World’s top LNG buyers form alliance to push for flexible contracts
The world’s biggest liquefied natural gas (LNG) buyers are clubbing together to secure more flexible supply contracts in a move that further shifts power to buyers rather than producers. Korea Gas Corp (KOGAS) said on Thursday it had signed a memorandum of understanding in mid-March with Japan’s JERA and China National Offshore Oil Corp (CNOOC) to exchange information and “cooperate in the joint procurement of LNG.” Japan, China and South Korea are the world’s biggest LNG importers, accounting for about 55 percent of global purchases, according to data from energy consultancy Wood Mackenzie. The countries’ biggest respective buyers are joining together to extract concessions from producers that would give them supply flexibility such as having the right to re-sell imports to third parties, something they are not allowed to do under so-called destination restrictions. “We have created a platform to share, discuss and solve our common issues such as traditional LNG business practices, including destination restrictions,” JERA spokesman Atsuo Sawaki said. The unusual alliance of three buyers across three countries will pressure exporters like Qatar, Australia and Malaysia, who prefer to have clients locked into decades-long fixed supply contracts that oblige buyers to take fixed amounts of monthly volumes irrespective of demand, with no right to re-sell unneeded supplies to other end-users. BIG CHANGE The LNG market is in the midst of huge changes as the biggest ever flood of new supplies is hitting the market, with volumes coming mainly from Australia and the United States. New production has resulted in global installed capacity of over 300 million tonnes a year, while only around 268 million tonnes of LNG were traded in 2016, according to Thomson Reuters data in Eikon. That has helped pull down Asian spot LNG prices by more than 70 percent from their 2014 peaks to $5.65 per million British thermal units (mmBtu). It has also given importers more suppliers to choose from, putting pressure on major producers like Royal Dutch Shell , Chevron, ExxonMobil and Woodside Petroleum to grant more flexible contract terms. Lee Seung-hoon, KOGAS chief executive officer, said in a recent interview with Reuters that his company was looking for flexible LNG contracts. Jera’s Co-President Yuji Kakimi made similar statements in an interview earlier this month. “Through this MOU deal, Korean, Chinese and Japanese LNG buyers are expected to play an active role in the LNG market,” Lee said in the statement announcing the agreement. KOGAS is the world’s No.2 LNG buyer behind Jera, which is a joint venture between Chubu Electric Power and Tokyo Electric Power. “Flexibility is becoming critical for LNG buyers … as the rise of solar capacity is going to make consumption of LNG more seasonal,” said Kerry Anne Shanks, head of LNG research for Asia/Pacific at Wood Mackenzie. Alex Killorn Womens Jersey
NTPC beats 12th Plan target by adding 12,840 MW
State-run power giant NTPC has exceeded the target of generation capacity addition of 11,920 MW set for the 12th Plan (2012-17) by adding 12,840 MW. NTPC Group’s power generation capacity has increased to 49,943 MW so far in the plan period, which would end on March 31, 2017. “With commissioning of 800 MW Unit at Kudgi in Karnataka, 250 MW Unit at Bongaigaon in Assam and 20 MW at Bhadla Solar in Rajasthan today, the total installed capacity of NTPC group has become 49,943 MW,” a senior official said. NTPC has exceeded the 12th Plan capacity addition target of 11,920 MW by adding 12,840 MW, the highest-ever capacity addition in any 5 year plan by the company, the official said. The NTPC Ltd and Group NTPC also achieved highest ever daily generation of 784.74 million units (MUs) and 870.11 MUs respectively on March 22, 2017 surpassing previous best of 782.95 MUs and 866.47 MUs achieved on September 9, 2016. NTPC coal stations clocked highest-ever daily generation of 749.63 MUs on March 22, 2017 over previous highest of 742.51 MUs in 2016. The NTPC has achieved the highest ever generation of 243.326 BUs on March 22 2017 in FY17 against previous best of 241.976 BUs achieved in FY 2016 from sources like coal, gas, hydro and solar. The official said that the higher generation from coal based stations indicates uptrend in electricity demand in the grid. NTPC has a total installed capacity of 49,943 MW from its 19 coal-based, 7 gas-based, 10 solar PV, one Hydro and 9 subsidiaries/joint venture power stations. The company has capacity of over 22,000 MW under implementation at 23 locations across the country including 4,300 MW being undertaken by joint venture and subsidiary companies. NTPC’s first coal mine, Pakri-Barwadih at Hazaribagh, became operational in December 2016. The first wind power project — Rojmal Wind Energy Project of 50 MW — is being set up in Gujarat. Mario Lemieux Authentic Jersey
Monetisation of 75 highways likely to fetch Rs 40,000 crore: Crisil
