MAJOR NEWS IN THE POWER SECTOR



[pic] MAJOR NEWS IN THE POWER SECTOR [pic]

October 1st to 15th 2007

TATA POWER

Adani to build world’s largest coal receiving terminal for Tatas

The Adani group is setting up world’s largest coal receiving terminal at Mundra for Tata Power Company. The terminal having 40 million tonne capacity will help Tatas import coal from Indonesia and other sourcing countries, and fire its 4,000MW UMPP being set up at Mundra. The terminal will have a discharge rte of 6,000 metric tonne per hour, and is being constructed just outside the SEZ owned and operated by the Adani group, and in the vicinity of the Adani-run Mundra Port.

(The Economic Times, Oct 15, 2007)

IFC to fund Mundra ultra mega power project

The private sector lending arm of the World bank, International Finance Corporation (IFC), has decided to fund the 4,000MW ultra mega power project to be developed by Tata Power at Mundra in Gujarat. The quantum of equity and debt to be provided by the IFC to Tata Power’s Mundra project would be determined after the negotiations. The project to be developed over seven to eight years was awarded to Tata Power on the basis of a tariff-based international competitive bidding by the power ministry. The government has decided to develop 10 ultra mega power projects through the private sector participation to meet the growing demand for power. These projects are expected to be commissioned during the 12th Five Year Plan (2012-17).

(Business Standard, Oct 12, 2007)

(Also appeared in Financial Express, Mint, The Financial World, The Times of India, Indian Express, The New Indian Express, Asian Age, The Political & Business Daily, The Tribune, Vijaya Karnataka, Daily Hindi Milap, Dainik Bhaskar, Sanmarg and Echo of India)

Bidding date for Krishnapatnam extended; REL Tatas in fray

Reliance Energy Ltd (REL), Tata Power and NTPC are among the 10 qualified bidders in fray for the 4,000MW Krishnapatnam ultra mega power plant (UMPP) in Andhra Pradesh, request for proposals (RFPs) for which will be accepted till October 24. After five postponements PFC has decided to accept the RFPs from the qualified bidders. Qualified bidders for the project comprise Tata Power, REL, NTPC, Essar, Sterlite, L&T, Torrent, AES, DS Construction and Sumitomo.

(The Financial Express, Oct 11, 2007)

Tata Power lines up Rs 6k crore for J’khand

Tata Power Company (TPC) will pump in around Rs 6,000-6,500 crore in the next 3 to 4 years for producing around 1,300MW. TPC’s growth in the state is linked to Tata Steel’s expansion plans. TPC managing director Prasad R Menon, who attended the groundbreaking ceremony of the company’s fifth 120MW thermal power unit, said the company’s sixth unit, also of 120MW, would be located inside the Tata Steel factory in the state. It would run on gases emitted by the steel major’s biggest 2.5 mtpa blast furnace, which is under construction. The fifth and sixth units, with 120MW capacity each, will cost TPC around Rs 1,080 crore. Currently, the power utility has a generating capacity of 427MW at Jojobera, which includes a 67MW plant, inherited from Tata Steel, and three other thermal units of 20MW each.

(Financial Express, Oct 11, 2007)

(Also appeared in Business Standard, The Times of India, Hindustan Times, DNA, Midday, Free Press Journal, The Political and Business Daily, Echo of India, Bharat Mitra,Vaartha)

Tata Power, REL in fray for 4,000MW AP project

After the controversial Sasan ultra mega power venture, the Krishnapatnam project in Andhra Pradesh is the next to go in for bidding. Tata Power, Reliance Energy Ltd (REL), National Thermal Power Corporation (NTPC), Essar Power, Jindal Steel & Power (JSP), Sterlite Industries, DS Construction and engineering firm Larsen & Tourbo (L&T) are in the fray for the 4,000MW ultra mega power project (UMPP).

(The Times of India, Oct 11, 2007)

(Also appeared in The Financial Express, The Indian Express, The New Indian Express, The Tribune, Echo of India)

TPC allots shares to FCCB holders

Tata Power Company has informed that the board of directors of the company allotted 8, 04,088 equity shares of Rs 10 each to holders of FCCBs. The company had received requests for conversion of 10,952 FCCBs into equity shares. In 1995, the company had issued 2 lakh FCCBs of $ 1,000 each aggregating $ 200 million, due on February 25, 2010 and convertible into equity shares. The bonds are convertible at any time on or before February 15, 2010 by the holders into equity shares of par value of Rs 10 each at a conversion price of Rs 590.85 per share at a fixed rate of exchange of Rs 43.38 per US dollar.

