APTEL has allowed fuel cost pass through for power plant, says Reliance Power
Anil Ambani-led Reliance Power today said that one of its arms Vidarbha Industries Power has got relief from Appellate Tribunal for Electricity (APTEL) as it has upheld fuel cost pass-through in the tariff for its 600 MW plant in Maharashtra. This will allow the company to recover enhanced cost of power based on higher fuel cost. “APTEL judgement provides regulatory clarity & certainty for VIPL,” Reliance Power said in a statement. Vidarbha Industries Power Ltd (VIPL), a subsidiary of Reliance Power Limited, had challenged Maharashtra Electricity Regulatory Commission (MERC) on 20 June, which partially disallowed fuel costs for FY2014-15 and FY2015-16. The said MERC order pertained to truing up for FY14-15, provisional truing up for FY15-16 and Multi-Year Tariff for FY16-17 to FY19-20. MERC had earlier approved the Power Purchase Agreement for Butibori Project of VIPL under Section 62 of Electricity Act. “APTEL found merit in VIPL’s contentions against the disallowance of fuel costs in the said MERC order. APTEL observed that once PPA is approved under Section 62 of Electricity Act, the basic principles of tariff determination as per Section 62 have to be followed, where the fuel cost is pass-through in tariff,” Reliance Power said in the statement. “APTEL observed in its judgement that actual fuel mix used must be allowed while undertaking the prudence check. APTEL has accordingly asked MERC to rework fuel cost pass-through based on the decisions in its judgement,” it further added. FAQ Womens Jersey
NTPC aims to be the lowest emitter of greenhouse gases
NTPC, globally the third largest power company in terms of coal based power generation capacity, intends to ensure minimum impact on environment from its power stations. It intends to become a low cost and low emission coal burner to maintain its position as a leader in the sector. NTPC is creating additional carbon sinks by planting one crore saplings during this financial year and the upcoming Telengana Thermal Power Project shall be most modern complying with the latest environment norms. NTPC chairman, Gurdeep Singh, in a statement outlined the company’s efforts in bringing down energy charges by stopping coal imports, ensuring better quality fuel through third party sampling and coal rationalization. NTPC is at present 2nd terms of capacity utilisation and 3rd in machine availability globally. It is 7th in terms of electricity generation, among the top twenty coal based power generating companies globally. Shaquem Griffin Authentic Jersey
Power sector’s debt woes may continue for 18 months
The country’s narrowing power deficit and increased coal production may not be indicators of the end of stress in the industry. There has been a negligible change in the power sector’s stressed capacity and debt. According to data published by the Reserve Bank of India (RBI), the infrastructure sector’s share in gross non-performing assets of banks was 13.90 per cent in June 2016, higher than 12.69 per cent in December 2015, and the power sector’s contribution to these numbers was 5.97 per cent and 4.99 per cent, respectively. “The primary reason for stressed assets in the power sector is weak demand. Demand has been weak due to muted industrial activity, resulting in ready capacity not finding long-term contracts, existing contracts running at low plant load factors and abysmally low spot power rates. Low asset utilisation is making it difficult for power producers to service debt,” said Debasish Mishra, partner at Deloitte Touche Tohmatsu India. According to Central Electricity Authority data, the plant load factor in September nationwide was 58.13 per cent . Legacy policy issues over coal allocation, low demand and banks’ unwillingness to take haircuts in acquisitions are some of the other reasons for the obstinate stressed debt in the system. “Coal production has increased, but the distribution and usage policy continues to be restrictive. The delay in announcing a new policy framework is leading to uncertainty,” said Ashok Khurana, director-general, Association of Power Producers. Khurana estimates the stressed power capacity at more than 50,000 MW, stating not much has changed in this number in the last couple of years. This capacity, Khurana said, lacked long-term power purchase agreements and fuel-supply agreements. “Around 18,000 MW faces under-recovery of fixed or variable costs due to various reasons and different stages of litigation,” he said. Multiple data points suggest stressed debt in the sector may linger. “Around 17,000 MW of projects, including those facing the consequences of aggressive bidding for coal supplies or huge cost overruns, and those with gas-supply issues, are projects where the debt at risk is the highest today. These are projects are not expected to turn viable in the long run even if they are structured under the 5:25 scheme or any other tool provided by the RBI,” said an October report by rating agency CRISIL. CRISIL estimated the debt exposure to these projects at Rs 70,000 crore. The 17,000 MW was higher than the 16,000 MW the agency estimated as debt at risk in July 2015. However, the quantum of debt involved in these stressed capacities has fallen marginally from Rs 75,000 crore to Rs 70,000 crore. “The debt situation will take time to resolve. One cannot undo the effects