The first 75 operational highway projects, which will be monetised by the NHAI under the toll-operate-transfer (TOT) model, are likely to fetch around Rs 40,000 crore, much lower than the government estimates, says CrisilBSE 0.73 %. According to the rating agency, investors would factor in the freight-heavy nature of national highway traffic, the associated volatility, and reduction in road freight growth expected after the implementation of the Dedicated Freight Corridor (DFC) before placing bids. Further, implementation of the Goods and Services Tax (GST) regime, while not necessarily negative for road traffic, may alter the type of vehicles that would be used on certain routes, it said. “Variation and volatility in traffic can reduce returns. Investors would take a hard look at this, including the impact of DFC and GST, when placing bids. They would also be wary of latent defects in roads that are not detected during technical examination,” Crisil Research Senior Director Prasad Koparkar said in a statement. He pointed out that there could arise issues pertaining to competing roads. “If an alternate route is built and is longer than the original stretch by 20 per cent, then it is not treated as a competing route,” Koparkar said. In TOT model, the National Highways Authority of India (NHAI) transfers ownership and the right to collect toll of operational highways to private entities for 30 years in return for a one-time upfront payment. According to Crisil, the calculation assumes annual toll revenue growth of 7-8 per cent and return on equity of 14-16 per cent. “Theoretically, Rs 40,000 crore can fund the construction of 2,800 km of four-lane national highways, which would be equal to the execution expected in fiscal 2017,” it said. Crisil estimates that between fiscals 2018 and 2020, construction of highways would require investments of Rs 2.2 lakh crore, or more than twice the Rs 1 lakh crore set to be spent between fiscals 2015 and 2017, with higher execution of publicly funded projects. “TOT could achieve the dual objective of releasing both the bandwidth of public agencies, otherwise used up for road maintenance activity, and funds for road construction. While traffic risk does exist in this model, offering bundles of diversified stretches – both by geography and traffic composition – could mitigate some of this risk,” its Director Ajay Srinivasan said. DeMar DeRozan Authentic Jersey
Highway sector headed for consolidation; M&A activity seen picking up, says ICRA
The highway sector in the country is poised for a wave of consolidation, mergers and acquisitions given the positive vibes the sector has seen lately due to the pace of implementation, changes in regulatory environment and accelerated investment flows. While developers are seeking to divest some of the projects to cut debt and free up equity for redeployment into new projects, investors are scouting for projects with right valuation. Aided by the regulatory changes, the sentiment has become positive in the sector with new investments triggering consolidation as also mergers and acquisitions, according to Shubham Jain, Sector Head Corporate Ratings, ICRA. Jain told Business Line that sponsors in 17 projects, involving a total cost of ?9,800 crore, have monetised their assets. These include 10 National Highway projects, 4 NH annuity and three State toll road projects. Early investors The interesting aspect of the acquisitions in the road sector made three years ago is that some of the first batch of investors such as Brookfield, Cube Highways, Aberis Infraestructuras and IDFC among others, are considering exiting having made good returns. Among the infrastructure sector, the road projects have been the direct beneficiaries of the policy decision on relaxation of the exit policy for projects awarded before 2009. The hybrid annuity model has seen 27 projects worth ?24,300 crore totalling 1,522 km being awarded by December 2016. Developers have received this model favourably as it has similarities with the EPC mode projects. The BOT mode annuity projects had a number of issues which the developers were forced to contend with. The pace of road project implementation has also gone up to about 16.5-17 km per day as against 14 km per day last year. While NHAI is aiming at 20 km per day, the Ministry of Transport is looking at 40 km per day, Jain explained. About 16 construction companies have a combined business of ?80,000 crore of road construction, with a visibility of projects for 3-3.5 years. With the Budget laying special focus on infrastructure and roads and bridges getting an allocation of ?64,900 crore, more projects will be on offer. A number of completed projects will come up for sale. This time around the buyers will be from operations and maintenance business who will base their purchases on increased returns from the sector. Returns on projects During the 2009-2013, return on roads was below expectation. But better returns would lead to a wave of mergers and acquisitions where specialised investors will come in, he explained. Jain said given the large number of infrastructure projects which are operational or nearing completion there could be churn in the sector. The opportunities in the road sector are highest with over 100 operational national highway projects. With financing traditionally being bank-centric, there is sustained effort to defocus from the banking system by encouraging other investment modes. Jameis Winston Jersey
