Most of the capacity projected for 2013-14 would be under construction and can be achieved. However, how far this helps in addressing demand is contingent upon final constraints (coal and gas) being tackled to allow these plants to run at high capacity. E.g. record capacity has come online in 2011-12 but the capacity utilization for industry was sub optimal due to shortage of coal and gas. While the government's target and the actual capacity addition achieved in the past year is laudable, the fuel shortage still remains a concern. Added to this, transmission capacity bottlenecks slow pace of obtaining statutory approvals for land acquisition are key factors affecting capacity creation. However, we remain optimistic that the government is cognizant to these factors and is taking active steps to address them.
Acquisition of land and securing of environmental clearnaces have always known to hinder the pace of power projct implementation. What is you overall view?
The concern on land acquisition, delay in issurance of necessary environment and forest clearances still remain and continue to hinder project development. On the coal front, the government's desision to abolish the 'go/no-go' restriction on coal blocks is promising. However, the issue regarding MoEF circulars still needs to be resolved, as due to this, project implementation time is increasing.
How do you forsee Essar Power's future growth in the light of these issues?
Essar, which originally started with a capacity target of 11000MW, is now looking at reaching a capactiy of 6700MW by 2014, substantially due to the issues raised above. We have deferred implementation of the projects aggregating 2970MW subject to achievement of milestones. These projects include a 1320MW imported coal project at Salaya (Jamnagar). Any movement on the projects which have been put on hold will depend on how these industry-wide concerns are addressed.
We hear of private power producers finding it difficult to attain financial closure for their projects in the absence of coal linkages. Coal India, on the other hand, insists on financial closure as a precondition to assigning coal linkages. Your comments...
Fuel security for power projects is extremely important for all stakeholders — equity providers and lenders. Unless there is clarity on long-term fuel supply, financing would not be possible particularly because of problems that have cropped up in the last 2-3 years. These are mainly due to delay in government approvals for coal mining, high price of imported coal, and domestic coal and gas shortage.
Bank exposure to power sector is a concern in certain banking circles due to the regulatory uncertainty that has affected viability of funded projects. The increase in exposure is governed more by resolution of fuel issues and regulatory bottlenecks rather than any confines posed by sectoral limits.
Essar Power has expressed its interest in bidding for ultra mega power projects. But how does it plan to meet shortage of fuel requirement?
We will consider bidding for any project or putting up any new project only after fuel security is ensured. This has been our policy even for the capacity we are putting up.
What has been the activity of Essar Power in the power sector? India requires 85,000MW power in the XII Plan. What would be the company's contribution?
Essar Power currently has four operational power plants in India and one operational plant in Algoma, Canada, with a total installed generation capacity of 1,600MW and 515MW capacities in Bhander and Hazira respectively, a 500MW co-generation plant in Vadinar (all in Gujarat, India) and an 85MW plant in Algoma (Ontario, Canada).
As indicated above, we are focused an achieving a capacity of 6700MW by 2014 with progress on additional projects of 3000MW depenedent on achievement of milestones. The 1200MW Salaya power plant is fully commissioned with the second unit of 600MW recently starting commercial production.
The coal-fired Salaya project, with a total 1,200MW capacity, has been set up at a cost of $1.1billion. The other power projects due to be commissioned in 2012 include the 1200MW Mahan 1 project, 120MW Paradip project and the 510MW Vadinar P2 project.
The company aims to achieve a total capacity of 6700MW by 2014. It has recently moved seven power projects to the construction phase, taking the total installed capacity inder construction to 9870MW.
What are the company's plans to foray into the renewable energy segment?
We are focused on a capacity of 6700MW which is a mixture of coal and gas by 2014. Essar Power is also exploring opportunities for new projects based on thernal, wind and hydro energy. We have a small (1MW) solar project and are eploring opportunitues in hydro in Nepal. However we will consider renewable opportunities in future having built a core base load coal based capacity.
Do you plan to acquire any coal mines to meet the fuel requirement?
We are always looking for opportunities to met our long term fuel security. Acquisition of new mines will also depend on development of future projects which are currently on hold due to regulatory hurdles in india. We are looking to buy an additional coal block with reserves of 100-150 million tonnes which will ensure fuel availability for the entire portfolio of 9670MW.
Essar Power has expressed interest to enter the electricity distribution business and had applied for licences in Maharashtra and Bihar. What is the progress on this front?
We have bid for opportunities in Maharasthra and Bihar. Our Bihar bid is under consideration by the government and we are hopeful of a positive outcome in the next few months. Essar Power had applied to the Maharashtra Electricity Regulatory Commission (MERC) for a licence to supply power in Mumbai. The company is also looking at distribution licence in other cities.