POWER SECTOR NEWS: Adani, CESC, NTPC, Reliance Power, Tata power

Date: 23 Jun. 12

1. Moody’s to downgrade Tata Power on bank debt

Source: Firstpost

Moody’s today said it was reviewing the corporate rating of Tata Power for possible downgrade, primarily due to bank debt related to the company’s Mundra ultra mega power project in Gujarat. The rating action reflects material covenant breaches on bank debt associated with 4,000 MW Mundra UMPP and questions relating to the project’s long-term impact on its financial profile, absence of changes to tariff structures, Moody’s Investors Service said in a statement. Covenant generally refers to an agreement between two parties.

The Mundra project is being executed by Coastal Gujarat Private Ltd (CGPL), a wholly-owned subsidiary of Tata Power. Reuters

Moody’s noted that covenant breaches do not constitute a payment default. The agency has placed Tata Power’s Ba3 corporate family rating, B1 senior unsecured bond rating and Senior Unsecured MTN Programme (foreign currency) rating of (P)B1 on review for downgrade. ‘Ba3 rating indicates ′higher credit risk.

The Mundra project is being executed by Coastal Gujarat Private Ltd (CGPL), a wholly-owned subsidiary of Tata Power. Commenting on Moody’s rating action, Tata Power Executive Director, Finance, S Ramakrishnan in a separate statement said that to support CGPL’s cash flows, the company has been in advanced discussions with the lenders to finalise structure for transferring coal SPV dividends.

To provide protection to CGPL and support its cash flows, Tata Power has already proposed to transfer atleast 75 percent of its equity interest in the Indonesian coal mines and also continues to evaluate other alternative options. “The matter is under consideration by the lenders for approving waivers in certain cases. Given the technical nature of the covenant breaches comprising mainly non cash entries

like impairment and forex costs, we believe our request should get favourable consideration.

Ray Tay, a Moody’s Associate Vice President—Analyst and lead analyst for Tata Power—said that CGPL is in the process of obtaining waivers from several financial institutions for the covenant breaches, but the issue may take several months to resolve. “While waivers are being negotiated, TPC will be subject to curtailment of new draws once it reaches the currently approved level of 83 percent of the project facility, thereby introducing greater liquidity risk, absent additional bank waivers,” Tay noted.

According to the statement, Moody expects to conclude its review in about one to three months. The 4,000 MW Mundra UMPP is based on imported coal. Noting that financial challenges at the

project have created considerable strain for Tata Power, Moody’s said the covenant breaches reflect continued strain associated with forex and fuel cost risk at the Mundra project. The Mundra UMPP has been hit by regulatory changes in Indonesia that resulted in higher prices of coal. Also, the inability to fully pass through fuel costs to end users has also adversely impacted the project.

“The (covenant) breaches are related to TPC not meeting its agreed maximum debt to equity ratio and minimum debt service coverage ratios,” the Moody’s statement said. Meanwhile, Tata Power said it has done 70 percent blending with low cost imported coal to offset some of the increase in cost.

“The issue of rise in cost of imported coal is not specific to Mundra but impacts all imported coal based

projects in the country, which exist and would need to be developed from herein after. Representations have been made to beneficiaries, Ministry of Power and PMO to resolve this issue,” Tata Power Managing Director Anil Sardana said.

The first unit of Mundra UMPP started commercial operation in March this year and the second unit is scheduled for commissioning in August.

2. Power may trip on fuel constraints

Sanjay Jog / Mumbai Jun 23, 2012, 00:05 IST

India’s power sector, expected to attract an investment of Rs 11 lakh crore during the 12th Plan period, is in crisis. Procedural and regulatory uncertainties, rising fuel constraints and deteriorating health of distribution companies have raised questions over the health of a sector that saw huge investment even during the 2008 downturn.

The sector has always been a laggard in infrastructure. Even if the Prime Minister’s target of 18,000 Mw capacity addition happens this year, it may not make much of a difference to the sector, stranded with fuel constraints.

India added 55,000 Mw generation capacity against the original target of 78,000 Mw and created an inter-regional transmission grid of 28,000 Mw against the planned target of 37,000 Mw during the 11th Plan period that ended March 31. However, the rising mismatch between demand and availability of coal and gas has put a question mark on the survival of existing capacities.

The PMO intervened to better the coal supply situation by directing Coal India Ltd to sign fuel supply agreements with power companies. That has brought some hope but with domestic production not expected to match demand, CIL may have to resort to imports or take a hit on its revenue through cutting of e-auction quantities.

Companies that opted for imported coal to meet the deficit, are also in trouble, as a result of high international coal prices. Regulatory issues in Indonesia and Australia have made imports expensive. Those who kept their plants running on imported coal had to incur losses, as there were no buyers.

Even state electricity boards prefer to shed load instead of procuring costly power fuelled by imported coal.

Take the case of ultra mega power projects. An uncertain environment has made the government delay the request for qualification for two UMPPs for the last two years. At the same time, an imported coal-based power plant like Tata Power’s Mundra UMPP is idling capacity, Reliance Power has put on hold the implementation of its Krishnapatnam UMPP.

Ashok Khurana, director general, Association of Power Producers (APP) says the existing generation capacity of 11,780 Mw and upcoming 57,680 Mw are expected to remain largely unutilised, as power rates have become unviable. The generation companies, which had entered into long-term power purchase agreements (PPAs), are yet to recover the difference in cost and many are negotiating to recover those regulatory assets. Against this backdrop, industry players see no incentive for the new capacities, especially in the high interest environment, to justify the risk and returns. This has prompted the power ministry to refer the issue to the Central Electricity Regulatory Commission, as power producers have insisted that a change to the concluded PPAs with various distribution companies was essential.

The power ministry itself has issued an advisory on the non availability of gas till 2015, which has dampened the investor mood. There are several power plants with total capacity of 8,770 Mw, in stages of commissioning and another 15,000 Mw, already operational, which are the victims of lack of assured gas supply. Industry associations such as Confederation of Indian Industry and APP believe nonoperational gas-based projects would have significant repercussions on power availability in several states and therefore made a case for a comprehensive package to gas-based power projects pooling and fiscal incentives.

The other key issue is the dismal financial health of distribution utilities, struggling to meet the widening gap between demand and supply. Most of these under the garb of demand management are resorting to load shedding. Their accumulated financial losses estimated at Rs 70,000 crore in 2010–11, are projected to grow to Rs 1,00,000 crore by 2014. CII argues the practice of cross–subsidising domestic and agricultural consumers by higher rates for commercial and industrial customers and the railways has distorted balance sheets. "In addition, lack of rate hikes and mounting Aggregate Technical and Commercial losses have led to under–utilisation of generation capacity.”

Industry players are hopeful that a relief package for distribution companies, based on recommendations of the Shunglu Committee and the Chaturvedi panel and rate rises will give the much needed boost to distribution reforms. Distribution companies in Tamil Nadu, Madhya Pradesh,

Odisha, Bihar, Tripura and Andhra have revised rates by 7-37 per cent. They are now concentrating on seriously addressing their cash flow issues.

However, Jayant Deo, MD & CEO, Indian Energy Exchange, suggests the only way out is to create national bulk market for 1 Mw and above consumers (industrial and commercial consumers). “In such a scenario, the regulators will not determine their tariff nor distribution companies procure power from the generation companies, All these 1 MW and above consumers will come to the day

ahead market, where the generators will sell un-requisitioned power at market-determined prices,” he concludes.

Pramod Deo, chairman, Central Electricity Regulatory Commission, believes “The Regulations of connectivity long-term, medium-term and short-term open access have already provided the framework for market access for the generators. This framework acts as an alternative payment security mechanism and also mitigates the default risk substantially.” Further, he informs that CERC seeks to address the issue of congestion in inter-state transmission, one of the irritants having the potential of rendering the generation capacities stranded and adversely impacting the price of electricity for consumers.

3. PMO lowers target for CIL on fuel supply to power units

Published on Fri, Jun 22, 2012 at 18:47 | Source: PTI

Updated at Fri, Jun 22, 2012 at 22:07

In a bid to resolve the fuel row, the Prime Minister's Office today asked state-owned Coal India (CIL) to sign the pacts with power producers with assured minimum coal supply of 65% of the commitment.

The PSU firm has also been asked to go in for coal imports through the state-owned agencies like the STC and MMTC, sources said.

CIL had its way in terms of making much less commitment for assured supply of 65% for the first three years of the fuel supply agreements (FSAs) from 80%, as directed by the Prime Minister's Office (PMO) earlier.

But in the fourth year, the supply has to increase to 72% followed by 80% in the fifth year of the agreements, sources added.

However, the company will have to pay damages, equivalent to 10% of the value of the shortfall in supply to the power producers. Besides, there would be no moratorium on payment of penalty.

The directions to the monopoly supplier CIL were given after Pulok Chatterjee, Principal Secretary to the Prime Minister, took a meeting of Coal Secretary S K Srivastava and CIL Chairman and Managing Director S Narsing Rao.

CIL which accounts for over 80% of the domestic coal production will take the PMO directions before its board, which is likely to meet next month.

"We will now be having board meeting of Coal India. They may take a final view on all these issues (penalty, FSA, coal imports)," Srivastava told reporters today after the meeting.

CIL, which missed the revised production target last fiscal and produced 435 million tonnes of coal, has set a production target of 464 MT for 2012-13.

