World’s top infrastructure manager eyes India oil, gas pipeline assets

Source: LiveMint.com, Mar 25, 2020

The global slump in oil prices amid the coronavirus outbreak will push Indian state-owned firms to sell some assets, according to Macquarie Infrastructure and Real Assets, and the world’s biggest infrastructure investor is already in line.

“There is a fair bit of opportunity for the government to divest non-core oil and gas assets, like oil storage facilities, pipelines, transmission facilities,” Suresh Goyal who heads MIRA in India and Southeast Asia, said in an interview. “With our investment platforms, local teams, we are well placed on capitalizing this opportunity.”

While he declined to share investment projections, MIRA raised about $61 billion in capital globally last year — the highest in the world based on data from Infrastructure Investor –and has poured $2.5 billion into India over the past decade. Attracting foreign investment is crucial to meet Prime Minister Narendra Modi’s goal of spending $1.5 trillion on new roads, rail links and other infrastructure over the next five years as public finances deteriorate.

Canada’s Brookfield Asset Management last year acquired Reliance Industries Ltd.’s East West Pipeline via an infrastructure investment trust for 130 billion rupees ($1.7 billion). The government plans to split GAIL India’s transmission business into a separate entity that it could sell to strategic investors. GAIL owns more than 70% of the country’s 16,800 kms pipeline network.

“India’s energy consumption is likely to grow 60%-70% in the next decade and a half, leading to a significant jump in petroleum products and gas consumption,” said Deepak Mahurkar, leader, India oil and gas industry practice, at PricewaterhouseCoopers LLP. “This is an important story for investors, especially the global private equity firms and infrastructure asset managers.”

MIRA set shop in India in 2009, and so far more than half its investment in the country has gone to the road sector. It is now looking to exit several investments, Goyal said, while declining to share details or returns beyond saying that they were “profitable.”

One concern, however, is how quickly and strongly the economy will recover from the coronavirus-led disruption, Goyal said. Another is banks’ increasing unwillingness to lend to the infrastructure sector. Indian lenders are battling the world’s worst stressed-loan ratio, with much of the soured debt in the infrastructure space. Banks’ lending to the sector, which includes power, roads, telecom, contracted by 1.8% in the first 10 months of the fiscal year ending March 31 compared with 10.8% growth a year earlier. “The capital that we bring is in the form of equity but it does need the support of local banks for working capital,” Goyal said. “Hopefully measures taken by the government and the central bank will change things.”

Success in energy efficiency, failure on storage and production front

Source: The Hindu Business Line, Mar 17, 2020

New Delhi: Despite some achievements, India has missed out on most of the goals, for the energy sector, defined under the Three Year Action Agenda (2017-2018 to 2019-2020) charted by the NITI Aayog.

The achievements can be seen on the energy efficiency and fuel quality front, but there are failures on the domestic coal and crude oil production front, in setting up of refineries and crude oil storage facilities among others. India’s per capita electricity consumption also lags far behind (still at one-third of the global average) despite the action agenda calling for bridging this gap.

This Three Year Action Agenda recommended policy changes and programmes for action from 2017-2018 to 2019-2020, the last three years of the Fourteenth Finance Commission.

According to the NITI Aayog, the document offered ambitious proposals for policy changes within a relatively short period.

“It is understood that while some may be fully implemented during the three-year period, implementation of others would continue into the subsequent years,” the agenda document said.

According to the agenda document, per capita electricity consumption in India stood at 1,010 kWh (for 2014-2015) against the world average of 3,200 kWh. There is considerable scope for growth in energy consumption in India. There are four major end users of energy: households, businesses, transportation and agriculture.

But, by the end of 2018-19, India’s per capital electricity consumption had risen modestly to 1181 Kwh, still at a third of the global average.

The document also said that by 2019, India should sustain its export capacity of refined products by setting up new refineries. “The PSUs may start construction work on new refineries of 60 million metric tonnes per annum (mtpa) capacity. Also, the refineries should upgrade their processing capacity to meet petroleum fuel quality standards of BS-VI.”

As fiscal 2019-20 comes to a close, the domestic oil refiners are confident of a nationwide roll out of BS-VI grade fuel. But the work on a 60-mtpa refinery project in West Coast is yet to begin. While some contractual agreements have been forged, the project has been bogged down on the land issue.

“By 2019-20, we must set up strategic-cum-commercial oil reserves up to 90 days of consumption through public and private investment,” the agenda document proposed. But, this also remains to be achieved with the present 5.33 million tonne of strategic oil reserves being able to meet barely two weeks’ crude oil demand.

Power demand up for second consecutive month

Source: The Hindu Business Line, Mar 17, 2020

Mumbai: For the second consecutive month, power demand is up, indicating signs of recovery. In February, conventional electricity generation increased 10.4 per cent on a yearly basis, according to a report by brokerage firm Motilal Oswal.

