Tuesday on a visit to the plant. We view this as a big positive for BHEL but at the same time wonder if BHEL has the technological know-how to venture into this segment.

BGR bags key Essar contract

BGR Energy has bagged a contract worth Rs 39.6 crores for supply of 169 fin tube bundles for the fluid catalytic cracking unit of Essar Refinery Expansion Project at Vadinar. This is the single largest contract for supply of air fin coolers in India.

PTC looking beyind trading - mulls coal imports and stake in mines

PTC India, the country's biggest electricity trading company, is planning to import coal and buy stakes in overseas coal mines to diversify its business amid increased competition from new power exchanges. It is using part of the Rs. 1,200 crore it raised through the IPO, to invest in power projects and energy assets.

The company is looking at supplying coal to power generators in exchange for assured supply of electricity for its customers, and has signed agreements to supply 1.5 million tonnes of coal to power generators by December 2009. The company can source up to 15 million tonnes of the fuel in the long run.

Coal imports are expected to double by 2012, partly driven by state and private utilities plan to almost double the country's generation capacity to 250 GW by 2017.

Power trading going strong

Indian Energy Exchange (IEX), the country's first power exchange, has traded 251 million kWh of electricity in the first two months of operations. Traded volume on Day-Ahead market has jumped from a modest 58 MWh on first day to over 18,000 MWh on August 8. The hourly prices were in the range of Rs. 6.50-8.50/kWh with an average price of Rs. 7.60/kWh.

Power sector bags maximum investments in 1H08

According to Assocham, India's power sector has cornered a major share in the Rs. 6,33,906 crore of investment announced by corporates during January-June 2008. The sector attracted 18.64% share at Rs. 1,95,913 crore, with companies like Tata Power, Sterlite Industries, Jindal India Thermal Power and Lanco Group having lined up big investments.

The other major sectors attracting huge investments include real estate, steel, retail and telecom.

NTPC seeks Govt. nod for ECB

NTPC has approached the GoI for free access to external capital markets for raising debt of about Rs. 1,050bn (c.US$25bn). The ECBs would include Rs. 603bn in foreign currency and Rs. 452bn in rupee term.

At present, companies can raise up to US$500m p.a. through ECBs under the automatic route for import of equipment. An additional US$250m can be raised for the said purpose with the approval of the RBI. However, NTPC wants to raise the money without any ceiling, and is pursuing the matter with the Power Minister.

NTPC aims at becoming a 50,000 MW company by 2012 and a 75,000 MW company by 2017. For achieving these targets, it needs to invest Rs 1,600bn during the 11th Five-year plan, the debt of Rs. 1, 050 bn with 70:30 debt equity ratio.

CIL to boost coal supplies to NTPC

Coal India Ltd (CIL) will increase its supply to NTPC by 10% to help the company tide over the shortfall in fuel linkage for its various projects. The additional supply will be mainly for Farakka, Kahalgaon and Talcher projects.
Around 80% of CIL's production goes to power companies with NTPC being a major customer. NTPC is currently facing acute shortage of coal as it is striving to reach the generation target of 30,000 MW by the end of this year.

All's not well with Suzlon

Suzlon Energy is facing complaints from their Indian customers of turbine failures resulting in losses of millions of dollars, the Wall Street Journal has reported. Companies who have complained includes Madras Cements, Essar, MSPL among others. The newspaper has quoted MSPL that each of the turbines that they had purchased from Suzlon generates only one-thirds of its rated output. Suzlon representatives have maintained that the drop in performance is only because of falling wind speeds and transmission grid problems. The newspaper has reported Suzlon's order book is under pressure as large Western turbine makers' sales backlogs are expanding and that by July, Suzlon's U.S. order backlog was down 23% from a year earlier and its India backlog was down by 15%.

Back to school for BHEL

The Group of Ministers (GoM) on Infrastructure headed by Finance Minister P. Chidambaram has asked BHEL to constitute an empowered committee that would look into international practises on capacity booking and recommend the best possible practice. The empowered committee would suggest advance booking systems, diverting material to other users to avoid cancellation charges and including price variation clauses.