Suzlon to sell stake in Chinese armhttp://www.thehindubusinessline.com/companies/article3562025.eceSuzlon Group has entered into a binding agreement to sell its equity in its wholly-owned manufacturing subsidiary in China, Suzlon Energy Tianjin Ltd, to China Power (Tianjin) New Energy Development Company Ltd (CPNE). The two companies signed a binding term-sheet on June 22 for the sale of of Suzon Energy Tianjin with the majority of its assets and liabilities for approximately $60 m or RMB 384 m or Rs 340 crore. The sale is subject to requisite regulatory approvals.Mr Tulsi Tanti, Chairman-Suzlon Group, said: “The dynamics of the wind energy market have changed considerably over the past year, and we are realigning our strategy to the China market with an agile, asset-light business model.”Suzlon established its marketing operations in China in 2005, followed by the setting up of its wholly-owned manufacturing facility in 2006. The company has to-date installed over 900 MW of wind capacity in the country

Power demand breaks all time record, Delhi faces outageshttp://economictimes.indiatimes.com/news/news-by-industry/energy/power/power-demand-breaks-all-time-record-delhi-faces-outages/articleshow/14344512.cmsPower demand in the city again broke all records today touching an all-time high of 5,330 MW, a day after registering the highest demand. The previous highest power demand in the city was recorded yesterday when it soared to 5,271 MW. "The maximum power demand in the city touched 5,330 MW which is a new record of power consumption in Delhi," a power department official said. Areas across the city faced power cuts ranging from one to four hours as maximum temperature remained at 43 degrees Celsius, which is five degrees above normal. South Delhi was worst affected as a major transformer of Delhi Transco Limited developed technical snag resulting cut in power supplies to almost all localities. The city faced outages also due to cut in supply of 200 MW of power by state-run power generation company NHPC to BSES for failing to pay up the outstanding dues. The private power distribution company however, claimed they were able to meet the demand. The power demand in the city has been increasing at a rate of around eight per cent in the last few years and as per projection of the government, it will reach 5,500 MW this summer.As per official figure, the power demand in 1905 was just two mega watt which had increased to 27 mega watt in 1947. The peak demand had touched 1,536 MW in 1992 while in 1997 it increased to 2,303 MW and further to 2,879 MW in 2001. In 2002, the power demand had gone up to 3,097 MW while in 2007, it touched 4,030 MW. While the demand went up to 4,408 MW in 2009, it touched 4,720 MW in 2010. Last year, the demand had gone up to 5,028 mega watt, which was the all-time high demand till it was breached when the demand touched 5,032 mega watt on May 25

CPI(M) asks J-K govt to improve power scenario in statehttp://www.financialexpress.com/news/cpim-asks-jk-govt-to-improve-power-scenario-in-state/965424/0 The Jammu and Kashmir Unit of CPI(M) today asked the government to improve the power scenario in view of growing dependence on the energy sector and public discontent against erratic power supply across the state."The overall power system in the state has become too faulty to cater to the genuine energy needs of consumers. Even metered areas are facing long and unscheduled power cuts much to the annoyance of public," state secretary of CPI(M) Mohammad Yousuf Tarigami said in a statement.He said the transmission and distribution system has also deteriorated and most of the transformers are damaged, depriving the consumers of vital electricity facility."No sensible government can afford to deprive its citizens of energy facility despite receiving fat tariff bills monthly," he said cautioning that continuous negligence of the issue will have serious rercussions."The people have a legitimate right to agitate against denial of their basic rights. The people are being forced to come to streets," he said.He said 67 per cent of transformers were damaged during the last fiscal as per government's statistics and outsourcing the repairing work of transformers to SSI units has failed to prove an efficient alternative."The department has also not succeeded in recovering hundreds of crores of power dues from government departments for which it was now trying to shift the onus to the poor consumers," he charged.Tarigami noted there was a great hue and cry in Jammu these days due to inconsistent power supply as the mercury has soared to 45 degree in the winter capital, putting the people to great inconvenience.

Date: 24 Jun. 12

Kalpataru Power Transmission: Well-energised

VIDYA BALA &SHARE  ·   PRINT   ·   T+  

Power transmission companies received a fresh lease of life after order flows from Power Grid Corporation of India (PGCIL) picked up sharply in the last quarter of FY12. But quite a few lost their market shares to new players last fiscal.

Despite aggressive competition, Kalpataru Power Transmission (Kalpataru) managed to retain its status in the top five in terms of market share, a minor dip notwithstanding.

The company’s strong order book supplemented by its infrastructure subsidiary JMC Projects’ robust portfolio provides revenue visibility for the next couple of years.

Sharp pick up in execution in both the parent and subsidiary companies in the recent quarter also suggests that the phase of slow delivery may be over. 

 Investors with a two-year perspective can consider limited exposure to Kalpataru. At the current market price of Rs 79, the stock trades at 4.4 times its consolidated expected per share earnings for FY14. While this is in line with peer KEC International, the latter has lost market share in FY12 in orders from PGCIL.

Order flows

PGCIL awards a host of orders in the transformer, substation, transmission lines and conductor segments to name a few. In FY12, the proportion of power transmission towers and lines in the total orders awarded increased to about 45 per cent from 37 per cent a year ago. But this also prompted a number of new entrants in the space, resulting in players such as KEC International losing a good chunk of their market share. Kalpataru, though, managed to remain in the top five, losing market share by just a percentage point. 

But retaining market share may have been possible only through aggressive bidding. Hence, we reckon that Kalpataru’s EBITDA margins are likely to hover in the 9-9.5 per cent range over the next couple of years, from the 10-11 per cent it enjoyed earlier. Unlike a few others, the company may not see further deterioration in margins on account of two reasons — one, Kalpataru has nearly half of its orders from overseas markets. These are typically margin accretive.

Two, while its EBITDA margins were dented in the fourth quarter of FY12 (8.8 per cent) due to volatile steel prices, it may yet recover it, given that about two-thirds of its orders have price variation clauses linked to indices. However, the recovery on these will come with a lag. Kalpataru’s consolidated order book stood at Rs 11,600 crore in FY12. That’s a healthy 2.2 times FY12 sales.

JMC Projects’ orders accounted for nearly half. Close to 50 per cent of the subsidiary’s orders are from the buildings and factories segment that may suffer lesser uncertainties in execution, unlike infrastructure projects.

Higher execution pace in the subsidiary is likely to provide traction to overall revenue growth. JMC Projects’ 43 per cent growth in sales in the fourth quarter over a year ago is evidence to this.

Manageable debt

 With both the parent and the subsidiary company requiring capital deployment, Kalpataru saw its debt double in FY12. That said, its debt equity ratio of 0.6 provides enough room for it to leverage more. Profits before interest and taxes too comfortably covered interest costs 2.8 times, causing little concern over debt servicing.

 Kalpataru’s consolidated sales expanded 22 per cent to Rs 5266 crore in FY12. Net profits, though, dipped 5 per cent to Rs 189 crore. Sedate quarters in the early part of FY12 and foreign exchange losses, besides higher steel prices, worked as drags. But recoveries on input costs seem likely through escalation clauses. 

Punjab State Power Corporation estimates go awry, deficit widensParvesh Kumar Sharma, TNN | Jun 24, 2012, 05.23AM IS

PATIALA: Though it had started preparations three-four months back, the Punjab State Power Corporation Ltd (PSPCL) has apparently failed in assessing the possible power demand during the paddy season. PSPCL had assessed an increase of 10% in power demand during the paddy season, but the demand has actually gone up by 20% within the first 12 days of the paddy season.

The state power scenario is bound to take turn for the worse in the coming some days, as PSPCL authorities has no solution except to pray for rains.

PSPCL had planned to supply up to 2,000 lakh units (LUs) per day during paddy season, but the demand has already touched a figure of 2,150 LU per day and is likely to go up further. This will mean a power deficit of 600 to 700 MW, sources said.

CMD of PSPCL, K D Chaudhary, confirmed that his officers could not assess the exact possible power scenario in the state. But, instead of offering any solution, his reply was, "As soon as monsoon arrives, the load on the system is likely to reduce and PSPCL shall be able to give uninterrupted power supply to consumers."

PSPCL had tried to arrange power from the central grid on "day-ahead basis", but the constraints imposed by northern regional load despatch centre (NRLDC) to transmit this power to Punjab from outside has multiplied the problems of PSPCL. Punjab is allowed to draw up to 5,100 MW only from outside. On June 21, PSPCL had purchased 190 LUs (750 MW) from the exchange on day-ahead basis at Rs 3.84 per unit, but NRLDC allowed transfer of only 110 LUs (450 MW) due to transmission constraints, sources added.

"PSPCL officers failed to assess the exact possible demand for power. Due to their fault, state residents are suffering. Punjab government must take strict action against officers involved in preparing the power plan for paddy season," demanded Sukhwinder Singh, a local.

However, PSPCL officers claimed that in addition to PSPCL's own availability of 7,249 MW power, consisting of 3,620 MW state generation, 1,258 MW share in BBMB, 2,127 MW share from the central sector and 184 MW from NRP projects, it has arranged short term power to the tune of 1,672 MW for June, 1,650 MW for July and 1,600 MW for August 2012.

RIL to supply gas to Bawana plant, power situation to improvePTI | 11:06 AM,Jun 24,2012

New Delhi, Jun 24 (PTI) Power situation in the city is likely to improve soon with Reliance

Industries Ltd agreeing to supply gas to the Bawana power plant, built at a cost of Rs 4,500

crore, to facilitate generation of 750 MW of power. "Reliance Industries Ltd has agreed to supply

the gas to the plant. The nitty-grity of final gas purchase agreement is being finalised," a top

official of the Delhi government told PTI. After failing to get gas for the plant from RIL as per an

earlier understanding, the Delhi government in February had sought intervention of Finance

Minister Pranab Mukherjee, who heads an Empowered Group of Ministers (EGoM) on gas

allocation so that plant could generate 750 MW of power. The EGoM in its meeting on February

24, heeding to the Delhi government's request, had allocated 0.836 mmscmd (million metric

standard cubic metres per day) to the plant from Reliance's Andhra off-shore KG-D6 fields but

the company had refused to supply the fuel citing drop in gas production. Three turbines of the

plant with a production capacity of 750 MW were synchronised in April last year and they started

producing around 200 MW after ONGC started supplying 1.564 mmscmd gas. The production

capacity at the plant will go up to 1,500 MW within three months when three other turbines are

synchronised. The government was relying heavily on generation of power from the Bawana

plant to meet the growing power demand during the summer months. The city has been reeling

under severe power cuts due to demand-supply gap and the situation has worsened worsened

further after state-run NHPC cut 200 mega watt of supply to Reliance Infrastructure-backed

discom BSES for non payment of dues to the tune of over Rs 200 crore.

