RInfra exits IEX, sells 4% stake for Rs 103 cr to an FPI

My View:

IEX being No. 1 power exchange in India provides competitive price of electricity. Rinfra sold it's stake in IEX by 10 times higher than the purchase price. IEX has evolved the Power Market and now contributes almost 9%. Rinfra on other side sold its stake to reduce its debt burden.




News:
Reliance Infrastructure has sold its entire 4.12 % stake in India Energy Exchange (IEX) for Rs 103 crore, about 10 times higher than the purchase value, to a foreign portfolio investor, sources said.

IEX is the country's largest power exchange. This comes after Jindal Steel & Power sold 4.12 % in IEX to Motilal Oswal PE in March and global investment firm Bessemer selling its stake in two separate deals, to TVS Capital and the Dalmia group.

IEX has nine % of the total power market and R-Infra was a primary investor. It bought the 4.12 % stake in 2007 for Rs 1.25 crore.

It had said discussions were in an advanced stage to monetise its entire road portfolio.

The company is reportedly in talks with Canada-based Brookfield Asset Management to sell its entire portfolio in that segment. This is part of the company's strategy to restructure its heavy debt by exiting from capital-intensive businesses.

R-Infra is also present across the value chain of power businesses i.e. generation, transmission, distribution and power trading. It also provides engineering, procurement and construction services for developing power and road projects.

It reported a 33.8 % rise in consolidated net profit at Rs 570 crore for the quarter ended September, from one of Rs 426 crore in the same period a year before.

The company is targeting projects worth Rs 2 lakh crore planned by the government across infra segments, it had earlier said.

R-Infra's Mumbai Metro (Rail) earned a revenue of Rs 61 crore in the September quarter, an increase of 13 % over the same period a year before.

Haryana discom reports Rs201 crore profit in first half of 2016

My View:

It can be said that this is the result which Power ministry was expecting from UDAY scheme. Dakshin Haryana Bijli Vitaran Nigam Ltd has done significant work to come out of loss making DISCOM to profitable DISCOM. However the Uttar Haryana Bijli Vitaran Nigam Ltd has been incurring losses. Lets see whether the states which have accepted UDAY can bring some good news like this in future.




News:

One of the two state-owned power distribution companies in Haryana, Dakshin Haryana Bijli Vitaran Nigam Ltd, has become the first power utility to turn around under rescue scheme Ujjwal Discom Assurance Yojna (UDAY), rolled out in November 2015, raising hopes that fortunes of the entire electricity value chain including of coal mining and power generation will benefit from better electricity demand in coming days.

An analysis of the financial health of the utility released by the power ministry on Thursday said the company has reported “remarkable achievement of turnaround” from a loss of Rs479 crore in 2015-16 to a profit of Rs201.35 crore in the first half of 2016-17.

Turnaround of distressed state power distribution firms is crucial for the health of other segments of the electricity value chain which depends on power offtake. Better power demand from distribution firms will help generation companies, especially thermal power plants, to step up their capacity utilisation which is currently at about 60%. Coal demand, too has been sluggish in the past as loss making distribution firms were not able to cater to the actual energy demand.

Monthly coal production recovered from a contraction and grew for the first time in three months in November, indicating improving power demand during winter.

As per data from state-owned monopoly Coal India Ltd (CIL), monthly production grew 5.3% to 50 million tonnes in November from a year ago, after a bearish trend in mining since August when output had shrunk by 10%.

The power ministry analysis said that the Haryana utility still has to improve upon its performance in meeting the target of lowering losses on account of billing inefficiency and power theft.

The UDAY scheme rolled out last November gave performance and efficiency improvement targets to loss making utilities in order to narrow their gap between cost of power supply and the price realised from consumers. Their accumulated debt up to September 2015 was allowed to be taken over by respective state governments to make available low cost credit.

Haryana’s second distribution firm, Uttar Haryana Bijli Vitaran Nigam Ltd, however, continued to make losses in the first half of this year. It reported a loss of Rs1,233 crore in the first half against the loss of Rs336 crore in the full year of 2015-16, said the analysis.

Procuring wind energy through bids a positive for sector:ICRA

My View:

With the procurement of wind power through auction route will help the developer to get the offtakers.

The proper implementation of UDAY will help to get the timely payment from the DISCOM to wind developers.

If the auction goes well,it will help to achieve the target of wind power of 60 GW by 2022.



News:

The scheme for procurement of wind energy through auction is a positive for the sector but receivables (payment delays by discoms) remain an area of concern, says ICRA.

"In ICRA s view, continuing delays in the payments by the state-owned distribution utilities (discoms) in key states such as Maharashtra and Rajasthan pose a challenge for the wind energy sector, although some improvement has been seen lately," ICRA said in a statement.

On the positive side, however, ICRA believes that the MNRE scheme for procurement of 1 GW through the auction route would facilitate the offtake for wind energy players, it added.

ICRA Ratings Senior VP Sabyasachi Majumdar, said in the statement, "While there has been some improvement in payment pattern by utilities in Rajasthan, with the implementation of UDAY (Ujwal Discom Assurance Yojana) as well as by the utility in Maharashtra in the last three month, a build-up in receivable position is seen, which varies from 8 to 12 months as on November 2016 and thus remains quite significant.

In addition to payment delays by state utilities, wind energy projects remain vulnerable to the risk of non-signing of power purchase agreements (PPAs) by the utilities as seen in Maharashtra and forced back down by utilities in Rajasthan and Tamil Nadu."

