India’s measures to revive gas-based power plants will benefit banks: Moody’s

Last Wednesday, the government of India approved measures to revive and improve the utilization of stranded gas-based power generation plants in the country. This is credit positive for India’s banks because they have significant credit exposure to such plants.

Among the biggest beneficiaries of these measures are IDBI Bank Ltd (Baa3/Baa3 review for downgrade, ba3 review for downgrade), State Bank of India (SBI, Baa3 stable, ba1) and ICICI Bank Limited (Baa3 stable/Baa2 review for downgrade, baa3).

Power generation plants that use regasified liquefied natural gas (RLNG) as their fuel base have been facing significant availability and pricing challenges because the actual domestic production of liquefied natural gas (LNG) has been significantly lower than the assumptions made when the plants were set up. At the same time, importing LNG at prevailing prices has proved difficult because it increased generation costs, which, in turn, raised prices beyond the reach of buyers.

Among our rated banks, IDBI Bank has an especially high exposure to gas-based power plants and would be the key beneficiary of these measures.

The government has now taken steps to make the import of LNG economically feasible for supply to these stranded plants by making the various stakeholders share the higher costs. The central and state governments will provide exemptions from certain applicable taxes and levies on the incremental LNG being imported, while gas transporters and re-gasification terminals will reduce their transportation tariffs, marketing margins and re-gasification charges on the incremental LNG. Power developers will forego their return on their equity. The Indian government has also proposed to provide support to power distribution companies that buy this power. The government estimates that there are 24,150 megawatts of gas-grid-connected power generation capacity in India. Of this, 14,305 megawatts of capacity has currently no supply of domestic gas and thus is stranded. The remaining 9,845 megawatts has also been working at a sub optimal level based on the limited quantity of domestic gas in the country.

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Germany to give 1 bn euro loan to India for strengthening power sector

Minister of State (Independent Charge) for Coal, and Renewable Energy has said that a development bank owned by the German government, the Kreditanstalt fur Wiederaufbau (KfW), has agreed to provide a concessional loan of a billion euros over the next six years to augment and strengthen the nation’s renewable power transmission infrastructure.

has also agreed to provide technical assistance of two million euros for forecasting, balancing, market design and network management in connection with grid integration of renewable power.

Goyal said the synchronisation of power from renewable sources under the Green Energy Corridor project, with soft loan assistance from KfW have not begun yet because it is at different stages of implementation in different states.

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Power sector total loan from banks at Rs 5.83 lakh crore

NEW DELHI: The total outstanding credit to the power sector from various banks amounted to Rs 5.83 lakh crore at the end of 2014 but the government has no plans to reschedule the loans to electricity generating firms.

In a written reply to the Lok Sabha, Power Minister Piyush Goyal said while the RBI does not maintain details of loans received by the approved power projects, however, bank-wise information on loans outstanding to power sector was available.

As per the data, the total outstanding loan to the power sector from various banks were at Rs 5,82,269 crore as on end of December 2014.

State Bank of India had the highest exposure to the power sector with a total loan amount of Rs 1,00,085 crore, followed by Canara Bank with Rs 45,620 crore.

The other major banks which had significant outstanding loans to the energy/power sector include Punjab National Bank (Rs 33,779 crore), Central Bank of India (Rs 33,263 crore), Bank of India (Rs 30,791 crore) and IDBI Bank Ltd (Rs 26,502 crore).

Among the private banks, ICICI had an exposure of Rs 13,646 crore, HDFC Bank Rs 8,962 crore.

In a separate reply to another question, Goyal said the government has no plans to reschedule loans to power companies.

“Commercial banks and financial institutions such as Power Finance Corporation and Rural Electrification Corporation etc take commercial decision and reschedule loans whenever justified,” the minister said.

In reply to another question, Goyal said some of the old power plants in India have been proposed for renovation and modernisation with the help of Industrial Bank for Reconstruction and Development (IBRD) and KfW Development Bank and Japan International Cooperation Agency (JICA).

He said the total financial assistance provided for energy efficiency renovation and modernisation at Bandel Thermal Power Plant in West Bengal (Unit-5, 210 MW) is USD 93.66 million, with IBRD contributing USD 77.01 million and Gobal Environment Facility (GEF) grant of around USD 16.65 million.

Similarly, Koradi plant (Unit 6, 210 MW) in Maharashtra has been provided a financial assistance of USD 71.45 million, comprising IRBD loan of USD 59 million and grant of around USD 12.45 million.

The minister further said KfW Development Bank, Germany has earmarked a soft loan of 90 million euro to two coal-fired units at Nashik owned by MAHAGENCO and at Kolaghat owned by West Bengal Power Development Corporation Ltd.

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India to boost LNG imports to raise power generation

The government said on Wednesday it will boost imports of liquefied natural gas (LNG) to improve electricity generation and revive plants worth billions of dollars to fuel economic expansion.

India’s plan to import LNG will boost power supply by 79 billion units valued at about 420 billion rupees and could spur spot prices of the super cooled gas trading at about USD 7.60 per million British thermal units in Asia.

