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The Central Electricity Regulatory Commission (CERC) has issued Sharing of Inter-State Transmission Charges and Losses (Sixth Amendment)

The Central Electricity Regulatory Commission (CERC) has issued Sharing of Inter-State Transmission Charges and Losses (Sixth Amendment)

Reforms and Regulations

The Central Electricity Regulatory Commission (CERC) has issued Sharing of Inter-State Transmission Charges and Losses (Sixth Amendment), Regulations, 2019. As per the amendment, transmission charges and losses for the use of inter-state transmission system (ISTS) network will not be payable for generation based on solar and wind power resources for a period of 25 years from the date of commercial operation. The benefit is contingent upon conditions like the solar and wind projects should have been awarded through the competitive bidding process as per the guidelines issued by the central government. The commercial operation date (COD) for such projects should be between February 13, 2018, and March 31, 2022. Lastly, the power purchase agreement (PPA) should be signed with discoms for the compliance of renewable purchase obligation (RPO). The modification will come in to effect retrospectively from February 13, 2018.

Central Sector

Power Finance Corporation Limited (PFC) has completed the acquisition of majority stake in the REC Limited. PFC has acquired 1.03 billion shares constituting 52.63 per cent equity stake held by the government of India in REC along with management control, at a cash purchase consideration of Rs 145 billion. The acquisition price of REC per equity share works out to Rs 139.50. About 70 per cent of the deal has been financed from the cash inflows from the business and the balance 30 per cent is through debt. Going forward, the merger is expected to be completed in 2019-20 and the timelines for the merger will be decided in consultation with the central government.

NTPC Limited has commenced commercial operations of the 660 MW unit 2 of the 1,320 MW Solapur Super Thermal Power Station in Maharashtra. With this, the Solapur Super Thermal Power Station stands fully commissioned. The NTPC Group‟s installed capacity has reached 52,866 MW.

In a recent report titled „Flexible Operation of Thermal Power Plant for Integration of Renewable Generation’, the Central Electricity Authority (CEA) has recommended raising the tariffs of the coal-based electricity to incentivise the flexible operation of thermal power plants (TPPs). Flexible operations of TPPs are required to accommodate the growing share of renewable energy. The report suggests that an increase in tariffs can be up to Rs 0.45/unit, depending on the quantum of green energy being generated by solar and wind plants. The tariff rise is about 13 per cent of the average all-India price at which states procured nonrenewable power in 2018-19. The report further notes that if natural gas-based power plants are to be used optimally for flexibility, about 45.27 MMSCMD of gas would be required in 2021-22, significantly higher than the present availability of 29.88 MMSCMD.

Solar Energy Corporation of India (SECI) has issued the request for selection (RfS) for 750 MW (tranche-II) of grid-connected solar photovoltaic (PV) projects in Rajasthan. The projects will be developed on build own operate (BOO) basis, and the scope of work includes acquiring the land, developing the project, establishing connectivity, and securing long-term open access. The projects are required to achieve financial closure within 12 months from the effective date of the PPA. The scheduled commissioning of the project is 18 months from the date of the PPA.

State Sector

The Telangana State Power Generation Corporation Limited (TS Genco) has lit up the boiler of the first 270 MW unit of the 1,080 MW Bhadradri Thermal Power Station in Kothagudem district of the state. The boilers of the other three 270 MW units will be lighted up in the coming months and project will be fully commissioned by the end of 2019. The project entails an investment of Rs 78.57 billion.

Private Sector

Renascent Power Ventures Private Limited (RPVPL) is planning to start selling power from the 1,980 MW Prayagraj TPP in Uttar Pradesh without any discount on power tariff. Following representations made by lenders to the Uttar Pradesh Electricity Regulatory Commission (UPERC) for change in ownership of the plant, the regulator is soon likely to come out with an order. In November 2018, RPVPL had acquired a 75.01 per cent stake in Prayagraj Power Generation Company Limited from lenders as part of the stressed asset resolution process. The company is planning to operate the plant at a higher plant availability of 85 per cent against 80 per cent which would allow the state discoms to get more power from the plant. Meanwhile, UPERC has asked it to submit an affidavit, according to which the state distribution companies will have a “right of first refusal” for the project‟s 10 per cent capacity which is presently not tied up with any PPA.

Projects and Ventures

Step Industries Private Limited, a cable and wire manufacturing company has secured a rural electrification project worth over Rs 1.32 billion from Jharkhand Bijli Vitran Nigam Limited (JBVNL). The project is a composite contract and entails supply and erection of rural electrification infrastructure in East Singhbhum, West Singhbhum and Saraikela-Kharsawan districts on a turnkey basis under the Jharkhand Sampurna Bijli Achchhadan Yojna (JSBAY) Phase-1. The project will include services like site survey to the installation of poles and commissioning, etc. and will be completed over a period of 18 months.

Debt and Equity

NTPC Limited has raised $450 million through a five-year bond offering in the international market under its $6 billion medium-term notes (MTN) programme. This issuance is NTPC‟s tenth offering under the programme taking the cumulative amount raised under the MTN programme to $4.30 billion.

PFC’s board has decided to set the company's overall borrowing limit at Rs 810 billion for 2019-20. The board decided to raise Rs 450 billion through long term borrowings like term loans and public or private placement of long term taxable/tax-free bonds. Further it plans to raise Rs 110 billion through long term foreign currency borrowings, Rs 70 billion through short term borrowings, and Rs 180 billion through commercial paper during 2019-20.

Kalpataru Power Transmission Limited (KPTL) has signed a definitive agreement to acquire 85 per cent stake in Swedish firm Linjemontage i Grastorp AB (LMG) for an enterprise value of $24 million (Rs 1.65 billion). Grastrop-headquartered LMG specialises in power supply solutions and services for electricity networks in the voltage range of 0.4-400 kV. The acquisition of LMG is in line with KPTL‟s objective of growth and greater geographical presence in stable and growing markets with a focus on the transmission segment.

Tata Power’s arm Coastal Gujarat Power Limited (CGPL) has signed a share purchase agreement (SPA) with Trust Energy Resources Pte Limited, another wholly owned subsidiary of Tata Power to sell its 100 per cent equity stake in Energy Eastern Pte Limited (EEPL). EEPL is a wholly owned subsidiary of the CGPL. The transaction is expected to be completed by March 31, 2019 and falls within related party transactions

Unitech Limited has sold its power transmission business - Unitech Power Transmission Limited (UPTL) to Sterling and Wilson Private Limited for an undisclosed amount. Unitech has entered into an SPA with Sterling and Wilson to sell entire issued and paid-up share capital of UPTL. After the completion of the transaction, UPTL will become a wholly owned subsidiary of Sterling and Wilson which is promoted by the Shapoorji-Pallonji Group.

Suzlon Energy Limited has completed the sale of two of its subsidiaries to CLP Wind Farms (India) Limited. In a recent filing, Suzlon has sold the remaining stake in its subsidiaries S.E Solar Limited and Gale Solar Farms Limited for consideration of Rs 765.5 million and Rs 225.4 million respectively. The transaction does not fall under the related party transaction as CLP does not belong to either any promoter or promoter group or group of companies.

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