ONGC to get 10 per cent RoI on Cairn blocks

In order to boost ONGC’s valuations ahead of followon public offer (FPO) which is scheduled early next year, central government has given in principal ok to the proposal which ensures  Cairn gets minmum 10 per cent return on investment (RoI) in Cairn India’s Rajasthan block.  The government’s in principal approval also paves the way for Cairn-Vedanta deal. 

 The state-run explorer has been losing money from these blocks, as it has to bear the  entire royalty burden, and has been using the deal to negotiate better terms for itself.  The petroleum ministry sources said, the government may transfer a part of its own share of profit from the blocks to help ONGC, but this would require the approval of the finance ministry as it means giving subsidy to the ONGC..

Officials in the finance ministry said, they were looking at ways to help ONGC while petroleum secretary S Sundareshan said his ministry wanted India’s second-largest company by market capitalisation to get a reasonable return.

“This will come as an upside for investors ahead of the FPO as the Rajasthan blocks will generate more revenues in the years to come. A positive return for ONGC would help the Cairn-Vedanta deal as well as ONGC’s concerns would be addressed without making any changes for Cairn India materially,” says Sanjeev Prasad of Kotak Securities .

The ministry is considering ways to give ONGC a return of 10-15 per cent on its investment in the Rajasthan blocks and is consulting ONGC and the Directorate General of Hydrocarbons, the quasi-regulator for the sector, the official said, requesting anonymity. One of those options is to amend the tripartite contract between Cairn India, ONGC and the central government for the Rajasthan blocks. The amendment would allow the Union government to directly compensate ONGC.

By altering a specific contract, as opposed to making a policy change that affects 70-odd royalty deals that are in the same situation as ONGC, the government will not need cabinet clearance, speeding up the deal. The government would like to resolve the royalty issue quickly, as it is looking to sell 5 per cent in ONGC through a public issue by March 2011; if the royalty issue is still pending, it might lower the valuations the government gets.

However, the Cairn-Vedanta deal, pending for about four months, might run into another hurdle. If the delay continues, Vedanta Resources might ask Cairn Energy, Cairn India’s Scottish parent, to lower the deal price, a person involved in the transaction said last Thursday.“The change in crude prices and scrip movements will be variables we will have to keep in mind as the deadline approaches,” he said. The deadline for the deal is April 15, which can be extended by one month.

Strong growth in power capacity and generation

Power capacity addition spurted by 2,085 mw during October, three times around the 716 average megawatt added in the previous two months and nearly 50 per cent more than that targeted for the month. In fact, this was the largest monthly capacity addition during the ongoing plan. The projects commissioned during the month included Rajiv Gandhi (Hissar) TPP U-2 and Sterlite (Jharsuguda) TPP U-1 (600 mw each); Indira Gandhi STPP U-1 (500 mw) of Aravli Power; Wardha Warora TPP U-2 (135 mw); and Pragati Stage- III (Bawana) CCPP GT-1 U-1 (250 mw). With this, the first seven months of 2010-11 have seen the commissioning of 7,020 mw of capacity, meeting 60 per cent of the targeted augmentation for the period. Fiscal 2009-10 had witnessed 51 per cent of target achievement, 2007-08 57 per cent, and 2008-09 only 31 per cent.

Cumulatively, the net capacity addition in public utilities till October in the ongoing 11th Plan amounted to 25,923 mw in public utilities, comprising 22,588 mw of thermal, 2,675 mw of hydro (renewable) and 660 mw of nuclear power. The renewable energy sources (grid connected) including small hydropower, biomass gas/power and wind energy etc., whose estimates are sourced from the Ministry of New and Renewable Energy, contributed 9,026 mw. The state governmentowned power plants accounted for 49 per cent of the total installed capacity of 167,278 mw in October, followed by 31 per cent in central government-owned plants, and 20 per cent in private sector plants. In RES, however, private sector accounted for 83 per cent of total capacity of 16,787 mw.