Coal-to-liquids project: Winners and losers

The Ministry for coal has disqualified Reliance Power, Adani Enterprises, Sterlite Energy, Bhushan Steel, Jindal Steel & Power and nine others who had submitted bids for the allocation of coal blocks for setting up of the $8 billion coal-to-liquid project due to failure to fulfill an eligibility criteria of having a minimum individual net worth set by the coal ministry at INR 4,000 crore. Those who qualified for the allocation include Reliance Infrastructure, Reliance Industries, Indian Oil, SAIL, JSW Steel, GMR Infrastructure and GAIL. Among these, SAIL and JSW Steel have failed to meet the technology criteria.

Citi raises price target for BHEL

Citi has downgraded BHEL from from ‘buy’ to ‘hold’, citing limited upsides from the current levels. However, it has raised the price target from Rs 1,642 to Rs 2,025 on account of higher earnings estimates over 2010-2012. In a note to clients, the brokerage house has commented that BHEL remains the best bet on power generation capacity addition in India and that it expects EPS to grow at a CAGR of 27% over the next three years.

L&T plans to foray into power projects

L&T is looking at buying equity stake in coal mines in Australia and Indonesia and an announcement to this effect is expected in 2-3 months, news reports suggest. It is a part of the group’s strategy to focus on the power sector. According to Business Line, L&T is keen on bidding for ultra-mega power projects or pick up equity stake in other power projects.

It has set up two subsidiaries – L&T Power Projects Ltd, which will invest in power projects, and L&T Power Development Ltd, which will set up power plants.

The company aalready has a JV with Japan’s Mitsubishi Heavy Industries for manufacture of boilers and turbines. The JV bagged its first order to supply equipments to APGENCO’s 1,600 MW Krishnapatnam power plant (Please refer to our earlier posting -

http://indiapoweringahead.blogspot.com/2008/08/umpp-update-3-more-in-pipeline.html).

BHEL keen on overseas acquisitions

BHEL has set a target to increase earnings from exports by six times to Rs 8,000 crore in the next four years (2008-2012). BHEL is also looking at acquiring companies abroad (primarily US and Europe) mainly to augment technological skills. In an interview to PTI, the CMD of BHEL commented that the company is looking for acquisitions in the areas of transportation equipment and fans as their success record in these segments are currently poor. BHEL had earlier set aside Rs 10,000 crore for overseas acquisitions and a separate unit was also created within the company to oversee these operations but could not make any headway in the last two years.

Power Grid forms JV with Teesta Urja

PGCIL has entered into a 26:74 JV with Teesta Urja Ltd. to form a company named “Teestavalley Power Transmission Limited”. The JV company will develop associated transmission system for evacuation of power from 1200 MW Teesta-III Hydro Electric Project (HEP) being developed in Sikkim by Teesta Urja Ltd.
The project, which is estimated at cost of Rs. 708 crore, will be built on a BOO basis on a 70:30 equity-debt basis and provide transmission capacity to private HEPs in north Sikkim. The project includes construction of 400 kV D/C Teesta-Mangan Transmission line (approx. 10 km) and 400 kV D/C Mangan-Kishanganj Transmission Line (approx. 180 kms). The project is scheduled for completion by September 2011.

Battle lines drawn between BHEL and Chinese players

BHEL Chairman and Managing Director K Ravi Kumar has quoted that BHEL has slowly lost 18,000 MW worth of equipment to Chinese firms, including an order for supplying 800 MW super critical technology to Andhra Pradesh Generation Company (APGENCO). The order was bagged by L&T-Mitsubishi Heavy Industries. In India, International Competitive Bidding (ICB) route is strictly adhered to by the companies who bid for supplying equipments to the power projects. Apparently, BHEL has expertise for supplying equipments for 250 and 500 MW but the bidding norms were changed to 300 and 600 MW which benefited Chinese firms. Thankfully for BHEL, this norm has been removed. BHEL has decided to invest Rs 10,000 crores in the next four years to ramp up capacity.

R-Power may be allowed to use surplus coal

GoI may consider allowing Reliance Power use surplus coal from captive mines attached to its 4,000 MW Sasan UMPP for another project in MP after it provides a mining map to establish that it has excess fuel. The power generated from the surplus fuel will be sold on tariff based bidding.

