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Metis Weekly Power & Coal Sector Snippet

April 2 - April 8, 2011

Sectoral Post Power Headlines Coal Headlines Power News Generation Transmission & Distribution Renewable Others Coal News Metis Insight: Low Availability of Coal Threat to Power Generation Power Exchange Prices & Volumes Fuel Statistics About Metis Contact Us 5 6 7 8 9 11 20 21 23 24 3 4 5

Metis Power & Coal Weekly Sectoral Post | April 2-8, 2011

Power Headlines
Generation

Renewable
Maharashtra to frame a policy to encourage solar energy Indefinable crucial debate about subsidies on solar power India needs comprehensive renewable energy law

India to see 28,000 MW of electricity capacity in 2011-12 World Bank likely to limit funding on coal-fired power plants GAIL Plans to set foot in power sector, ties up with NTPC CSPGC registers record power production Five IPPs to commission their projects by end of 2012 NTPC to speed up capacity addition, plans to secure overseas fuel supply, hike capex in FY12 NTPC profit rises up to INR 2,505 crore Consortium of Tata Power, SN Power win 236 MW project in HP Power Min reviews 12th plan capacity addition

Others

Backing out of PPAs becoming a trend

RIL's KG-D6 gas shortfall worries MoP Government to include urban transport, pipelines, power T&D in infrastructure Cabinet Secretary reviews IEP implementation

Transmission & Distribution

India adopts smart grid technologies in T&D PFC issues LoI to Sterlite for Transmission projects Discoms want DERC's acknowledgement on proof of requests Tariff hikes better SEB health PGCIL fails to get incentive for N-E states

Metis Power & Coal Weekly Sectoral Post | April 2-8, 2011

Coal Headlines
MCL posts dip in growth in 2010-11 Coal block auctioning draft guidelines released Deadlock continues among ministries over forest areas open for mining Power station coal imports rose by 33% in India Tata requests coal ministry for additional 2 years for dev of Kotre Basantpur & Pachmo Blocks CIL eyes Coal Acquisition in South Africa; on Govt. to Govt. basis Coal min assures Rungta of alternate coal block SCCL may increase coal prices to power plants Power Minister raises concern over shortage of coal

Metis Power & Coal Weekly Sectoral Post | April 2-8, 2011

Power News
Generation
India to see 28,000 MW of electricity capacity in 2011-12- Power Minister Sushil Kumar Shinde said that over 28,000 MW of electricity generation capacity will be in India during the current financial year (2011-12). These under-construction power projects are expected to be commissioned by March, 2012. The capacity addition would be from all sources of energy including coal, hydro, gas, etc. It is learnt that over 21,000 MW of the targeted 28,000 MW would be contributed by thermal power projects, approximately 4,100 MW would come from hydro power projects and the remaining 2,500 MW would be nuclear energy. The Power Ministry has set a target for adding over 1,00,000 MW of electricity during the XII Plan (2012-2017). planning to set up a joint venture for building gas-based power plants in India as well as in other countries. The MoU would enable GAIL and NTPC to cooperate in commissioning of the 5 million tonnes a year LNG receipt and regasification terminal adjacent to the Dabhol power plant. It is learnt that for NTPC, efforts would be made for supply of additional gas to its existing power plants and supply of LNG to its proposed units. Moreover, GAIL will receive additional leverage from NTPC in negotiating with potential LNG suppliers.

World Bank likely to limit funding on coalfired power plants- According to the new rules proposed by the World Bank, the multilateral lender will limit funding of coal-fired power plants all over the world except in the very poor countries where there are no alternative sources of energy and also these poor countries have to prove the necessity of the funding. The new rules do not limit funding to all fossil fuel projects, including oil and gas. In 2010, the World Bank faced severe criticism for approving a $3.75 billion loan to South Africa to set up one of the world's largest coal-fired plants. However, the proposed new rules will restrict financial support to mega coal-fired power projects, especially in emerging economies like India. This also means that more funding would come from the International Development Association. GAIL Plans to set foot in power sector, ties up with NTPC- GAIL (India) Ltd is planning to set its foot in the power sector through a tie-up with NTPC Ltd. In this regard it is looking forward to sign a MoU for cooperation in power sector shortly. The two companies are