Even as the fructification of power capacity is running below target in the current plan, as in earlier five-year plans, addition to stock of public utilities till October has exceeded 21,151 mw added during the 10th Plan and 18,524 mw in the 9th Plan. Renewable energy, a star performer, has in fact already surpassed the climb in the earlier plan by 50 per cent. The total stock of installed generating capacity at the end of October worked out to 167,278 mw; of which 10 per cent (16,787 mw) comprised RES. Grid-connected captive generating capacity contributed another 19,509 mw.

The western region has 31 per cent of grid-connected power capacity (including RES) followed by northern and southern regions contributing around 27 per cent each. The eastern region has 13 per cent of installed generating capacity, with the northeastern region accounting for just around 1-2 per cent. The southern region dominated in RES with 51 per cent followed by 29 per cent in the western region and 16 per cent in the northern region.

Total power generation including that from the Bhutan joint venture shot up 8.4 per cent in October, reversing the slide that had pulled down the growth rate to around 1.3-1.4 per cent in August- September, from 3.9 per cent in June-July and 6.6 per cent in April-May. Cumulative increase in power generation over April- October worked out to a somewhat respectable 4.7 per cent, which though was below 6.5 per cent in the corresponding period of 2009-10. Plant load factor for thermal plants (coal and lignite) was assessed at 72.5 per cent during April-October 2010, which was markedly lower than 75.7 per cent in this period a year ago. PLF for nuclear power improved from 49.8 per cent to 56.2 per cent between these periods due to better availability of nuclear fuels.

The average deficit went down to about 9.2 per cent during April- October 2010, from 9.8 per cent in the corresponding period a year ago, and 10.5 per cent during this period two years back. Peak demand level deficit worked out to 10.1 per cent against 12.1 per cent in the same period last year and 13.5 per cent two years ago. Lower power shortage could be reflective of a slowing economy as growth in generation during the period was lower than that a year ago.

Among the regions, the western region, which accounts for 30-31 per cent of power availability as also demand, faced 13.7 per cent average deficit, much higher than the average for the country. The northern region faced 8.8 per cent deficit. The southern and eastern regions faced 6.3 per cent and 4.9 per cent deficit, respectively.

Among the states, Madhya Pradesh and Maharashtra, faced 18 per cent power deficit during April-October; Uttar Pradesh faced 16 per cent; and Karnataka 10 per cent.

Power Sector Performance in 11th Five-Year Plan
	2007-08	2008-09	2009-10	2010-11 (up to October)
Capacity addition (mw)	9,263	3,454	9,585	7,020
Generation ('000 GwH)	704	724	772	468
Power deficit (per cent)	9.8	11	10.1	9.2

 

Cancun Talks: China, India Brazil press for more US cuts

China, India, Brazil and South Africa said the US must pledge deeper cuts in greenhouse gas emissions to help make progress in United Nations climate talks, sharpening divisions between rich and poor countries on how to combat global warming.

The four developing nations at the talks in Cancun, Mexico, also called on industrialized economies to provide more aid for countries seeking to clean up their energy industries, adding to demands that the US and European Union said may wreck the meeting.

“There is an agreement to be had,” US lead climate negotiator Todd Stern said yesterday in Cancun. “I’m not sure whether we will actually get it. I think that question hangs in the balance.”

With the two-week conference involving 193 nations entering its final four days, the EU said negotiating documents are too complex and too full of disputed items for this stage in the talks. The remarks add to the chances negotiations may follow last year’s gathering in Copenhagen in failing to produce an agreed package of measures to keep a lid on global temperatures.

“The texts are still much too long,” said Connie Hedegaard, the European Commissioner in charge of climate policy, referring to UN documents outlining possible goals at Cancun. “There are much too many options. They are still too complicated.”

Leaders gathering Venezuelan President Hugo Chavez, Evo Morales of Bolivia and Rafael Correa of Ecuador are among the 35 leaders arriving for the final days of the conference. US president Barack Obama, who attended last year in Copenhagen, is not coming this time.

