M&As in road sector pick up over easier exit norms: Icra
The country relaxed the exit policy for road projects under public-private partnership (PPP) model in May 2015. The move is showing results, with a higher amount of deals seen in the road sector in the last two years, according to rating agency ICRA Ltd. The rise in deals, however, may not have brought cheer to a good number of road projects’ sponsors as the ICRA data suggest 31 per cent of the deals in the last two years were made at a loss to the investor. “In about 31 per cent of the transactions, the return to the developers is negative, indicating loss on investment. Developers with a weak credit profile are the ones who disposed of their assets at a loss as liquidity took precedence over profit-making for them,” said K Ravichandran, senior vice-president and group head, corporate ratings, ICRA. On Wednesday, the rating agency said, “Sponsors in around 20 road assets involving a total cost of Rs 12,327 crore have monetised their assets as opposed to around Rs 7,000 crore in the preceding 50 months.” The report attributed the rise to relaxation seen in the exit policy for road projects. In May 2015, the Cabinet Committee on Economic Affairs (CCEA) relaxed the exit policy for projects awarded before 2009, allowing 100 per cent equity divestment by the developers as against 74 per cent earlier. Of the 20 road assets sold, three were state road projects and the remaining are national highway projects. “Of 17 national highway projects, 16 were awarded before 2009 and are the direct beneficiaries of the policy decision on relaxation of the exit policy for projects awarded before 2009 in May 2015,” ICRA said in its note. ICRA added the relaxation in the policy not only attracted private equity players that are more comfortable when they own 100 per cent stake in the projects, but also enabled the unlocking of additional 26 per cent of the developers’ equity invested in about 5,600 km of national highway projects, awarded under PPP. “This could result in freeing up of around Rs 4,500 crore of equity, which could support equity contribution towards the construction of 1,500 km of national highways in PPP mode,” according to ICRA. The report named Brookfield Asset Management (Canada), Canadian Pension Funds, Macquarie (Australia), I Squared capital (USA, Cube Highways), Abertis Infraestructuras (Spain) and IDFC Alternatives as the major investors currently looking for assets in the sector. There is a strong case for these funds to look at road assets as Ravichandran in the ICRA note added,”The ones with highest returns were secondary sale transactions wherein the sponsors are private equity investors. With the increase in WPI and the continued healthy growth in traffic, the toll collections are expected to grow by 10-11% over the next two years.” ICRA expects the asset sale transactions to gather further momentum as the valuations have improved following a favourable outlook on toll collections and decline in interest rates. Shubham Jain, Vice President and Sector Head, Corporate Ratings, points out those who might gain from this improved momentum for asset sale are projects with at least five to seven years of operational track record. “Projects awarded before 2009 are ideal candidates for the asset sale. The M&A opportunities in the road sector are the highest among various infrastructure sub-sectors with around 88 operational National Highways projects totalling 7,192 km with a total project cost of Rs.69,327 crore and median operational track record of four years,” Jain said. Paul Kariya Authentic Jersey
Shell India to expand natural gas marketing business
Royal Dutch Shell, is planning to expand its gas marketing business in India, said Shaleen Sharma, the company’s head of upstream development in India. Sharma, who spoke on the sidelines of an energy conference in Mumbai, said the downstream segment is the most attractive one currently in the gas market and the company plans to supply natural gas directly to buyers including power plants, fertilizer and petrochemical units and city gas distributors. “Indian LNG market is in good shape. That is the future. There are some new initiatives going on to see how we can access new downstream markets,” said Sharma, adding that Shell has set up a team in Singapore to boost the India gas market. Shell operates Hazira LNG Ltd, a five million tonnes per annum liquefied natural gas (LNG) import facility at Hazira, Gujarat. The company plans to double the capacity to 10 million tonnes a year, Reuters had reported on 31 March. Shell Gas B.V., a Royal Dutch Shell Plc unit, owns a 74% stake in the terminal while Total Gaz Electricite France, a unit of Total SA, holds the balance. Sharma also said that the company has dissolved the joint venture for an LNG terminal that it was planning with its consortium partners at Kakinada, Andhra Pradesh. “That was a joint venture with a number of companies including Gail. But we very recently expressed that we cannot carry on with that. This is due to lack of a secure market. We need some surety on the off-take. The joint venture agreement is no longer there,” added Sharma. The A.P Gas Distribution Corporation Limited (APGDC), Gas Authority of India Limited (GAIL) and Shell and Engie Global LNG had in September 2015 signed two joint venture agreements for the establishment of an LNG Floating Storage and Re-gasification Unit (FSRU) at Kakinada deepwater port. Kareem Hunt Womens Jersey