Further, implementation of forecasting and scheduling framework, as approved by State Electricity Regulatory Commission (SERC) in Karnataka and in other states where draft regulations are in place, poses regulatory challenges for the sector, given the variable and intermittent nature of wind power generation and limited experience available with IPPs in forecasting and scheduling as of now, the statement said.

Also, the sector continues to face challenges due to the limited compliance of renewable purchase obligation (RPO) norms by the obligated entities as well as the variance in RPO norms across the states, it added.

Notwithstanding these near-term challenges, the long-term demand potential for wind power remains strong, given the large untapped potential, fairly attractive feed-in tariffs and relatively lower execution risks.

ICRA notes that the incremental wind-based energy capacity requirement by FY2022 is estimated at about 46 GW as against the current installed capacity of 28.1 GW.

This is assuming annual energy demand growth of 6 per cent, non-solar RPO at 12.5 per cent by FY2022 and wind as a renewable energy (RE) resource contributing to a dominant share (75%) in meeting the non-solar RPO requirement on an all India basis, it said.

"ICRA further favourably notes that the scheme for award of 1 GW through the auction route by the Ministry of New and Renewable Energy (MNRE) would facilitate the consumption of wind-based generation by distribution utilities in states with limited wind energy resources.

"This, apart from reducing the offtake risks for wind energy players, would enable the distribution utilities in such states to honour their non-solar RPO requirement to some extent , Majumdar added.

Facts

Solar Power in India:

* The installation capacity in India increased about 5 times from 941 MW in March 2012 to 5248 MW in January 2016.

* In 2015-2016, the industry added over 3 GW of solar installed capacity, which was well above the target 1.4 GW for the year.

* In 2013-14, the tariff range was Rs. 5.50- Rs. 15.99 per kWh at both state and central levels.

* In 2014-15, the tariff range was Rs. 5.25- Rs. 7.56 per kWh.

* In 2015-16, the new low of Rs. 4.34 per kWh was achieved.

* Indian rooftop solar market, which has a total installed capacity of only 1,020 MW as of September 2016, or about 10% of total installed solar capacity in the country.

Demonetisation is a positive event for power sector: Mercom Capital

My View:

Demonetisation is helping a lot to power distribution companies as the unpaid bills are getting paid at faster pace.

Also by increase in liquidity of banks will help to reduce the lending rates to the power sector. With these Demonetisation it will improve the situation in sector by more foreign investment.

News:

Demonetisation has turned out to be a positive event for the power sector with distribution companies recovering pending power bills from their customers, Mercom Capital Group said today.

Quoting a number of discoms and government officials on the issue, the consulting firm also said that the power sector could also benefit from relaxed lending and lower rates, among other things.

"Demonetisation has been chaotic and changing the way the Indian economy functions...banks suddenly flush with funds, all of which could relax lending to the power sector and potentially bring down interest rates," it said.

The government has mandated that the old notes of Rs 500 and Rs 1,000 denominations can be used to pay pending utility bills which will help discoms due to their huge backlog of unpaid bills.

Discoms are expecting a substantial influx of payments prior to the December 31 deadline after which these currency notes will become invalid. For cash-strapped discoms this is unexpected good news, it said.

It quoted an official at Maharashtra State Electricity Distribution Company Ltd as saying, "since the announcement of demonetisation, discoms in the state have seen payments of old bills cross Rs 1 billion ($ 14.74 million) within a week. The signs are positive as this will financially empower the discoms".

Due to the amnesty of taxes and penalties provided to black money holders (unaccounted currency), the government will have a huge influx of money that can to be allocated for infrastructural development and funding new projects, stated an official at Transmission Corporation of Telangana Ltd (TCTL), it said.

"India is largely a cash economy so in the short-term demonetisation is going to hurt installations as small developers will find it tough to pay for land acquisition, but in the long-term it will be beneficial as dicoms will get paid, lending rates will fall and foreign investment will increase in the face of a falling rupee and rising dollar," Mercom said quoting an official at the Ministry of New and Renewable Energy.

An official at Bihar State Power Holding Co Ltd informed the consultant that there are many ambitious projects like the Green Energy Transmission Corridor that require large investments and with consumers repaying pending bills and government taxing defaulters, nodal agencies foresee better fund allotment from the government.

It said officials at Jharkhand Renewable Energy Development Agency, Odisha Power Transmission Corp Ltd (OPTCL) and Power Management Company, Madhya Pradesh, all concurred due to demonetisation, peace is being restored in regions like Jammu & Kashmir and Jharkhand, Madhya Pradesh, Odisha, Andhra Pradesh [insurgency belt] as insurgents find it hard to fund their operations.

This will uplift the morale of developers in these regions and installations will pick up.

Tamil Nadu Generation and Distribution Corporation received tepid response for its 500 MW tender due to demonetisation, but it was an exception said an official at MNRE.

An official at Uttar Pradesh Power Transmission Corporation (UPTCL) stated that the state has been a classic example for unpaid electricity bills. Now the Discoms can get some relief with consumers using their stashed cash to pay pending bills as well as advance payment for future month's electricity bills in some cases.

A slew of government funded projects and subsidies are expected as cash deposits increase in banks, an official at the Rajasthan Renewable Energy Corporation said.

Demonetisation, Mercom said, is turning out to be an overall positive event for the renewable sector as well.

"This combined with the rapid decline in solar component costs is making a lot of low questionable bids feasible. However, we have to wait and see how government agencies handle the situation - especially payment issues - going forward," Mercom Capital Group CEO Raj Prabhu said.