Ultra mega power projects

The government proposes to make it mandatory for bidders of ultra mega power projects (UMPPs) to source equipment from domestic suppliers. The move is aimed at reducing the dependence on foreign companies, particularly Chinese, and encourage a build-up of domestic supercritical technology equipment capacity.
Central Electricity Authority data reflect the UPA government’s concerns that Chinese companies hold sway over power equipment supplies in India. Of 43 supercritical units bought by Indian companies so far, orders for only four have been placed with Indian companies. Chinese companies have bagged orders for 26 boiler–turbine–generation sets (BTG). Koreans managed eight, while three went to Russian companies and two to Italian firms.
Tata Power has placed orders for five units of 800 mw each for the Mundra UMPP with Korea’s Doosan and Hitachi of Japan. Reliance Power has awarded contracts for six units of 660 mw Sasan UMPP to China’s Shanghai Electric. Equipment for Reliance Power’s Krishnapatnam and Tilaiya UMPPs are yet to be awarded.
Developers both in the state and private sectors have been moving from supercritical to sub-critical projects, causing concern. About 44,700 mw of supercritical capacity is under construction.
The power ministry proposes to revise bidding norms to make it mandatory for qualified bidders to buy equipment within the country. The plan to amend request for proposal would be put before the empowered group of ministers, headed by power minister Sushilkumar Shinde, that has been constituted to look into the UMPP issues, a senior government official said told Financial Chronicle.
Artificially pegged conversion rates for the yuan has given Chinese companies a distinct pricing advantage. “They have been able to quote 25 per cent lower because of the artificially determined exchange rates,” said an indigenous equipment supplier.
The centre will direct all state-owned power utilities to invite bids from equipment suppliers from Indian companies.
Power equipment makers like Bhel and Larsen & Toubro have welcomed the move, but electricity generators, including Tata Power and Lanco Power, said the move was the worst thing to happen to the power sector.
The state-owned Bhel said the step was in the right direction.
“We have always been saying that there is unfair competition with foreign players as there is zero per cent customs duty on imports. Some support is required at least till the time Indian supercritical equipment market is developed and is ready to take on competition. The government should facilitate manufacture of at least the first 10 or 15 supercritical sets,” Bhel chairman and managing director K Ravi Kumar said.
L&T Power managing director and chief executive officer Ravi Uppal said this was a step long overdue. “Companies like ours, Toshiba, and Bharat Forge are investing hundreds of crores in the sector. The proposal would help domestic players to grow and make the country self-reliant. We welcome foreign players to participate in Indian tenders as long as they set up shop in India,” he said.
However, Lanco Infratech chief financial officer J Suresh Kumar said the proposal would “lead to the market becoming anti-competitive, making Bhel a monopoly and subjecting generators to the whims and fancies of equipment suppliers.”
Tata Power finance director S Ramakrishnan said, “One has to look at the delivery schedules of domestic equipment makers”, implying that there were problems in supplies.
The government official said the power ministry was in favour of placing equipment orders with local equipment makers to help them establish more facilities and bring down costs.
The cost of initial supercritical units is high because of the large import content and low volume. Bhel is expanding its production capacity to 15,000 mw by the year- end. The company has tie-ups with Alstom and Siemens for manufacture of supercritical boilers and turbines. New joint ventures of L&T-Mitsubishi, JSW-Toshiba, Bharat Forge-Alstom and Ansaldo-GB Engineering are also setting up capacity.
Companies with domestic presence are at an advantage as they have qualified for bulk tenders to be floated by NTPC and DVC for 11 supercritical units. Only companies with a manufacturing base in India are qualified to bid for the contracts.

Placing a Rs40,000 crore order for the supply of power equipment to state-run NTPC Ltd and Damodar Valley Corp

New Delhi: In a move that will provide a fillip to the capital goods industry and the power sector, the Congress-led United Progressive Alliance (UPA) government will be placing a Rs40,000 crore order for the supply of power equipment to state-run NTPC Ltd and Damodar Valley Corp. (DVC).

The cabinet committee on infrastructure took the decision on Thursday, setting the stage for NTPC, India’s largest power generation utility, to invite tenders for the purchase of 11 boilers and 11 turbines of 660MW each within 45 days. Of these, nine units will be for NTPC and two for DVC.

The order will lead to “rapid capacity addition in the country, transfer of super critical technology and development of indigenous manufacturing capacity”, said a press note of the government.

Such so-called super critical equipment, apart from being environment-friendly, helps increase plant efficiencies.

Mint had reported on 16 June that the government’s 100-day agenda included this proposal.

“The order will be a huge boost for the Indian manufacturing sector and the power sector. It will also help in establishing super-critical technology in the country,” said K. Ravi Kumar, chairman and managing director, Bharat Heavy Electricals Ltd (Bhel).

Private sector joint venture firms expected to participate in the tender include Toshiba Corp. of Japan along with JSW Group; Ansaldo Caldaie SpA of Italy and GB Engineering Enterprises Pvt. Ltd; and Larsen and Toubro Ltd and Mitsubishi Heavy Industries Ltd of Japan.

“Bhel would be the primary beneficiary which would minimum get orders for five sets out of total 11 sets to be tendered under bulk route, this should help the company achieve more than targeted Rs55,000 crore order inflow for the year FY10,” said Madanagopal R., an equity research analyst at Mumbai-based Centrum Broking Pvt. Ltd, said.