accumulated over the past five years with one year of better performance. The debt-earning ratio continues to remain high and balance sheets will take some time to deleverage,” said Vivek Jain, associate director with India Ratings. The ability to service debt with operational cash flow for four of the seven main power producers in the country continues to remain under stress with an interest coverage ratio at below 1.5 times, Capitaline data shows. (See chart) Revival in demand is likely to be key in improving the debt quality and the debt servicing ability of power companies. However, a revival in demand may continue to elude the sector for some more time. “Demand for power has not revived and I do not expect it to revive in the next year. Only after the debts of state electricity boards are transferred to the books of the state governments will demand improve,” said Anuj Upadhyay, analyst, Emkay Research. GBS Raju, chairman, energy, GMR Group, is hopeful the situation will improve in 18 months. “Every plant in the sector has a different issue–a long-term power purchase issue, a railway link issue, a transmission line issue–and has found itself stranded. Problems are being addressed plant by plant. I expect things to improve in the next 18 months,” Raju said. Kentavius Street Authentic Jersey
Huge spurt in imported coal prices to hit firms in entire power value chain
The 60 per cent jump in imported coal prices between April and October current financial year is likely to negatively impact the power sector value chain. The distribution companies (discoms), independent power producers (IPPs) with non-escalable fuel cost, merchant power producers and ports relying on imported coal for the bulk of their volumes will face volume and profitability pressures, research agency India Ratings has said. The increase in imported coal prices was more pronounced in October 2016, where prices rose by 25 per cent to around $85 per tonne from $68 per tonne in September 2016. DISCOMS “Anecdotal evidence suggests that most state regulatory commissions have not allowed for Power Purchase and Fuel Cost Adjustment (PPFCA) on an actual and timely basis, which has led to an escalation in the power purchase cost of discoms, without a commensurate increase in revenues,” India Ratings said in a report. Historically, the ability of the distribution companies to pass on fuel cost increases to the end-consumers has been limited and delayed due to the political intervention in the tariffs. The regulatory commissions can allow a pass-through of such costs, by way of PPFCA, since power purchase cost is an uncontrollable expense for the discoms. MERCHANT IPPs Merchant IPP’s which sell power through the merchant route will be impacted significantly since the prices on the exchanges or bilateral trades have not moved up at the same rate as the rise in variable cost of generation in October 2016, on account of the imported coal price increases, the firm said. This will lead to a significant compression in their gross margins, which have fallen to zero in October 2016. Hence, the viability of merchant IPPs on imported coal is doubtful in the current price scenario. REGULATED POWER PLANTS The research firm also said it expects the hike in fuel costs to be credit neutral for power generators which operate their plants on the cost plus return on equity (ROE) model. The plants running on cost plus ROE are allowed a complete pass-through of such costs to the consumers by way of the monthly fuel cost adjustment in the bills, thus insulating these plants from any adverse movement in coal prices. However, with higher fuel costs, the impact of under-recovery or over-recovery, if any, on the variable cost due to lower or better performance than the operating normative parameters including station heat rate and auxiliary consumption is likely to lead to a higher level of absolute disincentives or incentives respectively. IMPACT ON COAL IMPORTS The overall dependence of imported coal in India declined during 2015-16 as the output from Coal India Limited increased significantly over 2014-15 and 2015-16, leading to a 10 per cent decline in the overall non-coking coal imports in India to 156.4 million tonne last fiscal. “The volume de-growth of non-coking coal was not as sharp in FY16, despite the lower prices, because other end-user industries namely cement and non-ferrous metals found it cheaper to use imported coal to fire their kilns or boilers. However, with the rise in prices of imported coal, these end-user industries are looking at alternative fuel sources, which could pressurise imported coal volumes from these players. Moreover, in a scenario of power surplus with adequate domestic coal availability, the use of imported coal for power generation is likely to remain benign,” the report said. IMPACT ON IPPs WITH NON-ESCALABLE FUEL COST With the decline in coal costs, the stress on the imported coal-based plants namely Adani Power’s 1980 Megawatt plant in Mundra and Tata Power Limited’s 4,000 MW plant in Mundra under its subsidiary Coastal Gujarat Power Limited had reduced, despite the absence of compensatory tariff. However, with the prices of imported coal rising again and judgement awaited on the applicability of the force majeure clause in the power purchase agreement, the stress levels would start building up again on these generators with non-escalable fuel costs.