CSPGC registers record power productionChhattisgarh State Power Generation Company has registered record power production in the financial year 2010-11. The plants run by the company produced 13875.776 Million Units (MUs) of power of during the fiscal, ending 31 March. The plant load factor (PLF) was 88.99 %, which is higher than the national average. Managing Director of the company, VK Shrivastava, said that the power production and PLF in state-run plants have set a record, as never before, these figures were reached. Compared to last year's figure, the production was higher by 583.244 MUs, he added. Five IPPs to commission their projects by end of 2012- Five IPP projects namely GMR Kamalanga Energy Ltd (1400), Jindal India Thermal Power Ltd (1200 MW), Monnet Commet Power Ltd (1050 MW) and Maa Durga Thermal Power (60 MW) are expected to commission in Orissa by 2012 end. State Government had signed 30 MoUs with IPPs with a combined capacity of 38,000 MW out of which the state share will be 6774 MW. IPPs have invested INR 12,375.09 crore on their proposed projects in the state. NTPC to speed up capacity addition, plans to secure overseas fuel supply, hike capex in FY12- NTPC plans to boost generation

Metis Power & Coal Weekly Sectoral Post | April 2-8, 2011

capacity in this year by doubling up capital expenditure to INR 26,400 crores and plans investment overseas. NTPC plans to add 4,320 MW capacities itself and 25000 MW through Joint Ventures by 2017. It has already tied up about INR 20,000 crore in debt from local banks to fund its capex and plans to raise USD 500 million through issue of euro bonds. It is also planning on doing due diligence on four proposals in Indonesia and Australia. NTPC profit rises up to INR 2,505 crore- In April, NTPC recorded 24.17 per cent growth in profit-after-tax (PAT) to INR 2,505.42 crore against INR 2,017.66 crore for the period of January to March, 2011. NTPC reported PAT of INR 8,826.16 crore for FY11 and net sales of INR 53,721 crore, showing an increase of 16.36 per cent. Consortium of Tata Power, SN Power win 236 MW project in HP- A consortium of Tata Power and SN Power has received the 236 MW Durga Hydro Electric Project in Himachal Pradesh (HP), for which the preimplementation will be signed with the Directorate of Energy, Government of HP shortly, after undertaking the detailed study. Tata Power told that the project would be developed through a Special Purpose Vehicle (SPV) formed and owned by the consortium. Power Min reviews 12 addition
th

addition to avoid bottling of power and provide adequate evacuation infrastructure. Assessment of loading of BoP vendors should be done to assure commissioning of projects on time. CEA was held responsible for taking necessary actions for enhancing capacity addition.

Transmission & Distribution

India adopts smart grid technologies in T&D- India has taken effective measures to adopt smart grid technologies in power transmission and distribution network in order to facilitate evacuation of electricity from grid and off-grid renewable generation sources but there are doubts about the ability of distribution utilities to absorb this new technology because of their poor financial health. Besides state-owned discoms also short of the required physical infrastructure and experienced personnel which are critical to absorbing the new technology. State utilities can cut down on their losses by adopting smart grid technologies, which should in turn help improve their financial health. World Bank has exhibited its interest to finance smart grid projects in India. Private distribution companies such as NDPL and BSES have the resources and capability to implement smart grid projects. Power Grid is executing pilot smart grid projects in the Western and Northern regions. It is learnt that if the projects are successful, they would be implemented in other regions as well. PFC issues LoI to Sterlite for Transmission projects- Sterlite Technologies Ltd announced it has received the letter of intent (LoI) for the acquisition of two transmission units floated by PFC Consulting Ltd for transmission system strengthening in the Western region. The two firms Jabalpur Transmission Company Ltd and Bhopal-Dhule Transmission Company Ltd were created as special purpose vehicles by PFC Consulting, an arm of Power Finance Corporation Ltd that conducted the tariff-based bidding process for the projects. The project, which spans the three States of Madhya Pradesh, Maharashtra and Gujarat, involves the construction of four major transmission

plan capacity

The Power Ministry along with CEA had th reviewed capacity addition for the 12 plan, expecting an addition of 100 GW. The table below shows the expected energy addition from different segments: Planned Capacity Addition (in MW): 12 plan (all clearances in place)
Thermal Hydro Nuclear

th

Total

Coal 201217 65,930

Gas 1,086

Total 67,016 9,173 2,800 78,989

The ministry stated that the pace of th development of transmission lines in 12 plan should coincide with generation capacity