(Financial Express, Oct 09, 2007)

(Also appeared in The Political and Business Daily)

Tata Power

CMP: Rs 944.10

Target Price: Rs 1,198

HSBC Securities has maintained its ‘overweight’ rating on Tata Power, while raising its price target to Rs 1,198 from Rs 843 earlier. The HSBC note stated “We believe in Tata Power’s ability to expand its generation capacity over next five years. We now expect it to implement 10.3 GW by FY 2013 against our earlier estimate of 9.4 GW. The coal ministry has allocated coal mines in India to the company, which should reduce its fuel costs substantially. We expect the coal mines to be operational by the end of FY11 and hence we reduced our fuel cost estimates by 14% and 13% for FY12 and FY13”.

(The Economic Times, Oct 06, 2007)

(Also appeared in The Times of India, The New India Express, The Tribune and Sandesh)

COMPETITION/ CONSUMERS

← RELIANCE ENERGY LIMITED (REL)

RPL to become second largest generator: UBS

Global investment banking major UBS has said ADAG firm Reliance Power was well positioned to become country’s second largest power generator, valuing the firm between Rs 71,800 to 92,100 crore. With this valuation, RPL will also make it among the top five listed utilities by market cap in Asia.

(The Times of India, Oct 15, 2007)

(Also appeared in Mumbai Mirror)

Grey market abuzz over Reliance Power IPO

Grey market stock traders in Saurashtra and Kutch have started trading in shares of Reliance Power even before the company’s IPO is cleared by the regulator. Grey market premium for Reliance Power shares have been coming in from Rajkot and Jamnagar centres right after the day the company filed its Draft Red Herrings Prospectus (DRHP) with the securities and Exchange Board of India. As per the DRHP, Reliance Power would issue 130 crore shares of Rs 2 each at an appropriate premium to be fixed later.

(Hindustan Times, Oct 12, 2007)

Reliance Power to offload 10.1% stake via IPO

Reliance Power (RPL), will offload a 10.1% stake in the proposed initial public offering (IPO). According to the draft red herring prospectus (DRHP) filed by RPL with the stock market regulator Sebi, the IPO will comprise 130 crore equity shares of Rs 2 each for cash at a premium to be decided through a 100% book building process. The proceeds of the issue are proposed to be utilized for funding various projects.

(The Economic Times, Oct 04, 2007)

(Also appeared in The Business Standard, The Financial Express, The Hindu Business Line, The Times of India, Hindustan Times, The Indian Express, DNA, Asian Age and Statesman)

Rel Power IPO Gets Green Light

The Board of Reliance Energy, the parent company of Reliance Power, has cleared its initial share offer to raise up to $2.5 billion. Reliance Power will sell 10% to 15% stake in India’s largest ever IPO to fund its Rs 70,000 crore projects. If successful, the public offer will value the company at over $20 billion.

(The Economic Times, Oct 01, 2007)

(Also appeared in Business Standard, The Financial Express, The Hindu Business Line, Mint, The Times of India The Indian Express, Hindustan Times, DNA, Asian Age, Mid Day, Free Press Journal, The Hindu, The New Indian Express, Deccan Chronicle, The Tribune, Statesman, Pioneer, Dainik Jagran, Dainik Bhaskar, Divya Bhaskar, Lokmat, Sakal, Navbharat, Janmabhoomi, and Gujarat Samachar)

← MAHARASHTRA STATE ELECTRICITY BOARD (MSEB)

Maharashtra to be power surplus by 2010

Notwithstanding the efforts being made by the Maharashtra Government continues to reel under power shortage. Being a key component of the infrastructure needed to boost any economy; power shortage has been spreading ripples of concern in corporate and business circles in the State. Estimated to be reeling around a power shortage of at least 4,000MW, planners feel that the State, in the long run, will have to substantially augment supply to the burgeoning industries in Maharashtra. MSEB had recently said that augmentation of power would require an investment of over Rs 55,000 crore by 2009-10. This includes Rs 5,198 crore for generation, Rs 2,899 crore for transmission and Rs 7,332 crore for distribution apart from an estimated Rs 40,000 crore as additional investment for zero load shedding on all these fronts.

