Special Conference Issue: e-Newletter on Power

Independent Power Producers Association of India

FOCUS…………………………………………………………2 � TIME TO PLAY FAIR, Mr DEORA By MJ Akbar

REGULATION…………………………………………………….3� Mechanism for switch to Open Acreage Licensing Policy to be in

place by 2010

� CCI not to look into KG D-6 gas dispute unless matter is referred

� Maharashtra bows to political pressures and "indefinitely" stays implementation of the latest power tariff order approved by MERC

POLICY ………………………………………………………....…5� MoP and CEA seek investor friendly fiscal policies for the power

sector

� Power projects that claim tax sops may see a cap on the price they charge for electricity sold in open market

� Power projects based on supercritical technology to get sops like extension of excise waiver and income-tax holiday benefits

COAL ...……………………………………………………….…5� Planning Commission advocates pricing of coal based on its gross

calorific value ( GCV)

� CIL claims proposed 11% increase in coal prices will have only amarginal impact on inflation

� Coal India Ltd proposes to divest 15 per cent in two stages over the next one year

� CIL to set up a wholly-owned subsidiary in Mozambique to expediteexploration process in two exploratory coal blocks awarded

� JSW Energy close to finalising a coal-supply linkage pact in Indonesiato secure supplies for its forthcoming power projects

OIL & GAS …………………………………………………….…8� RIL agrees to a special CAG audit of its KG-D6 as a one-time

exception and hopes it does not set a precedent for the future

� Power and Petroleum Ministries keen to explore a mutually acceptable solution to the ongoing legal battle between NTPC and RIL

� Cairn India-led joint venture discovers market price of $6.75 per mBtu for gas from Ravva Satellite field

� RIL finds natural gas reserves in well drilled on its NEC-25 blockin the Mahanadi basin, off Orissa coast

� Power projects to be commissioned soon might find favor in next round of allocation of gas from the RIL's KG D6 block

� Potential of commercial extraction of gas hydrate deposits from KG D6 has German researches interested

� ONGC gears up for gas production at first underground coal gasification project on pilot basis at Vastan Mine Block near Surat

� ARTICLE: The Ambani Brothers Dispute By Dr Bhamy Shenoy

POWER TRADING …………………………………………..…10� Transmission capacity constraints hamper trading volumes at

electricity exchanges

� Indians spend 30,000 crore every year on fuel and maintenance cost on power equipment for back-up against outages

STATE SECTOR ……………………………….………………..…12� NTPC likely to find going tough when cost-plus regime effectively

moves to tariff based competitive bidding from January 6, 2011

� Bihar seeks immediate additional central sector power allocation

� Chhattisgarh scraps controversial proposal to award 1,350MW power project and a coal mine to state-owned mineral trading company MMTC

� UPPCL proposes an average hike of 20 per cent in power tariffs

� Railways in JV with NTPC to set up 1000 MW power plant at Nabinagar in Bihar to meet its power requirements

ower pulse Special Conference Issue

CONTENTSIPP's & CPP's …………………………………………………..…13� GMR Energy plans to construct 800-Mw coal-fired power plant on

the eastern coast of India� Essar Energy to start coal-bed methane (CBM) production from

Raniganj block in West Bengal from December 2009� Phillips Carbon Black plans to sell about 40 MW of excess capacity

from its captive power plants in 2009-10� JSW Energy aims to generate 11,390 Mw by 2015� Adani Power likely to commission its second 330-MW unit at Mundra

towards the end of September or early October� CESC takes 50.1% stake in Dhariwal Infrastructure Pvt. Ltd's 600MW

power plant at Chandrapur in Maharashtra� Bhushan Power and Steel plans capacity addition to take its total

power-generation to 640 mw� CEA recommends coal linkages for six captive power projectsTRANSMISSION & DISTRIBUTION……………………………14� Government pushing for removal of licensing requirements needed

to distribute power to establishments located inside SEZ's� L&T bags four EPC orders in Qatar, UAE and Oman worth about

Rs 1,044 croreDEALS, FINANCES & TENDERS …………………………………16� NTPC and CIL close to signing proposed 50:50 JV to develop two

coal blocks and set up a pithead thermal power station� Maharashtra lines up investments of more than Rs 75,000 crore

for generation, transmission and distribution� Tata Power reports 160% increase in net profit for the quarter ended

June 30, 2009HYDRO POWER ……………………………………………………16 � Poor rainfall forces many hydel power plants to operate at about

40% PLF� Tamil Nadu reports lower hydel generation figures for April - August

period than last year � NHPC, SJVN and government of Manipur to form JV to develop

1,500-MW Tipaimukh hydropower project RENEWABLE ENERGY ………………….……………………...…17� RS India Wind Energy signs MoU with Haryana Renewable Energy

Development to set up solar photovoltaic power project in the state� Rajasthan targets to establish 3,000 MW to 5,000 MW of solar

power projects in the State� NTPC to largely focus on wind energy in its efforts to diversify its

fuel mix in the renewables space� Tamil Nadu sees gradual seasonal tapering of wind power generation

in August� Bharat Forge to enter the wind energy businessNUCLEAR POWER …………………………………..……………18 � Maharashtra to make fresh appeal to CEA for forming JV with

NPCIL for its proposed 10,000 mw project at Jaitapur in Raigad district

� AEC asks Indian companies in the civil nuclear sector to be vigilantwhile entering into tie-ups with overseas companies

IPPAI CONFERENCES ………………………………………….…18� PAPER PRESENTATION By Sunil Agrawal - GMRETL

Disclaimer: Power Pulse e-newsletter is intended solely for the use of members who have subscribed to it. The data used is from various published and electronically available primary and secondary sources of information. Any views or opinions expressed are solely those of the author and primary and secondary data sources and do not necessarily represent those of Independent Power Producers Association of India, which confirms the exercise of due diligence. Independent Power Producers Association of India neither takes responsibility nor vouches for the views or opinions expressed therein. This document is provided for information purposes only and does not constitute any business advice.

1

An Australian journalist, Hamish McDonald, has written an

unauthorized, but semicollaborative (Reliance executives are thanked

in the forward), biography of a great, but occasionally errant, genius,

titled The Polyester Prince: The Rise of Dhirubhai Ambani. There are

five references to Dhirubhai's first ally in politics, an alliance that

began when Dhirubhai's vision was buffeted on all sides by cynicism.

The first reference, on page 36, is sufficient: "After getting on his

feet back in Bombay, Dhirubhai used to make frequent trips to New

Delhi. He frequently went in the company of Murli Deora, a fellow

yarn trader who was then working his way up the Congress party

machine in Bombay... Dhirubhai and Deora used to catch an early

flight up to Delhi, and park their bags with a sympathetic clerk at

the Ashoka Hotel while they did their rounds of politicians and

bureaucrats to speed up decisions on import licences."

The past cannot be held against Murli Deora's present. He might,

in fact, justifiably feel that he should have been cabinet minister

much before he was finally sworn in. He is certainly one of the more

competent ministers. The question is about his portfolio, which he

has held since he joined the cabinet. He takes decisions that affect

the most substantive part of Dhirubhai's inheritance. Dr Manmohan

Singh believes in the Caesar's Wife principle: in public life, you must

be above suspicion. Would Caesar's Wife have accepted the oil

portfolio if she had been a fellow yarn trader of Dhirubhai?

There is too much that is odd about Murli Deora's insistence on

raising the price of a national asset that is in the private possession

of Mukesh Ambani. This must be the first government that is

determined to raise the price of an essential commodity, rather than

bring it down, or indeed keep it at a level that a private company

offered and accepted as part of a contractual agreement. On Friday,

Sharad Pawar, replying to the debate on essential commodities in

the Lok Sabha, blamed the higher price of energy as one of the

reasons for rising food prices. Attendance on Friday was higher than

on Thursday, with heavyweights present, possibly because it was the

last sitting of the session, but was anyone listening?

The fight between the brothers, Mukesh and Anil, is a bit of a red

herring. Mukesh Ambani is not going to sell his gas at nearly twice

a contracted price only to his brother. NTPC, a nationalized Navaratna

company will have to pay at least Rs 20,000 crores more to Reliance.

Anil Ambani is a big boy. He can look after himself. If Mukesh

Ambani needed a hundred million mobile telephones, Anil Ambani

would have tried to double the price of his phones.

But public concern is legitimate when a public sector company cannot

defend its interests because its nominated guardian, its cabinet

minister, is supporting the opposition. NTPC is in litigation against

RIL in the Mumbai high court to protect its interests, while its parent

ministry takes a contradictory view in the SC.

Murli Deora's logic for raising the price of gas shifts from odd to

downright curious. Gas, he says, is a national asset. The government

therefore should fix the price. But who gets the money? Not the

nation, but a private company. Finance ministers squirm even when

forced to raise energy prices in order to bump up government

revenues. But one cannot see a single squirm in this controversy.

Patriotism has clearly become the last refuge of Murli Deora.

FOCUS:

Mobashar Jawed Akbar (born11 January 1951) is a leadingIndian journalist and author.He is the Chairman of thefortnightly newsmagazineCovert, which he launched inMay 2008. He is also thefounder and former editor-in-chief and managing directorof The Asian Age, a daily multi-edition Indian newspaper with

a global perspective. Left journalism for a brief stint inpolitics and contested the general elections of 1989 fromKishanganj in Bihar on a Congress ticket, and despite thefact that the Congress was wiped out from the political mapof the state, won his seat. Served in Lok Sabha from 1989and 1991 and joined Government as advisor in the Ministryof Human Resources, and helped policy planning in the keyareas of education, the National Literacy Mission andprotection of heritage. Resigned from government, and leftpolitics in December 1992 to return to journalism and fulltime writing. He has written several non-fiction books,including a biography of Jawaharlal Nehru titled Nehru:The Making of India, a book on Kashmir titled Kashmir:Behind the Vale, Riot After Riot and India: The Siege Within,among many others. POWER PULSE brings you his articleon the gas pricing row which first appeared in the Timesof India dated August 09, 2009.