Metis Power & Coal Weekly Sectoral Post | April 2-8, 2011

lines. These include the 330-km JabalpurBhopal 765 kV (kilo Volt) link, the 250-km Dhule-Vadodara 765kV line and the 180- km Bhopal-Indore 765 kV link, besides the construction of two 765/400 kV sub-stations at Bhopal and Dhule. Discoms want DERC's acknowledgement on proof of requests- Delhis discoms have written to DERC to get acknowledgement of funds owned to them due to expected shortage of nearly 750 MW this summer. The discoms claim will help them secure bank loans to finance power procurement. Delhi discoms have a debt from various banks, of over INR 8,000 crore. The banks are not likely to offer the debt further due to discoms inability to perform in future. The major issue faced by discoms in terms of payment cycles, as they are able to receive payment after 3 months of the gas supplied to the customers. It was also highlighted that the price at which the power purchased is affected by the cost of fuel resulting in unsustainable business model. Tariff hikes better SEB health- Power Sector Companys experiences positive sentiment because of improvement in financial health of SEBs despite of facing losses for several months. It has been seen that average selling price for SEBs has been risen to INR 3.52/unit by FY09 and to INR 3.96/unit for FY10. If the tariff keeps on increasing, SEBs are expected to cut down on their losses. Haryana, Tamil Nadu and West Bengal have experienced tariff hikes after a couple of years. The average tariff had risen to INR1.25/unit last year, at time of elections. PGCIL fails to get incentive for N-E statesPower Grid Corporation of India Ltd failed to get the incentive based on the transmission system availability on the basis of Government notification for years 1998-99 and 1999-2000, as per the decision of Bench of the Appellate Tribunal for Electricity.

encourage solar energy projects in the state. The Government is framing the policy to promote solar power plants of 5 MW or more capacity in the state. It is to be noted that Maharashtra was also a part of the Centre's Jawaharlal Nehru National Solar Mission (JNNSM), under which 10 % of the solar power generation would take place in Maharashtra. The initial target of the Mission was to generate 1,000 MW of solar energy across the country by 2013.In this regard, the state had sent 11 proposals of rooftop and small-scale solar energy generation projects to the Centre. Indefinable crucial debate about subsidies on solar power- Deepak Gupta, the Secretary for Ministry of New and Renewable Energy (MNRE), reasserted plans to install 20 GW of solar power by 2022. It is noted that the biggest obstacle to the swift development in renewable energy technologies, especially in solar power, is the need for further cost reductions. According to Government and industry sources, solar thermal power in India costs between INR 13.70-18.80 ($0.31-0.42) per kWh and the cost of solar PV exceeded INR 20 ($0.44) per kWh, as opposed to wind powers INR 3.76-5.64 ($0.08-0.13) per kWh and coals INR 1.70-2.60 ($0.04-0.06) per kWh. Despite industry support for the Governments approach to the promotion of solar technology, the apparent lack of critical debate about the cost-effectiveness of subsidies is a surprise and concern. India needs comprehensive renewable energy law- A comprehensive renewable energy law, adequate transmission infrastructure, long term renewable energy generation targets and a centralized regulatory authority are some imperatives for sustained growth of wind energy sector in India. To adequately plan for growth of wind energy potential, unreasonably low estimate of potential have to be revised. Wind energy provides an option to mitigate the impact of climate change and bring down emission, as the companies today are looking for renewable energy options. While policy support such as generation based incentives, accelerated

Renewable
Maharashtra to frame a policy to encourage solar energy- The State Government of Maharashtra is formulating a policy to

Metis Power & Coal Weekly Sectoral Post | April 2-8, 2011

depreciation and RECs support growth, infrastructure constraints particularly in grid capacity could limit growth. An all time high of 2,300 MW of wind energy generation capacity was added in 2010-11, while adding 5,000 MW annually in the next few years. India offers a wide option for investors as the potential has attracted 18 wind energy equipment manufactures to set up facilities in India.