The delegates are looking for ways to curb fossil fuel emissions blamed for global warming once limits agreed in the 1997 Kyoto treaty expire in 2012. After failing to reach a legally-binding agreement last year, the UN scaled back ambitions for this meeting, focusing on agreeing regulations to protect forests, verify emissions cuts and channel up to $100 billion a year in climate aid to developing nations.

A UN text sketching out the options for Cancun says the nations of the world need to limit temperature increases since the 1700s to “below 2 degrees Celsius.” Carbon dioxide emissions have risen 40 per cent from 1990 to 2008, double the level that would produce a 3.5 degrees Celsius increase in global temperatures, the International Energy Agency said yesterday.

US position

The US, the only industrialized country not to ratify the 1997 Kyoto Protocol, has pledged to cut emissions about 17 per cent by 2020 based on 2005 levels. That amounts to a zero reduction from 1990, the baseline for Kyoto, according to the Indian environment minister Jairam Ramesh.

“The US offer is disappointing to say the least,” he said yesterday. He joined the other developing nations in insisting that the industrial countries make a second round of commitments under Kyoto, an effort that the UN says is not possible at this meeting.

“We need to stick to the Kyoto Protocol because it’s the result of a long-term effort and the only legally binding document on emissions reductions,” ie Zhenhua, China’s top official on climate policy, said at a briefing yesterday in Cancun. “We need to continue the second commitment period.”

Copenhagen compromise

Both the US and EU are pressing for a new climate agreement to include reduction pledges made earlier this year under the Copenhagen Accord, a non-binding accord cobbled together in the Danish capital last year when treaty talks failed.

The US wants the Copenhagen pact to serve as the basis for a new treaty that includes cuts from fast-growing countries like China and India. Japan, Russia and Canada have refused to sign up for a second round of cuts under Kyoto without developing country participation. China wants to stick with the Kyoto approach, which requires actions from only industrial countries.

The EU, which has committed to cutting emissions 20 per cent by 2020 from 1990 levels, urged all countries to make compromises, noting there were limits to what it could achieve.

“We can’t leave Cancun empty-handed,” Hedegaard said in a news conference.

Forest snag

Bolivia yesterday stepped up its call for rich nations to make deeper cuts. Its negotiator, Pablo Solon, also is resisting the forest protection measures, saying the methods being considered to count the stocks of carbon sequestered in trees don’t do enough to protect “the rights of nature.”

The Latin American country’s concerns are important because under the UN rules, which require consensus, any party to the talks can hold up progress with an objection.

The rich-nation targets in the 1997 Kyoto negotiation text range from 15 per cent below 1990 levels in 2020 to 50 per cent below by 2017, according to a document on the website of the United Nations Framework Convention on Climate Change.

The EU has said it will boost its reduction target to 30 per cent if other countries also strengthen their commitments.

“What we need is that others also move,” Hedegaard said.

Siemens to invest Rs 400 cr in renewable energy sector

Siemens Ltd will invest nearly Rs 400 crore in the development of wind turbines in the country in the next two years, company officials said here.

Siemens will design and manufacture the equipment and make the expanded Vadodara facility operational by 2013 in the next phase of development, said Dr Armin Bruck, Managing Director, and Mr A.K. Dixit, CEO, Energy Cluster, Siemens Ltd, on the sidelines of a function in which the Gujarat Chief Minister, Mr Narendra Modi, inaugurated the second phase of steam turbine and compressor manufacturing facility at Vadodara.

This is part of the Rs 1,600-crore of investments in India over the next three years, announced in February 2010 by Mr Peter Loescher, President and CEO of Siemens AC, to set up six hubs of base level products in India.

Manufacturing facility for steam turbines larger than 45 MW, which was one of the six hubs, has now been established at Vadodara, and the other five hubs are under way. These products will cater to the mid- and low-end market segment constituting around 70 per cent of the total market in India. The company envisages production of some 60 products at Vadodara.