Is live coverage of Parliament very kind to democracy? A friendlyexchange of obscure questions and obtuse answers in the morning,and exclusive footage of MPs in mortal combat against sleep in theafternoon, does not make for high TRPs. The periodic slogan-and-walkout routine has become just that: routine. When the Lok Sabhadebated steepling prices of essential commodities on Thursdayafternoon, kind cameramen did their best to avoid empty spacesand vacant faces.

Compare this to the sui generis turbulence within the political classover the price of one reasonably essential commodity, gas. Therehas to be a good reason. The merchants of tur dal have cash in theirpockets. The merchants of gas have both cash and MPs in theirpockets.

The metaphor is not original. Murli Deora, Minister for oil and gas,who tends to get communicative under stress, used it in Parliament.He lamented that alleging "this fellow is in his pocket, this fellow isin another's pocket" did no service to anyone.

It certainly does no service to Mr Deora. An independent MP, ParimalNathwani, was candid about his personal pocket of residence. Hewas an advocate for Mukesh Ambani. The Marx in Ms Brinda Karatleapt to the fore and she became instantly cross. She demandedreview of the candour clause in House rules, arguing that it hadcome into conflict with the "dignity of the House". She may havemissed her mark by a few notches. She should have been discussingthe dignity of the Union cabinet.

Time to play fair, Mr DeoraBy

M J Akbar

ower pulse Special Conference Issue

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REGULATION

Mechanism for switch to Open Acreage LicensingPolicy to be in place by 2010

The government has plans to get away from the current regime of

periodic auctions of government-nominated blocks and switch to a

round-the-year mechanism for accepting exploration bids, in less

than 18 months. The Directorate General of Hydrocarbons, has

called the switch to open acreage licensing policy, or OALP, “a natural

progression” and has confirmed that the information database will

be ready by December and the entire mechanism in place by 2010.

Canada and the UK are among the countries that offer acreage for

E&P on an open basis and while it is too early to gauge how this

change will impact government revenues, what is a welcome

development is that the new licensing regime will eliminate micro-

management by the regulator of the block auction process under

the current NELP. Besides, it will give greater flexibility to operators.

Currently, India has just offered its eighth NELP round in which 70

blocks are on offer and the seven rounds thus far, starting 1998,

have offered 256 blocks with a total committed investment of $11.9

billion (Rs57,477 crore). A prerequisite for the transition to OALP is

a national data repository which will act as a public pool of crucial

raw information on geological and geochemical characteristics, a

key information input for those looking for potential hydrocarbon

reservoirs. The new regime envisages that any explorer can bid for

any unallocated area at any time, with the blocks not being predefined.

The regulator will assess the bid made by an operator, call in any

competing bids and, finally, decide whether to grant it or not. OALP

will allow every company to study and specialize in certain geographies

if they so wish, making the entire country open for E&P. Right now,

companies are limited to what the DGH puts on offer. According to

an analyst, the regime gives operators “flexibility in block location,

size and project financing” by creating multiple opportunities that

“can be staggered over time instead of making over-aggressive bids

in NELP rounds and also facilitates them to extend their block

boundaries if they find that the hydrocarbon channels in their

designated blocks are extending to nearby underground rock layers,

and the adjoining areas are open. According to DGH, about 830,000

sq. km of potential hydrocarbon reserves are left and can be explored

under OALP.

CCI not to look into KG D-6 gas dispute unless

matter is

referred The Competition Commission of India (CCI) has said it will

look into the gas dispute between the Ambani brothers provided

someone forwarded a request. The competition watchdog has said

that, thus far, no reference has been made to it and has therefore

not initiated any enquiry when asked if it could look into the gas

supply dispute considering that it was already before the Supreme

Court. RNRL wants the court to direct RIL to supply gas to it at $2.34

per mmBtu, but RIL has argued that it cannot do so without government

approval. The CCI Act empowers the CCI to look into cases pertaining

to abuse of dominance, and anti- competitive practices, which are

exactly the issues raised by Anil Ambani at the AGM of RNRL last

month. RNRL has accused RIL of trying to ''perpetuate this monopoly,

and earn disproportionate profits at the cost of the people.'' RIL has

called for restraint while the matter is in the courts. RNRL has not

specifically mentioned the CCI, but has expressed hope that public

accounting bodies like Comptroller and Auditor General (CAG) and

Central Vigilance Commission (CVC) will, examine all relevant facts,

and take appropriate action against the guilty persons, if they have

caused huge losses to the public exchequer.

Maharashtra bows to political pressures and

“indefinitely” stays implementation of the latest

power tariff order approved by MERC

The Maharashtra government has “indefinitely” stayed implementation

of the latest power tariff order approved by the Maharashtra Electricity

Regulatory Commission (MERC), bowing apparently to political

pressures. Political parties, like the Shiv Sena and the Maharashtra

Navnirman Sena, had pilloried the order by claiming that it cross-

subsidised power for builders, malls, and multiplexes at the cost of

residential consumers who thereby were being subjected to a 4.2%

increase in tariff. MERC had passed the order in response to state

utility Maha Discom's petition for 36% tariff increase and was meant

to be effective from August 1, 2009. The State Energy Minister Sunil

Tatkare, in response to the stay order, has announced that the state

had used its powers under the Electricity Act, 2003 and did not

specify till what date the implementation of the order would remain

stayed. Analysts believe that it is absolutely unlikely that the stay

would be lifted before Assembly polls due in October. The MERC

had approved a 4.2% hike to help Maha Discom cover revenue loss

of Rs 1,099 crore in the current fiscal but the order was slammed

by the MNS which claimed that the regulator had favoured builders

whose power tariff had been reduced by Rs 5.10 per unit, by bringing

down their tariffs to Rs 7.15 from the existing Rs 12.25/unit. It further

contented that malls and multiplexes would also benefit from the

tariff order as the tariff for this category has been reduced from Rs

7.39 per unit to Rs 7.15. Meanwhile, Maha Discom has countered

the allegations by saying that though the hike for the residential

consumers was marginal, the order indeed ended up making power

cheaper for bulk commercial users.

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POLICY

MoP and CEA seek investor friendly fiscal policiesfor the power sector

In an effort to bring in more investor friendly policies for the powersector, the MoP and Central Electricity Authority (CEA) have madea fresh plea to the Centre for further liberalisation of RBI guidelinesfor use of external commercial borrowing proceeds for rupeeexpenditure. They have also pressed for long-term price hedginginstruments in the power markets and for disinvestment proceedsbeing made available for investments. The demand for suchamendments are being put forward especially since the growth ofcredit has slowed down from 68% in 2007 - 08 to about 34% in2008-09, while the share of power sector in FDI to infrastructuresectors increased only marginally from 16% to 18% over 2006-09.The Power Ministry has claimed that bank credit to the power sectoris subject to sectoral and group exposure limits and banks aredelaying disbursal of sanctioned loans; term lending institutions areconstrained by prudential norms and foreign direct investors areshying away due to insufficient return on equity. Meanwhile, evenstate-run Power Finance Corporation (PFC) and Rural ElectrificationCorporation (REC) are constrained by prudential exposure norms forgroups and companies and have to seek RBI approval to raise ECB.Further, government borrowing is crowding out private sectorborrowers and the duty and tax regime are not conducive to innovativeinfrastructure lending. The MoP and CEA have also mentioned thatlenders are cautious about lending to projects coming through theMoU route while also saying that the insistence of lenders on powerpurchase agreements (PPAs) creates difficulties for independentpower producers (IPPs) and merchant power plants (MPPs). It hasbecome difficult to raise debt since Banks and NBFCs are comfortableonly with PPAs tied to ultimate offtakers and not traders. Furthermore, the poor financial health of state sector utilities hampersinvestments, as they are not allowed return on equity and delays inland, forest and environmental clearances also lead to cost escalations.

Power projects that claim tax sops may see a capon the price they charge for electricity sold inopen market

According to MoP, power projects that claim tax sops may see a capon the price they charge for electricity sold in open market througha change that will be incorporated in the mega power policy. Theaction is aimed at preventing companies from making windfall gainswhile enjoying tax benefits since the Finance Ministry and PlanningCommission are opposed to extending tax sops to merchant sale ofpower. The cap proposed could be Rs 5-7 a unit. Currently, with ashortage of power across the country, merchant sale commands apremium as high as Rs 15 per unit while pre-determined rates areat Rs 1.20-3.50 per unit. The cap on price is likely to be includedin the final draft of the new mega power policy. Currently, the megapower policy provides tax benefits to thermal projects with over1,000 mw capacity and hydel projects with over 500 mw capacity

that have tied their entire capacity under long-term PPAs with stateutilities and trading entities. It also provides an exemption fromCustoms duty on import of capital goods and deemed export benefit,in the form of excise duty waiver, for supplies by domestic bidders.The projects also get income-tax holiday under Section 80-IA. Thechange is likely to hurt those projects that do not tie up their entireoutput under long-term power purchase agreements (PPAs) withstate utilities and trading entities. Power companies have firmcommitments with states and trading firms to sell 60-85% of generationat pre-determined rates and can sell balance output in the openmarket, while thermal power plants can sell 15% of generationcapacity, hydel plants are allowed to sell 40% of the power theygenerate.

Power projects based on supercritical technologyto get sops like extension of excise waiver andincome-tax holiday benefits

Power projects based on supercritical technology, including large-sized energy-efficient power equipment, are likely to find favor fromthe government through sops like extension of excise waiver andincome-tax holiday benefits. This proposal will form a part of thenew mega power policy which is being worked out since the existingpolicy has no incentive granted to new-generation supercriticalpower projects. Additionally, the new policy would also allow projectsthat have completed financial closure but have not tied up therequisite long-term power purchase agreements (PPAs), to apply formega power status and avail incentives. These changes will beincorporated in the final draft of the new mega power policy beingfinalised by the government. The benefits would be extended onlyif supercritical projects source equipment by inviting internationalcompetitive bidding with the mandatory condition that the suppliersets up an indigenous manufacturing facility. The existing megapower policy already allows duty-free import of capital goods andextends excise duty waiver for supplies by domestic bidders. It alsoprovides an income-tax holiday under Section 80-IA. These incentivesare given to hydel power projects of 500 mw and above and thermalprojects of 1,000 mw and above. According to MoP, the changesin the policy have been proposed to encourage technologicalinnovation and technology transfer for developing indigenous capacityfor manufacturing of supercritical equipment.