FM's bonanza to UMPPs: excise duty exemption

The Finance Ministry has granted excise duty exemption to goods (equipment supplies, cement and steel) procured for setting up UMPPs with greater than 3,960 MW of installed capacity. Moreover, there will be no countervailing duty on imports, which will help lower the overall project cost. Equipments such as boilers and turbines account for a large component of the total project cost of UMPPs.

Till date, only foreign suppliers have bagged the contract for installation of equipments for UMPPs – Shanghai Electric Co. (China) for Sasan, and Doosan (South Korea) for Mundra. Indications are that for Krishnapatnam UMPP as well, the contract for installation of equipment will go to a foreign supplier. Reliance Infrastructure had earlier signed an agreement for long-term co-operation with Shanghai Electric Co. for various identified areas in the power sector.

Tata Power, CESC in race for acquiring power supply co.

Tata Power, DLF, Reliance Infrastructure and CESC have expressed interest in acquiring 57.17% stake in West Bengal-based power company Dishergarh Power Supply Ltd (DPSC). The stake is being offered by Andrew Yule & Co, United India Insurance and LIC, and is part of the revival package of state-owned Andrew Yule.

Andrew Yule expects to fetch approx. Rs. 60 crore from sale of its 15% stake in DPSC, thus valuing it at Rs. 400 crore. DPSC clocked a net profit last fiscal after a gap of almost 7 years, on a turnover of Rs. 146.68 crore. The Rs 8.61 crore bottomline was impressive, as against a loss of Rs. 90 crore posted the previous fiscal.

Deloitte & Touche is handling the technicalities of the disinvestment process.

A look at power trading

NSE and NCDEX-promoted Power Exchange India Limited (PXI) will be operational in October. PXI will organise road shows in New Delhi, Mumbai and Bangalore between August 26 and September 2 to showcase its exchange and will hold discussions with stakeholders on intricacies of trading on the exchange. PXI proposes to start with day-ahead trading contracts (all 24 hours).

PXI would offer four types of membership, including trading member (TM), trading and self clearing member (TSCM), trading cum clearing member (TCM) and professional clearing member (PCM). TM membership will entitle the members to trade, both for themselves and/or on behalf of their clients. TSCM membership will entitle members to trade and clear for themselves only. TCM membership will entitle the members to trade and clear, both for themselves and /or on behalf of their clients. PCM membership will entitle the member to clear on behalf of his clients and other TMs.

The Indian Energy Exchange (IEX) promoted by the Financial Technologies, PTC India, Rural Electrification Corporation, Lanco, Reliance Infrastructure, Tata Power, IDFC and Adani has already clocked a trading of over 18,000 MWh since its launch on June 27. IEX currently operates day ahead market based on closed auction, double side bidding and clearing at uniform price.

Tata Power leads the capex race

India Inc. seems unperturbed by signs of global recession, with their capacity expansion plans surging past Rs. 10 trillion in Jan-June 2008, double the figure for July-Dec 2007, according to estimates of Assocham.

The biggest of the announcements were made by Tata Power at Rs. 25,000 crore, planning to raise power generation capacity to 12,861 MW, for the next five years; and Reliance Industries for setting up semi conductor plant and other micro-technology units, at an expenditure of Rs. 21,666 crore for the next 10 years.

Tariff hike politics could affect Torrent Power

Torrent Power has requested for revised tariffs for its 20 lakh customers in Ahmedabad, Gandhinagar and Surat. The revised tariffs would add Rs. 550-1,600 crore to company's topline.

The Gujarat Electricity Regulatory Commission (GERC) has started hearing on the petition, while individuals, trade & industry bodies and political parties have opposed the company’s move. While the opposition Congress and CPM have opposed the proposal citing already high inflation, the ruling BJP has however kept mum.

Reliance MF shifts from generators (NTPC, Tata, Torrent)

A study of Reliance MF's equity portfolio as on July 31 shows that:

In the engineering & capital goods space, BGR Energy Systems, Thermax, Alstom Projects and ABB topped the list of buys; while Crompton Greaves, Suzlon Energy and Siemens topped the list of sells.

Amongst the utilities, Torrent Power, Tata Power and NTPC topped the list of sells.

Renwables: wind-power targets seem challenging

Project database firm ProjectsToday anticpates that India would add 6,000 MW of wind-power capacity over 2007-12, below the Ministry of New and Renewable Energy's (MNRE) target of 10,500 MW. The probable reason for the shortfall is unavailability of land.

