SunEdison puts seven India projects on the block

M. RAMESH
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Chennai, Nov. 25: SunEdison, a solar power developer and a subsidiary of the US poly-silicon major MEMC, is looking to sell 49 per cent stake the most allowed under the power purchase agreements in seven of its solar projects in India. (Each project is under a company and SunEdison wants to sell 49 per cent in each.) Sources close to the development say that a US-based company is in talks with SunEdison for this. The projects Sources among investment bankers have toldBusiness Line that these seven projects total to a capacity of 52 MW. The biggest of the seven is the 25-MW project in Patan, Gujarat. The others are: three in Surendranagar (Gujarat), Sirohi and Jodhpur in Rajasthan and Jhansi in Uttar Pradesh. SunEdison estimates that over the lives of these projects, they would earn $140.69 million net cash, i.e., tariff and carbon credit revenues minus development costs, maintenance costs and taxes. Fortynine per cent of this works out to $68.94 million. Projects other than Patan (25 MW), Sirohi (1 MW) and Jhansi (1 MW) are jointly-owned. While IDFC is the co-owner of the Jodhpur project (5 MW), OPIC, a part of the US government and L&T Infra Finance are the co-investors of the Surendranagar projects. Incidentally, only last week did SunEdison announce raising $110 million in debt from OPIC, L&T Infra and IDFC. Significance These seven projects are in various stages of completion. All of them will be generating solar electricity by January 2012.

How the stake-sale pans out is a matter of great interest to the solar industry globally. This is because India is a very recent entrant in the solar power generation sector but is a big and growing market. With sunshine all through the year, India is a promising solar nation, where the panels are expected to produce more than in, say, Europe or the US. However, there are other issues such as difficulties in project implementation, and the absence of solar irradiance data. SunEdison's success in putting through the stake-sale deal will kind of become a benchmark for others.

Domestic gas output dips 7.4% in Oct

OUR BUREAU
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New Delhi, Nov. 25: With the dependence on imported gas expected to go up, the need for infrastructure, like trunk pipelines and liquefied natural gas terminals, has also increased. The domestic gas output in October fell 7.4 per cent at 4.026 billion cubic meter, as the production from offshore fields, including Reliance Industries-operated KG-DG block, fell 9.8 per cent to 3.249 billion cubic metres. An industry observer says, In view of the unfavourable demand-supply situation, the need for adding infrastructure both liquefied natural gas terminals as well as transmission networks has become more prominent. Today, whatever gas is available is fully used. Of the current demand of about 180 mmscmd, the domestic gas output is about 122 mmscmd, imported gas is 46 mmscmd. This figure may undergo a change in the short term if the domestic output does not increase, those tracking the sector say. The gas demand is projected to be 210 mmscmd in the near term. The cumulative gas output (April-October 2011) fell 8.3 per cent to 28.431 billion cubic metres, offshore production fell 10.9 per cent to 23.166 billion cubic metre against the same period last year, according to Petroleum and Natural Gas Ministry data.

There are two liquefied natural gas terminals Shell (Hazira) and Petronet LNG (Dahej) operational in the country. In the pipeline are three more terminals in Kochi, Ratnagiri, and Ennore. The public sector gas transmission and marketing company, GAIL (India), has planned investments of about Rs 30,000 crore to increase its transportation capacity from 175 mmscmd to 300 mmscmd by 2013. The country's October crude oil output dropped 0.9 per cent to 3.218 million tonne, against the same month last fiscal. This drop was mainly because of decline in output from offshore fields including ONGC's Mumbai High. Around 80 per cent of the country's hydrocarbon energy requirements are met through imports, as the growth in domestic oil and gas output is not proportionate with the growing consumption of petroleum products. Domestic refiners processed 2.8 per cent less crude oil in October from a year ago at 13.203 million tonne. The private sector refiner Essar turned 79.4 per cent less crude oil into petroleum products at its Vadinar refinery. The refinery was shut down for most of October.

Power cuts increase, but NTPC struggles to sell to utilities

ANIL SASI
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About 10 billion units go unsold in first seven months of this fiscal

New Delhi, Nov. 25: It's a paradox of sorts that at a time when most States are resorting to varying levels of load shedding, power major NTPC Ltd is increasingly finding it difficult to sell electricity to distribution utilities.