(Hindu Business Line, Oct 09, 2007)

← NATIONAL THERMAL POWER CORPORATION (NTPC)

NTPC in talks with overseas companies for green energy JV

In an effort to acquire expertise it doesn’t currently possess, India’s largest power generation company NTPC Ltd is in talks with foreign firms in the renewable energy business to sell around 40% of its stake in a proposed joint venture (JV) with multilateral lending agency, Asian Development Bank (ADB). NTPC will hold 40%, ADB, 20%, and the foreign companies will hold 40% in the venture that is part of an effort by the company and the government to reduce, if only marginally, the dependence of the country on fossil fuels such as coal and gas for power generation. The foreign companies are expected to share their expertise in the areas of wind, solar, geothermal and biomass energy generation.

(Mint, Oct 12, 2007)

Submits revised proposal for power exchange

The National Commodity & Derivatives (NCDEX) and National Thermal Power Corporation (NTPC) have submitted the revised power exchange proposal to the Central Electricity Regulatory Commission (CERC). The CERC had sought some clarifications on the proposal filed by the NCDEX – NTPC. The NCDEX officials are hopeful of getting the license soon, as the project has already received the government nod. PowerGrid Corporation, the National Stock Exchange, Tata Power, National Hydro Power Corporation and Power Finance Corporation are also partners in this venture.

(Business Standard, Oct 10, 2007)

NTPC claim to sites could derail TN mega power project plans

The Union government’s plan to accelerate approvals for a second ultra mega power project (UMPP) for Tamil Nadu, ruled by its ally, the Dravida Munetra Kazhagam (DMK), may come unstuck as NTPC Ltd, the largest power generating company and also a public sector undertaking (PSU), has claimed that the proposed sites under consideration had already been reserved for it. TN’s two plants were to be located in Cheyyur and Marakkanam. In a letter addressed to the power ministry, NTPC said the Cheyyur site was earlier identified by the PSU for setting up a power project, originally with a capacity of 2,000MW.

(Mint, Oct 08, 2007)

Railways asked to rush coal to 2 NTPC plants

The Railways has been asked to rush power-grade coal from whatever sources, no matter whether it is Eastern Coalfields Ltd (ECL) or Central Coalfields Ltd or North-Eastern Coalfields Ltd or any other coal company or imported stocks lying at haldia and Paradip ports, to National Thermal Power Corporation’s mega thermal power plants located at Farakka (West Bengal) and Kahalgaon (Bihar). The reason: the production at rajmahal mines, the captive mines of these two thermal power plants, has virtually collapsed with the result little coal is being transported by the merry-go-round systems. Worse, the pithead stocks too have been found to be substantially lower than what was earlier claimed.

(Hindu Business Line, Oct 05, 2007)

Rs 590 crore NTPC dividend

NTPC paid a dividend of Rs 590.37 crore to the government, making its total dividend for 2006-2007 Rs 2,638.56 crore – 32% of its paid-up capital. The shareholders of the company approved a final dividend of 8 per cent, amounting to Rs 659.64 crore, at the 31st annual general meeting. A cheque amounting to Rs 590.37 crore dividend for the government’s share was presented to Power Minister Sushilkumar Shinde by NTPC chairman and managing director T. Sankaralingam.

(Hindustan Times, Oct 01, 2007)

INDUSTRY

← STATE / GOVERNMENT/ REGULATOR / POLICY

Captive and merchant power plants too many get mega status

Fiscal sops and tax incentives may no longer be confined to stand-alone power projects. Captive and merchant power plants with a capacity of 1,000MW and more may also get to enjoy these concessions. The policy on mega power plants may be modified to make even captive and merchant plant status. The policy shift has been proposed by the power ministry in a Cabinet note. The mega power policy offers incentives such as complete waiver from Customs duty on equipment imports and a 10-year tax holiday to thermal power projects with a minimum capacity of 1,000MW and Hydel power projects of 500MW capacity. Captive and merchant are expected to play an important role in boosting the country’s power generation capacity.