However KPMG Advisory Services considers MNRE's targets as feasible, as India is currently adding 1,800-2,000 MW per year, mainly driven by the GoI's incentives for power generated by wind.

India is currently the fourth largest generator of wind power in the world with a capacity of 8,696 MW, even ahead of China's 5,899 MW. During the 10th Plan (2002-07), India saw installation of 5,426 MW of wind-power generation capacity, vs. the target of 2,200 MW.

NTPC, partners to start India's 3rd power exchange

NTPC, PFC, NHPC and TCS will come together to form India's third power exchange. Earlier, Financial Technologies started the Indian Energy Exchange, offering day-ahead trades; while NCDEX won the regulatory approval to set up a competing platform. However, major portion of electricity in India is sold through LT contracts.

Indian power exchanges currently conduct spot trades, and will subsequently allow captive power plants to sell surplus power. According to an analyst at Angel Broking, the cement, steel and sugar producers have shown keen interest in trading power on the exchanges.

Credit crunch hits investment plans of power cos

The Financial Times has quoted from a report by a London-based brokerage that Indian power companies are expected to delay at least $10 billion of investment plans because depressed global markets are making it hard for them to raise the necessary financing. Companies that could delay their investments include Adani Power and JSW Energy. This situation is in stark contrast to what was witnessed in the beginning of the year when Reliance Power raised $3 billion from the market.

Crompton Greaves on a capex spree

Crompton Greaves Ltd will be spending Rs 2.2 billion in 2008-09 on expanding capacities by 10-12 % across its three segments, a Reuter’s article reported yesterday. The company spent about Rs 1.5 billion last year. At the end of July, it had an outstanding order book of Rs62 billion, executable over the next 15 months.

BHEL to build 726 MW plant in Tripura

ONGC Tripura Power Co, a unit of ONGC, has signed a Rs 2,200 crore contract with BHEL for setting up a 726.6 MW gas-based CCGT power project at Palatana in Tripura. The project is expected to be completed by 2011 (end of 11th five year plan). The plant is expected to serve the NE states.

Dragons are not welcome in Elephant land

GOI ruled on July 24th that power plant with foreign equipment would not be supplied coal by state-owned mines. This may be the result of hard lobbying by BHEL. Seriously affected would be Chinese companies who want to tap India’s lucrative market for small-scale power generation equipment.

The ruling may jeopardize the eight power projects in the country that have contracted with Chinese equipment manufacturers and now risk being denied coal supplies to fuel their plants. The Chinese companies are the only foreign ones with a significant presence in the Indian market for supplying equipment to power projects with a unit size of less than 200MW. However a senior Government official has said that those power plants that have already placed orders with Chinese manufacturers would be taken care of.

BHEL, which accounts for 60% of the power equipment market, has been facing intense Chinese competition for orders from bigger projects. The government had announced in April that it plans to restrict overseas equipment manufacturers from bidding for orders unless they set up a factory in the country.
Bhel, India’s largest maker of power generation equipment has raised concerns about the alleged poor quality of equipment supplied by the Chinese, following which the Central Electricity Authority, the top power sector planning body, formed an internal group to conduct a technical audit of such equipment in May.

The power ministry has justified its decision on the grounds that it was seeking to prevent inefficient power plants with poor heat rates from foreign countries finding their way into the country.

Mundra UMPP to light up Haryana too

Adani Power Limited (APL) has signed a PPA with the Haryana Government for supply of 1424 MW of Power for 25 years. The bid was awarded to APL based on a competitive tariff bidding process which had taken place a few months ago. The power will be supplied from the company's under-construction power generation facility in Mundra, Kutch, at the rate of Rs 2.94 per unit.

APL had already signed two power purchase agreements with Gujarat Urja Vikas Nigam Limited for the supply of 1,000 MW of power produced from its Mundra I and II power project, and 1,000 MW from the Mundra III power project.

The company intends to sell power under a combination of long-term power purchase agreements to industrial and state-owned consumers as well as on merchant basis.