Others
Backing out of PPAs becoming a trendThere have been cases recently, where companies are involved in disputes over power purchase agreements (PPAs). A few days earlier, JSW Energy approached the Maharashtra Energy Regulatory Commission (MERC) for permission to renege on a contract with MahaVitaran, the state government-run power distributor. Earlier, it had asked MahaVitaran if it could walk out of the contract which required it to supply the latter 300 Mw of power from its Ratnagiri power plant, at Rs 2.71 per unit. MahaVitaran had refused. Last month, Gujarat Electricity Regulatory Commission (GERC) ordered Adani Power to fulfill its obligation of selling power to Gujarat Urja Vidyut Nigam. Expert says there are two kinds of companies which try to back out of PPAs. One way to exit from a PPA is to pay a penalty. Some utilities take companies to court and insist on execution. Industry insiders say it is always cheaper to pay a penalty and nullify a contract than bear losses for a long period of time. RIL's KG-D6 gas shortfall worries MoPDecline in natural gas production at Reliance Industries' eastern offshore KG-D6 fields has raised concerns in the Ministry of Power (MoP) as the shortfall may affect electricity generation in the summers of 2011. Taking this production shortfall into consideration, the Ministry had written to the Oil Ministry about

the less supply of gas to the power plants than allocated gas from KG-D6. It is learnt that production of natural gas from KG-D6 has fallen to 47.5 MMSCMD from 61.5 MMSCMD output, which the block had achieved in March 2010. This decline in production has led to Reliance making a pro-rata cut in supplies of all its customers. According to the MoP, only 24.5 MMSCMD of gas was supplied to power plants in February 2011 as against allocation of 33 MMSCMD on firm as well as fall back basis. Government to include urban transport, pipelines, power T&D in infrastructure- The Government is planning to expand infrastructure verticals by adding 8 to 10 more sectors which would include \sewage systems, urban transport systems, transmission and distribution of electricity and pipelines for natural gas & oil. The basis of granting infrastructural status will be based on the criteria such as providing external benefits and natural monopoly. Cabinet Secretary reviews IEP implementation- In January, 2011, a discussion was held by Cabinet Secretary and members of the Monitoring Committee reviewing the progress implementation of Integrated Energy Policy (IEP). The meeting focused on the issues pertaining to functioning of regulator in the petroleum sector and the price of petroleum products. The meeting highlighted certain key issues focusing on Harnessing renewable resources and National Energy Efficiency. It was learnt that there is a need of integrated approach for flagship programmes and need for developing a coordinated approach for optimal exploration to enhance the industry developments.

Metis Power & Coal Weekly Sectoral Post | April 2-8, 2011

Coal News
MCL posts dip in growth in 2010-11Mahanadi Coalfields Limited (MCL) has recorded a negative growth of 3.65 % in 201011. This is for the first time since the inception of the coal company in 1992 that MCL, a subsidiary of Coal India Ltd (CIL), has clocked negative growth. MCL, which was tipped to be the number one subsidiary of CIL in terms of coal output, has ended 2010-11 with a production of 100.28 million tonnes (mt), falling short of the targeted figure of 117 mt, said a company source. MCL authorities attributed the drastic fall in production to the recurrent strikes by the villagers and lack of law and order in Talcher Coalfields. However, workers held that managerial deficiencies are responsible for the setback in production. The Talcher Coalfields, consisting of seven open cast coal mines, produced 52.24 mt as against the target of 75.2 mt. The coalfield could manage to achieve only 69 % of the target, recording a negative growth of 12.9 %. Coal block auctioning draft guidelines released- The Union coal ministry on Monday issued a draft of the guidelines being framed for putting in place a competitive bidding regime for allocating coal blocks in the country. Competitive bidding will replace the current practice of allocating blocks to the private sector for notified captive use based on recommendations of an inter-ministerial committee. The news system is expected to induce transparency and objectivity in the overall allocation. The draft guidelines present four models for selection of successful bidders during the multi-step auction process. The four probable models include upfront payment, production-linked payment, upfront payment with priority for development status of the end use plant and production-linked payment with preference for development status of the end use plant in the power, cement and steel sectors, the model that is preferred most by the stakeholders will be finalised. The common thread that runs through all the four options is the preference to be accorded to projects set up in the same state in which the mine is located. The ministry has asked stakeholders to give their views within 15 days, following which the widely chosen option would be taken for inviting competitive bidding for blocks. Deadlock continues among ministries over forest areas open for mining- Environment minister Jairam Ramesh's offer to increase the areas open for mining to 71%, this is a 12% increase in "go" area over the previous offer made by the environment ministry. The coal ministry is still pushing for the abandoning of the "go/no go" classification. In a spirit of compromise, Ramesh understood to have also offered that proposals that have received stage-I forest clearance before December 31, 2009 would be considered even if they are in no-go areas. This would ensure that the "go/no go" classification is prospective. The proposals falling in the "no go" areas would be taken up by the forest advisory committee for scrutiny. If possible a compromise would be worked out; however, in cases where a compromise would not be possible, Ramesh is believed to have offered to bring the proposal, along with his ministry's recommendation for rejection, to the Cabinet for consideration. Power minister Sushilkumar Shinde wanted a special dispensation for the ultra mega power projects. Power station coal imports rose by 33% in India- Indian imports of thermal coal increased by 33 % from 49.4 mt in 2010 to 65.7 mt in the year ending March 2011. According to sources, Indonesia shipped 43 mt while South Africa supplied 19 mt. Demand for the fuel from power plants may increase to 750 mt in 2017 from an estimated 500 mt in 2011. Besides, it is learnt that Karnataka Power Corporation Ltd. is expected to grant a tender in 30 days for supply of 1 mt of imported coal. The company issued a tender in March 2011 for the supply of the fuel between June 2011 and March 2012. Tata requests coal ministry for additional 2 years for dev of Kotre Basantpur & Pachmo Blocks- Tata steel has requested coal ministry to extend the time frame to two years for the