Delay in laying gas pipelines prompts PLL, BPCL to move LNG by road
The inordinate delay in completion of gas pipelines in Kerala might have prompted Petronet LNG Ltd (PLL) to depend on trucks to move gas to its customers. BPCL has also adopted a similar initiative to deliver LNG to an industrial customer in Chennai from the PLL facility in Kochi. A senior official in BPCL told BusinessLine that the company dispatched its first truck-load of LNG supplies from the PLL terminal in the second week of March, to Turbo Energy located at Payyannur near Kanchipuram. The agreement with the Chennai-based company to deliver gas at its premises was signed on September 28, 2016, after undertaking several studies like HAZOP (hazard and operability study), a robust LNG distribution, etc. The company has also set up a storage and re-gasification system after incorporating standard operating procedure and high-degree of safety features, the official said, adding that Gujarat-based Inox India has bagged the contract for gas distribution to customers. BPCL, according to the official, has a success story of ‘LNG by Road Initiative’ from its Dahej plant, wherein the company has already completed delivery of more than 5,000 truck-loads of gas. “The initiative in Kerala will be a new beginning of BPCL in the Southern region, and another 3-4 companies have already approached us for gas supply in a similar way,” he said. Industry sources here pointed out that BPCL has brought around 400 MMbTU of LNG sourced from Australia by spot purchase and unloaded the consignment at the storage facility offered by PLL in Kochi. A part of the gas will be used by BPCL for its own use and the remaining will be for sale to various industrial customers. The spot purchase of the gas will benefit the public-sector petroleum company from avoiding various tax payments like VAT. Following the success of delivering gas to HLL in Thiruvananthapuram by road, PLL has been receiving good customer enquiries both from Kerala and outside. More companies have evinced interest in taking gas by trucks, and discussions are already on to finalise the tendering process with these companies, including a State-owned public sector, PLL officials said. The laying of pipelines by GAIL in the Kochi-Mengaluru stretch is fast progressing, and officials expressed hope that the pipelines will be ready by December 2018. Marshall Faulk Womens Jersey
The truth behind Indias electricity exporter status
The ministry of power last week claimed that India had become an electricity exporter for the first time. “As per Central Electricity Authority (CEA), the designated authority of government of India for cross border trade of electricity, first time India has turned around from a net importer of electricity to net exporter of electricity,” the ministry said in a statement, adding that upcoming cross-border transmission lines with Nepal, Bangladesh and Myanmar will continue to increase sales. India exported around 5798 million units of electricity to Nepal, Bangladesh and Myanmar, which is 213 million units more than the import of 5,585 million units from Bhutan during the April-February period in fiscal year 2016-17. Exports to Nepal and Bangladesh increased 2.5 and 2.8 times, respectively, in the last three years. Does India’s status as an electricity exporter mean that it has started producing surplus electricity? The reality is a large number of India’s households are still living without electricity. Available government data shows there is a discrepancy in the percentage of villages electrified as against the share of rural households electrified. The former set of figures is often cited to portray India’s electrification challenge as an already accomplished one. What explains the wide gap between the share of electrified households and villages? According to the Deen Dayal Upadhyaya Gram Jyoti Yojana website, a village is deemed electrified if basic infrastructure such as distribution transformer and distribution lines are provided in the inhabited locality as well as the Dalit Basti hamlet (where it exists), and electricity is provided in public places like schools, panchayat office and health centres. Here’s another interesting thing. For a village to be considered electrified, at least 10% of total households have to be electrified. But the actual supply of electricity is not mentioned in the definition of electrification. Such a definition means that village electrification numbers have little bearing on the supply of electricity in reality. Data