In comparison, power demand was down from September to December 2019. All-India peak demand for the 2020 fiscal was 183 GW, which is higher than the last three years’.

The demand pick-up was broad-based and across States. Coal-based generation increased 10 per cent YoY, hydro generation went up 18 per cent while nuclear generation was up 8 per cent. Renewable power generation went up by 14.5 per cent, which resulted in an overall power generation increase of 10.8 per cent, according to Motilal Oswal. In renewables, solar power generation went up by 21.5 per cent.

For conventional power generation, coal stocks at power plants increased, led by ramp-up in coal production. Coal India’s production went up 14 per cent on a yearly basis in February. Stocks at power plants now stand at 37mt (at 21 days of consumption) compared to 26 mt during the same period last year.

Further, volumes in the Indian Energy Exchange (IEX) have shown a significant increase.

Day Ahead Market (DAM) volumes on IEX increased 53 per cent year-on-year. Prices increased marginally by 1 per cent when compared to the previous month (January) to ₹2.9/kWh. However, on a year-to-date basis, DAM volumes on the IEX are 3 per cent lower.

Further, availability at NTPC’s critical plants (Sipat and Korba) has recovered after heavy monsoon rains this year. Plant Availability Factor was 100 per cent for Talcher Stage-II and 50 per cent for Talcher Stage-I in February.

Pain points remain

Even as the numbers look positive, on the ground, basic issues continue to dog the sector, which raises the question of whether this is a one-off development. The dues of power distribution companies (discoms) continue to grow and show no signs of abating. Stressed assets in the power sector continue to remain so.

Since the launch of Financial Restructuring Plan and Ujwal DISCOM Assurance Yojana (UDAY) initiatives, limited improvement in the financial profile of (discoms) can be seen, according to India Ratings and Research.

Then there is the issue of a weak economy, which could result in lower demand for power. Unlike a few other developed global economies, which have transitioned away from coal to gas and renewables, India would, however, remain dependent on coal. The low expected PLFs, lack of strong balance sheets in the sector, limited appetite of discoms to tie up long-term power purchase agreements and low project returns would continue to prevent any major fresh project coming up in the thermal sector. India Ratings estimates a continued muted outlook for thermal plant load factor of 55.2 per cent for the nine months of financial year 2020. Further, due to the above factors, PLF is likely to remain below 60 per cent for FY21.

Thermal plants’ Jan load factor at 5-yr low as slowdown hits power demand

Source: Business Standard, Mar 10, 2020

New Delhi: The average plant load factor (PLF) of thermal power generation units is on a decline in the country. At 57.61 per cent, the PLF in January touched a five-year low.

In 2019, the PLF witnessed double-digit slump in most months. The fall corresponds to a decline in electricity demand, which recorded just a 0.28 per cent growth in the year — the lowest since 2014. Read the rest of this entry »

NTPC achieves largest ever commercial capacity addition of 5,290 MW in 2019-20

Source: The Economic Times, Mar 02, 2020

NEW DELHI: State-owned power giant NTPC on Monday said the company – including its joint venture and arms – has achieved its annual commercial capacity addition target of 5,290 MW for 2019-20.

This is also the largest ever commercial capacity addition for the group in a single year, NTPC said in a statement.

The latest capacity additions are 250 MW unit of Barauni Thermal Power Station Stage-II (2 x 250 MW) and 800 MW unit of Darlipalli Super Thermal Power Station Stage-I (2 x 800 MW) with effect from March 1, 2020.

In the current fiscal, NTPC has added commercial capacity at Gadarwara (800 MW), Lara (800 MW), Tanda (660 MW), Khargone (660 MW), Barauni (250 MW) and Darlipalli (800 MW) plants. Read the rest of this entry »

Natural gas prices in India likely to be cut by steep 25% from April

Source: Business Standard, Feb 21, 2020

New Delhi: Natural gas prices in India are likely to be cut by a steep 25 per cent beginning April, in line with the slump in global rates, sources said.

The price of most of the natural gas produced by state-owned ONGC and Oil India Ltd, which account for the bulk of India’s existing gas output, is likely to be cut to around USD 2.5 per million British thermal unit for the six-month period beginning April 1, from $3.23 as of now.

This will be the second reduction in six months and will reduce rates to the lowest in two-and-half-years. Read the rest of this entry »

Govt plans ₹11,000 crore power transmission project in Ladakh

Source: LiveMint.com, Feb 18, 2020

The government plans to set up a 900-km power transmission link that will help large solar and wind energy projects in Ladakh supply electricity across the country, said Anand Kumar, secretary in the Union ministry of new and renewable energy.

The move is part of India’s strategy to develop the Union territory of Ladakh. The ₹11,000-crore marque project seeks to resolve grid connectivity problems faced by the region. This is also expected to attract investments for setting up green energy projects in the cold desert region. Read the rest of this entry »