Metis Power & Coal Weekly Sectoral Post | April 2-8, 2011

development of the Kotre Basantpur and Pachmo Blocks. Ministry of Coal (MoC) had reprimanded Tata steel for slow progress of coal. Tata Steel has submitted its contention to MoC for the delay, for the above mentioned blocks citing the following issues: Delay in the transfer of surface rights to the company by CCL, taking time span of 26 months for the overall transfer. Declaration of Kotne Basantpur under No Go area. As per the revised guidelines by Ministry of Environment and Forest (MoEF), the work cannot be initiated due to awaited single forest clearance proposal.

SCCL may increase coal prices to power plants- The state-owned Singareni Collieries Company Limited (SCCL) is mulling rate hike of about 72 % on coal supplies to power plants, as the rising costs impacted the bottom line in 2010-11. SCCL said that it would be calling on increasing the price of F-grade coal after consulting the government later this year. The company had revised the price of F-grade coal only once in the last ten years by a marginal 5 % increase in 2004, which stands at Rs 750 per tonne as compared to the average price realisation of Rs 1,610 per tonne to the company. Companys total production rose to 51.33 million tonnes during FY 10 against the actual target of 50.5 million tonnes, while the average cost of production rose to Rs 1,451 crore from previous year. Power Minister raises concern over shortage of coal- Power Minister, Shri Sushil Kumar Shinde had raised concern over domestic coal shortage to various ministries due to falling supply from CIL. CIL supplied only 335 MT against the demand of 365 MT and an additional 15 MT on best effort basis. Power Ministry requested MoC to increase domestic coal production by 20% and augment availability by speedy disposal of pithead stocks & restoring to e-auction. MoP may be allowed to reduce its capacity addition target for FY12, in case of non removal of coal supply constraint.

CIL eyes Coal Acquisition in South Africa; on Govt. to Govt. basis- Coal India Limited (CIL) is planning to acquire coal assets in Limpopo province of South Africa, leveraging the Government to Government bilateral platform. South Africa has been identified as the preferred location due to availability of quality coal resources, comparative nearness to India and favorable Foreign Direct Investment (FDI) policy for coal mining. In reference to the overseas initiatives, a high level delegate from CIL met South African Government during Mining Indaba at Cape Town in February briefing about plans of CIL to acquire coal assets in South Africa. CIL has requested MoC to provide advice for allotment of potential blocks to CIL on Govt. to Govt. basis. CIL plans to intend full leverage to acquire this opportunity in accordance to acquire coal assets in South Africa. Coal Min assures Rungta of alternate coal block- The Coal Ministry has recently assured Rungta Projects Pvt Ltd of allocating an alternate coal block to it. The company was allotted a coal block in the past which now fell under the No-Go category as specified by the Ministry of Environment and Forests. The Ministry has said that the company's request is being considered by the Cabinet Committee on Infrastructure and the Group of Ministers.