Nearly a quarter of a century after India embraced economic liberalisation, many businesses still rely on costly back-up generators for round-the-clock power and a third of its 1.2 billion people are still not connected to the grid.

Prime Minister Narendra Modi, elected in May, has made a commitment to bring order to the chaotic power sector and end the chronic blackouts that impede India’s economic rise.

The government has charged GAIL (India)  Ltd to import LNG for power plants outside Gujarat, where a local state company will import the fuel to revive power plants and improve generation, Power Minister Piyush Goyal said after a meeting of the union cabinet.

During the rainy season lasting five months when power demand is less, India would daily import about 10 million cubic meters of gas and this would rise by 80 percent in the remaining seven months, Goyal said.

To make imported gas affordable to consumers, the union and state government will give tax concessions while the importers will charge less for regassification, transportation and marketing.

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Most power plants in India falter on green regulation

A staggering 90 per cent of coal-based thermal power plants in India fare unsatisfactorily on the environmental front, shows a recent analysis. While state-owned power generation companies are among the worst performers, plants owned by private firms have performed better on environmental and energy parameters.

In a report released by the Centre for Science and Environment (CSE) on Saturday here, the plants rated the best were owned by firms from the private sector. These facilities included CESC’s Budge Budge (West Bengal), JSW Energy’s Torangallu (Karnataka) and three from Maharashtra — Tata Power’s Trombay plant, JSW Energy’s Ratnagiri facility and Reliance Infrastructure’s Dahanu plant. Among the top 10 performers, eight were private companies.

“Even the best coal plants in India are average (in terms of environment performance) when compared to their counterparts worldwide,” said the report, titled ‘Heat on Power – Green Rating of Coal-based Thermal Power Plants’.

The plants that fared the worst were Jharkhand State Electricity Board’s Patratu, Uttar Pradesh Rajya Vidyut Utpadan Nigam’s Obra, Damodar Valley Corporation’s Bokaro B, Tenughat Vidyut Nigam’s Lalpania and Karnataka Power Corporation’s Raichur facilities.

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Clean energy push: Drop in solar power cost a game changer, says PM Narendra Modi

Prime Minister Narendra Modi has said that India has the potential to lead the world in the domain of renewable energy, describing the narrowing difference between the cost of solar and conventional energy as a “game changer” for the sector.

At the inauguration of a three day global conference, RE-Invest 2015, Modi on Sunday described the thrust on renewable energy production as an effort to ensure universal energy access for India’s poor. He said the price of solar energy has tumbled from Rs 20 a unit to Rs 7, bringing it close to conventional power. He recalled that as Gujarat chief minister he persisted with the solar power programme even as people found it scandalous that it was generated at Rs 20 a unit, but added that prices started falling as the industry scaled up. “Now prices are in the direction of conventional electricity. This is a game changer,” he said.

We have always spoken of energy in terms of megawatt. It is the first time we’re talking of gigawatt. We have no option but to make a quantum leap in energy production and connectivity,” Modi said, addressing a gathering of 2,000 delegates from India and 40 other countries.

In November last year, the government set an ambitious target of setting up 170 gigawatt of wind, solar and biomass power projects by 2022. Modi talked about India working to evolve an alliance of about 50 countries with abundant sunshine to pool research and technological advancements in the field of solar energy with an aim to make power accessible to the poorest of the poor and in remotest locations. He also said that India’s stress on renewable energy is not aimed at impressing the world but to meet its own energy requirements.

The prime minister stressed on the need for local equipment manufacturing for clean energy projects to generate jobs and technological innovation. Modi’s stress on equipment manufacture in India is linked to his ‘Make in India’ campaign, through which he wants to boost local manufacture to create jobs for people.

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Empowering the Enterprise

With the organisations working round the clock, power is becoming more critical by the day. The enterprises are committed to using energy productively and efficiently. They are increasingly relying on reliable and energy efficient power back-up systems to keep their operations running

There has been substantial growth in the industrial and commercial infrastructure in the country over the years. However, due to unavailability of uninterrupted source of power supply and rising energy cost, the need for reliable energy efficient power back-up systems have become an essential part of an organisation set-up. However, even the power sector cannot safeguard itself from the vagaries of the political situation and the state of the PC segment.

The UPS segment has de-grown in the past year due to election in India in 2014 and also due to the slowdown of growth in the home PC segment. But the market is full of optimism, as there is high growth in the demand from tier-II and tier-III cities. This is leading to vast improvement in the opportunities for the UPS market in India. “The market has de-grown in the past year by about 2.5% to 3%.,” says Gurudutt M – Head – Mid Market and Enterprise Channel Business, IT Business – Schneider Electric India.

According to research firm RNCOS, the Indian UPS market is expected to grow at 11% in 2014-2018. “We see a growing demand from tier 2 and tier 3 cities which has led to an increase in the opportunities for the UPS market in India,” says Syed Sajjadh Ali, Managing Director – India, Electrical Sector, Eaton. He also points out that with the advancement in technologies, e-commerce, data centers, servers, electronic and medical equipment’s, there will be significant demand for high power range of UPS systems in India.

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