COAL

Planning Commission advocates pricing of coalbased on its gross calorific value (GCV)

The Planning Commission is keen to implement a complete revampof the system for coal pricing and moving it into a free trade zone. It has said that coal prices should ideally be left to the market andtrading of coal, nationally and internationally, should be free. It isalso advocating export of coking and non-coking coal and hassuggested benchmarking export prices with import rates. Althoughcoal prices were de-regulated in 2000, its price is fixed by state-owned companies under the guidance of the Ministry of Coal. ThePlanning Commission, while reviewing the Integrated Energy Policy,has said that high quality coking and non-coking coal, which are

ower pulse Special Conference Issue

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exportable, should be sold at export parity prices as determined byimport price at the nearest port minus 15% and since a substantialamount of coking coal is imported, domestic coking coal should bepriced at import parity price. It has also suggested for a shift togross calorific value basis (GCV) for coal pricing instead of the presentuseful heat value (UHV). It has suggested that “coal prices shouldbe made fully variable based on GCV and other quality parametersinstead of the current system of pricing on the basis of broad bandsof UHV.” Since the Coal Ministry has so far not adopted the systemof GCV and as a step towards migration from UHV to GCV for pricingof domestic coal, the Ministry will reduce the bandwidth of currentUHV grades in coal, limiting them to 300 kilo calories on a trialbasis from dedicated coal mines to NTPC where automatic samplingarrangements are available at both ends. Meanwhile, even the 11thFive-Year Plan (2007-12) has envisaged pricing of coal based on itsgross calorific value. Coal India, which accounts for more than 80%of the country's total coal reserves, last raised coal prices in 2007by 10%.

CIL claims proposed 11% increase in coal priceswill have only a marginal impact on inflation

India's largest coal miner, Coal India Ltd., has proposed a 11%increase in coal prices and has argued that the price hike will haveonly a marginal impact on inflation. The price increase is likely tonet CIL an additional revenue of Rs4,629 crore to shore up itsbottomline after the company posted a profit of Rs300 crore on aturnover of Rs46,000 crore last year. Incidentally, the weightage ofcoal in the Wholesale Price Index, or WPI, is 1.753%. Analysts havepredicted that with CIL mining 84% of the coal produced in thecountry, a 11% increase will push up inflation by around 0.16%.The larger impact of the price hike will be felt by cement, powerand steel companies. CIL is free to fix the price of coal after priorapproval from the government and its last price revision was inDecember 2007.

The latest revision is expected to partly bridge the price gap withinternational coal, which is about one-third higher than domesticcoal. It is understood that the envisaged hike will increase the pricefor coal to the power sector by Rs77 per tonne, which will work outto around 5 paise per unit of power generated and for the cementsector, the impact will be around Rs20 per tonne which will workout to around 80 paise on a 40kg bag. Some believe that the pricehike is more to allow CIL to partly offset the increase in input costs,such as a higher wage bill on account of the Sixth Pay Commission,and thereby show a healthier balance sheet ahead of its proposedlisting on the stock exchange. For the record, Indian coal, with acalorific value of 3,500 kilocalorie per kg, is priced at around $38(Rs1,835) per tonne, which works out to around 30-40% lower thaninternational prices. India has 256 billion tonnes of coal reserves,of which around 455 million tonnes (mt) per annum is mined andCIL is targeting a production of 435 mt this year, against 403.73 mtachieved in 2008-09. Meanwhile, demand for coal is expected toreach about two billion tonnes a year by 2031-32, about five timesthe current rate of extraction, with the maximum demand comingfrom the power sector.

Coal India Ltd proposes to divest 15 per cent intwo stages over the next one year

Coal India Ltd, with an equity capital of Rs 6,316 crore, has proposedto divest 15 per cent in two stages over the next year. In the firststage, five per cent disinvestment in favor of employees and a trustwill take place; and in the second, another 10 per cent will beoffloaded through an IPO. Of the proposed five per cent first stagedisinvestment, two per cent would be offered to its 4.25 lakhemployees and the balance three per cent to a trust which wouldbe responsible for issuing shares to those who may lose land in thecompany's future mining projects. The issue price would be set ata “fair value” as evaluated by valuers. The company has opted fora disinvestment as it is sitting on a cash reserve of Rs 30,000 croreand it may prove costly for CIL to service a bigger equity createdthrough fresh issue of shares. CIL needs to acquire land at the rateof 40,000-50,000 acres a year to maintain growth in domestic coal

production and has a policy currently to offer jobs to eligible candidatesor provide cash payments against land acquisition. But, with theland acquisition getting increasingly sensitive, CIL plans to compensatethe land-losers by offering stakes in future projects so that they canalso be partners in the growth and be compensated through amechanism that kind of factors in futuristic value of the land asset.

CIL to set up a wholly-owned subsidiary inMozambique to expedite exploration process intwo exploratory coal blocks awarded

Coal India Ltd has decided to set up a wholly-owned subsidiary inMozambique to expedite the exploration process after it was awardedtwo exploratory coal blocks in that country. It has proposed to setup a separate company for carrying out coal mining activities there,which will be a fully-owned subsidiary of CIL and will forge a jointventure (JV) with a state run mining firm in Mozambique. The CILsubsidiary will have an 85 per cent stake in the JV, while the remaining15 per cent will be held by the Mozambique-based mining company,with the modalities of the JV yet to be decided. The two exploratorycoal blocks awarded are the A1 and A2, in Tete province ofMozambique, having an estimated reserve of one billion tonnes.While the exploration of these two coal blocks, spread over 224 sqkm, is set to commence within a few months, the mining activitiesare expected to begin after three and a half years. Besides, CIL hasoffered to distribute artificial limbs in the war-ravaged nation beforestarting mining operations in Mozambique with the setting up of apremier mining institute in Mozambique, on the lines of the IndianSchool of Mines, Dhanbad. CIL had also stepped up its efforts toacquire stakes in coking and thermal coal assets in Australia andhas invited Expressions of Interest (EoIs) from mining firms in Australiaby the end of August. The coal major was keen on entering into astrategic partnership with Australian mining firms having provenexpert ise in mining for developing the coal assets.

JSW Energy close to finalising a coal-supply linkagepact in Indonesia to secure supplies for itsforthcoming power projects

In an effort to secure coal supplies for its forthcoming power projects,JSW Energy is close to finalising a coal-supply linkage pact inIndonesia and is also exploring options of acquiring coal mines inSouth Africa and Australia. The company is in the final stages ofcompleting due diligence for the 50-million tonne coal linkage inIndonesia. Meanwhile, JSW Energy has already identified a coalmine in South Africa and if the deals are finalised, JSW Energy wouldget additional coal linkage of 250 mt. Currently, it has limited accessto coal reserves in India and is largely dependant on imports andapart from making full-fledged acquisitions, is also in talks with theSouth African government for jointly developing coal mines. JSWEnergy has targeted to commission 3,140 mw by the end of 2010and may enter the capital market by the end of October through anIPO, the proceeds of which will go for developing identified generationand transmission projects, mining ventures and to service debt. Itcurrently generates 560 mw of power from a plant in Karnatakaand has projects totaling to 3,090 mw of generating capacity invarious stages of implementation. The company has also enteredinto long-term PPA's with the governments of Rajasthan andMaharashtra. JSW Energy has plans to import 13 mt of coal for itsupcoming power plants at Ratnagiri and Vijaynagar, Karnataka andhas secured coal supplies from a block in Orissa where it has a JVwith Mahanadi Coalfields, from whom it would be able to procurearound 90 mt in the long term.

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OIL & GAS

RIL agrees to a special CAG audit of its KG-D6 asa one-time exception and hopes it does not set aprecedent for the future

Reliance Industries Ltd has agreed to a special CAG audit of its KG-D6 contract, but hopes that it will be a one-off case. It has conveyedits 'no objection' to the Petroleum Ministry saying that it hopes “thisis a one-time exception which does not create a precedent for thefuture”. RIL has added that though the PSC (production sharingcontract) does not allow special audit, it is willing to accept a CAGaudit for the ensuing year but not 2006-07 and claimed that it didnot understand the “scope” of such an action since audit up to 2006-07 has already been conducted by the government-appointedauditors and RIL has been supplying all information required to theDGH from time to time. Meanwhile, the Government has informedRIL that the special audit has been ordered under Section 1.9.1 ofaccounting procedures in the PSC and that it was for the sake oftransparency and cooperation. The development follows the CAGannouncing that it was having problems with accessing books ofoil/gas field developers, although it did not point out RIL specifically.Incidentally, the government had ordered a special audit of eightcontracts, including RIL's, which involve substatial financial stakesfor the government, in November 2007.

Power and Petroleum Ministries keen to explorea mutually acceptable solution to the ongoinglegal battle between NTPC and RIL

The Ministries of Power and Petroleum are exploring a mutuallyacceptable solution to the ongoing legal battle between government-owned NTPC and RIL. The ministries have announced that theywould prefer and are open to a mutually agreed solution if it couldbe worked out between RIL-NTPC, as it involves a governmentundertaking. The Petroleum Ministry believes that the NTPC vs RILcase is different from the RIL vs RNRL case - where the governmentis a party. Its contention is that the government has not received anyproposal from RIL to approve the sale of natural gas from RIL's KG-D-6 block to NTPC, hence no decision has been taken by it in thematter. But, the Ministry has added, that in the case of RNRL, thegovernment has already rejected the gas price of $2.34/mmBtu.This appears to be a kind of climb down by the Petroleum Ministrywhich had, till now, upheld only the $4.20 per million metric Britishthermal unit (mmBtu) as the official selling/valuation price approvedby the government. But, what is intriguing, is to see how thegovernment separates the NTPC vs RIL case from the RIL vs RNRLcase. Meanwhile, RNRL has argued that the gas contract betweenRIL and RNRL was drawn from the NTPC vs RIL contract and so, evenif the two ministries do manage to reach a consensus, it is likely tohave implications on the RIL vs RNRL case. Meanwhile, the Governmentcontinues to toe the line that the objective of the government is toprotect its rights under the production sharing contract (PSC), which

is a legal agreement signed between the government and oilcompanies that determines rights and obligations of both sides afteroil and gas is produced, and not to indulge in the dispute betweenthe Ambani brothers. The government, therefore, wants to treat theNTPC vs RIL case separately.