from 2011 census shows that almost one-third of the households in the country were dependent on kerosene as a source of lighting, with the situation being worse for rural households. This is even as over 84% of villages had been electrified in 2011-12, as per data with the Centre for Monitoring Indian Economy (CMIE). International comparison also underlines the fact that Indians consume much less electricity in comparison to their peers. The ratio of domestic and world electricity consumption (per capita) was broadly similar in India and China in 1990. Latest data shows that China has surpassed the global average in terms of power consumption, whereas India is still stuck at its pre-reform relative electricity consumption levels. In 1990, India reported 273 kilowatt hour (kWh) of electric power consumption, as against 511 kWh in China and 2,120 kWh in the world. In 2013, these figures were 765 kWh, 3762 kWh and 3104 kWh, respectively, as per World Bank data. India’s efforts to sell electricity to its eastern neighbours might bring strategic and diplomatic benefits and also open new frontiers for exploring electricity generation opportunities in the region. Such developments, however, should not make us oblivious to the fact that a large majority of Indians are still living in darkness in villages which have been declared electrified on paper. Christian Covington Jersey
Hydro power projects of 11,928 Megawatt capacity under construction: Goyal
Forty three hydro-electric projects, with total generating capacity of 11,928 MW, are under construction, the Lok Sabha was informed today. Out of these 43 projects, 16 are stalled due to financial constraints and other reasons, Power Minister Piyush Goyal said. The total power generation capacity of the 16 projects is 5,163 MW and the anticipated completion cost of these projects would be Rs 52,306 crore while their original cost was Rs 27,027 crore, he said. “As per the calculation made by the Central Electricity Authority, the annual loss of energy generation from these stalled projects is about 15,564 million units,” he said during Question Hour. The minister said a panel to monitor power projects, set up by the Ministry of Power, independently follows up and monitors the progress of the hydro projects. He said the CEA monitors the progress of under- construction power projects through frequent site visits and interaction with the developers and equipment suppliers. “Regular reviews are also undertaken in the Ministry of Power to identify the constraints areas and facilitate faster resolution of the hydro projects,” Goyal said. John Lynch Authentic Jersey
Saudi Aramco keen to take stake in west coast refinery
Saudi Aramco, the world’s largest oil producer, is interested in picking a stake in India’s biggest oil refinery being planned to be set up in Maharashtra at a cost of Rs 1.8 lakh crore. State-owned Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) together plan to set up a 60-million tonnes a year oil refinery on west coast to meet the rising fuel needs of the country. “Saudi Aramco and Abu Dhabi National Oil Co (Adnoc) are talking to us for investments in the Indian oil sector,” Oil Minister Dharmendra Pradhan said at the Global Natural Resources Conclave here. Later talking to reporters, he said Aramco is interested in picking a stake in the west coast refinery while Adnoc is keen on petrochemical projects. “Aramco is talking of stake in the refinery,” he said. He, however, did not go into how much stake the Saudi national oil company will pick. “Let’s see,” is all he said. IOC holds a 50 per cent stake in the project while BPCL and HPCL have 25 per cent each. The 60-mt a year refinery will be set up in two phases, along with a mega petrochemical complex. The phase-1 capacity will be 40 mt together with an aromatic complex, naphtha cracker unit and a polymer complex. This will cost Rs 1.2-1.5 lakh crore and will come up in 5-6 years from the date of land acquisition. The mega complex will require 12,000-15,000 acres and land on the Maharashtra coast has been identified, he said. The second phase, involving a 20 mt refinery, will cost Rs 50,000-60,000 crore. IOC has been looking at the west coast for a refinery as the company found it tough to cater to requirements in West and South with its refineries mostly in the North. HPCL and BPCL too have been looking at a bigger refinery because of constraints they face at their Mumbai units. The mega west coast refinery will produce petrol, diesel, LPG, ATF (aviation turbine fuel) and feedstock for petrochemical plants in plastic, chemical and textile industries in Maharashtra. A top official at one of the state refiners said the project will be funded with 60 per cent debt and 40 per cent equity. The three refiners will chip in Rs 72,000 crore in equity. Fifteen mt a year is the biggest refinery any public sector unit has set up at one stage. IOC recently started its 15 mt unit at Paradip in Odisha. Reliance Industries holds the distinction of building the biggest refinery in India till now. It built its first refinery at Jamnagar in Gujarat with a capacity of 27 mt, which was subsequently expanded to 33 mt. It built another unit adjacent to it for exports, with a capacity of 29 mt. The refinery being planned by the state-owned firms will be bigger than that. The phase-1 itself will be bigger than any one single unit. India has a refining capacity of 232.06 mt, which exceeded the demand of 183.5 mt in 2015-16. According to the International Energy Agency (EA), this demand is expected to reach 458 mt by 2040. Alec Ogletree Jersey