MP has enough power to support industrialisation: Chouhanhttp://news.in.msn.com/national/article.aspx?cp-documentid=250191918

Bhopal, Jun 23 (PTI) Madhya Pradesh has enough power generation capacity to support rapid industrialization, Chief Minister Shivraj Singh Chouhan has assured foreign investors."As on March 2011, the total installed power generation capacity in Madhya Pradesh was 8,998 MW," Chouhan, who is on a tour of South Korea, told reporters in Seoul, an official release here said.Chouhan, who is trying to attract investors from south-east Asia, also spoke of the incentives being given by the state to investors in large projects.He also pointed out that industrial relations in the state were harmonious, and the number of man-hours lost was the least in the country.

Date: 25 June 2012

Power duty hike has industrialists in a bindVaivasvat Venkat, TNN | Jun 25, 2012, 02.33AM IST

LUDHIANA: The industry in the city has not been privileged to utilize uninterrupted power supply but it might have to bear a 4% increase in duty on power supply. And this is not going down well with city industrialists as they voice there opinions against this consideration. 

The industry is apprehensive that such hike by Punjab State Power Corporation Limited (PSPCL) would deteriorate the condition of the already ailing industry. 

General secretary of Chamber of Industrial and Commercial Undertakings (CICU) Avtar Singh says, "While PSPCL hasn't been able to provide uninterrupted power supply to the industry over 8 years, the government is considering a hike in electricity duty from 13% to 17%. Not to mention the 12.5% entry tax on diesel generating sets and 5% electricity duty from captive consumption from any source." 

He adds that PSPCL is making it tough for the industry in the state to survive with enormous taxes, far from competing with national and international industry. 

Singh says the policies framed by the PSPCL are anti-industry as power is being supplied at exorbitant rate when compared to other northern states. "You can't hope any new industry to set base in the state when the taxes and duties are imposed every now and then," he adds. 

'Duty hike adding burden on industry' 

Industrialists in the city are up in arms against Punjab State Power Corporation Limited (PSPCL) decision to impose 4% hike in duty on power supply. 

CICU joint secretary Upkar Singh says the medium, small and micro enterprises (MSME) are in a fix with their sole concern being survival in this competitive market. "Soon after a tax free budget, the Punjab government is set to levy hefty property tax on industrial, commercial and residential property. Industrial plots already have a house tax imposed on them, so additional property tax is only adding burden to the industry," he says. The joint secretary added that they have requested chief minister of the state not to impose property tax or hike the electricity duty in order to provide respite to industrial sector.

Delhi Discoms to push for steep hike in tariffMONDAY, 25 JUNE 2012 09:07 HARIKUMAR B

The new power tariff is expected early next month, and recent developments indicate that private discoms are pushing for a steep hike in domestic tariff. The Reliance-backed BSES discoms were in the spotlight last week for defaulting in payments to at least three generating companies, and have stopped getting supply from one. Sources said all this has led the BSES discoms to pursue their case for a hike with the regulator.

The timing is significant as the city's power demand is touching a new high almost every other day. Delhi Electricity Regulatory Commission is also on the verge on announcing the tariff, making last-minute changes. The BSES discoms have put the blame for defaults squarely on "unrealistic tariff", which they say has plunged them into a financial crisis. A source said the discoms deserve the hike that they have been claiming for and that without it the city could face blackouts.

Old power projects to be renovated in UttarakhandPTI | 09:06 PM,Jun 24,2012

Dehra Dun, Jun 24 (PTI) In a bid to meet power demands, old power projects of Uttarakhand

would be strengthened to increase their capacity under Renovation, Modernisation and

Upgradation (RMU) programme. UJVN Limited Chairman Subhash Kumar said he had recently

talked to Union Power Secretary P Umashankar in this regard and he had given his consent for

RMU of Chhibro Khodri, Dhalipur, Dhakrani, Kulhal and Tiloth-Maneribhali phase-I projects. He

said presently 20,290 million units of power are being generated from these projects and an

additional 250 million units of power would be generated after completion of RMU of these

projects. In this regard, Kumar pointed out that in 2005, an MoU was signed between Power

Finance Corporation (PFC) and a German company KFQ with the consent of the centre for RMU

of these projects but no progress was made since then. He said he had discussed the matter

with Union Secretary and that he had assured to get it approved from Finance Ministry. Kumar

told the Union Secretary that at a time when work on hydro-power projects on river Ganga and

Bhagirathi is stalled, it was all the more important to renovate and modernise the existing

projects to meet the power demand of the state. The Union Secretary also promised to provide a

loan of Rs 600 crore in easy instalments to the state for the purpose.

Solar power developers in legal tangle with Gujarat Govt

CHENNAI, JUNE 25: Three solar power companies are in a legal tangle with the Gujarat Government over the issue of ownership of the companies that are putting up the projects. All the three – Azure Power (Gujarat), Millennium Synergy and ESP Urja – are wholly owned by American solar power developer SunEdison.

The point under dispute is whether or not these three companies are in breach of a covenant of the power purchase agreement which stipulates that the “power producer shall continue to hold at least 51 per cent of equity from the date of signing of this agreement”.

Azure Power (Gujarat) and ESP Urja have a 5 MW plant each, while Millennium runs a 10 MW plant.

Gujarat’s nodal agency Gujarat Urja Vikas Nigam Ltd had issued notices terminating the power purchase agreement for Azure Power (Gujarat) and had stopped making payments for the purchased power for the other two companies.

Azure Power (Gujarat) was initially promoted by Azure Power India, a company whose various projects have been funded by the German development finance agency, DEG, the US Exim Bank and IFC (Washington).

The three companies have petitioned the Gujarat Electricity Regulatory Commission. The Commission, in its orders passed recently, has stayed the operation of the termination notice served on Azure Power and has directed GUVNL to make the due payments to Millennium and ESP Urja.

“It is unfair and unjust that the generator is not paid for the power supplied by him to the distribution licensees,” the order says.

The IFC-funded SunEdison’s contention, as spelt out in the order relating to the Azure Power case, is that it signed the shareholder agreement – for taking over the ownership of the developer – prior to the signing of the PPA.

The question as to whether or not there is a breach of the PPA with respect to the covenant relating to the shareholding pattern is yet to be decided by the Commission.

Essar Energy gets clearance for Mahan coal block in Madhya Pradesh

Essar Energy Plc said it received provisional approval for forest clearance for its Mahan coal block in Madhya Pradesh state, bringing it a step closer to start mining operations at the site. 

Essar Energy, which recently changed its accounting period, also said its core earnings for the 15-month period ended March 31 was $737.1 million. 

For the 12 months ended Dec. 31, 2010, the company reported core earnings of $697 million. 

Essar Energy's power business has been restricted by delays in securing clearances required for mining from captive coal mines adjacent to its Mahan and Tori power projects. 

"Significant further progress is still required in a number of areas and we will be continuing our dialogue with both state and central government to try and ensure this momentum is not lost," Chief Executive Naresh Nayyar said in a statement.

25 JUN, 2012, 11.01AM IST, PTI 

Meghalaya to tap its huge green energy potential in a big waySHILLONG: Taking cue from Tamil Nadu and Karnataka, power-deficit Meghalaya is going all out to tap green energy to bridge the widening demand-supply gap in the state. 

A preliminary investigation conducted by the Meghalaya Non-Conventional and Rural Energy

Development Agency indicated that the state could generate about 3155 MW of electricity through non-conventional sources of energy such as bio-mass, solar and wind energy. 

A GIS mapping, conducted by the Chennai-based Centre for Wind Energy Technology (C-WET), an autonomous institution of the Government of India, said the state is capable of tapping between 40-90 MW of power from wind energy alone, MREDA director John Rodborne said. 

The government agency in collaboration with CWET is presently conducting a feasibility study in the entire state to install windmills in at least seven selected sites across the state. 

Three Wind Turbine Test Stations have been installed in the southern slope of Meghalaya and four more will be added by year end, he said. 

These stations have been installed in Ladrymbai in Jaintia Hills district, Laitdiengsai in East Khasi Hills district and Mawiawet in West Khasi Hills district respectively. 

The other four will be set up in Skhentalang in Jaintia Hills district, Laitkynsew and Mawkynrew in East Khasi Hills district and Phodjaut in West Khasi Hills district, the official said. 

The preliminary information received from the installed centres indicated that wind blowing up the cliffs in the southern slopes of the state could be essentially tapped for almost throughout the year. 

The reason behind the idea of having wind-power project is because it is one of the most environment friendly means to generate electricity, Rodborne said. 

The time taken to set up a wind power project is also shorter as compared to the time taken to set up a conventional thermal power plant.

MahaGenco takes Coal India, arm to competition tribunalSeeks Competition Commission of India probe into? abuse of dominance? by CIL, Western Coal FieldSanjay Jog / Mumbai Jun 25, 2012, 00:49 IST

Coal India’s “dominant and monopolistic” position in relation to production and supply has been challenged at the Competition Commission of India (CCI). The Maharashtra State Power Generation Company (Maha-Genco) has complained to the country’s apex competition regulator, pressing for an investigation against the Kolkata-headquartered Maharatna for “abuse of dominant position”.