Cairn India-led joint venture discovers marketprice of $6.75 per mBtu for gas from Ravva Satellitefield

A Cairn India-led joint venture has discovered a market price of$6.75 per mBtu for the fuel from a field in the KG basin. PartnersCairn, Oil and Natural Gas Corp (ONGC) and Videocon have writtento the government seeking an increase in the Ravva Satellite fieldgas price to $6.75 per mBtu. The new price sought by the Ravvaconsortium is 60 per cent more than the maximum price of $4.20per mBtu approved for RIL's KG-D6 fields for five years to March2014. GAIL, which markets the gas produced from Ravva and RavvaSatellite gas fields, had in October last year offered a price of $5.73per mBtu for the fuel but the price was not acceptable to the jointventure partners. Ravva joint venture in April this year invited offersfrom Vemagiri Power Generation Ltd of GRM Group, GVK Powerand Infrastructure Ltd and Silkroad Sugar Pvt Ltd. Silkroad offereda price of $6.75 per mBtu and accordingly the Ravva joint venturehas asked GAIL to match the price. The Petroleum Ministry has askedGAIL if it is willing to buy gas at the new price and in case the state-run firm refuses, the Ravva joint venture would have the freedomto market the gas produced from the satellite field to private partiesat a price not less than $6.75 per mBtu.

RIL finds natural gas reserves in well drilled onits NEC-25 block in the Mahanadi basin, off Orissacoast

Niko Resources of Canada, RIL's JV partner, has announced that theyhave found natural gas reserves in a well drilled on its NEC-25 blockin the Mahanadi basin, off the Orissa coast. The gas was discoveredin the well AJ2 last month, according to Niko, which added that itwas not a new discovery but an appraisal of earlier gas finds. AJ2is an appraisal well drilled to access the potential in the previous A6and J1 discoveries and gas struck in AJ2 is not a new pool. NikoResources holds 10 per cent interest in the Mahanadi basin shallowwater block covering an area of 10,755 sq km in water depthsranging between 20-600 meters and RIL holds 90 per cent interestin the Bay of Bengal block. RIL has so far made eight gas discoveriesin NEC-25, off which six were declared commercially exploitableand development plans have been submitted to the DirectorateGeneral of Hydrocarbons (DGH) in 2007. Field Development Plan(FDP) is an investment proposal for bringing to production oil or gasfinds and operators can only begin such investments after gettingthe necessary approval from DGH, the sector regulator. Meanwhile,Niko has not committed on the potential reserves in the AJ2 wellbut has claimed that the discovery “looks promising”.

Power projects to be commissioned soon mightfind favor in next round of allocation of gas fromthe RIL's KG D6 block

The Government will soon take a decision on further allocation ofgas from the Reliance Industries Ltd-operated Krishna GodavariBasin D6 block and deliberations with the Ministry of Power on theadditional requirement of gas for the sector have already takenplace. It is likely that the list of beneficiary-companies has beendecided by the Ministries of Power and Petroleum and will beannounced soon. It is more than likely that only those projects to becommissioned soon may become the beneficiaries this time andpower plants that have sought allocation of D6 gas are from Delhi,Andhra Pradesh and Gujarat. Allocations for the initial production

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of 40 mscmd from the block have already been made by theGovernment and the current production from D6 is 37 mscmd,against a peak production which is estimated at 80 mscmd. RIL, issupposedly not ramping up production from the field for want ofbuyers. But, with new allocations to happen soon, the productionfrom the block is expected to go up. The Government had, inaccordance with the gas utilisation policy and the approved pricingformula, allocated gas to priority sectors from the initial productionat a landfall point price of $4.2/ mBtu. Accordingly, 15 mscmd wasallocated to the existing urea plants, 18 mscmd to the existing powerplants, 3 mscmd to the existing liquefied petroleum gas (LPG) plantsand the remaining 5 for city gas distribution projects. It was alsodecided that the unutilised gas against this allocation will be allocatedto the existing gas-based steel and power plants, including captiveones. RIL has so far signed contracts with 15 fertiliser plants, 20power plants, three steel plants, and one city gas distributor.

Potential of commercial extraction of gas hydratedeposits from KG D6 has German researchesinterested

German researchers have gotten interested in the gas potential inIndia and are planning to invest around e43 million by 2011 for itsexploration. Plans are to extract methane gas from the KG basin,which has the largest recent find of methane hydrate deposits, thecore material used to produce natural gas capable of poweringvehicles and even rockets. According to the researchers, the largestmethane hydrate bed ever seen has now been discovered in theKrishna-Godavari basin which it hopes to tap through new hi-techpressure devices to pump out the methane. Scientists from the LeibnizInstitute of Marine Sciences at the University of Kiel (IFM-GEOMAR)are leading this project in India that deals with the exploration andsubsequent processing of the submarine gas hydrate resources whichaims to produce natural gas from marine mevthane hydrates.According to the project head, “the innovative aspect of this projectis that it can enable long-term sequestration of CO2 from marinesediments.” The technology involves liquid CO2 to be injected into the hydrate deposits to induce the dissociation of methane hydrateand to fill the pores with CO2 hydrate instead. Incidentally, therelative abundance of methane and its clean burning process makesit an attractive fuel since it is a much more environment-friendlythan other fossil fuels, such as gasoline, diesel and petrol, and canbe used for electrical generation and for vehicles. But, the thing thathas enthused most is the fact that processed methane has thepotential to be used as rocket fuel, though it has never powered aspacecraft or plane before. The researchers are working along withIndian institutes including the Directorate General of Hydrocarbons(DGH), National Institute of Oceanography (NIO) and others. Thecommercial extraction of gas hydrate deposits has so far only beenrealised in a few cases with key dominating roles by Japan, the US,Canada, South Korea and China.

ONGC gears up for gas production at firstunderground coal gasification project on pilotbasis at Vastan Mine Block near Surat

ONGC is gearing up for gas production at India's first undergroundcoal gasification (UCG) project on a pilot basis at Vastan Mine Blocknear Surat in Gujarat. The field is expected to produce about 5.5lakh cubic metres of synthetic gas per day by end of 2010 and if thepilot project is a success then ONGC aims to go commercial byproducing about 2 billion cubic metres of the synthetic gas perannum from this field by 2013-2014. The investment for commercialrollout of the project would be in the range of Rs 1,000-2,000 croreand the field has enough reserves to last for about 30-40 years.Apart from Vastan Field, ONGC is also looking to set up a UCGproject at Bhavnagar in Gujarat and one in Rajasthan. The calorificvalue of synthetic gas is 10 times lower than natural gas and so far,only Russia has achieved commercial success in a UCG project.

Unfortunately, instead of the Indian government using all the legalpower it has from production sharing act (even assuming it is slantedtowards Mukesh Ambani's RIL), it is acting like a banana republic.There are some basic features of any PSCs which should help thegovernment to be in the driver's seat. But the government is actingas though it has poor cards to play with.

The government has set up yet another committee to look into thepricing regime for gas sector and also "study the feasibility of havinga uniform cost price regime for gas sector". At present there arethree gas regimes: The administered gas mostly owned by ONGCand Oil India is sold at or above $2 per mmbtu. The other regimefor pre NELP (New Exploration Licensing Policy) has a price rangeof $3.5 to $5.73 per mmbtu. It is not clear how this was arrived at.The third regime is for imported gas (regasified liquid natural gas)whose price ranges at present over $5 per million btu and it variesfrom time to time in line with international oil price. Under the NELPPSC the price formula is based on so called "arms length basis tobe approved by the government". Though new NELP was based onlesser role for the government in price fixing, excepting that ofmonitoring and approving, the governmnet is trying to get back intothis. This will work against attracting the exploration investment intoIndia despite the great discoveries in KG Basin.

The government has set a committee of ministers to look at whatshould be the position of the government about Ambani brothers.This committee is headed by the Finance Minister and consists ofthe Law Minister, Petroleum Minister and Power Minister. When thisis purely an implementation of PSC to be done by Director Generalof Hydrocarbons which should have the competence to interpret thePSCs, why are we politicizing this whole issue?

As discussed before there are two basic issues. Under any PSC,without the concurrence/approval of the government, the originalsignatories to PSCs can negotiate the "sale" of the reserves to a thirdparty. This gives a strong position to the government to null andvoid the original contract itself. At the least, it gives every legal rightto null and void the contract signed by RIL with RNRL when thepartition agreement gave some rights in KG basic gas reserves toAnil Ambani's RNRL.

The Ambani Brothers DisputeBy

Dr Bhamy Shenoy

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ARTICLE

Dr. Bhamy Shenoy is analumnus of IIT Madras with aPh.D in business administrationfrom University of Houston .He worked for Conoco in allfacets of In ternat ionalPetroleum Industry for 21years from 1966 till 1987. Hetook early retirement in 1987to return to India to geti n v o l v e d i n I n d i a ' sdevelopment. As an activist,he has been associated withMysore Consumers Council, anNGO for consumer and

environmental protection and Pratham, an NGO for providingeducation to slum children. He contested election twice asan independent. From 1997 till 2003 he was involved inenergy sector reform in former Soviet union countries ofKazakhstan , Uzbekistan , Turkmenistan , and Georgia andwas board member of the National Oil Company in Georgia. He was successful in implementing reforms to reduce oilsector corruption in Georgia . He is a senior advisor toCenter for Energy Economics at University of Texas as Austin.Here, he shares his thoughts on the Ambani family feudfor the exclusive benefit of POWER PULSE subscribers.

In addition, as many have already pointed out and also the PetroleumMinistry, that the Article 21-6-1 in PSC obliges the contractor to sellall the gas at arms length prices to the benefits of the parties to thePSC. The formula / basis on which the arms length sale is determinedis required to be mandatorily approved by the Government of Indiaprior to the sale of all gas and the gas has to be marketed domesticallyand in accordance with the Government Policy on utilization ofnatural gas and approval of price formula / basis. It was alwaysunderstood by the parties to this litigation that, under the PSC, thecontractor's right to market the gas is subject to the approval of priceformula / basis of Government of India as well as the gas utilizationpolicy of the Government of India.