Of the Rs 1,600 crore, Siemens plans to invest around Rs 1,200 crore in Gujarat alone. On the two phases in Vadodara, it has invested Rs 575 crore so far, including Rs 300 crore in energy and healthcare sectors.

The expansion will double the capacity of the Vadodara facility to manufacture steam turbines from the existing 45 MW up to 150 MW, which in the next phases will be augmented up to 250-300 MW.

The smaller turbines up to 15 MW are sourced from this factory by Siemens AG to cater to Asia, Africa and Europe.

Mr Dixit said around 30 per cent of the installed generating capacity in India is currently from Siemens licensees. In the industrial sector as well, over 500 Siemens industrial steam turbines from Vadodara facility have been installed in the country.

“Now, with the ability to manufacture steam turbines up to 150 MW locally as well as with the compressor manufacturing and testing facilities commencing at this site, we will widen our portfolio in the oil and gas sector.”

Siemens Ltd, in which Siemens AG holds a 55.18 per cent stake, comprises 19 legal entities with 21 manufacturing plants in India, with a business volume of Rs 12,000 crore in 2009, expected to double in the next two years.

Responding to Mr Modi's claim that Siemens is “shifting” wind turbine manufacturing facility from China to Vadodara, the officials clarified that Siemens's China business is three times larger than in India. “We are now adopting a balanced growth approach and only the latest technology development in renewable energy will now be done at the Vadodara facility.”

They said Siemens Ltd's current contribution to the behemoth's global business is less than three per cent, as against China's eight per cent. Siemens India currently has an order book of Rs 12,400 crore, including Rs 7,700 crore from the oil and gas sector. Oil and gas sector account for about 15 per cent of the company's business.

Besides, Mr Dixit said, Siemens is making Gujarat a major service centre for turbines and compressors as a continuous business proposition. The company is, at present, providing technology via BHEL to power plants of up to 800 MW, based on super-critical technology.

It is also working on providing turnkey-basis solutions to the gas-based power plants to be set up at Dahej and Kutch in Gujarat.

APEPDCL registers lowest transmission loss in country

Three north-coastal districts has registered the lowest losses at 8.4 per cent, as against the country's average of 30 per cent.

The Andhra Pradesh Eastern Power Distribution Company Ltd (APEPDCL) — operating in the three north-coastal districts of Visakhapatnam, Vizianagaram and Srikakulam besides East Godavari — has registered the lowest power transmission and distribution losses in the country, at 8.4 per cent, as against the country's average of 30 per cent, according to Mr H.Y. Dora, Director, Operations.


Mr Dora was speaking at a seminar on energy efficiency organised by the Confederation of Indian Industry and the Bureau of Energy Efficiency here on Friday.
He said the APEPDCL was taking steps to improve energy conservation and efficiency and to educate the general public.


It had distributed six lakh CFL lamps in Visakhapatnam district and had taken up a pilot project in East Godavari district to replace agricultural pump-sets and pipes to improve energy efficiency.
Stress on efficiency


He said there was a huge demand-supply gap in the power sector and adding capacity would only solve part of the problem as it could never match a rise in demand.
Therefore, energy conservation and efficiency should be stressed.


Mr Rajeev Kumar Yadav, the project economist of the Bureau of Energy Efficiency, outlined the steps being taken to promote awareness about energy efficiency and to reduce the energy intensity of the Indian economy.
Small and Medium Enterprises


He urged the small and medium enterprises in particular to focus on the aspect.
The use of obsolete technologies and low energy productivity were the main problems of the SME sector in India.
The lack of common infrastructure and institutional finance were compounding the problem.
Energy efficient steps


He said the Bureau of Energy Efficiency had identified 30 clusters of SMEs in different sectors to promote energy efficiency in the country.