Metis Power & Coal Weekly Sectoral Post | April 2-8, 2011

Metis Insight: Low Availability of Coal Threat to Power Generation

Coal plays a vital role in Indias power generation model and has proved to be the best option for quenching major portion of Indias energy thrust. The share of thermal power is around 63% of the installed capacity and its contribution to the total generation is 83%. Out of the thermal power generation, coal based generation forms the bulk of generation, contributing approximately 2/3rd of the total electricity generation in the country from an installed capacity of about 53%. However the non-availability of coal is posing as a major threat to the capacity addition plans of the company. With major thrust on coal based power, it is imperative for adequate supply of coal and timely development of mines to be in place. The country has over the past few years facing problems in the availability of coal for power generation. A major chunk of the proposed capacity in the coming plan period, more than 70,000 MW is also coming with coal as the fuel.

India is one of the major coal consumers in the world. Most of the production of coal is indigenous, with the government still having maximum control in the sector. With time, the sector has opened up with private participation in terms of captive mining being allowed. Further there are plans to introduce competitive bidding of coal blocks on the lines of the procedure followed at present in the power sector.

If we consider the trend for power projects based on various sources of coal supply, the maximum projects are based on domestic coal production, including captive blocks and linkages. Nearly 32, 592 MW is expected to th come up at the end of the 11 plan from domestic coal based plants and 5,898 MW from imported coal based plants, taking the total to 38, 490 MW. Further details are given in the following table:
th

Summary of coal based projects for likely benefits during 11 Plan Linkage 2007-08 2008-09 2009-10 th 2010-11 (till 28 Feb 2011) 2010-11 (Balance) 2011-12 (Likely) th Total for 11 Plan Projects slipping from coal based capacity CIL 4120 1260 5593 4901 3125 8955 28152 SCCL 0 0 0 500 0 0 500 Block 1500 500 0 700 750 490 3940 Domestic Coal Based 5620 1760 5593 6101 3875 9445 32592 Imported Coal Based 0 250 1062 2124 900 1760 5898 Total 5620 2010 6655 8225 4775 11205 38490

3450

1200

4650

660

5310

Metis Power & Coal Weekly Sectoral Post | April 2-8, 2011

Source: CIL, Metis With nearly 11205 MW of coal based capacity expected to come up in the present fiscal, it is highly important for the concerned coal linkages and captive production to be in place. The details of coal requirement for FY 12 are given in the table below: .

Coal Requirement and supply for the year 2011-12 in respect of plants designed on domestic coal (Figures in Million Tonne) 1 480 Coal requirement for plants designed on indigenous coal 2 Coal Availability from indigenous sources 2 (a) From CIL Sources 319 2 (b) From SCCL 33 2 (c) From captive Mines 22 2 (d) Total coal availability from indigenous sources 374 3 106 Shortfall of indigenous coal [1 - 2(d)] 4 Coal to be imported to meet the shortfall for plants designed on indigenous 70 coal 5 Ceiling of imported coal in view of domestic coal availability of 374 Million 29 Tonne and the 10% blending limit in the candidate TPSs 6 43.5 Domestic coal equivalent of imported coal 7 Gap (in terms of Domestic coal) [ 3 - 6 ] 62.5 * 62.5 MT coal translates to roughly 12,500 MW (87.5 Billion Unit at 80% PLF) Source: MoP, Metis There is a gross shortfall of 106 million tonnes be taken to provide a substitute amount of 43.5 that is expected from indigenous production. Out MT of domestic coal. The net shortfall finally of this 70 MT will be imported by various utilities amounts to 62.5 MT which is equivalent to throughout the year. However, with the blending fuelling 12,500 MW of capacity in the coming requirements in place, there is a shortfall of 29 plan. MT, which cannot be imported. Instead steps will Critical Issues Pertaining To Coal For Power Station 1. Availability of CIL linked Coal Coal India Limited (CIL) had indicated availability of 360 Million Tonne (MT) coal for the power utilities for the year 2011-12. This has been reduced to 319 MT during the Annual Plan discussions of Ministry of Coal held in Planning Commissioned on 27th January, 2011. With a substantial reduction of 41 MT from Coal India Limited in 2011-12, new generating capacity of around 15,000 MW would become stranded / under-utilized for want of coal.