With such powerful legal backing why is the solicitor generalsuggesting for negotiations with the parties? Does this imply thatthe government should give up something to get back some thingfrom the brothers? RIL stands to get higher price and is not a loser.RNRL will also get access to gas since power plants are on prioritylist in any case. But they will not get a ridiculously agreed price of$2.34 per mmbtu for 17 years. In any case, RNRL will get reimbursedfor higher cost since the power it sells is controlled unless they wereto sell in the open market. In that case they should give higher pricefor gas also based on market. The same set of situation holds goodfor NTPC which is also arguing for a lower and fixed price. NTPCwill also be able to pass on the higher cost of gas to its customers.

Now let me give two graphs to show how gas prices move with theoil prices and also how it commands premium or is discounteddepending upon the supply/demand. These are based on BP's latestStatistical Review of World Energy, June 2009. This is almost like abible for international energy economists.

Graph-1According to this graph, gas prices have fluctuated closely withinternational oil prices. Since the US has a huge gas market andalso the role of imported gas is not significant, and based upon thegas bubble in the early 90s and later after 2006, gas prices havebeen discounted with respect to oil prices. This can be seen clearlyin the following graph.

Graph-2This graph clearly shows that before the recent price increase in oilprices, LNG imported into Japan had commanded a premium overoil prices. During the last five years, LNG in Japan and Gas Europe(mostly piped gas) were sold at a discount.

One thing which should be obvious from these two graphs is thatit is not possible to fix price of gas based on historical basis and itfluctuates widely. At the same time it should also be clear that gasprices move with oil prices and they are not independent. In thisback ground, how could the Petroleum Ministry approve $2.34 permillion btu for 17 years. Second, how could the Petroleum Ministrysuggest a price of $4.20 as the right price today? This implies ahuge discount with respect to the current oil price and internationalLNG prices.

The latest GAIL committee to look at one more pricing regime forgas and potential pool price for whole of India will force Indianeconomy to pre 1991 days, when license-permit-quota raj wasdismantled and fresh air of liberalization, though in small doses,was allowed. This is the lesson which the US learnt when they also

had price control on gas. It became so complex at one stage theyhad more than 300 types of gas, though all of them had exactly thesame composition and was not different in terms of quality. Forpricing purpose there were so many different types. India, insteadof dismantling such a regime, which is not all that complex today,is getting ready to build a new edifice of great complexity. Bureaucratswould simple love it. It gives them enormous power and also greatopportunities to earn huge "rents". What we need is a free marketwhich will work to the benefit of all, especially the "aam admi".

(** Views expressed in the contributed papers are those of the authorsand Power Pulse may or may not subscribe to them, either fullyor in part.)

POWER TRADING

Transmission capacity constraints hamper tradingvolumes at electricity exchangesInadequate power transmission capacity, has finally come to haunttraders at exchanges, with volumes of electricity traded at exchangesjumping multifold in the past one year but the absence of a comparableincrease in the transmission capacity to support the evacuationcausing bottlenecks. This is likely to hurt the shortage prone areaslike the northern region but more importantly will thwart the growthof the power market in the country. It is learnt from the Indian EnergyExchange (IEX) - India's first power exchange promoted by theFinancial Technologies India ltd (FTIL) and PTC India, that more than20 per cent of the volume of power scheduled at the exchange everyday is not evacuated due to lack of transmission capacity. While bidsare placed for over 20 million units of power daily, anything above14 million units is unable to flow. What this boils down to is that theremaining 6 MUs of curtailed power translates to a daily revenueloss of over Rs 4 crore for the Indian power market. In order toevacuate the 20 MUs of power transacted at the exchange, IEXrequires a transmission capacity of up to 1,000 Mw on a daily basisagainst which a capacity of only 400 Mw becomes available. Thelack of required transmission capacity is a huge stumbling block forthe growth of the nascent power market in the country and potentialgrowth in daily trading volume has not been achieved due totransmission constraints. Transmission constraints have impactedvolumes at all power exchanges. Power is traded at the exchangeby first discovering a market price by inviting bids from interestedbuyers and sellers in the bid-call period and once the price isdiscovered, the exchange then notifies the national and regionalload dispatch centers to allocate the required transmission corridors,which is where the problem arises.

Indians spend 30,000 crore every year on fueland maintenance cost on power equipment forback-up against outagesAs a back-up to secure against frequent outages, Indians spend astaggering 30,000 crore every year on fuel and maintenance coston power equipment. In a pan-India study conducted by WartsilaIndia, the expenses on power generation using inverters, generatorsand other back-up equipment are almost 80% more than whatconsumers pay on grid supply and the operational expenses ongenerating back-up power in the country are estimated to be aroundRs 30,000 crore every year. The study was carried out over a fiveweek period in May-June 2009 and covered 1,500 respondentsacross 21 cities in the country. The study has also shown that thecost difference to a consumer on an average is about 80% abovethe grid cost when faced with 6-7 hours of load-shedding every daywhich increases three-fold if all the appliances like fridge and TVare run on back-up. While releasing the study, Wartsila India saidthat a 'reliability surcharge' of as little as 50 paisa per unit cansupport rapid power generation capacity build-up in the countrywhich would be far less than the extra charges consumers incur onback-up equipment. It also called for other complementarytechnologies and solutions to impart much-needed flexibility intothe system to improve peak load management.

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STATE SECTOR

NTPC likely to find going tough when cost-plusregime effectively moves to tariff basedcompetitive bidding from January 6, 2011

NTPC and RIL may be locked in a legal dispute over K-G D6 gaspricing, for now, but as per the National Tariff Policy (NTP), the state-owned power generator will have to do all purchases of powercompetitively from January 6, 2011. NTPC, which conducted anopen transparent international competitive bidding (ICB) to discovergas price of $2.34 per mmBtu where RIL willingly bid its price, doesnot have an option for making higher gas price as pass through toits customers. If NTPC accepts the gas price of $4.20 per mmBtu asper the NPT it will be passed on its consumers from the westernregion comprising Maharashtra, Madhya Pradesh, Chhattisgarh,Goa, Dadra and Nagar Haveli. NTPC's proposed expansion of2,650 mw at Kawas and Gandhar, will come up only in 2012-13and it will not be possible for it to construct these plants beforeJanuary 6, 2011, as gas-based power plants take 30-36 months toconstruct. MoP has confirmed that the cost-plus regime for powersector effectively moves to tariff based competitive bidding to lowerpower costs from January 6, 2011. The change is effected throughPara 5.1 of the National Tariff Policy notified by Government of Indiaas mandated by Electricity Act 2003, which states that “all purchasesof power have to be done competitively, even from public sectorprojects from January 6, 2011”. NTPC could suffer losses if the gasprices are high and the resultant tariffs are not competitive. Meanwhile,NTPC had earlier harped on the fact that it would not be impossiblefor it to purchase gas above $2.34 per mmBtu for carrying out theexpansion of 2,650 mw at Kawas and Gandhar. Besides, ADAG,through its advertisements in public interest has claimed that NTPCwill lose Rs 30,000 crore if it agrees for the gas price of $4.20mmBtu.

Bihar seeks immediate additional central sectorpower allocation

Bihar government has sought immediate additional central sectorpower allocation. Its problems got compounded ever since thebifurcation and creation of Jharkhand, which left Bihar without anythermal stations and making it almost entirely dependent on centralsector drawals. The Centre has formed a four-member committeewith members from coal, power and railway ministries and NTPCto examine the issue to redress Bihar's problem. The committeevisited CIL's Rajmahal mines and NTPC's Farakka power plant totake stock of the situation especially on the back of the non-availabilityof coal at NTPC's three eastern generating stations of Farakka,Kahalgaon and Talcher which has forced their operations at lowplant load factors. Bihar draws a sizeable degree of power fromthese three plants but reduced generation due to uncertainty in coalavailability has led to lower supplies and heavy power cuts in Bihar.

The three power stations have a combined generation capacity of6,940 mw. Farakka TPS has a total installed capacity of 1,600 mw,while Talcher TPS's installed capacity stands at about 3,000 mw andKahalgaon's capacity is about 2,340 mw but are operating at lessthan optimum levels. Meanwhile, Bihar has invited bids for franchisepower distributors in Patna, Gaya, Muzaffarpur and Bhagalpur circles.R-Infra has bid for all 4 circles, CESC for Patna and Muzaffarpurwhile Glodyne has bid for Patna and Gaya.

Chhattisgarh scraps controversial proposal toaward 1,350MW power project and a coal mineto state-owned mineral trading company MMTC

Chhattisgarh has decided to scrap a controversial proposal to awarda 1,350MW power project and a coal mine to state-owned mineraltrading company MMTC, triggered by charges that the stategovernment had not followed due and transparent procedures.Concerns were also raised over awarding and giving access to acoal mine to MMTC which also did not have much experience ineither power generation or mining. What bothered many was thatthe deal was being finalized by sidestepping a sealed financial tenderand based on a simple presentation by some invited companies.Now the government has announced that the Chhattisgarh MineralDevelopment Corp. (CMDC) is processing for a fresh tender whichmay give it a better deal from the last. MMTC had plans to executethe project through a public-private partnership route and had soughtan EoI, to form a joint venture and seven companies, including theIndiabulls Group, Adani Group, Tata Power Ltd and Larsen andToubro Ltd (L&T), were shortlisted. About 40 public sector firms,including Bharat Heavy Electricals Ltd and MMTC, had respondedto the EoI tender and were required, on selection, to form twoseparate joint ventures with the Chhattisgarh State Electricity Board(CSEB) and CMDC, respectively.

UPPCL proposes an average hike of 20 per centin power tariffs

The UPPCL, in its Annual Revenue Requirement (ARR), submittedwith the UP State Electricity Regulatory Commission, has proposedan average hike of 20 per cent in the power tariff for differentcategories of consumers. In its ARR, the UPPCL has proposed to linktariff with number of supply hours. While no hike had been proposedfor agriculture and rural domestic consumers, it has been proposedto link the tariff charged from the urban domestic consumers withthe hours of supply made to them.