Power demand to rise in future: NTPC CMD
Exuding confidence that Centre’s UDAY scheme will help revive debt stressed discoms, NTPC Ltd Chairman and Managing Director Gurdeep Singh today said electricity demand is going to increase in future. The central government had launched UDAY scheme to help discoms reduce debt and improve their financial position which will ultimately help them buy power required for their customers. They were unable to buy power from generating firms despite having demand from their consumers. Singh was addressing employees’ on 41st raising day of the company today at Engineering Office Complex at Noida. He also spoke about efforts of NTPC’s to bring down energy charges by stopping import of coal, ensuring better quality coal through third party sampling and coal rationalisation. Singh urged NTPC’s Power Management Institute and research arm NETRA to play a crucial role the company’s development. Speaking about Environment Management, he said NTPC has to ensure minimum impact on the environment from its power stations and carry forward the slogan “Low cost Low emission” to maintain its position as a leader in the sector. NTPC is creating additional carbon sinks by planting one crore saplings during this financial year and the upcoming Telengana Thermal Power Project shall be most modern complying with the latest environment norms, he said. Inclusion of safety as a Core Values is to ensure safe practices in all areas of Company’s operations, he added. Singh lauded Team NTPC’s efforts for achieving highest generation on September 9, 2016, performance of Koldam Hydro project, start of work at Pakhri Barwadih coal mine, for being the first company to issue Masala bonds, Consultancy Wing for providing services to nearly 18000 MW projects in the country and construction of toilets for Swachch Bharat campaign under CSR. State-run NTPC is the third largest power company in terms of coal based power generation capacity, and among top 20 coal based power generating firms globally. Will Richardson Womens Jersey
Three firms move GERC for fixing tariff for energy to waste conversion
At least three firms already moved a petition in Gujarat Electricity Regulatory Commission (GERC) for approval of a tariff of Rs 7 per unit for generate energy from water. The three firms that have moved GERC have expressed their willingness to generate around 48 MW of power from the nearly 3000 odd metric tons waste of Ahmedabad city. Pravin Patel, chairman, standing committee said, “The AMC has entered into contract with three firms and each firm will generate 1000 MT of garbage into 16 MW. These firms will gradually increase the capacity and will utilize around 1200 MT of garbage.” Patel said that as per the centre government policy, the power will be purchased at Rs 7 per unit and the centre government will give subsidy for the same. He said that the state government has already adopted the policy as the same has been formed by the centre government. The AMC will not incur any burden for setting up this power generation units. He said that the three units have moved GERC for getting the tariff fixed. Meanwhile, Gujarat Electricity Regulatory Commission (GERC) has also initiated the process for determining tariff for procurement of power by distribution licensees and others from Municipal Solid Waste (MSW) based power projects. The power regulator has proposed a gross tariff of Rs 7.30 per unit for Pelletization or Refuse Derived Fuel (RDF) technology-based power projects and Rs 7.25/unit for projects using incineration technology. Sources said that GERC is yet to come out with the final order on the tariffs. As per the state government’s Waste to Energy Policy-2016, Gujarat has the potential to generate approximately 100 MW of power from solid waste. The potential has been assessed for 8 municipal corporations and 162 municipalities. Under the Waste to Energy Policy-2016, the policy is aimed at reducing pollution caused by untreated solid waste. Under the policy, Urban Local Bodies (ULBs), such as municipal corporations, will provide land on lease at a token rate of Rs 1 to business entities who wish to set up their solid waste-based power generations units. Brett Connolly Authentic Jersey
TN Discom rejig: Power Ministry says can’t relax FRBM norms for borrowing