The country's largest power utility, and one of the most cost-efficient in terms of delivered electricity tariffs, has seen an estimated 10 billion units of electricity going unsold in the first seven months of this fiscal. Last year too, around 13 billion units generated by the state-owned utility went unsold as distribution utilities failed to draw power according to the schedule declared by them. Though the electricity going unsold is just a fraction of NTPC's total generation (around 221 billion units last fiscal), the worrying aspect is the growing tendency among distribution utilities to go in for load shedding rather than shell out a higher amount of money for buying expensive power from projects using liquid fuel or those where higher amounts of imported coal blending aretaking place. While liquid fuel generation is evidently expensive, blending of imported coal too jacks up the electricity tariffs as such coal is relatively more expensive than domestic coal. Tariff revision Since fuel costs are pass-through for nearly all of NTPC's projects, as the blending ratio increases, the financial hit on distribution utilities and State Electricity Boards (SEBs) is higher, unless they can pass it on to the consumers. As most SEBs have failed to revise tariffs to the extent required for passing on the actual costs faced by them, they are struggling to cope with the cost increases being passed on to them by the generators. The trend, warn experts, could only get worse , as the level of blending of imported coal is only scheduled to increase as domestic coal production has failed to keep pace with demand. As a thumb rule, around 75 per cent of cost of power for a thermal station is on account of coal. Backof-the-envelope calculations show that against a projected requirement of 742 million tonnes of thermal coal for fuelling coal-fired stations by the end of the Twelfth Plan, only 527 million tonnes of domestic coal are likely to be available even in the best-case scenario. This translates into a shortfall of 215 million tonnes or 29 per cent of the country's total requirement projected by 2017. Cost implications To get an idea of the cost implications of imported coal, NTPC's Farakka station, where the power generator is currently blending 20 per cent imported coal the highest in all its stations, has already seen just variable component surge to Rs 2.79 per unit of electricity produced in 2010-11. This has pushed up tariffs to well over Rs 3 per unit. Farakka's variable cost is much higher than the NTPC's average tariff of Rs 2.63 across all its 28 stations during the financial year. NTPC is currently blending imported coal ranging between 7 and 20 per cent across its stations. NTPC's average imported coal blending during 2010-11 was close to 8 per cent in comparison to about 6.5 per cent in the previous year. This could be much higher this year, as the domestic coal shortages are increasing by the day.

Gas-based power projects in AP running out of steam

AMIT MITRA & V. RISHI KUMAR
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Supplies from Reliance's KG Basin shrink

Hyderabad Nov. 29: Gas-based independent power projects (IPPs) in Andhra Pradesh appear to be running out of steam, with gas supplies from Reliance Industries Ltd's (RIL) KG Basin shrinking in the last few months. Their expansion plans hinge on fresh gas allocations, which seem tough going by the current demand-supply situation. While RIL dashed off an arbitration notice to the Ministry of Petroleum and Natural Gas on Monday, most of the IPPs that depend on fuel from this basin are finding it difficult to run the existing plants at the desired capacity. Officials of some IPPs say that at the present rate of gas availability, their PLF (plant load factor) has slumped to below 65 per cent. Due to the cash crunch, we are not being able to service our debt, take up regular maintenance of the plant and meet fuel payments, an official of a leading IPP told Business Line. The four IPPs which have suffered the most include the 220-MW GVK II unit, 445-MW Konaseema Gas Power Ltd (KGPL) of the VBC Group and the 464-MW Gautami plant. While together they require 7.21 MMSCMD to meet 90 per cent of fuel requirement, they were allotted 6 MMSCMD. But, availability as on date is hardly 4.54 MMSCMD, so they require additional supplies of 2.67 units to regain their viability. Poor fuel supplies have not only cut their PLF, but resulted in higher heat rate and auxiliary power consumption. For instance, KGPL has suffered a loss of Rs 32 crore on account of higher heat rate alone last year. The company's present net loss per month on these two accounts is Rs 5 crore, a source close to KGPL said. These IPPs have pointed out that if gas is made available beyond 80 per cent PLF threshold, the AP discoms could receive this additional power at a cost of seven paise per unit. The PPA is based on a two- part tariff fixed cost of 0.94 paise per unit and variable (fuel) cost which at the present rate of $4.2 per MMBTU works out to Rs 1.75 per unit