94 infra projects worth Rs 150 cr and more facing delay, cost overrun: Govt
Big infrastructure projects worth Rs 150 crore and above are running behind schedule and have cost overrun, Parliament was informed today. As many as 1,186 such projects were under the monitoring of the ministry at the end of December 2016, Minister of Statistics and Programme Implementation D V Sadananda Gowda said in a written reply in Lok Sabha. “Of these 1,186 projects, 94 projects are delayed and showing cost overruns. The reasons for delay are project specific,” Gowda said. Ministry of Statistics and Programme Implementation monitors ongoing central sector infrastructure projects costing Rs 150 and above on time and cost overruns. Law and order, delay in land acquisition, geological conditions, delay in environment and forest clearances, rehabilitation and resettlement, local body permissions, utility shifting, contractual issues are among major reasons behind the delay and cost override, he said. At times these factors also result in non-utilisation of funds fully, the minister said this in a response to a query on number of such projects, cost and time overruns and measures taken to avoid them. Nick Martin Jersey
DGCA deregisters 2 aircraft of grounded carrier Air Costa
The aviation regulator DGCA has deregistered two aircraft left with the grounded airline Air Costa. According to sources, the Directorate General of Civil Aviation (DGCA) wrote to the airline that its two Embraer aircraft have been removed from the Civil Aircraft Register. The Vijaywada—based airline has not flown since February and had cancelled bookings till May because of cash crunch and financial issues with the aircraft lessors. The latest action by the DGCA will effectively allow lessors to take back the aircraft from Air Costa, the sources said. The airline has also not paid salary to its 450 employees since January resulting in an exodus of employees, including 40 pilots. The employees are also planning a protest at the airline’s headquarters in Vijaywada demanding payment of their salary. The airline’s monthly wage bill stands at around Rs. 4 crore, the sources said. John Lynch Authentic Jersey
New US flight rules: Indian authorities await official word
Indian aviation authorities will wait for official communication from the US before deciding on whether to issue any travel advisory following the American government’s ban on big electronic devices in cabin baggage on flights from select Middle East and African nations. In a new order, the American government has barred travellers going to the US on flights from select countries from carrying large electronic devices like cameras and laptops as cabin baggage. As per the restrictions, passengers would have to check-in any devices bigger than a smartphone — including iPads, Kindles and laptops — before clearing security or boarding. The latest decision of the US administration is “more of a security issue rather than a safety issue”, a senior DGCA official told PTI. There is no official communication so far from the US authorities in this regard, he added. Since the matter pertains more to security aspects, a decision on whether to issue any kind of travel advisory is likely to be taken by the BCAS after discussions, the DGCA official said. Only after getting an official communication from the US, any decision would be taken, he added. The Directorate General of Civil Aviation (DGCA) is primarily responsible for the safety aspects while the Bureau of Civil Aviation Security (BCAS) deals with the security issues. The open-ended ban would affect more than 50 flights from 10 airports, including major global hubs like Dubai and Istanbul, according to senior administration officials. Many flights to the US transit through the airports which have been included in the restrictions list. There is a possibility that Indian travellers transiting through these airports would have to comply with the new US norms. The 10 international airports covered under the ban are in Cairo, Egypt; Dubai and Abu Dhabi, UAE; Istanbul, Turkey; Doha, Qatar; Amman, Jordan; Kuwait City; Casablanca, Morocco; and Jeddah and Riyadh, Saudi Arabia. Samuel Morin Womens Jersey
“Transparency, fair trade will boost aviation”