The Centre has told the Tamil Nadu government that it cannot give any relaxations for borrowings beyond the mandated norms for the Discoms financial restructuring package. At a recent meeting the Union Power Ministry expressed its inability to go beyond the FRBM (fiscal responsibility and budget management) norms. The Power Ministry, however, agreed to tweaking some other norms to enable the State join the Centre’s scheme to revive financially stressed electricity distribution utilities – the Ujwal DISCOM Assurance Yojana or UDAY. “We cannot change the basic structure of the scheme as it has been approved by the Union Cabinet, but concessions can be worked out within the norms. States are coming out with their own specifications and we have facilitated wherever we can,” an official said. Chief Minister J Jayalalithaa had in June in a memorandum given to Prime Minister Narendra Modi spelt out certain modifications stating that if not considered then it would be difficult for the State to implement UDAY. Though Tamil Nadu has in-principle agreed to join the Centre’s scheme, the Power Ministry is being cautious. A source involved with the negotiations said, “we have to wait for the MoU draft, which the State will send once its Cabinet approves.” Under UDAY, States take over 75 per cent of the Discom debt and pay it back by issuing bonds. Jayalalithaa had put forth a condition that Tamil Nadu will takeover ?17,500 crore of loans of Tangedco, if additional borrowing towards principal repayment and interest servicing on account of Discom debt take over is provided over and above the normal borrowing limit by relaxing FRBM norms for 15 years. “This is something which falls under the domain of the Finance Ministry and we have communicated it to the State government,” another official said. For implementing UDAY, Jayalalithaa had also sought that the State government be allowed to float 15-year bonds with five-year moratorium and floating interest rate of not more than 20 basis points. “Tenure of the bonds can be flexible. Some States have preferred 10-year bonds,” a member of the negotiating team told BusinessLine. The Tamil Nadu Chief Minister had also asked the Centre to provide 25 per cent of the taken over debt as grant similar to the assistance provided in the Financial Restructuring Programme of 2012 and a provision for quarterly revision of electricity tariffs to offset fuel price change. Officials concerned said, the Centre had accommodated a lot, if not all, of the conditions of Tamil Nadu government. Regarding relaxation of the FRBM norms, the Power Ministry said it will convey the issue to the Finance Ministry, but did not make any commitments on that score. If Tamil Nadu, which has Discom debt of ?80,000 crore, joins the scheme then the total number of States coming on board will be 18. The combined Discom debt, including Central PSU dues that would be restructured in respect of these 17 States that have already joined the scheme is around ?2.57 lakh crore, which is around 68 per cent of the total outstanding Discom debt as on September 30, 2015. Ja’Whaun Bentley Womens Jersey
State-owned electric companies to stop importing coal from next financial year: Coal Secretary
Coal Secretary Anil Swarup on Thursday said that state-owned electricity generating companies will stop importing coal from the next financial year, The Hindu Business Line reported. Swarup said power generation companies owned by the Centre and states imported between 35-40 million tonnes of coal in 2015-’16. “After March 31, 2017, there will be zero imports,” he said. Swarup said that while the government was keen on allowing the entry of the private sector into the commercial coal mining industry, the move was being delayed by low demand as well as capacity maximisation by state-owned Coal India. The secretary added that the government could not allow the entry of private companies unless “everyone is getting coal”. He added that Coal India would keep making efforts to meet its production target of 1 billion tonnes of coal by 2020. “We should get prepared to produce as much as our target and lift [it] when required,” he said while speaking at a conference on India’s coal sector. A report by BMI research, a subsidiary of global ratings agency Fitch, has said that India may continue to face deficits in its coal requirement because of delays in opening up the sector to commercial mining as well as delays in granting approvals to new state-owned miners, according to dna. “We are assuring the supply of coal for [the] private sector,” Swarup said. However, reports have suggested that the Indian government will have to spend four times its defence budget to meet its 2020 target. Josh Bynes Womens Jersey
