NHAI to float bids for monetising 10 national highway projects by April
Buoyed by response from institutional investors from the Middle-East, Canada and the US, NHAI plans to come out with bids for monetisation of 10 out of 75 public-funded national highway projects in the first phase. The move follows the government’s decision in August last year authorising the National Highways Authority of India (NHAI) to monetise public-funded highway projects in the country. “Bids are likely to be out by April inviting tenders for monetisation of at least 10 projects on toll operate transfer (TOT),” a senior NHAI official told PTI. The official said 10 such projects out of a basket of 75 have been identified for monetisation and several investors, including Canadian Pension Fund, Abu Dhabi Investment Fund and those from the US, Europe and Singapore, have shown keen interest in buying them. “Investors are keen on our projects and we are going to bid out the same,” the official said. Road Transport and Highways Minister Nitin Gadkari has earlier told PTI that monetisation of public-funded highway projects could result in funds in the range of Rs 80,000 to Rs 1 lakh crore initially. Ever since the government’s nod for monetisation, NHAI has been conducting traffic studies related to such projects, the revenue streams available and their overall viability. The Cabinet Committee on Economic Affairs on August 3 last year had authorised NHAI to monetise the public-funded highway projects for mobilising funds. Close to 75 operational NH projects completed under public funding have been preliminarily identified for potential monetisation using the toll operate transfer (TOT) Model. The corpus generated from proceeds of such project monetisation could be utilised by the government to meet its fund requirements regarding future development and operation and maintenance of highways in the country and could address development of highways in unviable geographies. Market feedback indicates that certain institutional investors from outside the country have long-term investment appetite and are keen to participate in operational highway projects with stable toll revenue outlook. These investors generally hesitate from taking construction risk, but are willing to look at de-risked Brownfield road assets, the government has earlier said. T.Y. Hilton Jersey
Refinery looks remote as differences between govt, Rajasthan escalate
Negotiations over refinery project is expected to stretch long as both Rajasthan government and oil major Hindustan Petroleum Corporation Ltd (HPCL) refused to their position over price revision According to sources, both parties have major differences over the availability of crude oil to keep a 9-million tonne (MT) refinery operational for at least 30 years. HPCL is relying on the conservative figures of directorate of hydrocarbons (DGH) which estimates reserves to be around 380 MT.Rajasthan government, however, based on the estimates of Crain India has argued that availability is much more. According to the sources, to strengthen its case, Rajasthan government is planning to approach DGH to validate the revised figures.”Discussions are on but still there is no meeting of minds. Both the stakeholders are though positive about the final outcome,” said a senior official who is privy to developments. Along with it issues like fixing internal rate of return (IRR) and financial assistance of Rs 37 billion as viability gap funding remains at core of ongoing discussions. In addition, the unilateral decision by the oil company to raise capital cost by Rs 70 billion have become point of contention.”HPCL has come down from their earlier 15% IRR. But even revised estimates are too high when compared with other refineries in the country,” added the official. According to the company though the size of the refinery remains the same, the unit will cost more because it now has to be built to produce Euro-VI grade petrol and diesel. Milan Lucic Jersey
Alternate fuels to hit petrol, diesel demand
Energy consumption cannot grow at current pace, say experts. Petrol and diesel demand have shown steady growth in the country over the last two years. Petrol in the financial year 2015-2016 clocked a demand growth of 15 per cent and is at 11.2 per cent for the first nine months of the current financial year. Diesel, which in 2015-16 grew at seven per cent, showed a 3.7 per cent growth in the nine-month period, according to Petroleum Planning and Analysis Cell (PPAC) data. However, this is bound to change, say industry experts as the trend may not be structurally viable and alternate fuels may play a larger role. “The GDP’s composition is changing with services inching towards 60 per cent, which is reducing the energy intensity of the economy. I do not expect demand for petrol and diesel to grow at a higher rate than the GDP. The recent 11-12 per cent annual growth number is an anomaly,” said Debasish Mishra, partner at Deloitte Touche Tohmatsu India. “In any country, and specifically for India, energy should track the GDP trend and hence energy consumption cannot structurally grow at the current pace. Energy growth should be in the range of 0.6 to 0.8 times of the GDP numbers, and petrol and diesel as a component of energy will sooner or later have to follow the same correlation,” said an oil and gas analyst from a domestic brokerage firm who did not wish to be named. Vivek Jain, associate director, India Ratings & Research expects petrol demand to grow at 11 per cent in the current financial year and taper down to 8-10 per cent in the next financial year. “Going forward, petrol demand growth should come down as we are talking about a higher base,” Jain said. He, however, remains optimistic about petrol demand growth. “GDP would be a wrong correlation to make. If vehicle sales growth continues, petrol consumption may continue to be strong,” Jain added. However, not everyone is convinced. “Taking a long-term view, energy efficiency and efficiency in fuel consumption in vehicles will taper petrol demand,” said the analyst quoted earlier. Several analysts also pointed out a significant contributor to petrol’s double digit growth was the shift in consumption from diesel to petrol. The future for diesel demand in the country looks bleak as alternate fuels like compressed natural gas and liquefied natural gas (LNG) take centre stage. Companies in India are now experimenting with options to run trucks on LNG and two-wheelers on CNG. Experts expect if these trials are successful they will further dent demand for diesel products. Truck transport in the country alone is a significant contributor to diesel demand. Authentic Jersey