Metis Power & Coal Weekly Sectoral Post | April 2-8, 2011

The above figure shows the growing trend of Coal receipts from CIL and the linkage capacity addition (MW) therein. For the period 2011-12, anticipated

availability of coal from CIL is 319 MT which will facilitate capacity addition of 9580 MW.

14 12 10 8 6 4 2 0

Growth in CIL Linked Installed Capacity and CIL Receipt

Growth (%)

2008-09

2009-10

2010-11

2011-12

Growth in CIL Receipt

Growth in CIL Linked Installed capacity

Source: MoP, Metis

Further, the overall scenario of CIL linked Coal Requirements and Supply has been explained in the table below and the capacity which is likely to be stranded/Under-utilized capacity for want of domestic coal. The 306 MT coal already tied up with the capacity commissioned upto 31st March, 2009 through FSAs, balance 13 MT coal

cannot be distributed among the power plants requiring coal to the tune of 75 MT. The coal available from Coal India Limited (319 MT), SCCL (33 MT) and captive mines (22 MT) restricts the quantity of coal which can be imported to approximately 29 MT, which is equivalent to 43.5 MT of domestic coal.

Scenario of CIL Linked Coal Requirements and Supply Year CIL Linked Capacity $ New (MW) 2009-10 5593 Cumulative (MW) 67237 CIL Target (MT) 313 # Receipt (MT) 296.5 Stranded/Underutilized Capacity (MW) 2000 (14.5 BU)

Metis Power & Coal Weekly Sectoral Post | April 2-8, 2011

2010-11 2011-12

7511 * @ 9580 *

74748 84328

335 382 (11th Plan W.G.) 360 (M.T.P.A) 319 (A.P.)

306 *

6000 15000

Source: MoP, Metis $ - Including tapering linkage for Projects with Coal Blocks # - 306 MT for plants commissioning up to 31-3-2009, 7 MT to be commissioned during the year 2009-10 * - Anticipated @ - 5601 MW already commissioned Capacity addition of 100 GW is th expressed by MoP for the 12 plan period. Out of this 100 GW 65930 MW will come under coal based power generation. These projects are the ones for which all clearances are in place and the work is in advance stages of completion. The table below shows the future scenario of CIL coal linkages and the capacity likely to be stranded at the end of 2016-17 because of the requirement and the availability of coal.

Generation Capacity likely to be stranded Entirely linked to CIL Coal Block based units having tapering Linkage 2000 MW 9500 MW 30% Capacity of plants with Coal(30:70) 1000 MW 500 MW Total

In 2011-12 Additional by 2016-17 Cumulative by 2016-17

22000 MW 29000 MW

25000 MW 39000 MW 64000 MW 320 MT 100 MT 220 MT 44000 MW

Additional coal requirement for new capacity Additional coal availability indicated by CIL earlier Un-bridged gap New capacity likely to be stranded in 2016-17
Source: MoP, Metis

2.

Increased import of Coal

Inadequate availability of domestic coal The quantity of globally available coal being limited, increase in the quantum of import has the tendency to push up the price of imported

coal. Due to surge in demand for imported coal and floods in Australia, the prices of coal have already gone up substantially in the recent months. Given the financial health of State Electricity Distribution Companies in the country, the power utilities are reluctant to increase import of coal.

Metis Power & Coal Weekly Sectoral Post | April 2-8, 2011

Coal Import
55 # 30 # 23.2 Import (MT) 10.15 16.06

2007-08

2008-09

2009-10

2010-11

2011-12

# Anticipated (including coal for stations entirely based on imported coal)

Source: MoP, Metis

Domestic and Imported Coal and its Price in INR

700 600 500 400 300 200 100 0 47000 44000 42000 37000 33176 30 24000 Domestic Coal Domestic Coal Imported Coal Imported Coal (2010-11) (2011-12) (2010-11) (2011-12) Quantity (MT) Total Price (Rs. Crore)
Source: MoP, Metis

305 31720

319 55

32000 27000 22000

Blending increases cost of generation The utilities have already started urging that the directions for import of coal may be reviewed as high cost of power with blending of imported

coal has started impacting their operations and finances. The cost of power with 10% to 15% blending of imported coal has, depending on the location of the plant, lead to increase in power generation cost by 30-35 paisa per kWh.