Railways in JV with NTPC to set up 1000 MW powerplant at Nabinagar in Bihar to meet its powerrequirements

The Railways is looking to set up a 1000 MW capacity power plantat Nabinagar in Bihar to meet its power requirements. The plant willbe set up under a joint venture with NTPC and the Railways havealready formed 'Bharatiya Bijlee Company Limited' for initiatingpower projects for itself. The upcoming plant will feed 164 tractionsub-stations located in Eastern and Western region of the country.Railways consumed more than 14,096 million Kwh in 2007-08 foroperational (traction) and non operational (non traction) purposesand its power needs are currently met by different state utilities andcompanies like Tata Electric, Damodar Valley Corporation and NTPC.Meanwhile, Railway Minister Mamata Banerjee has also announcedsetting up of another 1000 MW power plant at Adra in her Budgetspeech this year, which will feed power required for the tractions ateconomical tariff.

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IPP's & CPP's

GMR Energy plans to construct 800-Mw coal-firedpower plant on the eastern coast of India

GMR Energy is considering plans to construct an 800-Mw coal-firedpower plant on the eastern coast of India, which is expected to bein the vicinity of its existing 388-Mw power plant at Vemagiri inAndhra Pradesh. GMR Energy also has plans to add another 4,200Mw over the next few years, till 2015 to its existing capacity. It isplanning a 1,200-Mw plant on the west coast and recently achievedfinancial closure for its 1,050-Mw, coal-based project in Orissa andhas nearly achieved another closure for its 1,200-Mw plant atChhattisgarh. Besides, GMR is also expanding its Vemagiri powerproject in an effort to more than double the capacity. Of the 4,200-Mw addition, 2,250 Mw will be coal-based and 1,190 Mw will behydro-powered, while another 750 Mw will be through natural gas.These expansions would be on top of the two acquisitions, whichGMR effected recently with the addition of a 600-Mw project beingset up in Maharashtra from EMCO and an 800-Mw natural gas-fired power project in Singapore. It also has a 50 per cent stake inInterGen, a global power generation company which has 7,700Mw of gross operating capacity across five countries and an additional2,800-Mw capacity under development. Keeping these long-termpower generation plans in mind, GMR has made two strategicacquisitions of coal mines in Indonesia and South Africa early thisyear. It acquired a 100 per cent stake in a coal mine PT BSL, Indonesiafor around $80 million, which has a mine life of approximately 25years besides also acquiring a 34 per cent stake in Homeland EnergyGroup (HEG).

Essar Energy to start coal-bed methane (CBM)production from Raniganj block in West Bengalfrom December 2009

Essar Energy will begin production of coal-bed methane (CBM) fromRaniganj block in West Bengal from December 2009. In the firstphase it would be producing the gas, which is found in coal seams,from 15 wells. Essar will be writing to the Directorate General ofHydrocarbons (DGH) soon, seeking permission to produce gas bythe year-end. DGH has certified reserves of 2.2 trillion cubic feet inthe block. Essar has not divulged the price at which the companywould be selling gas to its customers but has confirmed that it hasalready identified the markets and the buyers for the CBM gas. Itis also considering the sale of the gas to nearby industrial housesin West Bengal, who could use it as a substitute for furnace oil andthe company is in the process of signing the gas offtake agreements.Essar, which holds 100 per cent rights to the block, will become thesecond company after YK Modi-promoted Great Eastern EnergyCorporation to produce CBM in the country. It expects to produce100,000 standard cubic metres of gas (scmd) a day initially, whichwould be scaled up in the second phase. The company has estimatedCBM production per well in the region at more than 5,000 scmd.

Phillips Carbon Black plans to sell about 40 MWof excess capacity from its captive power plantsin 2009-10

Phillips Carbon Black Ltd may sell nearly 40 MW in 2009-10 fromits captive power plants located at the various greenfield andbrownfield projects. It is also looking at possibilities to generate fromrenewable sources by using waste rubber in the factories of anothergroup company CEAT, which could be used for own consumption.The company generates electricity from lean gas at cogenerationplants at its carbon black factories. It recently commissioned a 30MW plant at Durgapur, raising the total power generation capacityto 48 MW and has a target to generate over 80 MW of renewableenergy by this fiscal. Currently, it generates 20 MW at Durgapur ofwhich 15 MW will be up for sale and 12 MW at Vadodara of which8 MW could be surplus. At its proposed 16-MW plant in the greenfieldproject in Mundra, the company hopes to have a 10 MW surplus,after meeting its requirements and the project is expected to becommissioned by the end of this calendar year. There are plans afootto expand the production capacity at its Kochi plant from 2.5 MWto 16 MW in 2011-12 while also generating 16 MW at its greenfieldcarbon black factory in Vietnam. These initiatives through renewableenergy sources would help the company to explore revenue potentialwhile optimising power cost.

JSW Energy aims to generate 11,390 Mw by 2015

For developing a 3,000 Mw of generation capacity, buildingtransmission infrastructure and undertaking mining projects, JSWEnergy will borrow around Rs 5,000 crore over the next year and ahalf, in addition to raising around Rs 4,000 crore from the marketand through internal generation. JSW Energy, which aims to generate11,390 Mw in the country by 2015, has tied up with two consortiumsof lenders, led by IDBI Bank and State Bank of India for the loans.The company also plans to dilute 10 per cent of its equity throughfresh issue to the public and of the total Rs 14,048 crore requirementfor the projects under implementation, it has already tied up Rs9,900 crore debt so far., out of which the two lenders' consortiumshave already disbursed Rs 4,038 crore till June this year. As theprojects progress, JSW is likely to disburse about Rs 5,000 crorewithin the next 15-18 months. At present, the promoters and promotergroup companies, including listed companies JSW Steel and JSWHolding, are jointly holding 92 per cent stake in the company andthe remaining eight per cent is with Mauritius-based companiesSteel Traders Ltd and Indus Capital Group Ltd.

Adani Power likely to commission its second 330-MW unit at Mundra towards the end of Septemberor early October

Adani Power Ltd (APL) is likely to commission its second 330-MWunit at Mundra towards the end of September or early October.Meanwhile, the generation from the existing 330-MW unit has beenstabilised at full capacity, recently, after being brought on stream inMay. But, the existing unit is now undertaking rectification of 'minorproblems' in the sea water processing equipment. In the absence ofany supply commitment till February 2010, APL is supposedly sellingits entire generation as merchant power on spot basis through thepower-trading arm of its parent, Adani Enterprises. It is understoodthat parts of the generation were sold to the Punjab state utility atapproximately Rs 6.5/unit. Meanwhile, Adani Power is scheduled tosupply 1,000 MW to Gujarat state utility beginning February 2010and long-term supplies of another 1,000 MW to Haryana througha dedicated transmission facility will begin at a later stage.

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CESC takes 50.1% stake in Dhariwal InfrastructurePvt. Ltd's 600MW power plant at Chandrapur inMaharashtra

CESC, which generates and distributes electricity in Kolkata and itssuburbs, has announced its intention to expand nationally with aRs200 crore acquisition of a power project in Maharashtra from agroup of investors led by Pune-based Manikchand Group. CESC haspaid Rs200 crore for a 50.1% stake in Dhariwal Infrastructure Pvt.Ltd (DIPL), which has obtained “all necessary licences” and acquired450 acres of land at Chandrapur, 150km from Nagpur, to generate600MW of power. CESC will be acquiring the rest of the shares inthe company by March next year at an “insignificant cost”, accordingto the company. DIPL has not started building the plant, which isestimated to cost Rs2,800 crore, but has secured the right to buyaround five million tonnes of coal annually from South EasternCoalfields Ltd, a subsidiary of Coal India Ltd.. CESC has contendedthat Maharashtra is the most lucrative state for power companies,and has estimated that at Mumbai suburban tariffs they would havemade Rs1,600 crore in extra profits every year. After its entry intothe west, CESC is now looking to expand in the north and the south,and is eyeing unfinished power projects across India. It is expectedthat CESC will tie up the funding for the plant by the end of the year,and if all goes well, will start generating power within 33 monthsof financial closure. Under an agreement with the state, DIPL wouldhave to sell at least 50% of the 600MW it generates to the MaharashtraState Electricity Distribution Co. Ltd, or MSEDCL, and though regulatedby the state government, MSEDCL's average tariff is Rs5.80 a unitwhich is significantly higher than CESC's average tariff of Rs3.90 aunit. DIPL will be selling the remaining 50% that it generates at amuch higher price than the MSEDCL rate and CESC has estimatedan internal rate of return (IRR) of around 20% on its investment inMaharashtra. Currently, it generates 975MW at four plants in Kolkataand its neighbourhood, and is ready to start building a new plantat Haldia in West Bengal's East Midnapore district while also lookingto set up power plants in neighbouring states such as Jharkhand,Bihar and Orissa. A new unit at CESC's Budge Budge plant in Kolkatawill be commissioned next month which will raise its generationcapacity to 1,225MW.

Bhushan Power and Steel plans capacity additionto take its total power-generation to 640 mw

Bhushan Power and Steel (BPSL) plans to invest Rs 3,000 crore toadd 250 mw capacity to its existing power plant and to increaseproduction of value-added steel at its Orissa facility over the nextone year. BPSL already has a 260 mw captive power plant inSambalpur (Orissa) and plans are afoot to increase its capacity to390 mw by the year-end. The planned capacity addition will takethe company's total power-generation capacity to 640 mw. It hopesto sell its surplus generation through open access at spot prices inthe market.

CEA recommends coal linkages for six captivepower projects

The Standing Committee of CEA has recommended coal linkagesfor six proposed, as well as existing, captive power projects. TheCEA has proposed grant of long-term coal linkage after it found therequired infrastructural inputs to be in order. The captive powerprojects that are being recommended are Ispat Energy Limited's 250MW project in Maharashtra, Hindustan Zinc Limited's (HZL) 160 MWproject in Rajasthan, Bindal Paper Limited's (BPL) 15 MW co-generationproject in Uttar Pradesh, Abhinav Steel Private Limited's (ASPL) 15MW project, also in Uttar Pradesh, and Viraj Steel and EnergyLimited's 12 MW project in Orissa.