HPCL reworks fiscal pact for Rajasthan refinery, work to start
State-owned HPCL’s long-pending 9 mtpa refinery at Barmer in Rajasthan will go on stream soon, with the state government agreeing to a revised fiscal package for the project, Oil Minister Dharmendra Pradhan said today. “Very soon, work will start on the Rajasthan refinery project. We have finalised the financial assessment,” he said at the Global Natural Resources Conclave here. Later talking to reporters, he said fiscal incentives for the project have been revised and a memorandum of understanding (MoU) is likely to be signed in Jaipur later this month. “The fiscal package negotiated by the previous (Congress) government had put a big burden on Rajasthan. Now, that has been balanced,” he said. He did not provide details of the revised fiscal incentives being offered by the Rajasthan government. “Work on the project will start very soon,” he added. The project, which has been in the works for nearly five years now, is projected to cost Rs 41,000-42,000 crore, up from the previous estimate of Rs 37,320 crore. HPCL, in March 2013, had signed an MoU with the Rajasthan government for setting up the refinery-cum-petrochemical complex in the Thar desert near the oil discoveries made by Cairn India. But the refinery never took off as a change of guard in the state led to the Rajasthan government putting on hold the fiscal incentives for the project. While 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, officials said. Engineers India Ltd (EIL) is doing a feasibility study. The HPCL board, in March 2013, had approved setting up of the complex at a cost of Rs 37,320 crore. Half of the crude oil requirement at the proposed refinery at Barmer was to come from the neighbouring oil fields of Cairn India. The rest was to be imported crude. At that point, HPCL had asked the state government to extend fiscal benefits like the ones extended by Gujarat and Odisha to new refinery projects to make the Barmer unit viable. The concessions included 50 per cent exemption in excise duty, waiver of VAT on products sold in Rajasthan and the state government picking a small stake in the project. Originally, the state-owned Oil and Natural Gas Corporation (ONGC), which owns 30 per cent interest in the Barmer oil fields of Cairn India, in 2005 had committed to building the refinery, but later started soft-pedalling the project. In 2012, HPCL entered the fray and proposed to take 51 per cent stake in the same. ONGC, which originally had the authorisation from the government for processing the Barmer crude at the proposed refinery, willingly made way for HPCL. Cairn India, which holds 70 per cent interest in the fields, currently produces about 1,60,000 barrels per day oil (8 million tonnes a year) from the Rajasthan fields. For HPCL, which has only two refineries in Mumbai and Visakhapatnam, the project will help meet fuel demand in the north. Pierre Pilote Womens Jersey
Private sector infrastructure investment may stay elusive for another year
At the start of financial year 2016-17, there seemed to be a clear government push to increase public sector spending to revive private investment cycle in the infrastructure and energy space. As the sector steps into the current financial year, there appears to be little progress; the wait for private investments could get longer by another year, industry experts believe. It will take time for private investments to come up. There is excessive capacity in manufacturing, so investments might not be forthcoming. In infrastructure, there is uncertainty. There are issues of funding, as banks are wary of lending to these projects with non-operating asset concentration, says Madan Sabnavis, chief economist, CARE Ratings. In the financial year 2016-17, in addition to budget allocations made to the infrastructure and energy sectors, public sector companies operating in these segments have also made significant investments. Industry analysts are of the view that while these investments have helped various private companies survive, the next 12 months would decide if private investments will trickle in. Public sector investments made in the energy sector includes state-run power producer NTPC’s Rs 17,520.68 crore in the first nine months of FY17, as against Rs 16,156.50 crore in the same period last year, according to data shared by the company. Data sourced from Petroleum Planning and Analysis