ONGC’s $2.4 billion Mozambique deal under Oil Ministry scanner
ONGC’s USD 2.475 billion purchase of Videocon Group’s 10 per cent stake in a giant Mozambique gas field has come under the Oil Ministry’s scanner following allegations that the PSU may have overpaid about USD 200 million, charges that the company vehemently denied. ONGC Videsh Ltd, the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), had in June 2013 bought 10 per cent stake in the Offshore Area 1 from Videocon Group for USD 2.475 billion. This stake was later divided between OVL and Oil India Ltd in 60:40 ratio. The deal has now come under Oil Ministry’s scanner following allegations that OVL might have overpaid Videocon. Government officials said the ministry has over the past few months asked the company to provide several details of the deal including the basis of the valuation. The inquest by the ministry was acknowledged by senior company officials, who said details have been provided on multiple occasions. Sources said Videocon was in 2012 willing to sell its stake to OVL at a small premium to the price Thailand’s PTT Exploration and Production paid for acquiring an 8.5 per cent stake in the same block from Cove Energy for 1.22 billion British pounds (USD 1.9 billion at exchange rate prevalent at that time). The 10 per cent stake, they said, was available to OVL for about USD 2.3 billion or so but the company a year later paid USD 2.475 billion to Videocon. An e-mail sent to ONGC Chairman Dinesh K Sarraf, who was Managing Director of OVL at the time of the deal, for comments received a response from the company stating: “There is no basis to this allegation and ONGC Videsh strongly refutes it.” OVL had followed up the Videocon purchase by buying another 10 per cent stake in the same Offshore Area 1 of Mozambique from US energy major Anadarko Corp for USD 2.64 billion in 2014. A year later, Anadarko in its annual filings with the US Securities and Exchange Commission said it made a “gain” of USD 1.5 billion or over 62 per cent of the purchase price, from the sale of 10 per cent interest in Offshore Area 1. Woodlands, Texas-based energy exploration company Anadarko continues to be the operator of the block, with its stake reduced to 26.5 per cent from 36.5 per cent after the deal. Presently, OVL has 16 per cent stake in Offshore Area 1, which holds as much as 75 trillion cubic feet of gas reserves. OIL has 4 per cent and a unit of Bharat Petroleum Corp Ltd (BPCL) another 10 per cent stake. Other partners in Area 1 include Mitsui with 20 per cent stake, ENH (15 per cent) and PTTEP (8.5 per cent). Gas from the block is to be converted into liquefied natural gas (LNG) for transportation by ships to markets like India. Sean Doolittle Jersey
New Record Low Solar Tariff of Rs.3.30/kWh Logged at Rewa Solar Park Auction in Madhya Pradesh, India
In the recently concluded 750 MW Rewa Solar Park auction in Madhya Pradesh, bids reached a new record low of Rs.3.30 (~$0.494)/kWh (levelized tariff over 25 years) over a rupee lower than the previous low tariff of Rs.4.34 (~$0.065)/kWh, which was recorded in the state of Rajasthan in January 2016. The winning bid for first year tariff hit a new low at Rs.2.97 (~$0.0444)/kWh and will escalate by Rs.0.05 (~$0.0007) over 15 years, bringing the levelized tariff to Rs.3.30 (~$0.494)/kWh over 25 years. In an extremely competitive auction, bids submitted were 10x the tendered volume at 7,500 MW for a tendered capacity of 750 MW. Last year the state government of Madhya Pradesh approved extending a payment guarantee for the Rewa Solar Park. The guarantee will ensure against any payment default to projects inside the solar park, stated an Madhya Pradesh Urja Vikas Nigan (MPUVNL) official. The official also added that the solar park is a joint venture of Solar Energy Corporation of India (SECI) and MPUVNL. The payment guarantee and deemed generation benefit were contributing factors in attracting these low bids. The implementing agency (MPUVNL) did not put an upper limit capacity for bidders – any bidder was able to bid for the entire capacity (750 MW). ACME Solar won with the lowest bid to develop a 250 MW project (Unit-2) quoting a tariff of Rs.2.970 (~$0.0444)/kWh for the first year and a levelized tariff over 25 years of Rs.3.30/kWh (~$0.0494)/kWh, followed by Solenergi which won a 250 MW project (Unit-3) quoting a first year tariff of Rs.2.974 (~$0.0444)/kWh at a levelized tariff of Rs.3.304 (~$0.0495)/kWh. Mahindra Renewables was the other winner for a 250 MW project (Unit-1) with a first year tariff of Rs.2.979 (~$0.0445)/kWh and a 25 year levelized tariff of Rs.3.309 (~$0.0495)/kWh. Sembcorp Green Infra, SBG Cleantech, Hero Future Energies, Enel Green Power, Solairedirect, ReNew Power, Azure Power, Adani, and Canadian Solar were some of the other developers who participated in the auction. “We saw record low bids largely because of our progress made on the solar park infrastructure, unlike other solar parks where projects were tendered during initial stages of park development. We in Madhya Pradesh waited to create conducive infrastructure, and the results are here for everyone to see,” said an official at MPUVNL. Another official at MPUVNL believes that this low tariff is feasible. “The low tariff is not a surprise as these