TRANSMISSION & DISTRIBUTION

Government pushing for removal of licensingrequirements needed to distribute power toestablishments located inside SEZ's

The government is pushing for removal of licensing requirementsneeded to distribute power to factories, business outsourcing units,software developers and social infrastructure like hospitals and mallslocated inside Special Economic Zones (SEZ). The move is aimed ateasing procedural hassles and the Power and Commerce ministriesare in advanced stages of inter-departmental talks that would leadto doing away with the requirement. However, a SEZ developer willhave to obtain a licence if it wants to distribute power outside thezone. The proposed move is expected to help in cutting down thelong-drawn licensing requirements needed for obtaining a licencefor distribution of power and will help scores of other SEZs, whichare on their way of becoming operational. The proposed move willmean that the moment a SEZ gets notified, the developer will geta deemed licence status to distribute power to the units and othersupporting infrastructure inside the zone. The Commerce Ministryhad released guidelines on generation and distribution of power inSEZs on February, 2009 where it had spelt out norms for buildingpower plants inside the tax free industrial enclaves and had stipulatedthat the developers will have to obtain a distribution licence, asmandated by the Electricity Act, 2003. Currently, there are 98functional Special Economic Zones housing 2279 units while scoresof other zones are likely to start exporting by the end of this year.Incidentally, Mundra SEZ, which is being developed in over 6,000hectares and is currently the largest SEZ, will host a 4,629 mw powerplant in side the zone, which will not only supply power to the unitslocated inside it, but also to grids located outside while RelianceUtilities Ltd, which partnered Reliance Jamnagar Infrastructure Ltdin building the Jamnagar-based Special Economic Zone refinery, hasalready built a 720mw plant inside the zone.

L&T bags four EPC orders in Qatar, UAE and Omanworth about Rs 1,044 crore

L&T has bagged four engineering-procurement-construction (EPC)orders, in Qatar, UAE and Oman, aggregating approximately to Rs1,044 crore, for the construction of substations for the major Gulf-based infrastructure firms like Qatar Petroleum, KAHRAMAA, DubaiElectricity and Water Authority (DEWA) and Oman Electricity andTransmission Company (OETC). The contract from the oil and gasmajor, Qatar Petroleum, which was secured by L&T against stiffinternational competition, envisages the construction of foursubstations at Ras Laffan, including development of a 33 kV and 11kV power distribution network and is valued at Rs 737 crore. Slatedto be executed over a period of 32 months, the project is one of thekey phases of the overall development of Ras Laffan Industrial Cityin Qatar. The order awarded by Qatar's electricity and watercorporation, KAHRAMAA, is worth Rs 96 crore and involves theconstruction of one 66/11 kV gas insulated substation (GIS) at theEducation City, in Doha to add to its constructing of five similarsubstations in the capital city, already. DEWA has awarded L&T a Rs115 crore order for the construction of a 132/11 kV substation inDubai, where L&T is already constructing two similar substationswhile its joint venture, L&T Oman, has secured a Rs 96 crore orderfrom OETC for the construction of one 132/33 kV GIS substation atNakhal in Oman.

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DEALS, FINANCES & TENDERS

NTPC and CIL close to signing proposed 50:50 JVto develop two coal blocks and set up a pitheadthermal power station

The NTPC board has cleared a proposal for a 50:50 JV betweenNTPC and Coal India (CIL) which will pave the way for the CIL boardto clear the proposal and sign the JV agreement soon. The JV plansto develop two coal blocks at Brahmini and Chicro Patsimal inJharkhand and set up a pithead thermal power station. The powerplant details are yet to be prepared but, based on the initial reserveestimates at these mines, coal production could easily support atleast a 4,000 mw thermal plant. But since the two blocks areunexplored, the JV will have to ascertain the quantum of coal reservesand seam location following which mining work can start. While theNTPC board has cleared the proposal, CIL had raised some issueson pricing of the coal from these blocks which had forced NTPC toredraft the agreement. Meanwhile, CIL is also working to float fourseparate foreign mining joint ventures with local partners, one eachin the US, Australia, South Africa and Indonesia.

Maharashtra lines up investments of more thanRs 75,000 crore for generation, transmission anddistribution

Maharashtra has lined up investments of more than Rs 75,000 crorefor various power projects in the state spread across the board ingeneration, transmission and distribution which include those projectswhich are currently at various stages of development after havingobtained all approvals. According to the state power department,in the next three to four years, over Rs 60,000 crore would beinvested by state-run power utilities, with about Rs 30,000 croremarked for generation projects and Rs 15,000 crore each fortransmission and distribution with a large portion of debt beingcommitted by public financing companies including Power FinancingCorporation and Rural Electrification Corporation. According toKPMG the biggest advantages for Maharashtra state utilities gettinggreater chunk of debt from PFC and REC is that they are less exposedto the volatility in the finance markets and have been aggressive inimplementing power projects and have also been very successful.According to the Maharashtra Electricity Distribution Co a combinedcapacity of over 10,000 megawatts is expected to be added by stateand private power generation firms by 2012 while the state distributionarm is looking at enhancing its carrying capacity from 10,000 MWto 20,000 MW. Maharashtra believes that if these targets areachieved, power deficits in the state could be a thing of the past.Currently, the state faces a power shortage of around 5,000 MWdaily during peak hours which is likely to rise to 10,000 MW by theend of 2012. Meanwhile, NTPC and some private players such asTata Power, Reliance Power, Adani Power, JSW Energy and JindalPower are also expected to complete commissioning of few units.Analysts believe that private firms may add nearly 4,000 MW to thestate grid by 2012.

Tata Power reports 160% increase in net profitfor the quarter ended June 30, 2009

Tata Power has reported a 160% increase in net profit at Rs 572.65crore as compared to Rs 219.85 crore in the corresponding quarterin the previous year for the quarter ended June 30, 2009, on aconsolidated basis. Revenue for the quarter increased 15.82% at Rs4,713.16 crore compared to Rs 4,069.34 crore in the correspondingperiod last year. On consolidated segment-wise performance, netrevenue for power business was Rs 3342.97 crore and for the coalbusiness was Rs 1158.43 crore as compared to Rs 2888.32 croreand Rs 1011.84 crore respectively, during the corresponding periodslast year. PBIT for power business was Rs 662.41 crore against Rs315.36 crore, 110.05% higher, whereas, PBIT for coal business stoodat Rs 373.16 crore as compared to Rs 296.85 crore, 25.71% higherthan corresponding quarter in the previous year. It has also lined upnearly Rs 24,000 crore as capital expenditure in the next three yearsand has over 30,000 consumers till July-end who have evincedinterest to switch over to Tata Power for their electricity requirements.It currently supplies power to around 28,500 consumers, includingindividual and bulk industrial consumers like airports and stateinstallations.

HYDRO POWER

Poor rainfall forces many hydel power plants tooperate at about 40% PLF

Poor rainfall has forced many hydel power plants to operate at about40% capacity and most are perilously close to a complete shutdownfor want of adequate water in their reservoirs. This has led to thethermal power plants bearing the extra load, but also raising concernsthat a failure at a big thermal power plant could disrupt suppliesacross the country. According to MoP, generation from the hydelsector is already down substantially and only about 27,000-28,000mw is available which could fall sharply if the monsoons continueto play truant. Meanwhile, even the Central Electricity Authority(CEA), has warned of the sluggish progress of the monsoon duringJune-July, and the corresponding below-normal rainfall in thecatchment areas of reservoirs in the southern, western and easternparts of the country which has resulted in a decline in water storagelevels at most hydroelectric projects. It has informed that becauseof water shortage, hydel power plants are currently running only inthe peak hours, i.e. 6-10 pm. It is learnt that the water level in theBhakra reservoir on the Sutlej is down to 70 mtrs against averagelevels of 500 mtrs in June-July while its average generation is at846 mw against an installed capacity of 1,480 mw. Likewise, inGujarat, the 1,200 mw Sardar Sarovar hydroelectric project has shutdown after generating only 50 mw in early July and the 1,500 mwNathpa Jhakri hydel power project in Himachal has been temporarilyclosed due to technical reasons. The Tehri hydel project is also facingcritical water levels and if it is forced to shut, then the northern gridcould lose another 1,000 mw, which would make it extremely difficultfor the north Indian states of Punjab, Delhi, Haryana, Chandigarh,Jammu & Kashmir, Rajasthan and Uttarakhand.

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Tamil Nadu reports lower hydel generation figuresfor April – August period than last year

Tamil Nadu has reported lower hydel generation figures by logging1,637 MUs of hydel power in the period from April 1 till August 19,compared with 2,190 MUs in the corresponding period last year.However, the shortfall, compared with last year, has not beenincreasing and in the last three months, it has hovered around 550MUs. What is also working positively in favor of Tamil Nadu, till nowat least, is that TNEB data has shown that the potential storage thusfar this year is better than in the corresponding period last year,which could generate 1,125 MUs against 826 MUs. Tamil Nadu has2,186 MW of hydel capacity. Storage at Mettur was reported at58,894 million cubic feet, recently, which is 66.6 per cent of thereservoir's full capacity of 88,452 mcft. At the beginning of the monthlast year, the storage here was 59 per cent of capacity andencouragingly, inflows have been consistently higher than thedischarge.

NHPC, SJVN and government of Manipur to formJV to develop 1,500-MW Tipaimukh hydropowerproject

NHPC, through a JV, will develop the 1,500-MW Tipaimukhhydropower project in the north-eastern state of Manipur. The projectwas initially awarded to the state-owned North Eastern Electric PowerCorporation Ltd. The Union Power Ministry has reportedly askedNHPC, Satluj Jal Vidyut Nigam (SJVN) and the state government ofManipur to form a joint venture to develop the project in whichNHPC would hold a 69% stake and SJVN 26%. The other 5% sharewould be with the Manipur government. NEEPCO's planned capacityaddition target has come down to 3,000 MW from 4,500 MW asplanned earlier for by the end of March 2017, after losing theTipaimukh project. NHPC is finalising the draft Memorandum ofUnderstanding for the proposed Tipaimukh JV and work is alreadyin process and the draft MoU would be submitted within a monthto the government, as desired by the Power Ministry.