In addition, the cabinet committee on economic affairs (CCEA) on Thursday gave its assent to an empowered committee of secretaries (eCoS) set up for International Coal Ventures Pvt. Ltd, to also consider the overseas acquisition plans of Coal India Ltd, India’s largest coal miner.

In another development, CCEA has given its in-principle approval to the department of telecommunication’s proposal to allow Telecommunications Consultants India Ltd (TCIL) to exit from the Rajasthan-based telecom operator Bharti Hexacom Ltd.

Bharti Hexacom is a joint venture with Sunil Mittal promoted Bharti Airtel Ltd holding 70%; TCIL had invested Rs106.02 crore for its stake.

CERC checks price volatility in Day-Ahead Markets

CENTRAL ELECTRICITY REGULATORY COMMISSION

3rd Floor, Chanderlok Building, 36-Janpath, New Delhi-110001

Tel. No. 23353503, Fax No. 23753923

Website : www.cercind.gov.in

New Delhi, the 11th September, 2009

PRESS RELEASE

CERC checks price volatility in Day-Ahead Markets

Exercising it powers under the Electricity Act, 2003, CERC issued order

today notifying the permissible price band for interstate day-ahead power

transactions. The following are the key features of the order:

i) The price band is only for interstate day-ahead power market.

ii) The price band would be from 10 paise per unit to Rs.8 per unit.

iii) This would be applicable to power exchanges and also to bilateral

markets.

iv) The order would lapse after 45 days.

2. This order has been passed by CERC after conducting a public hearing on 8th

September, 2009 and considering the comments/suggestions/objections received

from the stakeholders.

3. The move to initiate this regulatory intervention was based on noticing the

steep increase in short-term power prices and increased weekly price volatility.

4. The order mentions that the Commission is equally conscious of its statutory

obligation to ensure reasonable return for the investors in the sector and assures

that their long term interests, future investment plans and reasonable rate of return

are among the other considerations kept in mind while arriving at the above

mentioned caps. Further, Commission has made it clear that the price caps are

being imposed only for day-ahead transactions and that too for a short period of 45

days.

5. The order is available on the website of the Commission.

(http://www.cercind.gov.in)

Sd/-

(Alok Kumar)

Secretary

CERC notifies tariff regulations for green power

CENTRAL ELECTRICITY REGULATORY COMMISSION
3rd Floor, Chanderlok Building, 36-Janpath, New Delhi-110001
Tel. No. 23353503, Fax No. 23753923
Website : www.cercind.gov.in
New Delhi, the 17th September, 2009

PRESS RELEASE

CERC notifies tariff regulations for green power

CERC has notified the tariff regulations for electricity generated from
renewable energy sources. These regulations have been finalized keeping in view
the statutory mandate to Electricity Regulatory Commissions for promoting cogeneration
and generation of electricity from renewable sources of energy. The
Tariff Policy had also mandated CERC to lay down guidelines for pricing non-firm
power, especially from non-conventional sources to be followed in cases where
such procurement is not through competitive bidding.
2. These regulations assume special importance in view of the National Action
Plan on Climate Change which stipulated that minimum renewable purchase
standards may be set at 5% of the total power purchases in year 2010 and thereafter
should increase by 1% each year for ten years. The new tariff regulations are
expected to promote new investments so that renewable electricity supply could
expand to meet the goals stipulated in the National Action Plan.
3. Specifying capital cost norms and fixing tariff upfront for the whole tariff
period are the two main features of the new regulations. The regulations provide
normative capital costs for projects based on different renewable technologies.
These capital costs are to be revised every year for incorporating the relevant
escalations. The norms themselves would be reviewed in the next control period
which will start after a period of three years. However, the regulations has enabling
provisions to review the capital cost norms for solar power projects every year in
view of the fact that the costs for these technologies are expected to decline more
rapidly.
4. However, the tariff permitted to a project under these regulations would
apply for the whole tariff period which is 13 years. The tariff period for solar
power has been kept as 25 years and for small hydro below 5 MW, it has been kept
as 35 years in view of the special considerations required for these technologies.
This feature of upfront tariff for whole tariff period is a major initiative to ensure
regulatory certainty.
5. Tariff philosophy in these regulations is to give a preferential tariff to the
projects based on renewable technologies during the period of debt repayment.
Preference has been given mainly in respect of return on equity, shorter loan
repayment period, higher normative interest on loan. Thereafter, these projects are
expected to sale power through competitive route.
6. Tariff model adopted is levellized tariff in order to avoid front loading of
tariff while at the same time ensuring adequate project IRR.
7. These regulations also provide that in case of solar power which is
comparatively an evolving technology and also for other new technologies such as
municipal waste based generation, the project developer can also approach
Commission for a project specific tariff.
8. The Forum of Regulators has also agreed to implement Renewable Energy
Certificate (REC) mechanism which will be an alternative route for fulfilling
renewable purchase obligations. This mechanism is mainly aimed at addressing the
mismatch between renewable resources availability in the local region and the
renewable purchase obligations. CERC would play a supportive role for designing
and regulating national level REC registry and REC market.
9. Further, in order to address the technical problems relating to absorption of
large volumes of non-firm power such as wind in the grid, CERC has constituted
an expert task force which has representation from Central Electricity Authority,
States, System Operator and C-WET. The Task Force has been mandated to give
recommendations in respect of forecasting of generation from these technologies,
ensuring grid reliability and equitable sharing of costs involved in ensuring reliable
operations. The Task Force would also recommend appropriate grid connectivity
standards for renewable sources based generating stations.

Sd/-
(Alok Kumar)
Secretary