BHEL to build three power plants in Karnataka

According to Bloomberg, BHEL and the Karnataka may agree next month to jointly build three utilities in the state, of a combined capacity of 2,600 MWs, comprising of a 1,600 MW plant at Yeramaras, a 500 MW plant at Yadlapur and another 500 MW plant at Bellary. This will be the company's first foray into electricity generation.

BHEL spreads its wings to Rwanda

BHEL announced that it has secured an order worth Rs 400 crore (US$95mn) to build a 28 MW hydroelectric plant in Rwanda from the country’s central government. The project involves supply of critical components as well as execution. This project news comes soon after BHEL announced bagging a similar project in Vietnam. BHEL’s international expansion might improve its top line but certainly lends exposes the bottom-line to forex fluctuations.

NTPC's renewable foray

NTPC will enter into renewable power generation through a JV with Asian Development Bank, GE Energy Financial Services, Kysushu Electric Power Co. (Japan) and Brookfield Renewable Power (US). NTPC will hold 40% stake in the JV, while the rest will be equally shared by other partners. The JV will concentrate on wind power, mini and micro hydro-electric power.

The JV will set up greenfield capacity and develop under-utilized projects to meet NTPC's target of 500 MW of renewable power capacity in the next three years. While the initial projects will be in India, the JV will also look overseas to become a major investor and facilitator of renewable energy with a regional and global outlook.

Bharat Forge - NTPC JV gets moving

Bharat Forge and NTPC have formed a 51:49 JV, called Bharat Forge NTPC Energy Systems. The JV will manufacture auxiliaries for a power plant, which account for Rs. 1 crore per MW. With GoI's intention of installing 20,000 MW, there is considerable business.

According to Chairman and MD BN Kalyani, if the Indo-US nuclear deal goes through, Bharat Forge will be one of the prime suppliers for nuclear power plants, since forgings comprise 60-70% of a nuclear reactor. It will set up a 15,000-tonne press at a coastal location for the manufacture of a 500-tonne single forgings piece, which is needed for the power sector. The company will finalise the location by December 2008, and delivery of equipments would start within 3 years.

Opportunity for private players in NTPC-BHEL JV

GoI is planning to induct a private investor in the recently-formed NTPC-BHEL Power Projects Ltd. (NBPPL) (50:50 JV of NTPC and BHEL). The move aims at converting the public sector character of the JV into a private firm.

NBPPL would look at roping in financial investors or a strategic partner into the equipment manufacturing operations to broadbase its operations. The strategic partner could be offered up to 26% stake, while some stakes would be offered to financial institutions on the lines of Power Trading Corp (PTC). In PTC, financial Institutions like IDBI, IDFC, IFCI, GIC and LIC have around 30% stake.

The JV is expected to invest Rs. 6,000 crore to set up a power equipment manufacturing facility that will churn out boilers and turbines equipped to charge up 5,000 MW of greenfield thermal capacity by 2013. It will also take up EPC contracts and O&M works.

Suzlon to raise Rs. 5,000 crore

Suzlon Energy will raise up to Rs. 5,000 crore through issue of equity-linked securities (FCCBs, GDRs, ADRs) in the international and domestic market.

The company has earlier raised about Rs. 2,183 crore, by issuing over 1.13 crore shares to QIBs, at a premium of Rs. 1,907 per share.

Nuclear deal beneficiaries??? ONGC, L&T, JSW Steel, R-ADAG

The action is hotting up in the nuclear power value chain. Have a look below:

1. ONGC is planning to get into uranium mining, and has formed a 74:26 JV with Uranium Corporation of India (UCIL).
   
2. L&T is planning to foray in nuclear reactor manufacturing.
   
3. JSW Steel, through its power generation subsidiary JSW Energy, wants to get into nuclear power generation, through a JV/technology tie-up with a global major.
4. R-ADAG is rumoured to be holding exploratory talks with global majors for a foray into manufacturing of nuclear reactors.
   

However, private sector players are yet to be allowed an entry into nuclear power generation. It will require an amendment of the existing Atomic Energy Act.

UMPP update: 3 more in the pipeline

GoI has decided to set up three more UMPPs with 4,000 MW capacity each, in Tamil Nadu, Maharashtra and Orissa.

The previous three UMPPs (Mundra in Gujarat, Sasan in Madhya Pradesh & Krishnapatnam in Andhra Pradesh) have indicated substantial preponement of their commissioning schedules.