The global aviation market is booming. A strong growth in passenger traffic in 2016, especially in India, has prompted both domestic and foreign airlines to focus more on the Indian aviation sector. According to the International Air Transport Association (IATA), passenger traffic rose 6.3 per cent in 2016, which is above the 10-year average annual growth rate of 5.5 per cent. The fourth-largest carrier in terms of total passengers carried on international routes, as per IATA, Lufthansa, which is the largest foreign carrier group operating between India and Europe – with a market share of 15 per cent, recently made Delhi its first global destination to launch the commercial service of its most modern long-haul aircraft, Airbus A350-900. In a conversation with Business Today’s Rajeev Dubey and Manu Kaushik, Carsten Spohr, Chairman of the Executive Board and Chief Executive Officer of Deutsche Lufthansa AG, and Wolfgang Will, Senior Director, South Asia, Lufthansa Group Airlines, spoke about the emerging trends in international aviation markets and Lufthansa’s India plans. Edited excerpts: Do you think the worst is over for the globalaviation industry? Which way is it headed now in terms of profitability? What about theconsolidation happening all over the world? Carsten Spohr: Let us start with the global perspective. First of all, this industry has never been safer than it is today. This is always worth mentioning when we talk about aviation. Second, the industry has been able to return its cost of capital on a global scale last year, and has been growing faster than the GDP [gross domestic product] around the world. From the global perspective, we are seeing better years than we probably had seen for a long time. It is obvious where markets are as open as they are fair. The markets where consolidation is taking place show better results than those parts of the world where competition is distorted by government subsidies or lack of consolidation. We will hopefully see more consolidation, like in the US, and more level-playing field in parts of the world where we don’t have it yet. How do you see the Indian market in this context, especially the capping of fares at `2,500 fordomestic flights with duration of up to two hours? As a frequent visitor to India, I am glad to see how well the country has understood the importance of aviation for a healthy economy. Obviously, there are huge challenges. Infrastructure is always a challenge when you have fast growth. India needs to make sure that this is a healthy and competitive industry. Again, wherever in the world we are, and in whichever industry we are in, trade can only be as open as it is fair, and that’s what regulators have to provide. With that, and the dynamics we see in this market, which is bigger than anywhere else in the world, we definitely see a healthier development of the aviation sector in India than we have seen for a long time. How do you see capping of fares? To be honest, as someone who doesn’t operate domestically, I leave this to Indian experts, who know more about it than I do. It’s probably not an issue for a global European carrier to get involved with. When you talk about government subsidies, we assume you are referring to some Middle East airlines. How much of a disruption is that for the global aviation industry? I think it’s a huge element of disruption. I see airlines from Europe and Asia leaving routes between Europe and Asia. The WTO [principles] apply to industries all over the world but aviation. We may not be able to bring aviation under the WTO, but nothing keeps us from applying the WTO principles. That’s our expectation from governments around the world, including the European Union, which is now assuming a stronger role in negotiating aviation. Is it [subsidy] largely a Middle East problem or does it happen in other parts of the world too? When it comes to the network of Lufthansa, the biggest impact comes from the Gulf… It’s a global industry, so we should have a global agreement thatopenness and fairness are in stable relationship with each other. The biggest subsidies come in which form – capital funding or pricing? There are various forms of subsidies around the world. The US carriers talk about subsidies of 41 billion euros for one region – the Gulf. In the end, it doesn’t matter which form of subsidy is given. We need to have fairness for all players in one particular market, and that’s how other industries have worked. How will the rise in global fuel prices impact airlines? How are you gearing up for a crude price hike? We should not be too nervous because the recent increase in fuel prices takes us nowhere near the high we have seen before. This industry has always been able to react to changes, even disruptive changes. I think what we are seeing right now is not unhealthy but something in the range of what we have seen over many years. I am not at all pessimistic about 2017. Has fuel cost as a percentage of total cost gone down? You do hedging to take care of fuel prices. If oil prices keep rising, do you have some mechanism to keep your profits intact? The Lufthansa group has shown healthy profits over the past years with varying fuel prices. One way for us to stabilise ourselves is hedging. One very important answer to high fuel price is modernisation of Lufthansa. We are introducing 40 new aircraft this year; we introduced 46 last year. The A350, which brought me here, uses 25 per cent less fuel per seat, and generates 50 per cent less noise. That’s the answer of Lufthansa. Modernisation is the answer to challenges. Of course, you need to be healthy to be able to make those investments. We are spending more than€2 billion euros a year on new aircraft and modernising Lufthansa, which not only