projects are viable for developers at these costs. If you factor that all of these projects are in the same location, developers have eliminated a lot of extra work [costs] compared to, for example, a situation where the same capacity is divided into 15 projects that would have included expenses like temporary transmission and infrastructure costs related to each project. This is not the case here,” stated another official at MPUVNL. The construction of a transmission substation within the solar park has also led to heightened interest among developers said a government official. This substation will take care of all evacuation from the park. Inefficient evacuation infrastructure was one of the major problems faced by developers in other solar parks, according to the recent Mercom Quarterly India Market Report. “Although this is the lowest tariff ever recorded in India, this auction has several special attributes which makes it hard to directly compare with previous low bids. The size and location of the projects, payment guarantees, deemed generation benefit, longer construction timeline, the recent solar module price crash, and yearly tariff escalation for 15 years – all make the low bids unique,” said Raj Prabhu CEO of Mercom Capital Group. “The fear is that media, government officials and analysts will hype up the low bids and other states will then start pressuring developers to match bids from the Rewa auction tariffs, which has happened in the past. A positive takeaway from this auction is it demonstrates that if you remove some of the developer risks by offering payment guarantees and deemed generation benefits in a park with a solid infrastructure, tariffs have room to come down. However – mostly thanks to Chinese module prices declining by about 30 percent over the last year – without which any bids to build projects below Rs.4.0/kWh would have been almost impossible,” he further commented. Even though direct tariff comparison between countries is challenging due to many variables, the new low tariff of Rs.3.30 (~$0.0494)/kWh, a record low for India, is still not the lowest tariff in the world (see chart below). IFC, a member of the World Bank Group, is extending its global expertise to structure and implement the transaction to help attract private investments of about $750 million (~Rs.50.2 billion) for the development of the 750 MW Rewa Solar Park. Morgan Burnett Authentic Jersey
How Jaitley may have got it right on petroleum subsidy
Finance minister Arun Jaitley’s expectation of benign crude oil price for the next financial year, which got reflected in this year’s budget numbers for petroleum subsidy, has found support from the latest developments on key factors impacting global oil prices. Jaitley has budgeted for a petroleum subsidy of Rs 21,909 crore for 2017-18, a less than 1 per cent increase over the revised estimate of Rs 21,770 crore for current fiscal. This came despite the nearly 25 per cent jump in oil prices since 30 November when the global cartel OPEC announced its historic production cut. US-based Energy Information Administration (EIA) reported last week US crude oil inventories rose to 508 million barrels between January 27, 2017 and February 3, 2017, the second-highest weekly inventory stockpile since 1982. US shale output rose to highest levels since April 2016, in the same period. “Gradual increase in retails prices of Kerosene and LPG will save subsidy for the GoI by around Rs 50 bn in FY18 as per ICRA’s estimates. After factoring in the benefits from the above, the subsidy provided in FY18 budget will be sufficient till a crude price of around $60 per bbl,” said K Ravichandran, Senior Vice President at ratings agency ICRA. He added the centre could have expected that crude prices will not increase materially from the current level. “This is due to counter balancing factors at play including additional US production which will more than compensate for voluntary cut by OPEC members in the near term, leaving the markets adequately supplied,” he said. Also, experts say US president Donald Trump’s energy policies towards increasing drilling as well as production activities will undermine OPEC’s efforts to restore prices. While Russia — one of the biggest oil producers — has agreed to cut production by more than 500,000 barrels per day in the first two quarters of 2017, analysts predict Russia’s oil output will reach record levels from the second half of 2017 to capitalize on increased oil prices. Further, Libya and Nigeria, which were exempted from making cuts in oil production, have aggressively increased production. Libya alone has raised output by more than 100,000 barrels per day since the OPEC deal was announced. Jarred Tinordi Womens Jersey
Sri Lanka off-shore oil block re-offered for development
Sri Lanka is calling offers to develop an off-shore oil block in the North West of the island where some gas-condensate discoveries have already been made. Sri Lanka’s Petroleum Development Secretariat said it seeking expressions of interest to survey and develop the 2,924-sq km block. Cairn India did seismic surveys and dug three wells, of which two showed evidence of petroleum. However the firm did not develop the wells when oil prices collapsed after a global commodity and economic bubble fire by the US Federal Reserve burst, and the block was returned to Sri Lanka amid doubts about its commercial viability. Cairn won the block in 2007 at the height of the last commodity bubble. In the Mannar and Sri Lanka’s north oil exploration also happened in the 1970s, after the first oil shock and commodity bubble fired by the Fed, forcing the dollar off the gold standard. Sri Lanka also saw some oil exploration in 1981, during the second oil shock and commodity bubble, which ended when Fed Governor Paul Volcker tightened policy and ended it, creating the so-called ‘great moderation’ period. Sri Lanka is now offering the block at a time when oil prices are low. Stanley Cup Womens Jersey