The bids have been called for the fourth UMPP being set up in Tilaiya in Jharkhand, and the process of identifying the selected developer is expected to be completed by 2008-end.

Areva T&D draws up Rs. 500-cr capex plan

Areva T&D India Ltd. has capex plans of Rs. 500 crore for FY09 and Rs. 200 crore for FY10. The company is aiming to increase its presence in the rapidly expanding electricity T&D sector from current 15% to 35% in the next 3 years.

According to the CFO Karim Vissandjee, the company is bullish on the UMPPs and transmission projects, and is deploying more personnel from its offices in Europe and China. It is also setting up an engineering hub in India, and will increase the R&D headcount from current 80 engineers to 400 by 2012. The company is watchful of the political developments in the nuclear energy space in India.

Mumbai Metro awards contract to ABB, Siemens and SEW

Mumbai Metro One (MMOPL) has roped in ABB, Siemens and Sew Constructions to execute various works for the 11 km Versova-Andheri-Ghatkopar (VAG) corridor of the Mumbai Metro Rail project.

MMOPL, the SPV formed by Reliance Infrastructure, Veolia Transport (France) and Mumbai Metropolitan Region Development Authority, to develop the metro along the VAG corridor awarded the contract for power supply to ABB, signaling and train control systems to Siemens and the contract for three specialized bridges including a cable stayed bridge and two cantilever bridges to SEW Constructions.

BHEL gets GoI rap for project delays

GoI has criticized BHEL for delaying power projects in the country.

Minister of State for Power, Mr.Jairam Ramesh commented that PSU rules, regulations and procedures have impeded the execution capabilities of BHEL.

The minister pointed out that Lehara Mohabbat Power Project in Punjab, of which BHEL is the EPC contractor, is nearly 15 months behind schedule and would come online only by October 2008. Similarly, there are other projects like Amarkantak (MP), Chandrapura (Jharkhand) and Bellary (Karnataka) that are running behind schedule.

Two to tango: NTPC-BHEL JV finalized

GOI has finalised the JV between NTPC and BHEL. The JV, which will be operational from October 2008, will focus on the following areas;

1. Manufacture of balance of plant equipment-mainly coal handling plants, ash handling plants and water demineralising plants
2. EPC contracts by participating in competitive biddings.
3. O&M work particularly for state utilities.
4. Boiler and turbine manufacturing will NOT be the focus.

Sources indicate that the JV and would soon bring in a private partner.

As capacity shortages and quality in these three areas specifically have emerged as critical constraints for the growth of power sector in India, we view this development as a big positive for both, more so for BHEL as it would ensure a steady market for them.

BHEL to benefit from preferential treatment for construction of supercritical plants

GoI is said to have been thinking about providing preferential treatment to BHEL for construction of 660 MW supercritical power projects. Even if BHEL is not the lowest bidder, it would be given the option to match the lowest bid in order to bag the project.

The Government is planning to invite bids for nine units of 660 mw supercritical equipment (boilers, turbines, generators) for NTPC's seven projects and Damodar Valley Corporation's (DVC) two projects. The Government is also planning to encourage global players to bring international expertise.

Source: India Infoline News Service

Neyveli Lignite: fund raising spree continues

Mining and power company Neyveli Lignite is planning to raise about Rs. 1,900 crore through ECBs or bond issue or a mix of both.

The proceeds will be invested in two major projects - expansion of mine II by 4.5 MTPA, and setting up of 500 MW power projects at Neyveli and Barsingsar (in Rajasthan). The two projects require an investment of Rs. 6,300 crore, and would be funded with 70:30 debt/equity mix. It has already raised Rs. 2,500 crore at 9%, through a consortium of bankers led by Canara Bank.

During 2007-08, Neyveli Lignite made a capex of Rs. 1,700 crore. The capex for 2008-09 is expected at Rs. 1,000 crore.

Tata Power shortlisted for Senoko Power sale

Singapore's Temasek Holdings Pte has shortlisted Tata Power (India), Marubeni Corp (Japan), YTL Power Bhd (Malaysia), GDF Suez (France) and OneEnergy Ltd for the bidding process for Senoko Power Ltd.