Cell (PPAC) shows state-run oil companies in the April-February 2017 period spent close to Rs 91,781crore, higher than the combined target of Rs 87,603 crore. The construction companies have seen their order books filling up, and the construction cycle has picked up due to government spending. However, private investment in infrastructure remains muted. Though some new developers are emerging, solving the NPA issue remains a prerequisite to brining back private investment. With early signs in deal activity, and government considering ways to resolve the financial stress, the next 6-12 months could be interesting, said Manish Agarwal, partner, leader & infrastructure, PricewaterhouseCoopers Pvt. Ltd. In railways, Business Standard earlier reported according to the sources, railways had spent Rs 68,059 crore till December 31, in the first nine months of the last financial year. “In railways, where there is scope for private investments to come in is in the station development segment. In this segment, I expect commitments to be made in the current financial year, which actual private investment would start coming in only after 12 months time. Other ambitious projects like the bullet trains and the DFIC projects will take longer to see any private investments being made, said Vishwas Udgirkar, senior director, Deloitte India. In the road sector, National Highways Authority of India (NHAI) in the April-January period has awarded engineering, procurement and construction (EPC) projects worth Rs 17,967.87 crore. Data for the awarding remaining two months of the last financial year are yet to be shared. Udgirkar added the current financial year may see some private investments trickling in based on the financial closures achieved for hybrid annuity model (HAM) projects in the last financial year. For roads again, through HAM, commitments of some private investment has been made in the last financial year, we may see this forming in capital investments being in the current financial year. As far as EPC projects and public spending through these EPC projects are to be spoken of, it has helped the private companies survive, whether it has helped make the private sector financially healthy to re-invest would be difficult to say,” he added. Even as private investments may elude for a little longer, some public sector companies are expected to continue with their capital expenditure plans. NTPC Ltd looks to invest another Rs 30,000 crore on a standlone basis in the current financial year. The capex shall be used for capital expenditure of NTPC’s up-coming hydro and thermal projects over 21,000 MW in construction along with new Solar, wind capacities, new expansions etc. the company said in an email response. Hindustan Petroleum Corporation Ltd (HPCL) on the other hand said it plans to spend Rs 7,000 crore in the current financial year, which would be marginally higher from its last financial year capex. Chris Thompson Jersey
HAL turnover rises
Hindustan Aeronautics Ltd (HAL) has posted profit before tax at ?3,294 crore in fiscal 2016-17, registering 0.18 per cent growth compared with last fiscal’s ?3,288 crore. Though PBT was barely above last year’s level, the company posted the highest ever turnover of ?17,406 crore for the fiscal under review, registering 4 per cent annual growth from ?16,736 crore in the previous fiscal. The defence major has said it is “business as usual.with the company doing well on expected lines”. In a statement, HAL Chairman and Managing Director T Suvarna Raju said, “We paid ?800 crore to the government by interim dividend. This is in addition to ?162 crore paid as dividend tax.” He added that HAL’s PBT was at ?3,294 crore. HAL said it received orders worth ?21,000 crore in FY 2016-17, that included 12 Do-228 aircraft for the Indian Navy, 32 advanced light helicopters for the Indian Navy and the Coast Guard, and AL-31 FP engines for Su-30MKI.The production of 12 Su-30MKI aircraft in Phase-IV was one of the company’s main achievements. The Indian Air Force (IAF) had ordered a total of 270 Su-30MKI fighters, out of which 230 are already in service. Evan Rodrigues Authentic Jersey
Cabinet approves India-France MoU in civil aviation
The Cabinet today cleared the pact between the Airports Authority of India (AAI) and France’s DGAC for technical collaboration in the civil aviation space. The memorandum of understanding (MoU) would be between AAI and Civil Aviation Authority (DGAC). An official spokesperson tweeted that the Cabinet has approved ‘India-France MoU in civil aviation’ sector. The pact will be “beneficial for enhancement of skills and expertise of AAI’s officers”, the tweet said. Furthermore, the MoU will be beneficial for imparting training to engineers, technicians and managers, among others. AAI manages a total of 125 airports, including 11 international ones, and also provides Air Traffic Management Services (ATMS) over entire Indian air space and adjoining oceanic areas, as per its website. Austin Czarnik Authentic Jersey