(The Economic Times, Oct 11, 2007)

PFC to set up equity fund for power sector

State-run Power Finance Corporation (PFC) proposes to set up an equity fund to cater to the financial requirements of the power sector. Initially, PFC’s role would be advisory in nature and the fund would be managed by a separate company or through an asset management company. For the capacity addition of about 80,000MW the country would need around Rs 10 lakh crore. The proposed fund would be different from the India Power Fund which was thought of earlier by the PFC. PFC would tie-up with foreign funds for this purpose and later during the course of time may infuse money in the equity fund.

(The Financial Express, Oct 11, 2007)

(Also appeared in Business Standard)

BEST plans to generate 50MW wind power, says city will get it in a year

The Brihanmumbai Electric Supply and Transport (BEST) undertaking is planning to generate power for distribution in the city. A power distribution utility, the undertaking plans to generate around 50MW of energy on a turnkey basis for which it has contracted wind energy major. The undertaking is in the process of identifying sites to set up around 35 windmills. The BEST is also in talks with the state power generation utility – Maharashtra State Electricity generation Company Limited (Maha Genco) – for joint development of the 1040MW gas-based power plant at Uran in raigad district.

(The Indian Express, Oct 08, 2007)

DVC gears up for retail power distribution

Damodar Valley Corporation (DVC) has decided to appoint SBI Caps to conduct a commercial viability study of its proposed retail distribution venture in Jharkhand. After the completion of the study, DVC will invite a notice inviting tender (NIT) for participants of the bidders. Interestingly, Tata Power, Torrent Power and CESC had evinced interest in undertaking retail power distribution in DVC’s command area in Jharkhand in a joint venture with DVC.

(The Economic Times, Oct 08, 2007)

PFC may be roped in for four medium power projects

Company scouting for contracts in Punjab, Rajasthan and Jharkhand

Power Finance Corporation (PFC), the nodal agency for handling ultra mega power projects (UMPP) of 4,000MW each, is looking for business opportunities to handle smaller power projects of around 1000MW each. Whereas the company is likely to extend consultancy business to bid out two projects of 1200MW each in Punjab, it is in talks with Rajasthan and Jharkhand governments for evolving similar arrangements for two projects of around 1000MW each.

(The Economic Times, Oct 07, 2007)

Hydro promises to be a big power churner

Hydro power has the biggest potential among the power generation resources in t he country and is poised to be the second biggest contributor to the country’s power graph. Hydro power has a potential to generate 1, 75,000MW in India, that is, five times the current capacity, according to Brajesh Koshal of Enam Securities. India’s present hydro power installed capacity is over 30,000MW. Companies that are supplying equipment and constructing hydro power plants have the necessary expertise. Therefore, diversifying into hydro power generation completely is the next logical step. However, here is a risk involved in hydro power generation. The end project cost is always 15-20% more than what is estimated, due to the nature of the work involved and the geography. This is the reason why smaller players are averse to getting in Hydro power generation.

(DNA, Oct 06, 2007)

World Bank, ADB funding for Rs 70K-crore national grid

The power ministry has released the funding details of the ambitious Rs 70,000 crore plan to set up a national grid by state-run Power Grid Corporation. Of the Rs 70,000 crore, the ministry has proposed an investment of about Rs 55,000 crore during the 11th Plan. To fund these projects, an assistance of about $3 billion (about Rs 12,500 crore) from multilateral agencies like the World Bank ($2 billion) and Asian Development Bank ($1 billion) has been envisaged.

(The Financial Express, Oct 05, 2007)

Mega power project shelved

A 4000MW power plant intended for Maharashtra has been shelved simply because no suitable site has been identified. The Power Finance Corporation and Central Electricity Authority (CEA) had planned to build nine such ultra mega power projects in various parts of the country. This was a major initiative planned in the 11th Plan. The coal-based generation power plant was to have been commissioned at Giriye near Deogarh in the Konkan region. However, a strong farmer lobby opposed the move after which union minister said it would be relocated. Acquisition of land for new private power plants also continues to be a cause of concern and this was brought up at the meeting. In fact, this issue has come to the fore in power projects involving Tata and Reliance at Shahapur where locals filed public interest litigations. Availability of power will be an important issue for the next assembly elections scheduled to be held in late – 2009.