First Solar Slashes Revenue Expectations By $1B As Demand For Solar In China Slows
First Solar, the world’s largest manufacturer of thin-film cadmium telluride (CdTe) modules and utility-scale solar solutions provider, reported net income of $1.49 per share for the third quarter, beating analysts’ bottom line expectations. Sales, however, fell 45.9% to $688 million, and CEO Mark R. Widmar officially slashed sales guidance for 2016 to $2.8-$2.9 billion from $3.8-$4 billion, due to the timing of certain utility-scale solar project sales. Widmar withheld comment on the company’s 2017 outlook, deferring until November 17 when First Solar will give an outlook update. But the combination of the enormous outlook decline for 2016 revenues and uncertainty in articulating visibility to future earnings left the investing community with little choice but to sell first and ask questions later. On the call, CEO Widmar raised the possibility of fast-forwarding from the current Series 4 module straight to the Series 6, given that, in the current pricing environment, the Series 4 and as yet unveiled Series 5 module will likely experience significant margin pressure. Widmar is also considering other cost-cutting measures, but at the end of the day none of this will really make a difference as the company is simultaneously facing several negative macro trends. Small Share in a Cyclical Industry The solar industry is highly cyclical and First Solar is a small fraction of the overall share. Though First Solar is the world’s largest manufacturer of thin-film modules with ~3GW of capacity, thin film only has about 6% overall market share relative to polycrystalline silicon, an industry dominated by Chinese manufacturers. Workers install polycrystalline silicon solar panels in the Guanshui Town of Muping District in Yantai, Shandong Province of China last November. First Solar, the world’s largest manufacturer of thin-film cadmium telluride (CdTe) modules and utility-scale solar solutions provider, reported net income of $1.49 per share for the third quarter, beating analysts’ bottom line expectations. Sales, however, fell 45.9% to $688 million, and CEO Mark R. Widmar officially slashed sales guidance for 2016 to $2.8-$2.9 billion from $3.8-$4 billion, due to the timing of certain utility-scale solar project sales. Widmar withheld comment on the company’s 2017 outlook, deferring until November 17 when First Solar will give an outlook update. But the combination of the enormous outlook decline for 2016 revenues and uncertainty in articulating visibility to future earnings left the investing community with little choice but to sell first and ask questions later. First Solar ended the day down over 14% after the release. On the call, CEO Widmar raised the possibility of fast-forwarding from the current Series 4 module straight to the Series 6, given that, in the current pricing environment, the Series 4 and as yet unveiled Series 5 module will likely experience significant margin pressure. Widmar is also considering other cost-cutting measures, but at the end of the day none of this will really make a difference as the company is simultaneously facing several negative macro trends. Small Share in a Cyclical Industry The solar industry is highly cyclical and First Solar is a small fraction of the overall share. Though First Solar is the world’s largest manufacturer of thin-film modules with ~3GW of capacity, thin film only has about 6% overall market share relative to polycrystalline silicon, an industry dominated by Chinese manufacturers. Solar module pricing has also fallen 29% year-to-date, and the industry is in an over-supplied position. China’s Changing Targets Top Chinese solar players like Trina Solar Ltd., Canadian Solar Inc. and JinkoSolar Holding Co., who control well over 90% of the market, are feeding the decline in ASPs. According to Bloomberg New Energy Finance they built out capacity aggressively even as the Chinese government (the number one buyer for solar modules) is lowering solar subsidies and dialing back demand as it digests existing new solar capacity. In China, there was a rush to install solar in the first half of the year because only solar projects that were operational by June 30, 2016, would be eligible for a ‘feed-in tariff’ of about 1.0 yuan (15 U.S. cents) per kilowatt hour (kwh), while those completed beyond June 30 would get a lower tariff rate. From the beginning of 2016 year until