Senoko Power has an installed capacity of 3,000 MW and generates approx. 30% of Singapore's electricity. The deal may fetch around $3bn, and is likely to be completed by the end of 2009.

Renewbles update: action hotting up - generators fined

Maharashtra Energy Development Agency has collectively fined Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL), Reliance Power, BEST and MPECS Rs. 485.85 crore, for not generating enough energy through non-conventional means. The Renewable Purchase Specification (RSP) policy makes it mandatory for power generation companies to generate 4% of their output from renewable sources.

According to the RSP policy, Rs. 5 has to be forfeited for each unit of shortfall in 2007-08. Based upon the shortfalls, R-Power is liable to pay a fine of Rs. 183.63 core, MSEDCL @ Rs. 199.77 crore and BEST @ Rs. 90.422 crore.

The companies have appealed to the Maharashtra Electricity Regulatory Commission (MERC), as they cliam that they could not meet the targets as alternate energy projects have long gestation period. Earlier, MERC had also acknowledged that there was a short supply of power through renewable sources and would consider waiving the penalties.

Meanwhil, R-Power announced that it has several renewable energy projects in the pipeline, and BEST is also looking at outsourcing its renewable energy projects to a specialist company.

Earnings Watch: GVK Power

GVK Power and Infrastructure reported Q1 2008 net profit of Rs 40.6 crores. In an interview to a private business channel, CFO Mr. Issac George said that the company is waiting for gas supplies from RIL to commence commercial operations for the 684 MW to come online.

The power assets contributed lower profits when compared to Q1 2007 because of a a one-time charge towards major maintenance expenses. According to new accounting guidelines, major maintenance expense, which comes once in three years on gas turbines has to be written off the in the year in which the expenditure is incurred. He stated that all their projects are on schedule.

BHEL bags Rs 200 crore hydro project in Vietnam

BHEL announced yesterday that it has bagged an order worth Re. 200 crores for a hydro power project in Vietnam. This is the company's maiden entry into Vietnam, and it was awarded by state-owned Nam Chien Hydropower. The project is slated to be completed by end-2010.

This would open up a huge market for BHEL in hydro as well as in the thermal and gas based power plants segments in Vietnam, which will witness huge capacity additions in the future.

Under the contract, BHEL would be responsible for the design, engineering, manufacture, supply and supervision of installation as well as commissioning of the plant. It is being funded by the Government of India's Line of Credit to Vietnam.

NTPC approaches High Court against RIL

NTPC wants its gas-supplies dispute case against RIL to be heard on a fast-track basis, and is likely to file a petition in the Bombay HC. A related case between RIL and RNRL is also being heard in the HC.

RIL, in 2004, had won the right to supply 12 mmscmd of gas to NTPC’s power projects in Gujarat at $2.34 per mmbtu. NTPC went to court in 2005 after RIL did not sign the agreement because of a dispute over a clause relating to unlimited liability. The RIL-RNRL gas sales agreement was drafted on similar lines. RNRL would benefit if the NTPC-RIL agreement fails as it will get the additional 12 mmscmd of gas allocated to NTPC at $2.34 per mmbtu.

When GAIL India is quoting $22 per mmbtu for imported LNG on a long-term basis, getting gas at $2.34 per mmbtu could help NTPC to reduce its power production costs drastically.

R-Power: high debt cost could cost hurt

Reliance Power has outlined huge capex plans to fund its Sasan and Krishnapatnam UMPPs.

The company has mandated SBI to raise Rs. 10,000 crore rupee debt for Sasan, while for Krishnapatnam, it will raise Rs. 26,000 crore through rupee debt (Rs. 10,000 crore) and ECBs (Rs. 16,000 crore). The IPO proceeds (Rs. 11,700 crore) will contribute to the equity portion of the projects.

The company is targeting a generation capacity of over 28,000 MW over the next few years, and this would need investments of up to Rs. 1,00,000 crore (@ Rs. 4 crore per MW of thermal capacity).

According to analysts, power generation companies with high leverage are likely to be adversely affected during an increased interest rate scenario. The company is moving ahead with its fund-raising plans at a time when interest rates have peaked.