(DNA, Oct 04, 2007)

Power sector funding may come under priority lending

The funding constraints in the power sector may ease if a government proposal to include power sector funding under priority sector lending targets of banks goes through. Banks give 40% of their total credit for priority sector lending, in sectors such as agriculture, small and medium enterprises (SME) and exports. It is expected that the inclusion of power under priority sector lending will unlock over Rs 2 lakh crore for the sector. The move to include power sector funding under priority sector follows huge financing requirements for the sector. During the 11th Plan (2007-12), the government intends to add 78,577MW of capacity, requiring a total investment of over Rs 10, 30,000 crore.

(The Economic Times, Oct 04, 2007)

Bidding plan for transmission being finalised

On the pattern of ultra mega power projects, the Centre is in advanced stages of finalizing standard bid documents for inviting private sector participation in the transmission sector through a slew of tariff-based competitive bidding projects. The Government is finalizing the bid documents based on its tariff Based Competitive Bidding Guidelines for Transmission Service, in consultation with the State-owned Power Finance Corporation (PFC).

(Hindu Business Line, Oct 03, 2007)

← BHARAT HEAVY ELECTRICAL LIMITED (BHEL)

BHEL to set up Vizag captive power plant

Power equipment and engineering major BHEL has won an Rs 394 crore turnkey contract to set up a 67.5MW captive power plant at Vizag steel plant in Andhra Pradesh. Rashtriya Ispat Nigam Ltd has placed the order to meet the requirement for the expansion of the Vizag plant. The power plant is likely to be commissioned in 26 months. BHEL will be involved with the design, engineering, manufacture, supply, erection and commissioning of the plant, in addition to civil works. The power plant will be equipped with a state-of-the-art multi-fuel fired boiler.

(Business Standard, Oct 10, 2007)

(Also appeared in The Economic Times, The Indian Express)

BHEL’s BHPV acquisition to come at a cost

Power equipment major BHEL may have to shell out an additional Rs 402 crore for acquiring the ailing Bharat Heavy Plates and Vessels (BHPV) as the finance ministry has decided not to write off the ailing PSU’s loans. This would increase BHEL’s acquisition cost to Rs 1,053 crore from the earlier Rs 651 crore. While BHPV owes Rs 224.80 crore as loan amount to the central government it has accrued Rs 178.08 crore as interest on the principle amount. It also owes Rs 173.45 crore to different banks as principle amount including Rs 112.85 crore to the State bank of India (SBI). The cost of revival of BHPV on a stand-alone basis was estimated at about Rs 1,073.68 crore and the same with BHEL would amount to Rs 1,302 crore.

(The Economic Times, Oct 03, 2007)

BHEL may take equity in Koradi power plant

Bharat Heavy Electricals Ltd (BHEL) could consider taking equity in the brownfield expansion of the Koradi Thermal Power Station near Nagpur. The Rs 8,000 crore expansion would be based on super-critical technology and will add 1,600MW to the State grid. Maharashtra State Power Generation Co Ltd (Maha Genco), the operator of the plant, will undertake the expansion. The project will have 80:20 debt-equity ratio, and Maha Genco would soon approach the Maharashtra government for Rs 1,600 crore as equity participation.

(Hindu Business Line, Oct 01, 2007)

BHEL eyes global JVs to make nuclear power equipment

BHEL is in talks with global power equipment firms Siemens, Areva and GE to set up a joint venture in the country to manufacture nuclear power plant equipment. The move is aimed at giving the company a head-start over competition after the nuclear power market opens up with the operationalisation of the Indo-US nuclear deal. At present, the nuclear energy space is dominated solely by the state-owned Nuclear Power Corporation (NPC). The total installed capacity of nuclear power is around 4,120MW with proposed addition of 3,880MW during the Eleventh Plan. This would, however, grow at a rapid pace once fuel arrangements and equipment supplies improve after the deal. As per Planning Commission’s estimates to get 10% of total power from nuclear source, the capacity would have to be enhanced to 1,00,000MW by 2030.

(The Economic Times, Oct 01, 2007)

BHEL to raise capacity to 20,000MW by 2012

Bharat heavy Electricals (BHEL), the country’s biggest power equipment maker, plans to scale up manufacturing capacity to 20,000MW by 2012 at an investment of around Rs 6,500 crore as it seeks to gear up for the massive electricity requirement in the next few years. The second phase of expansion to raise capacity to 15,000MW has begun at an investment of Rs 3,200 crore.

(The Economic Times, Oct 01, 2007)

(Also Appeared in The Times of India)

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