June 30, China installed 20 Gigawatts (GW) of solar as developers pushed to get their projects in under the more favorable tariff regime. But recently the Chinese government has set a new national target for solar installations of 18 Gigawatts. Over the long term, China has ambitious goals to increase renewable energy’s share of the overall energy mix to 15%, but in the near term it seems to be taking a breather to make sure that all the new renewable capacity is actually hooked up to its grid. Roth Securities analyst Phillip Shen downgraded First Solar to neutral from buy this morning, taking his price target to $40 from $55. Shen had correctly predicted the industry over-capacity after traveling to China earlier this year. He said in his note, “Although module ASP declines have recently flattened, the next ramp up of manufacturing capacity from Asia or seasonal slowdown of demand in China could catalyze another leg down.” Shen’s new 2017 EPS estimate stands at $1.55, which is $.05 higher than the roughly $1.50 of 2017 consensus. Utility-Scale Buyers Showing Increased Price Sensitivity Complicating matters for First Solar further, on the demand side, utility-scale buyers are increasingly price-sensitive. Alexander R. Bradley, First Solar’s CFO, said on the call that the company passed on several projects in India and Africa this quarter. “We won’t chase the pricing to the bottom and we won’t go into deals that are uneconomic for us,” Bradley said. Southern Company and NextEra, two big utility-scale buyers, recently announced they were going to focus less on solar and more on wind and other renewable alternatives. When asked about this on the call, management conceded it was the case, adding there is “somewhat of a scarcity of tax capacity for large utility-scale assets,” referring to financing from lenders interested in tax credits. Better places for your capital The
Life expectancy in India cut by two years due to air pollution: IEA
With Air pollution in India has reaching a new high the average life expectancy in India has been cut by 23 months, according to International Energy Agency (IEA). Air pollution in India is closely linked to the energy sector. In Delhi pollution levels reached 30 times the World Health Organization’s recommend levels on October 30, the Paris based agency said. The IEA in its report “Energy and Air Pollution” said that that air pollution remains closely linked to the energy sector as a vast majority of pollutants including particulate matter, sulfur oxides, nitrogen oxides come from the inefficient burning of fuels. India’s capital, home to more than 16 million inhabitants, has a concentration of breathable particulate matter more than ten times in excess of the WHO air quality guideline value, earning Delhi the title of the world’s most polluted city. “Around 590 000 premature deaths were attributable to outdoor air pollution in 2015 and about 1 million premature deaths to household air pollution,” said IEA in a media statement. There is a real risk that India’s economic growth may worsen India’s dismal air quality. This is particularly true given India’s reliance on coal – which currently makes up 44% of total energy demand – along with biomass (24%) and oil (23%). IEA in its reports said that the government and energy sector can take actions which include: setting an ambitious long-term air quality goal; putting in place a clean air strategy for the energy sector that avoids pollutant emissions; and ensuring effective monitoring, enforcement, evaluation and communication. The international agency also recommended practical strategies including: relocating highly polluting industries – including cement manufacturing, fertilizer production, and the paper, rubber and wood industries – outside the city. The Delhi government has roped in measures such as converting public transport from diesel to compressed natural gas, changing some coal-fired plants to natural gas, prohibiting open burning of waste. Although these measures have been effective in relation to particular sources of pollution, they have quickly been offset by a growing population, the IEA release added. The Paris Agreement and momentum the behind the low-carbon energy transition is providing extra motivation for a switch away from traditional, polluting energy production across the world. However for a city like Delhi, which cannot afford to have many more days of peak emissions, the real motivation is the health of its citizens. Jim McMahon Jersey