In its petition, MahaGenco says the mining entity’s alleged misconduct can be “established” at two levels. One, at the time of executing a contract for coal supply, and, two, while implementing the terms of any contract and effecting supply to the beneficiary thereunder.

The state-owned power generating company, India’s second-largest, has made CIL and its subsidiary, Western Coalfields Limited (WCL) respondents in its petition.

MahaGenco managing director Subrat Ratho confirmed the 2005-founded company having moved the CCI against CIL, the world’s largest coal miner. “In our petititon, we have submitted that CIL’s abuse of its dominant position takes place when coal companies become reckless and consistently supply inferior-quality coal to the detriment of the purchaser,” he told Business Standard.

“The FSA (fuel supply agreement) does not protect the purchaser on the issue of poor quality of coal.”

As much as 1,02,863.38 Mw electricity generated in the country is based on coal, according to Ratho. “This is 84 per cent of the total generation capacity,” he added. Maha-Genco produces 63.4 per cent of the total amount of electricity generated in Maharashtra.

The power produces argues that it is not any commercial activity that has helped the country’s top coal companies vest a dominant position in the market. “Rather,” Ratho claims, “they have acquired it by virtue of a statutory scheme and the policy of the (Union) government.”

What MahaGenco now wants CCI to do is examine whether the country’s dominant coal companies are abusing their position, and whether the power generators have a resultant prejudice in favour of entities like CIL and WCL. It has stressed the need for an investigation into the general body of consumers in India. “The contracts under which coal is supplied has to be examined so as to protect the interest of the power generators and the consumers,” Ratho notes.

CIL and WCL, both founded in 1975, have “abused their dominant position” to make huge profits at the cost of electricity consumers, according to the MahaGenco petition. The 2010-11 report published by WCL says the Miniratna CPSE that owns 84 coal mines in Maharashtra and Madhya Pradesh had achieved its highest turnover of Rs 7,033 crore, registering an increase of Rs 325 crore over the previous year’s Rs 6,747.63 crore.

Further, MahaGenco says the instance of abuse can be reckoned from the “lopsided and redundant” process of joint sampling provided under the FSA. Joint sampling is a “sacrosanct” right of the purchaser, in order to verify and examine as to the certainty of the quantity and quality of the coal supplied to it, it notes.

“In the absence of proper protocol of joint sampling, there are chances of degradation of the quality of coal, including the size of coal and physical quality,” according to the petition. “Denial of such right directly or indirectly would lead to the effect of frustrating the objective with which the FSA has come into existence.”

MahaGenco has prayed that Coal India and WCL be asked to instal adequate number of auger sampling machines to ensure adequate mechanisation of the collection and sampling.

The two top companies should also be asked to instal adequate number of crushers to ensure that the coal was crushed to the size of 250 mm as required under the FSA. Also, they should be asked to set up adequate capacity for working coal the earliest, adds the petition.

Morgan Stanley to buy wind energy company Continuum for Rs 1200 cr

Sabarinath M, ET Bureau | Jun 25, 2012, 11.01AM IST

MUMBAI: Morgan Stanley Infrastructure Partners, an arm of the US investment bank, has agreed to pay Rs 1,200 crore to buy a majority stake in a wind energy firm, highlighting the increasing interest of US private equity firms in Indian renewable assets. 

Singapore-based Continuum Wind Energy, promoted by IIM-Ahmedabad classmates Arvind Bansal and Vikash Saraf of Essar Group, runs wind energy farms in India and will issue preference shares to Morgan Stanley to be converted into equity at a later date, a banker close to the transaction said. The purchase will be equivalent to more than 50% stake in the energy firm. Mumbai-based o3Capital advised on the transaction. Bansal and Essar Group director Saraf founded Continuum in 2010 along with banker Gautam Chopra and former Wipro and Asian Pulp and Paper executives Sukant Gupta and Ashish Swarup. 

While Bansal, Saraf, Chopra and Gupta are part of the energy firm's top management, Saraf, the head of M&As in Essar Group, plays a non-executive role. The company started the wind power business by acquiring Kutch-based wind farm assets of European power generation major Vestas. Continuum Wind Energy will use the money to expand its business. 

Coal India hikes prices in select Western blocks by 10-15 per centPTI Jun 24, 2012, 12.32PM IST

NEW DELHI: State-run CIL has hiked the prices by an average of 10-15 per cent for non-coking coal mined from selected blocks in Western Coalfields.

The development comes after Coal India (CIL) rolled back the hike in prices of coal under its new pricing mechanism in the wake of protests by consumers.

Sensex16882.16 90.35 (0.53%)

Date: 26 Jun. 12

Dikshit hints at power tariff hikeNew Delhi, Jun 25, 2012, DHNS:

After paying more for fuel, residents may have to spend more on electricityPeople who are yet to recover from the impact of recent hike in fuel prices, should now brace themselves for increase in power tariffs. Chief Minister Sheila Dikshit on Monday hinted at increasing the power tariffs in the national capital soon. 

“The power companies do not have money and something will have to be done about it,” said Dikshit reacting to media queries about power companies demand a hike in power tariffs. 

The Chief Minister did not elaborate any further. 

If and when the new tariffs are announced, it will be the third increase in the power tariffs in the past ten months. 

The power distribution companies in Delhi are demanding increase in power tariffs as power generating companies have hiked their prices. 

Meanwhile, Delhi BJP strongly opposed the decision of Delhi Electricity Regulatory Commission (DERC) to recover different rates for peak hours and non- peak hours in the capital. 

“Power companies are looting the consumers in various ways. It earns profit by selling power of

Delhi’s share to other states and keeps the consumers of Delhi in darkness although power is available in Delhi.

Now, the power companies have proposed new method to earn more profit. Delhi Government and DERC have agreed to their new method,” said Vijender Gupta, Delhi BJP President on Monday. 

With effect from 1st July, 2012, the power companies will supply power to industrial and domestic consumers at different rates. 

According to the decision the period between 3 pm to 12 pm will be considered peak hours and after 12 pm to 6 am will be considered as non peak hours. 

Different rates will be recovered from consumers during the specified periods.

Discoms irked at delay in new tariff order

The Hindu, 2012-06-26

“The wait adds to pending dues; aggravates financial problems”

The Capital’s power distribution companies which are unhappy at the absence of a “cost reflective tariff” are equally sore over the delay in announcement of a new tariff order by the Delhi Electricity Regulatory Commission. The wait for the new tariff order, the discoms claim, adds to their pending dues and further aggravates their financial problems.

“Each additional day adds to our outstanding dues and our debts increase. Ideally, the tariff should be revised in the beginning of the year so that the discoms can pay off their dues. The consumers too benefit as the debts are paid off on time and there is no additional liability that has to be passed on to them as interest of the previous dues,” said a senior official.

On Monday, Chief Minister Sheila Dikshit announced that the tariff orders will be issued by the end of the week and also indicated that a hike is in the offing.

But discom officials said that a delay in announcing the revised tariff has severely affected their credibility with the banks. “Banks are already refraining from giving loans to discoms, but in our case, we suffer more, because the lenders realise that Delhi has not had a cost reflective tariff in several years and the repayment of loans is more difficult for the companies,” said the official of another discom.

A power department official said as per the rules, the DERC should announce the tariff within 120 days of the filing of the annual revenue requirement petitions by the discoms. “This year the petitions were filed by first week of February, so the tariff orders should have been out by now,” said a discom official.

Discoms have been petitioning for a hike in power prices for a long time. Citing increasing fuel costs and other over heads as reasons, the discoms have been critical of the DERC for not issuing tariffs that take into account the rising costs of power generation and purchase.

EQUITY

All three discoms have already sought equity infusion by the Delhi Government and their parent companies to pay their creditors. The companies claim, that banks and other lending agencies have not been forthcoming with loans, keeping in view the discoms’ poor financial condition.

BSES, for instance, was supposed to get a loan of Rs. 4,000 crore from a government owned bank, but has managed to get only half of the assured amount, even after it met the loan conditions and raised Rs. 1,020 crore from equity infusion.

“The rest of the amount that was supposed to be syndicated from the other banks could not be raised, owing to the companies’ current poor financial state,” said an official. A senior official of the DERC said the order is being finalised and will be announced soon. “The companies have sought a moderate hike as compared to the previous years’ petitions. We have studied their demands and will soon come out with a tariff that will be fair.”

The official said the regulatory assets have already been recognised last year and there will be further clarification this year.

Government sets up panel to review power projects on GangaNitin Sethi, TNN | Jun 26, 2012, 05.29AM IST

NEW DELHI: The Prime Minister's Office has constituted an inter-ministerial committee headed by Planning Commission member B K Chaturvedi to review existing and ongoing hydroelectric projects on Ganga and its tributaries. The committee has been tasked to submit its report in three months. 

The panel will recommend the flow that should be maintained in the Ganga and its tributaries. It will also suggest how the existing power projects should be altered to achieve the required flow keeping in mind the impact on tariffs. It will also review the environmental clearance granted to existing and upcoming projects and suggest what changes need to be made to the conditions laid down for those who get the nod. 

The committee includes representatives from the ministries of environment,

power, and water resources and other authorities and research institutions. From outside the government, thePMO has chosen director general of Centre for Science and Environment Sunita Narain, former professor of IIT-BHU and mahant of Sankat Mochan temple at Varanasi Virbhadra Mishra and head of Tarun Bharat Sangh Rajendra Singh. 

The committee has been asked to take into view the existing reports of institutions like IIT Roorkee and Wildlife Institute of India and has been empowered to call any government official or other experts for consultation as well. 

The panel was set up after intense pressure from some Hindu religious leaders and activists, including Rajendra Singh, demanding greater action by the government to maintain the flow and purity of the river. The PMO held several parleys on the issue after the religious leaders warned of upping the ante in the coming months. 