Airfares in India among ‘lowest’ globally, says Jayant Sinha
India has one of the lowest and “most competitive” airfares in the world despite high cost of planes and fuel, Union Minister Jayant Sinha said on Wednesday. “These are the two most important costs for an airline. Our taxes are also quite high,” said the Minister of State for Civil Aviation. “But when you look at pricing in India, as far as Indian airlines are concerned, I can assure you that we are among the lowest and most competitive air fares in the world,” he added. In efforts to make air travel more affordable as well as connect unserved and under-served airports, the government has come out with the regional connectivity scheme. Under the scheme — UDAN (Ude Desh Ka Aam Naagrik) — fares are capped at Rs 2,500 for one-hour flights. “Our effort is to provide air services at an affordable cost and the regional connectivity scheme UDAN is aimed at that only,” Sinha said. At an event organised by All India Management Association (AIMA), Sinha said the country’s economy is delivering high quality products and services at very affordable prices for the consumers. “We are frugal economy because we are poor country… So we have to deliver product and services at price points which are affordable. This forces us to really think about affordability and cost management at all the time,” he noted. In terms of purchasing power parity, India’s GDP is around $8 trillion while it is about $18 trillion for both the US and China. According to Sinha, India is growing at 7-8 per cent while the US is expanding at 2.5 per cent and in the case of China the growth rate is pegged at 6 per cent. “It effectively means that the contribution that the Indian economy is going to make in the next decade in terms of relative contribution of growth rate of the US economy, is 180 per cent,” he noted. Further, he said that India’s contribution to global GDP growth in PPP terms in the next decade would be almost twice what the US is going to add. “…It is 60 per cent of China, which is still going to be larger. But we are 60 per cent of China, which is a much larger piece of $18 trillion,” he added. Martin Hanzal Jersey
Ministry of Power Issued More Than 38 Lakhs Energy Savings Certificates To Industries
Ministry of Power has issued/entitled to purchase Energy Savings Certificates (ESCerts) to Designated Consumers (DCs) of Perform, Achieve and Trade (PAT) Cycle I on 16th February 2017 on verification of their performance with regard to energy savings, based on the recommendations of Bureau of Energy Efficiency (BEE). The first cycle of PAT has been completed in March 2015. The DCs have contributed to the success of PAT cycle I and this cycle has witnessed an energy saving of 8.67 million tonne of oil equivalent (Mtoe) against the targeted energy saving of 6.886 Mtoe which is about 30% more than the target. This cycle also contributed in emission reduction of 31 million tonnes of CO2 and avoided generation of about 5,635 MW resulting in monetary savings of Rs. 37,685 crore. It has also contributed in investment of Rs. 24,517 crore for energy efficient technologies by DCs under PAT. PAT is a multi-cycle scheme aimed to cover most of the energy intensive sectors of the economy. In this regard currently in the PAT cycle II, 621 DCs from 11 sectors have been included in the scheme. Bureau of Energy Efficiency (BEE) under Ministry of Power is implementing Perform, Achieve and Trade (PAT) scheme, a component under National Mission for Enhanced Energy Efficiency (NMEEE) in India. PAT is a market based mechanism to enhance cost effectiveness through certification of excess energy savings in energy intensive industries that can be traded. PAT scheme was launched in 2012 with first PAT cycle (2012-15) covering 478 Designated Consumers (DCs) from 8 energy-intensive sectors, namely Aluminium, Cement, Chlor-alkali, Fertilizer, Iron and Steel, Pulp and Paper, Textiles and Thermal power plant which roughly covered 33% of India’s total energy consumption. Central Electricity Regulatory Commission (CERC) is the Market Regulator and Bureau of Energy Efficiency is Administrator for the trading of ESCerts. POSOCO (Power System Operation Corporation limited) has been appointed as Registry for making DCs as eligible entities for trading of ESCerts and book-keeping of ESCerts. There are two power exchanges i.e. IEX and PXIL where trading of ESCerts shall take place. CERC has already approved the Procedure for Transaction of Energy Savings Certificates (ESCerts) on 14th Feb 2017. BEE shall soon inform the date of opening of Registration to all DCs along with the fee details, after the same is approved by CERC. Trading/transaction of ESCerts shall be done on continuous basis i.e. every Tuesday on weekly basis. Trading of ESCerts at power exchanges is expected to start from April 2017. Marshawn Lynch Jersey