In Andhra Pradesh too the programme was being implemented in the two Godavari districts (refractory cluster), Bhimavaram in West Godavari (ice-making) and Warangal (rice milling).
The bureau was helping units in these clusters implement energy-efficient steps and arrange institutional finance for the purpose.


Capt. Sriram Ravichander, the Chairman of the Vizag zone of the CII, said the industry should focus on the vital aspect.
The Vice-Chairman, Mr R.V.S. Raju, also spoke.

Cost of solar power projects set to fall

The Indian solar energy market is expected to witness a major boost within the next five years with per megawatt cost of solar power projects estimated to fall by nearly 50 per cent. Until now, the initial high capital expenditure incurred while implementing solar energy projects has been one of the main deterrents for investors. 

"Currently, solar photovoltaic projects cost around 15 to 18 crore per megawatt. The manner in which solar PV technology is improving, the cost of solar PV projects per megawatt should come down to 8 to 10 crore per megawatt within the next five to 10 years," Deepak Gadhia, Principal & Chief Mentor, Green Force Enviro Pvt. Ltd, told Projectmonitor. 

On the other hand, solar thermal projects cost around 20 crore per megawatt but it would come down to around 8 crore in next five to 10 years, Gadhia said. However, solar thermal was expected to produce double the amount of energy compared with solar PV, he added. Gehrlicher Solar AG, the German solar energy giant, recently established a joint venture with Greenforce Enviro Pvt. Ltd to offer EPC and other services for solar power plants that are being planned across India. The proposed joint venture aims to take full benefit of the Jawaharlal Nehru National Solar Mission. 

When questioned if the proposed joint venture would bring down EPC cost in the solar sector, Gadhia stated that the proposed joint venture would offer megawatt services and also involve "robots" in the installation process, which would help lower the cost of labour. 

"The cost of panels is only around 40 per cent of expenditure in any solar PV project, so if other costs are reduced then the project cost per megawatt will be reduced further," Gadhia said. 

At present, India does not have local players in the solar EPC business. The few ones that exist in this business are actually subcontractors for other international partners. The Gehrlicher Solar- Greenforce Enviro JV is expected to change the scenario in the solar EPC business.

New Climate Finance Tool for developing countries launched in Cancun

To help developing countries make sense of the multitude of funds & instruments available for climate finance a landmark website,www.climatefinanceoptions.org, was launched at the United Nations Climate Conference in Cancun. The UN Climate Change Conference begins in Cancun on 6th December, 2010 and leaders of 194 countries are expected to attend to discuss their future commitments to reduce emissions and take action against climate change. Rich countries had earlier pledged $30 billion to fight the affects of climate change - of which about $4 billion has been earmarked for forestry. In 1992, the UN Framework Convention on Climate Change (UNFCCC) was adopted as the basis for a global response to the problem. With 194 parties, the convention enjoys near-universal membership. The objective of the Convention is to stabilise greenhouse gas concentrations in the atmosphere at a level that will prevent dangerous human interference with the climate system. The convention is complemented by the 1997 Kyoto Protocol, which has 192 parties. Under this treaty, 37 industrialised countries and the European Community have committed to reducing their emissions by an average of five percent by 2012 against 1990 levels. Climate finance issues are high on the agenda in Cancun.  The Climate Finance Options (CFO) web platform, envisioned as the go-to site for information on climate finance will help developing countries in their efforts to identify critical sources of funding to combat climate change. Within the framework of global negotiations on climate change, the World Bank Group and the UN Development Programme (UNDP) have jointly developed the web-based knowledge platform in close cooperation with the UNFCCC Secretariat. The Platform will generate a number of benefits: Improved access to information on climate finance as a basis for more informed planning and decision making by developing country governments; Greater equity in the ability of users from countries and communities with varying levels of capacity to access the system; Useful documentation in preparation of policies related to financing mitigation and adaptation; Greater efficiency in climate finance transactions; Faster deployment of mitigation & adaptation projects; Better coordination among the UN System, MDBs including the private sector, in financing for climate action in developing countries.