While the government also considered the possibility of upgrading the existing National Ganga River Basin Authority to the level of an independent commission along the lines of the NationalHuman Rights Commission through a new law, that has been put on the backburner with the PMO keen to set up the committee under Chaturvedi. 

Narain and Singh are also members of NGRBA, a meeting of which was last called with activist G D Agarwal sitting on a hunger strike against government inaction.

Power cos hope for policy to ensure fuel availability: APPPublished on Mon, Jun 25, 2012 at 11:41 |  Source : CNBC-TV18

Updated at Mon, Jun 25, 2012 at 12:35  

The Prime Minister's Office (PMO) on Friday had stepped in to resolve the issue of fuel supply pacts between Coal India and the power companies. Earlier, Coal India had said that the current production plan would not allow the PSU to sign Fuel Surcharge

Adjustments (FSAs) above the 65% trigger level. However, the PMO agreed to increase the trigger level to 80%.In the latest development, the PMO concluded that a 65% trigger level would be maintained for the first three years. Coal India has been directed to increase the trigger level from the fourth year by 65-80%. In an interview with CNBC-TV18, Ashok Kumar Khurana of Association of Power Producers said that whether the trigger level is set at 65% or 75%, it is very important to align the coal and power sector regulations.According to Khurana, the government must reassess the situation and come up with a plan that could resolve the problems associated with balance coal required for meeting the normative requirement of 65%."Otherwise, you reduce the normative requirement to 65% because if you take 65%, which is now a decision, you meet a plant load factor (PLF) of about 55%. That gives you a gap of 30% of PLF to meet your normative requirement. Now this requires a concrete plan of bulk import of coal and the pricing structure and bringing the coal sector in alignment with the power sector. Otherwise, all the assets, post 2009, would be stressed and slowly start getting into the NPA side, creating systemic risk for the banking sector too," explains Khurana.On the whole, the power producers are looking for a correct policy directive by the ministry of power and coal that will ensure certainty of fuel availability for the power developers. Morevoer, it will help them to align their power production and plans accordingly, clarified Khurana.Below is the edited transcript of the interview on CNBC-TV18. Also watch the accompanying video. Q: Would 65% trigger be acceptable to independent power producers or do you think it would be a negative outcome for them?A: My idea is whether you have 65% or 75%, the real crux of the matter is that you need to align the coal sector with the power sector regulation. Even when you add 80% over there, the developers could not have met their normative level of plant factor which is about 85%.We are asking the government to reassess the situation correctly and come up with a concrete plan indicating the coal level they will give us and how they will resolve the balance coal which is required to meet the normative requirement. Otherwise, you reduce the normative requirement to 65% because if you take 65%, which is now a decision, you meet a plant load factor (PLF) of about 55%. That gives you a gap of 30% of PLF to meet your normative requirement.Now this requires a concrete plan of bulk import of coal and the pricing structure and bringing the coal sector in alignment with the power sector. Otherwise, all the assets, post 2009, would be stressed and slowly start getting into the NPA side, creating systemic risk for the banking sector too.Our request to the government is, if you think Coal India cannot supply beyond 65% and they are committed to supply 65%, then find out the correct policy and the regulatory measures to meet the balance 30% for normative ability. Come up with a concrete plan, so that developers are certain and can go ahead with their production plan.Along with that consumers can also get power, for which power plants have been created. Today, we have about 35,000 MW of power plants, which cannot produce their full output because of fuel shortage that is coal and gas.

  Q: So would it be fair to say that independent power producers would not be very keen to sign FSAs with Coal India under these kind of norms which have been proposed last week unless they hear clearly on imported coal norms and also issues on price pooling are sorted out?A: They will be willing to sign. But, one is Coal India supplying you domestic coal, other is the balance which comes to the ministry of power. If the ministry of coal, after discussion with PMO as per their production limitation say, they cannot go beyond 65%, it is now for the ministry of power to sit down and decide the power regulations.You cannot force Coal India to supply more than what they supply. Then they will only make promises but will not supply. At least now they are sure they will supply 65%. So it is a correct time for the regulators and decision makers to sit down and decide for the next four years, what would be the power regulatory framework.They have two choices. They can bring down the normative factor or they can go for bulk imports and have a pool pricing. Therefore, all tariffs would need to be revised upwards. But they must keep in mind one thing that today also, a week back when there was acute power shortage in the country, there was power available in exchanges. There were more sale bids than buy bids.Therefore, consumers are the Discoms who have a threshold beyond which cost they will not buy power. The government has to sit down and take an informed decision on pricing of power, pricing of coal and the quantum of coal.Q: What are the chances though that this 65% change is up for debate because suggestion has come from the PMO. They are also equally frustrated about the fact that FSAs have not been signed between Coal India and power companies. Is this open to debate or this is what the PMO has set down as the new rules of the games?A: We only got information from the press reports. We are actually waiting because the press report also says that after 65%, PMO asked Coal India to go for bulk import and go for price pooling. My idea is that all these factors have been discussed in the PMO and now we are looking for a correct policy directive by ministry of power and ministry of coal, so that the power developers can have certainty of fuel availability and can have their production plans and produce power.Q: A separate issues seems to be that the government is now actively considering import duty, something which they considered earlier but didn't go through. Have you heard of any headway on that front? What kind of quantum could we be looking at because the suggestion is it could he as high as 19-21% now?A: We understand from newspaper report that there was a meeting in PMO and the Ministry of power has been asked to prepare a cabinet paper for that. But my idea is this is a wrong timing for the decision. For any decision, you have to take a holistic view. The timing, whom it will benefit and who will be adversely impacted by it?Today, we already have most of the power assets post 2009 completely stressed. Now if you have duty imposition of 21%, you are increasing the capex of power plants by 21% and in return the consumer pricing over there. Secondly, when this committee report came up for protection of domestic industry, the rupee was at 45 to a dollar.The domestic manufacturers have already implied protection of more than 28% now. It is not a correct time to introduce the duty structure only for couple of domestic

manufacturers. The outcome of this duty would be a rise in power prices. Today, only at present cost structure, there are no takers of power from the exchange. It would have very adverse implications for the power sector producers and the consumers.Therefore, we have already sent our request. We think that the government will think and postpone this decision to a correct time when the rupee has come down to 45-44 levels and we have adequate coal and the import prices have also fallen down.  

Munda-Hemant spat delays power projectSanjay Ojha, TNN | Jun 26, 2012, 05.31AM IST

RANCHI: The difference of opinion between chief minister Arjun Munda and deputy CMHemant Soren over allotment of work for construction of power transmission network in the state has resulted in an inordinate delay in execution of the project.

While Munda is in-charge of the state energy department, Hemant holds the additional charge of finance department.

The project has failed to take off even after it was cleared by state cabinet in January and a memorandum of understanding (MoU) was signed between the state energy department and PowerGrid Corporation of India Limited (PGCIL) in February.

Sources in energy department said the chief minister prevailed over his cabinet colleagues after almost a year's effort in putting an end to the conflict between various departments over allotment of work for construction of power transmission line and the council of ministers approved to nominate PGCIL as consultant.

The PGCIL was entrusted with the task to invite companies to construct transmission line network and also supervise the progress and quality.

"The total cost of the project was estimated to be around Rs 1,416 crore. The PGCIL was to get 11 per cent of the project cost as consultancy and supervision charge which comes to around Rs 150 crore. The money was to be given in advance but the file is still with the finance department. Even after four months of signing of MoU, the finance department has not taken any decision on the matter," said a source.

"If the file remains with the finance department without clearance for long then the power crisis in the state will continue for another two years because from the date of allotment of work it will take the company to complete the project in at least 20-24 months. At the same time, we will not

be able to draw power from the private producers who are coming up with plants in the state in absence of transmission line," the source said.

State energy secretary Vimal Kirti Singh expressed ignorance about the reason behind the delay in finance department in clearing the file.

Officials in the finance department, who didn't want to be named, said the file had been sent to the minister for his consent.

"It is pending with the minister and only he will be able to say anything about it," said an official.

CERC clears power corridor for StateSubhash Chandra, N S Bangalore, Jun 25, 2012, DHNS :

Evacuation of power purchased from other states has been made easy with the Central Electricity Regulatory Commission (CERC) directing a free corridor for Karnataka till June 2013.

The State was finding it difficult to wheel the power it purchased from other states for want of a corridor. 

The Power Corporation of Karnataka Limited (PCKL) had filed an application before the Commission to implead itself in a petition filed by Andhra Pradesh seeking availability of corridor to evacuate the power it had purchased. 

Tamil Nadu had purchased power from National Thermal Power Corporation (NTPC) and was trying to override or block the corridor.

“The impleading application was filed in March 2012 after we realised that the power purchased from other states was not reaching our consumers due to non-availability of corridor. Now the matter has been resolved and we have a free corridor to evacuate the power purchased by us till June 2013,” said Naveen Kumar, Managing Director, PCKL. 

Sources in the PCKL said Tamil Nadu had contended that having purchased power from NTPC, it had overriding facilities with the Power Grid Corporation Limited. However, the PCKL claimed that it had booked the corridor in advance and hence had a right over it. 

The favourable order by the CERC enabled the State to keep power problems at bay during summer. The power supply in most parts of the State was near normal without severe loadshedding unlike last year.

A senior officer from PCKL said it was probably first time that the State was able to meet its peak hour demand during summer. He said an agreement had been entered with Himachal Pradesh government to get 400 megawatt (MW) of power. 

An agreement had been entered into with Jindal Steel Works to purchase 500 MW till 2013. Naveen Kumar, MD, PCKL, said the Karnataka Electricity Regulatory Commission had approved the power purchase agreements periodically.

Tata Power seeks nod to produce in Bhutan and sell to India

The Hindu, special correspondent, 26 Jun. 12

Tata Power has urged the Central Government to formulate a policy that allows a private company like it to undertake large capacity hydro electric projects in Bhutan and sell power generated in that country to India.