RENEWABLE ENERGY

RS India Wind Energy signs MoU with HaryanaRenewable Energy Development to set up solarphotovoltaic power project in the state

RS India Wind Energy has been the only company, of the fourcompanies that signed a MoU with Haryana Renewable EnergyDevelopment Agency (HAREDA) last year, to acquire land so far forsetting up solar photovoltaic power projects in the state. Despitesubmitting their detailed project reports, the other three projectshave been found to be not bankable which has forced them to nowrework their projects to make them feasible and for resubmittingnew reports soon. RS India Wind Energy had submitted a proposalfor developing a 3-mw capacity solar power plant and has taken 30acres on lease in Raisena village in Gurgaon district. A total of15,008 solar photovoltaic (SPV) modules of 200 watt each wouldbe used in the project to harness solar energy for power generation.HAREDA has announced that the total expected cost of the projectis around Rs 57 crore, of which 30% will be equity and the rest will

be debt. It has projected 325 sunny days in a year and forecast theannual generation capacity of this project at about 59 lakh units, ofwhich 49.10 lakh units would be available for sale. Haryana ElectricityRegulatory Commission has fixed the tariff of this project at Rs15.96/unit of which Rs 12 will be paid by the Centre and the restby the state government. The other three firms who are re-workingtheir details include Astonfield Renewable Resources for a 3 mwplant; Epuron Renewable Energy for a 2 mw plant and Azure PowerIndia, also for a 2-mw plant. One factor that these companies willhave to consider is the module cost, which was around Rs 170-200per watt four months back but has now been reduced to Rs 140-150/watt which will make their projects more viable and bankableand maintaining a minimum internal rate of return of 14% to makeit a profitable venture. Further, as per guidelines of the Centre, theseprojects should be commenced before December 31 for a tariff ofRs 15.96 or March 31, 2010.

Rajasthan targets to establish 3,000 MW to 5,000MW of solar power projects in the State

Union Minister for New and Renewable Energy, Mr Farooq Abdullahhas assured that every village in Rajasthan would be supplied withpower within the next five years. He made the comment whiledrawing attention to efforts being made to establish solar powerprojects of 3,000 MW to 5,000 MW capacity in the State. He addedthat the ministry would shortly chalk out an action plan for supplyingelectricity to villages which were not connected to the Grid sub-stations and underlined the importance of non-conventional energysources in this regard. It is expected that Rajasthan with its richresources of solar and wind energy, shows immense potential to bea front runner for power generation through the non-conventionalsector. Also expressing concern over global warming andenvironmental degradation he added that gradual discontinuanceof fuels like coal, gas and crude oil for power generation should bethe way forward in preference of environment-friendly resources ofbio-mass, solar and wind energy. The desert State with its availabilityof enormous solar radiation has a huge potential for becoming theleader in non-conventional power production and has also set thetarget for producing 500 MW power every year by harnessing windenergy in Barmer and Jaisalmer districts.

NTPC to largely focus on wind energy in its effortsto diversify its fuel mix in the renewables space

NTPC is fast-tracking plans on diversifying its fuel mix and is keento make wind power a key thrust area in the renewables space. Itis likely to soon roll out plans for 1,000 MW of greenfield wind powerinstallations across Karnataka, Gujarat and Andhra Pradesh overthe next few years. The company's first wind project is expected tocome up in Karnataka, with wind farms totaling 500 MW at half adozen locations in the State and is in advanced stages of finalisingthe Detailed Project Reports for the projects in Karnataka while alsoassessing the techno-commercial viability of the other identifiedprojects. NTPC has already signed a MoU with the Karnataka PowerCorporation Ltd. (KPCL) for setting up the 500-MW wind powercapacity, under which KPCL will provide the land while NTPC willset up and operate the wind farms. NTPC's move to focus on greenprojects is a response to increasing environmental consciousnessand its commitment to the global climate change agenda. Currently,around 78 per cent of NTPC's installed capacity of 30,644 MW iscoal-fired, while much of the remaining capacity is based on naturalgas. According to the Global Wind Energy Council, India added just1,800 MW during the last year, taking its total installed windgeneration capacity to 9,645 MW while China added a whopping6,300 MW, second only to the US in terms of new additions, takingits capacity at the end of the year to 12,210 MW. The US added awhopping 8,358 MW during the year and with that overtook Germanyas the leader in terms of total wind energy installed capacity.

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AEC asks Indian companies in the civil nuclearsector to be vigilant while entering into tie-upswith overseas companies

Calling Indian companies in the civil nuclear sector to exercise duediligence and read the fine print, Atomic Energy Commission (AEC)Chairman Anil Kakodkar has asked interested companies to bevigilant while entering into tie-ups with overseas companies so asto not jeopardise their growth prospects. He cautioned Indiancompanies against allowing themselves to be subjected toextraterritorial application of foreign laws that could restrict theirparticipation in the indigenous three-stage nuclear powerprogrammes. Likewise, it is also likely that in addition to Indiancompanies being tied down to their alliance partners in the domesticsector, there is also the danger of them not being allowed to operateoverseas. The note of caution comes at a time when Indian companiesare not only engaged in the fully indigenous nuclear power programmebut also looking at participating in overseas projects. Kazakhstan ispoised to place orders for Indian 220 MWe pressurised heavy waterreactors. But after India's acceptance in the civilian nuclear energymainstream, it is critically important that domestic companies shouldneither compromise their independence nor surrendered technology.He added that while there should be no difficulty in protectingacquired technology and its use, the right to use pre-existing

technology should be preserved and exercised.

IPPAI CONFERENCES

Snap Shot on Indian Power Trading

� Only a few traders are actively trading� Trading percentage has not crossed even 5% of total generation� Overdraw volume from all five grids is around 5.54% of total

generation

DENIAL OF OPEN ACCESS

Impact of Denial of Open Access on thePower Sector Solutions & Way Forward

Presentation BySUNIL AGRAWAL - GMRETL

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PAPER PRESENTATIONPOWER PULSE brings you a presentation made by Mr SunilAgrawal of GMRETL on the subject of "Denial of Open Access"made at a past IPPAI Conference "Impact of Denial of OpenAccess on the Power Sector - Solutions & Way Forward" whichwas held in New Delhi, in the recent past.

Tamil Nadu sees gradual seasonal tapering ofwind power generation in August

In a huge blow to the TNEB, which banks on its wind power potential,

the last few days has seen a gradual seasonal tapering of wind

power generation in Tamil Nadu. After hitting highs of 46 million

units a day in early August, wind power generation began dropping,

first to 41 MUs on August 11, and then to around 13 MUs on August

16. And since, it has hovered around 3 MUs a day, and swinging

rarely up to 10 MUs. What is hurting Tamil Nadu is that the Tamil

Nadu Electricity Board, had targeted generation of 1,315 million

units for August, against which the achievement, till mid month, was

a paltry 630 MUs. What has worsened the situation is that hydel

power generation too thus far in the current financial year has been

lower than in the corresponding period last year.

Bharat Forge to enter the wind energy business

Bharat Forge Ltd is set to enter the wind energy business and will

be supplying some critical components for wind turbines for Tata

Power's upcoming power plants in Maharashtra. The company will

be supplying 1.5 mw wind turbines for Tata Power's upcoming 10

mw power plant coming up at Satara where installation work is

likely to begin shortly. The company's client base, currently, in the

renewable energy sector includes GE and Siemens.

Maharashtra to make fresh appeal to CEA forforming JV with NPCIL for its proposed 10,000mw project at Jaitapur in Raigad district

The Maharashtra government and its undertaking MahaGenco, are

keen to make a fresh appeal to the Central Electricity Authority (CEA)

for forming a joint venture with the Nuclear Power Corporation

(NPCIL) for its proposed 10,000 mw nuclear project at Jaitapur in

Raigad district of the state. The fresh attempt by the state government

and MahaGenco, comes at a time when the Bombay high court

recently allowed NPCIL to go ahead with land acquisition for the

project. The project is likely to come up over 900 hectares and

Nuclear Power Corporation has already joined hands with Areva

for a European Pressurised Water Reactor (EPR) of 1,600 mw. The

project entails an investment of around Rs 50,000 crore and

MahaGenco had initially desired to acquire upto 49% equity in the

project. The project has become crucial for Maharahstra which is

witnessing a rapid rise in demand for power while MahaGenco,

currently, has an installed capacity of about 9,000 mw.

NUCLEAR POWER

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Some Suggestions for way forward…

� Early implementation of Intra-state ABT as this may be a preamblefor implementation distribution open access similar to Inter-stateABT for transmission open access.

� Preparation of Road Map for reduction of losses and crosssubsidies through efficiency improvements by way of privatization.

� Distribution surcharge is to be decided in a manner so as togenerate enough competition.

� Captives, Merchant and Independent Power Producers needs analternatives in case of Open Access denial at last moment asthese might have made advance arrangement for supply ofpower.

� SEZ power evacuation policy should be in place for theirconnectivity to the grid and flow of power and vice versa.

� Opening a new alternatives for IPP/MPP/CPP to sell their entirepower in UI under the circumstances of legal proceedings onopen access denial by states.

� If the over drawl volume from all five grids are traded throughbilateral or Power Exchange the trading volume would jumpfrom 3.15% to 5.54 % of total generation.

� Paying the proportionate Transmission Loss by the utilities inaddition with UI charge for over drawl from grid.

� Regulatory and technical barrier for open access need to bereduced for greater assurance to customer (viz. rationalizationof grid support & demand charges).

Section-11 of EA-2003

� The Appropriate Government may specify that a generatingcompany shall, in extraordinary circumstances operate andmaintain any generating station in accordance with the directionsof that Government. Explanation. - For the purposes of thissection, the expression "extraordinary circumstances" meanscircumstances arising out of threat to security of the State, publicorder or a natural calamity or such other circumstances arisingin the public interest.

� The Appropriate Commission may offset the adverse financialimpact of the directions referred to in sub-section (1) on anygenerating company in such manner as it considers appropriate.

Questions???

� Who is appropriate Government in case of merchant plant

� Is any word missed out in provision

� Which are extra ordinary circumstances

� How long extra ordinary circumstances can continue

� How many times these circumstances can repeat

� Which are other circumstances can be included in public interest,and so on…….

************* x**************

(The pdf version of the entire regulation comes to POWERPULSEsubscribers as an attachment to the current newsletter.)

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