Torrent Power plans to install 8,600 MW capacity

Ahmedabad-based Torrent Power is targeting 8,600 MW of generation capacity, through various green and brown field power projects. On completion, it will join the league of other private players - Tata Power and Reliance Power. Though the company has not indicated the capital outlay estimates and method of funding of the new projects, the cost of all projects could be in the region of Rs. 225bn (@ Rs. 3 crore per MW).

The plans include:

1. Upgrade of 1,148 MW CCGT project coming up at Sujen in Surat district by another 3,000 MW. The land acquisition process has commenced for the expansion, and the first phase of the project is expected to be online by year-end.
2. A 1,500 MW CCGT plant that will come up at Dahej SEZ, near Bharuch, for which Torrent has been named as co-developer.
3. A 2,000 MW coal-fired power plant in Pipavav in the Saurashtra region. The coal will be sourced from Orissa. A new company, Torrent Pipavav Generation Ltd. has been incorporated as a subsidiary to implement the project.
4. A 1,000 MW coal-fired power plant in Chattisgargh. An agreement has already been signed with the state government and the Chhattisgarh SEB.

Tata Power’s existing generation capacity is 2,389 MW, which is expected to reach 12,861 MW by 2013 (including 4,000 MW Mundra UMPP being executed by the SPV - Gujarat Coastal Power Ltd).

NTPC has a generation capacity of 27,350 MW, and is planning to add another 45,000 MW by 2017.

RPL, through its own and subsidiaries is currently developing 13 medium and large sized power projects with a combined installed capacity of 28,200 MW.

ADAG's big nuclear plans

ADAG is silently doing the groundwork for its ambitious nuclear power project. The group company Reliance Infrastructure (R-Infra) has formed a nuclear power initiative group, and roped in V K Chaturvedi, former Chairman of Nuclear Power Corporation (NPCIL), to head it. The company is in talks with several domestic and foreign nuclear reactor builders, including GE, Russia’s Atomstroy Export and state-run NPCIL for a possible JV. Till the time, private entities are actually allowed to get into the nuclear power generation, R-Infra’s nuclear power initiative group will explore all entry avenues in this emerging sector.

Simultaneously, Reliance Power has also decided to undertake intitial investments of about Rs. 20,000 crore to foray into nuclear power generation - initially setting up 1,000-1,500 MW of capacity, and then expanding on to higher capacities.

At present, India has 17 nuclear power plants, all owned by NCPIL, with a total installed capacity of 4,120 MW. NPCIL plans to set up 15 nuclear plants over the next 20 years. According to estimates, installed nuclear power capacity in India is expected to reach c.20,000 MW by the year 2020.

Many companies, both foreign and domestic, are waiting for amendment in the Atomic Energy Act and clearance from Parliament on private participation in the nuclear energy generation in the country. It is learnt that Indian companies, led by Anil Ambani’s Reliance Power, NPCIL and Bhel plan to invest over Rs. 1,00,000 crore in the next five years to expand their presence in the nuclear energy sector after the country signs the nuclear agreement with the US, paving the way for import of fuel and transfer of technology.

Jindal Power project set to generate revenues

Jindal Power Limited's (JPL) 1,000 MW super thermal power plant in Chhattisgarh will be transferred to the national grid from August 15, and part of it could be taken by the southern states which are faced with power crisis due to failed monsoons.

Jindal Power has embarked on a massive expansion programme involving addition of 2,500 MW in Chhattisgarh and an additional 2,500 MW in Jharkhand.

Jindal Power has captive coal mines that are located at a distance of 8 km from the super thermal power plant and a conveyor tube has been set up for transporting coal between coal mines and the plant. The water requirement of the project is met by a dam constructed across the river Kurket which is around 25 km.

Areva plans big play in India's nuclear power sector

Driven by the IAEA's unanimous clearance over India-specific safeguards agreement, world's largest nuclear power firm Areva of France is gearing up to enter India's nuclear power sector in a big way and is planning to float a separate subsidiary for it.

Globally, Areva has two separate companies, one for nuclear power generation - Areva NP, and another for transmission and distribution - Areva T&D. Areva NP is a JV between Areva and Siemens and holds 66% stake in the venture.

India is steadily marching forward to sealing the civilian nuclear deal with the US. The deal is now two hurdles behind. First, it has to be cleared by the 45-member Nuclear Suppliers Group (NSG) and then ratified by the US Congress.