Tata Power has recently had discussions with Bhutan Government officials for development of larger projects. While the response from the Bhutanese Government has been quite positive, the company has been advised to take up the matter with the Indian Government so that Tata Power could be permitted to undertake co-development in Bhutan, in addition to the public sector undertakings of the Indian Government.

Under the current policy, such development support is routed through NHPC or other PSUs (public sector undertakings) which have been exclusively mandated by the Indian Government for development of hydro power projects in Bhutan. Similarly, PSUs alone are mandated for sale of power in India.

“Tata Power has been associated in the co-development of Bhutanese hydro electric project at Dacachu (125 MW) and is mandated to bring in 100 per cent of the generated electricity to India. The project is likely to be commissioned in 2012-14. Similarly, long distance 400 kV power evacuation systems between Bhutan and India to transmit power from Tala hydro electric project has been constructed and operated by Tata Power under joint venture with Power Grid Corporation of India Limited,” the company has pointed out.

Tata Power said it was, therefore, important that a recommendation in this regard should come from the highest level to explore all possibilities in this direction.”.

Konaseema Gas power heads for debt recastCredit profile turns weak as inadequate gas supplies hit operationsAbhijit Lele / Mumbai Jun 26, 2012, 00:30 IST

Woes of power sector seem to be just growing by days. Andhra Pradesh based 460 MW Konaseema Gas Power, a project promoted by VBC group, is heading for corporate debt restructuring.

Senior public sector bank executive said the power project has been hit by the delay in the availability of natural gas. Besides, long idling of plant (over three years) has also impacted the company. It would be taken for consideration this week.

The total debt exposure of lenders is in excess of Rs 1,400 crore. With IDBI Bank having exposure of over Rs 297 crore and Power Finance Corporation just over Rs 360 crore.

Konaseema is natural gas based combined cycle power plant at Ravulapalam, near Rajahmundry in the East Godavari district. The capital cost of the project is Rs 1,800 crore ($ 450 Million), according to company website.

M S P Rama Rao, its managing director, said Gas supplies are down. The government has prioritized gas supplies with fertiliser projects coming on top. The power plant gets 30 per cent of required supplies.

The company has been paying interest on loans on time. “We are seeking payment holiday on principal for two years. There is no demand for any scarify”, he said.

The Plant consists of two gas turbine generators from SIEMENS of Germany. The Gas turbines have the capability of firing liquid fuel as alternate fuel in exigencies.

Konaseema has power purchase agreement with AP-based power companies for paying conversion charges of 90 paisa per unit and Rs 1.80 per unit for fuel. The merchant power producers get higher amount for fuel costs, giving them edge over us, Rao said.

The gas supply scenario is expected to improve only after two years once port terminals (for imported natural gas) at Kakinada and Gangavaram on East Coast become operational.

IL&FS Investment Managers and AMP, both private equity funds, has made investment into the Konaseema project. They hold under 10 per cent stake in the company.

Power Ministry may finalise amended bidding norms for new projects this week

PTI

NEW DELHI, JUNE 26: The Power Ministry may finalise the amended bidding guidelines for new electricity generation projects this week, a move that is expected to fast-track the award of new thermal plants.

In an inter-ministerial meeting on June 28, the Ministry of Power is likely to finalise the standard bidding documents for the upcoming thermal power projects, including the ultra mega power projects, sources said.

“In the June 28 meeting hopefully, we would be able to finalise the documents and then take a legal view,” a Power Ministry official said.

The new norms are likely to address the contentious issue of passing on the increase in raw material price to the end consumer.

Many private power producers have approached the government to allow them to increase the tariff of imported coal-based projects after Indonesia linked its fuel prices to the international market in September last year.

Ultra mega power projects

Various private power firms, which source coal from the island nation, are now feeling the heat from rise in prices of the fuel. Once finalised, the documents will pave way for inviting preliminary bids for UMPPs.

The government proposes to set up two more UMPPs in Orissa, one at Cheyyur in Tamil Nadu and another at Sarguja in Chhattisgarh.

The initial bids for setting up a 4,000-MW UMPP at Bedabahal in Orissa were invited in July last year and 20 companies submitted the bids. The second and final round of bidding can only take place once the new bidding documents are in place.

Project details

Power Finance Corporation, the nodal agency for UMPPs, has so far allotted four such projects.

Reliance Power has bagged Sasan (Madhya Pradesh), Krishnapatnam (Andhra Pradesh) and Tilaiya (Jharkhand) UMPPs. Tata Power is currently executing Mundra UMPP in Gujarat.

The Government plans to add 90,000-MW capacity by 2017 and these UMPPs are likely to contribute substantially for the same.

Power tariffs need to be rationalised

SHAHID HASAN, BUSINESS LINE

India faces a serious challenge, of providing secure and equitable energy resources for future growth. Being a versatile form of energy, electricity plays a key role in the country’s economic development. Mounting transmission and distribution losses and deteriorating financial health were important drivers for initiating reforms.

The Electricity Act, 2003, was, in fact, was a result of a number of good objectives. It was hoped that by creating independent regulatory bodies, the government’s age-old prerogative of designing and deciding electricity tariffs, keeping in mind its political constituencies, would come down. In other words, the new model would help operate the regulated entities on sound commercial principles and in a consumer-friendly manner. It was also expected to whittle down the huge backlog of financial losses.

EXPECTATIONS BELIED

But we have not been able to insulate the functioning of regulatory institutions from political economy linkages. As part of the reforms blueprint, it was envisaged that dependence on the government for subsidy support would come down in future. However, the results have been just the opposite. The subsidy requirements of restructured companies increased significantly in the post-reform period from Rs 14,000 crore in 2002-03 to Rs 34,000 crore in 2009-10, which is either not paid fully or on time, eventually affecting the cash flows of electric utilities.

One of the reasons for this situation is the direct or indirect unwillingness shown in correcting tariffs in the past. While prices of almost everything, including essential commodities, have gone up, electricity rates have not been revised appropriately with respect to rising cost of electricity production.

The conventional practice followed by regulators to avoid any appreciable tariff increase has been to defer part of revenue requirements by parking them as “regulatory assets”, which need to be recovered in future. Why should a consumer pay for electricity charges in future for the electricity consumed by someone else in the past? It’s only recently that some regulators have realised this problem and allowed price increase.

PRICING MECHANISM

Instead of free or subsidised power, the state should pursue a rational pricing mechanism, in combination with improved service and delivery of power. Section 61 (g) of the EA 2003 stipulates tariff to progressively reflect the cost of supply of electricity, and reduce and eliminate cross-subsidies within a period to be specified by the commissions. Fundamentally, it makes great sense, but its operationalisation in letter and spirit along with the freedom to indicate and provide subsidies to any consumer or class of consumers becomes very weak.

Of course, we can’t completely ignore some disadvantaged class of consumers in our society, but regulators are yet to spell out a roadmap for gradual reduction of cross-subsidies. It is now important to define the timeframe, rather than leave such important provisions vague.

There is an urgent need for regulators to gradually reduce the level of cross-subsidy and ensure that tariff to various consumer categories reflect cost. This should, however, not be at the cost of quality and reliability of supply. It is important to understand that if the costs are not met, the discoms will reluctant to arrange for additional power.

There will also be a significant impact on the financial viability of the utilities --- in particular, the distribution companies. All States have set up independent regulatory commissions and have also initiated a tariff revision exercise, but reduction of cross-subsidies and movement of tariffs towards cost of supply has been rather slow.

Regulatory institutions should act as a driving force for the development of sector by not only formulating a long-term vision, but also by defining the means for translating the vision into reality.

INTERLINKED ISSUES

It would also be wrong to entirely blame the power sector for its poor performance. Given its inter-sector dynamics, urgent and bold actions are also needed in other synergetic sectors, particularly in the coal industry. Of late, fuel supply, land and environmental issues have assumed significant importance, and are also being critically debated. The government should consider infrastructure sectors as a whole, and we need a better model to substitute the current system of regulatory governance.

Thus, after 21 years of power sector reforms, we still continue to have energy and peak shortages to the tune of 8.5 per cent and 10.6 per cent, respectively. Also, only two third of total households have access to electricity. There are also

concerns about availability, quality of supply and service. It is time for some serious introspection and corrective action on part of all.

(The author is Associate Director at TERI — The Energy and Resources Institute The views are personal.)

Power thefts worth 12L detected in Surat, ValsadTNN | Jun 25, 2012, 10.27PM IST

SURAT: Dakshin Gujarat Vij Company Limited(DGVCL) detected power thefts worth Rs 12.10 lakh from Kamrej, Puna, Saroli and Laskana in Surat district and Sarigam and Gundlav in Valsad district respectively on Monday.

Official sources said that the vigilance teams of the DGVCL fanned out in these areas following complaints of rampant irregularities in the electricity theft and the huge line and distribution loss.

Out of the total 304 connections checked in Surat and Valsad districts, irregularities were found from about 18 connections.

Sources said that the department has registered quality cases against one Sushila Mohan Prajapati, a resident of Laskana for taking direct service from the DGVCL's electricity pole and slapped a bill worth Rs 1.78 lakh and Hirabhai Tulsibhai of Puna for Rs 2.26 lakh for tampering with the electricity meter.

Last month, the DGVCL detected power theft worth Rs 1.17crore from the Surat, Navsari, Valsad, Bharuch and Dangs district.

"We have started a campaign against the power thieves in the region. Daily our vigilance teams are fanning out in their respective sub-divisions on the surprise checking drives," said a senior DGVCL officer.

Date: 27 Jun. 12

Power rates up by 26%, steepest rise for NorthSWETA DUTTA

Posted: Wednesday, Jun 27, 2012 at 0217 hrs IST

         

New Delhi: The Delhi Electricity Regulatory Commission on Tuesday announced a 26 per cent

increase in power tariff for all domestic consumers. The revised tariff will be applicable starting

July 1.

The raise in tariff is 24.15 per cent for domestic consumers but another 8 per cent surcharge was

added to this, taking the total to 26 per cent.

The power regulator also noted that a revised fuel surcharge will be added to the tariff after three

months.

The consumers in North Delhi will see the steepest rise at 27.88 per cent, as the area distribution

company (discom), Tata Power, till now had the lowest fuel surcharge at 4 per cent. With the

surcharge being made uniform during revision, Tata Power consumers will have to shell out

more.

Residents who were provided power by BSES Rajdhani, which till now levied a surcharge of 6

per cent, will face a hike of 25.47 per cent in their bills. Consumers under BSES Yamuna, who

paid a surcharge of 7 per cent, will be least affected with a 24.29 per cent increase.

The fixed charge for domestic consumers, getting power of up to 2kW load, has been increased

from Rs 30 per month to Rs 40 per month.

As for the cost per unit, consumers who earlier paid Rs 3 per unit for the first 200 units will now

pay Rs 3.70 per unit. With the additional fuel surcharge, it will amount to

Rs 3.997.

For the next 200 units, consumers paid Rs 4.8 per unit earlier and will continue to pay the same.

With the fuel surcharge it will come to 5.18 per unit.

Above 400 units, consumers will have to pay Rs 6.4 per unit, which will come to Rs 6.91 per unit

(including fuel surcharge) instead of the existing Rs 5.7 per unit.

The staggered slab for consumers using power up to 400 units has been removed, and a flat rate

has been put into effect.

New Delhi district, which is provided power by NDMC, has the least increase in the power tariff.

(See box)

DERC Chairman P D Sudhakar said: “The ultimate purpose of power reforms is to provide

continuous power supply to consumers. If revenue requirements of discoms are not met, they

cannot sustain by taking loans from the banks. The interest on the loans will finally become the

consumers’ burden.”

Chief Minister Sheila Dikshit said the DERC is an independent entity and is authorised to decide

power tariff. “The government has yet to receive an official communication on the new power

tariff. We will look into it after we receive a copy,’ she said.

Discoms BSES and Tata Power welcomed the increase in tariff and maintained that it will help

them meet the increasing power purchase cost, while the surcharge will help in partial recovery

of the accumulated gaps.

Power stocks: Valuations at all-time low

Only low-cost power producers would generate positive returns as further tariff hikes look unlikely

Malini Bhupta / Mumbai Jun 27, 2012, 00:06 IST

Stocks of power companies have fallen out of favour over the last one year, as fuel costs soared and demand began contracting. The BSE Power Index has fallen 26 per cent over the last year. The last three months have particularly been bad for power stocks, with the Power Index falling 29 per cent. Except Power Grid, the sector has underperformed the Sensex by a wide margin.

While the overall health of the sector has been a big overhang, a major reason for this underperformance has been the decline in margins due to rising costs. Shortage of domestic coal and the poor financial health of state electricity boards (SEBs) have been a big reasons for the sell-off through FY12. While the government has taken measures, such as improving the coal supply and raising tariffs in 23 states, thermal generators continue to see a sharp decline in the operating profit margin to sales ratio. According to a report by HSBC Global Research, “Key generators, such as Adani Power and Tata Power, have reached critically low margins and we do not expect a significant improvement in this trend over the next few years.”

The market does not see the issues pertaining to SEBs being resolved before three to four years. And, with retail tariffs in India higher than those in China and the US, another round of tariff hikes is also ruled out. This implies only those who can cut costs would be able to improve profitability.

Though coal prices have declined 15-20 per cent in the first quarter of FY13, analysts don’t expect power producers to benefit as a weak rupee has nullified the gains. Apart from high fuel cost, companies with high foreign debt are also likely to be hit by the falling rupee. An analysis done by HSBC shows the worst-affected by a high interest burden are Jaiprakash Power, Lanco Infra, Adani Power and Tata Power.

Analysts believe only those companies which can cut costs and supply power at relatively lower rates would be able to sustain profitably. According to Emkay Global, “The breakeven cost of power purchase for SEBs is Rs 2.3/unit and at Rs 2.8/unit (FY13-16) subsidy is maintained. We would look for a utility, which can supply power at these rates, making decent profits.” Some analysts are, therefore, positive on Reliance Power as it has the cheapest cost of power and huge asset values. This is followed by KSK Energy, with greater clarity on fuel supply leading to a decent project portfolio and better certainty on returns

Power cuts likely to continue for some more daysTNN | Jun 27, 2012, 01.37AM IST

HYDERABAD: Despite the onset of monsoon, there seems to be no respite from power cuts in the state. Official sources said the power situation will improve only when the hydel power generation begins. Till then, the citizens have to face the unscheduled power cuts for several hours even during the nights.

AP Transco official said while the power supply demand is hovering at 250.45 million units (MU) per day, the supply is not crossing 215 MU with the shortfall being about 35 MU. Of the total supply, thermal generation accounts for 97.69 MU while hydel power supply is just 3.95 MU. Apart from these, central power generation agencies like NTPC account for 72.96 MU, while independent power plants generate another 30.25 MU and non-conventional resources supply another 10.3 MU.

Officials said the deficit of power supply against the demand is growing for the past 10 days. Last week the gap between the demand and supply was just 15 MU, it rose to 24 MU a couple of days ago and it touched 28.9 MU on Monday (June 25).

With the deficit in power supply is on the rise for the past one week, the Transco has been imposing more power shutdowns. Official source said two hours power cuts are being imposed in the Greater Hyderabad, five hours in the district headquarters and six hours in small towns. But unofficially power interruptions are more than four to five hours in the city. CPDCL is imposing power cuts for every one hour in some areas in the name of load relief to maintain grid frequency. The situation in the surrounding and rural areas is much worse and no one can be sure when the power would go off.

"If the CPDCL maintains a schedule, we can plan accordingly. But the interruptions are completely unaware to the general public. Due to erratic supply, we are also facing acute water shortage," K Dattatri , a scientist and resident of Bairamalguda near L B Nagar said.

Citizens complain that though CPDCL has publicized the fuse call office telephone numbers there was hardly any response from many of these numbers. "Even if the fuse call staffers pick up the telephone, they were not in a position to tell when the power supply will be restored in our area," Chatla Srinivas, a government employee and resident of Warasiguda said.

Power distribution losses down to 7.8%Express news service : Mumbai, Wed Jun 27 2012, 01:36 hrs

The electricity distribution losses of the Brihanmumbai Electric Supply and

Transport undertaking has dropped from 10.5 per cent to 7.8 per cent,

general manager O P Gupta told a committee meeting on Tuesday.

Of these losses, around six per cent has been attributed to technical issues.

“The remaining one per cent may be due to electricity thefts,” Gupta said.

BEST committee member Sunil Ganacharya said cases of electricity theft

were recently reported at Antop Hill and Memon Wada. Mayor Shraddha

Jadhav had earlier raised the issue of illegal shanties stealing electricity.

“BEST chairman Ashok Patil even visited the area and checked the

electricity bills there. While places running garment machines and small

industries run a bill of a few hundreds, a maid-servant’s shanty received a

bill of Rs 1 lakh. How is that possible?” Ganacharya said.

SP corporator and committee member Yakub Memon said the problem had

not been fully addressed despite the undertaking’s vigilance department

raids.

Punjab faces 200 lakh units of power deficit, power cuts imposedHoshiarpur/Lucknow, Jun 26, 2012, PTI:

Punjab is facing a shortage of more than 200 lakh units of power daily, a senior official said here on Tuesday.

The state is consuming more than 1,900 lakh units of power as against the demand of 2,100 lakh units daily, he said. 

Chairman cum managing director of Punjab State Power Corporation, K D Chaudhary, said as a result of monsoon failure only 8 hours power supply was being given to 80 per cent grids.

Three hours power cuts were being imposed daily at district headquarters in state, he said. 

The present circumstances had forced the Powercom to impose a weekly two-day power cut for the industrial sector. 

He said the Punjab government had provided subsidy of Rs 4,200 crore to the Powercom up to March 31, 2012 to compensate it for free power supply to farm sector and BPL families. 

He added the water level in Bhakra dam reservoir had gone down to 40 feet as compared to last year due to failure of monsoon. 

Moreover, there was no pre-monsoon showers this time, he added.

He justified providing domestic power connections to the consumers in the unauthorised residential colonies at double the normal rates. 

He said after providing electric connections to such areas, the power theft had gone down considerably. 

BlacklistingUttar Pradesh CM Akhilesh Yadav on Tuesday asked officials to black-list companies supplying poor quality power transformers and metres.

“Strict action should be initiated against officers involved in the verification of such companies,” Yadav said addressing a meeting to review the power scenario in the state.

CM also directed officers to install metres on feeders through which consumers can get information about the time of power supply. 

The process to black-list 14 companies is underway and two officers involved in their verification have already been suspended, said chairman of UP power corporation, Avnish Awasthi. 

‘Banks’ exposure to power will touch Rs 5.3 lakh cr this year’Jun 26, 2012

Power sector woes might result in significant bad loans in the Indian banking system, whose exposure to this segment is projected to touch Rs 9 lakh crore in next three years, says a report.

Acute shortage of coal for power projects as well as worsening health of distribution companies (discoms) remain major worries for the sector. “The government’s and companies’ continued inability to address the challenges in the power sector may result in significant NPLs (Non Performing Loans) in banking sector over the next 2-3 years,” brokerage firm Kotak Securities has said.

the government is working on plans to restructure the debt burden of state discoms. Reuters

In a recent report, the entity noted that new power projects having a total capacity of 40-50 GW could be in danger of defaulting on their debt obligations. “We estimate the banking system’s exposure (including loans from PFC and REC) to the power sector will rise to Rs 9 trillion (Rs 9 lakh crore) by the end of FY 2015 from Rs 5.3 trillion (Rs 5.3 lakh crore) at the end of FY 2012 (19 percent CAGR in FY 2012-15E),” the report noted.PFC and REC are leading state-run lenders to the power sector.

Pointing out that the central government’s effort to address coal-supply and pricing challenges “is quite timid,” it said that a sharp rise is expected in NPLs in power generation sector as well as increase in SEB (State Electricity Board) losses over the next 2-3 years.”We see several new power generation projects as being unable to meet their debt obligations.

Banks may not recognise them as NPLs under various guises but the magnitude of the problem is too large for any quick-fix solution,” it said.

Even though, the government is taking initiatives to ease fuel supply scenario for the power sector, many existing and upcoming projects are faced with severe coal shortage.

Amid rising concerns about defaults in the banking system, the government is working on plans to restructure the debt burden of state discoms. The precarious health of discoms has been mainly blamed on lower tariff realisation and efficiency issues.

PTI

Reliance Power’s plant kicks offTNN | Jun 27, 2012, 05.29AM IST

NEW DELHI: Reliance Power said the first two units of its 600 MW Butibori thermal power plant in Maharashtra have started generation.

"Reliance Power has synchronised the first of two units of its 600 MW Butibori thermal power project near Nagpur in Maharashtra," a statement said. Synchronisation means that electricity generation has started but the station is yet to be connected to the national grid. pti

R-Power has invested Rs 3,600 crore in the Butibori plant.

Project to generate power from bamboo on the cardsBangalore, June 26, 2012, DHNS :

Project proposed in Kanakapur on a pilot basis

The generation of power from bamboo will be a reality soon if the Forest Department has its say. 

Forest Minister C P Yogeeshwara told reporters on Tuesday that a proposal had been submitted to the government to take up the project on a pilot basis in Kanakapur taluk.

Land in some parts of Kanakapura had become unfit for agriculture due to flow of sewerage water from Bangalore. Bamboo plantation can be taken up on such land and power can be generated by setting up gasifier plants, he said.

The minister said he had recently visited Mundargi in Gadag district where a bamboo-based gasifier plant was being set up and collected details about the project. 

He said he had already appraised Chief Minister D V Sadananda Gowda of the proposed project and had received a positive response from him.

According to the minister, about 40 tonnes of bamboo can be grown in an acre of land. About 5 mega watt of power can be generated from about 40,000 tonnes of bamboo.

Per unit cost of power generation under this method is Rs 1.50. Bamboo can be cultivated anywhere in the State and in all seasons. 

“If the government can take up bamboo cultivation on dry and barren land and set up a gasifier plants in all districts, the State will become free of power shortage problem,” he said.

He said he will soon urge the Centre to consider bamboo as a plantation crop so that those who take up bamboo cultivation can get subsidies.

Power Ministry may finalise bidding norms for new projects this weekPTI Jun 26, 2012, 11.21AM IST

NEW DELHI: Power Ministry may finalise the amended bidding guidelines for new electricity generation projects this week, a move that is expected to fast-track the award of new thermal plants.In an inter-ministerial meeting on June 28, the Ministry of Power is likely to finalise the Standard Bidding Documents (SBDs) for the upcoming thermal power projects, including the ultra mega power projects(UMPPs), sources said.

Power consumers' body protests against proposed hike in tariffTNN | Jun 27, 2012, 12.35AM IST

LUCKNOW: The UP Rajya Vidyut Upbhogta Parishad, on Tuesday, petitioned the UP Electricity Regulatory Commission (UPERC) lodging its protest against the proposed rise in power tariff.

The parishad, in its memorandum submitted with UPERC chairman Rajesh Awasthi said that had the power corporation resorted to recovery of revenue then there would have been no need to raise the power tariff.

President of the parishad, Avdhesh Verma said that the total revenue loss to the UPPCL has been to the tune of Rs 24,000 crore, which if recovered would have been sufficient to bail out the corporation from an ailing revenue situation.

27 JUN, 2012, 03.20PM IST, SHUCHI SRIVASTAVA,ET BUREAU 

Regulatory issues impacting power industry in India: Essar EnergyMUMBAI: London-listed Essar Energy says that regulatory and coal supply issues have impacted the entire power industry in India. The company said it commenced commercial operations at Salaya I (unit I) 600MW, in April 2012 and at Salaya I (unit 2) 600MW, in June 2012. 

"Overall, therefore, we have added 1,580MW of installed capacity since the start of 2011. This takes Essar Energy's total operational capacity to 2,800MW. However, regulatory issues continued to cause delays, notably with regard to Government clearances to begin mining operations at the coal blocks previously allocated to Essar Energy's Mahan and Tori power projects." 

The company also said, "The Indian Association of Power Producers and senior executives from several member power companies, including Essar Power, held a meeting with the Indian Prime Minister and his ministerial colleagues to discuss options for resolving a number of the issues. 

These included the need for much improved supplies from Coal India, the state-owned producer, and long delays in decision making on approvals to allow mining to begin at captive coal blocks previously allocated by the Government to power projects. These delays have particularly involved environment and forest clearances." 

Against this backdrop, Essar Energy believes that its decision in February this year to progress construction of three of its later stage coal-fired power projects only against the achievement of certain milestones was the right decision allowing us to manage risk and focus on completion of its other under construction projects, said the company.

Tariff hike trends augur well for power sector: Rel InfraPublished on Wed, Jun 27, 2012 at 10:23 |  Source : CNBC-TV18

Updated at Wed, Jun 27, 2012 at 15:17  

In a move that's seen benefitting stocks likeReliance Infra   and Tata Power , power tariffs in Delhi are set to rise effective July 1. Domestic prices will go up by 24% and commercial prices will go up by 19.5%.Additional charges of Fuel surcharge will put a further burden on the bills. The Delhi Electricity Regulatory Commission (DERC) has said there won't be another hike in prices for the next two to three years.In an interview to CNBC-TV18, Lalit Jalan, chief executive officer, Reliance Infra says low tariffs were leading distribution companies or discoms to face a loss of almost Rs 2 a unit which was leading to a loss of Rs 20 crore a day.He expects the hike in power tariffs to help pare losses that companies were facing in Delhi. In the last 10-years, Jalan says tariffs have been hike by over 36%. This trend of hiking prices definitely augurs well for the power sector, he adds.

Below is an edited transcript of his interview. Watch the accompanying video for more.Q: How much will this help narrow your losses? Could you take us through what the gap would still be after this tariff hike takes effect?A: With the tariff increase I think the current bleed that the discoms were facing of almost Rs 2 a unit which was leading to Rs 20 crore a day, that bleed for the Delhi discoms together should get bridged. But the old unrecovered dues would still take a few years to be recovered through tariff.Q: Has there been a promise from the regulator with a plan for you to recover the past dues or there is no concrete plan yet?A: There is a concrete plan. The detailed tariff order is not available yet, but in the short media release that we have seen, they have given us an 8% surcharge on the tariff towards old unrecovered dues. This is an exemplary step. This is totally inline with the directions of the Appellate Tribunal of November 2011 of giving essentially three things, a cost effective tariff which I think this tariff order is, second is a full fuel power purchase pass-through which also this is and third is a regulatory asset recognition and to have a path for it. We will have to see the detailed order but this is totally compliant to the Appellate directions to all the regulators in the country.Q: Prices have been hiked in August last year, then in February, then in May but this time around the DERC order also seems to suggest that now you cannot raise tariffs again for the next two to four years. Why is that?A: No, I haven’t seen that piece. If you really see, 80-90% cost of any distribution company is made up of power purchase costs and in the last 10-years that we have been running the Delhi discoms, the power purchase costs have gone up by more than 300%. 100% of the power in Delhi is bought by central and state utilities. The biggest supplier to us is NTPC which supplies 70% of power to Delhi and 15% is by the state gencos or power generating companies.This entire tariff is regulated by the state regulator or CERC (Central Electricity Regulatory Commission). So we have almost no control over power purchase costs. These have gone up by 300% over 10 years. However, owing to a period of five-six years when the tariff in Delhi was not allowed to increase at all, the tariff increase in the last 10 years has barely been 36%, leading to huge under-recoveries which are what has been the problem.If you look at the cost elements, there are two elements; one is the commercial losses which at the time of privatisation were in excess of 40%. They have been bought below 5%, saving Rs 30,000 crore to the Government of Delhi. The second is the operating costs. These have actually come down by 40% in spite of inflation at 7% a year for the last 10-years. So, by all these savings, the efficiency has gone to the government and the consumers. In fact, today the cost of power in Delhi is less than half that of Gurgaon.Q: Tariffs have been hiked in other places as well including states like Tamil Nadu. Is this something that is going to spread to other states? Will the quantum will be as large as Delhi has announced because it’s the largest in the NCR?A: In Tamil Nadu it is 37% which was announced a month back which was larger than the 21% that has happened in Delhi. What I have seen is that the trends have been good. Having seen no increases for many years FY12 saw about 16 states giving new tariff. FY13 in the current year this is the 14th state giving the tariff. Many tariffs have

been in excess of 15-20%. States like Bihar, Chhattisgarh and Orissa have given tariff increases both years. What is happening is SEBs have no ability to pay. If you cannot pay, you will have to force load-shedding.Q: By when do you think distribution companies like you can get into profitability? Your losses are getting cut, but looking at the shape of your past dues, when do you think recovery can happen and you could become net positive?A: I think we will just go through the details o the tariff order. This order should give us the regulated profits for the year, if I do not include my losses of the previous five years. Those we have shown in our books as regulatory assets so that the year-to-year we do end up showing a little profit. We will recognise the actual state of the operating performance of the discoms. But the regulatory asset recovery will take a few years.