Metis Power & Coal Weekly Sectoral Post | April 2-8, 2011

Total Price (Rs. Crore)

Quantity (MT)

Impact of Blending/Imported coal on Variable Cost of Generation

Energy Charges (Rs./Unit) 3.00 2.50 2.00 1.50 1.00 0.50 0.00 0 10 20 30 40 50 60 70 80 90 100 1.09 0.78 1.36 1.59 2.6

1.79

1.97

Blending Proporation (%)

Source: MoP, Metis

High cost of power procurement Discoms have also reported that due to blending of imported coal, the average per unit cost of power procurement having gone higher than the average power purchase price approved by the SERC, there is under recovery. 3. Coal Block development Issues The shortages in coal supply may further aggravate with the MoEF concept of Go / NoGo, because: 203 coal blocks (including 26 of power sector) have been placed in the No-Go list. Around 660 MT of future coal production is likely to suffer which will adversely impact our capacity addition and power generation programme. The concept of "Go / No-Go", though without any legal basis, has created tremendous uncertainty and affected the power project execution. Around 8 projects (13,560 MW) are in advanced stage of development, 2 UMPPs (8,000 MW) (Chhattisgarh and Orissa) have been kept on hold and many Central/ State & private projects (11,300 MW) are affected Developers have now adopted a "wait and watch" policy on coal blocks/linkages and this has started adversely affecting power projects and the capacity addition programme.

Metis Power & Coal Weekly Sectoral Post | April 2-8, 2011

Sector

Captive Coal Blocks for Power Sector Number of Geological Number of Blocks in Reserves (Million Blocks in GoNo-Go-Area tonnes) Area 1 13 6 6 26 245 3953 2113 777 7088 13 32 4 13 62

Geological Reserves (Million tonnes) 7417 10739 2407 2978 23541

CPSUs State Utilities UMPPs Private Developers Total Source: MoP, Metis

Measures suggested by MoP Since "Go - No-Go" has no legal sanctity, there should be no reference to it and no block be classified as "Go" or "No-Go". MOEF/FAC should consider all forest clearance cases on individual merit without being prejudiced by the nomenclature of "Go" and "No-Go". MOEF should fast track EC/FC of coal blocks. MOEF should help in expediting the clearances at State level also. MOC must increase domestic coal production from existing mines and EC should not hamper this exploitation. MOC/CIL to get mines, having clearances, on production line Treat UMPPs as equivalent to "national projects". Moratorium imposed by MOEF in critically polluted areas be removed for power sector pending CEPI (Comprehensive Environment Pollution Index) study, as they account for only 8% of SPM emission. Coal supply to any power plants, including those in areas where CEPI is above 70, should not be stopped. Otherwise power shortages will further increase and adversely affect economic growth.

Metis Power & Coal Weekly Sectoral Post | April 2-8, 2011

Status of Captive Coal Blocks in Go and No-Go area

Go- Area

62 captive coal blocks fall in Go-Area out of which one already surrendered 13 captive blocks under operation with annual production of 22 million tonne Most of the remaining 48 coal blocks were allocated in 2006 to 2008 Projects with the capacity of 1000 MW has already been commissioned. A capacity of 2300 MW and 9080 MW is likely to be commissioned in 2011-12 and 2013-14 respectively Out of 15 blocks linked to the above capacity, mining plan for 11 approved and 4 blocks are under exploration Out of the above 15 blocks, EC received for 5 blocks, 2 blocks do not require FC but FC received for none of the remaining. In addition, mining plan approved for 14 blocks, but construction of power plants yet to start. Allottees of 19 coal blocks, neither mining plan got approved nor construction of power plant started.

No-Go Area

26 captive blocks with reserves of 7 billion tonne fall in No-Go area, out of which forest clearance for 2 blocks for Sasan UMPP received The capacity of 10,460 MW (2700 MW-state, 3960 MW-Sasan UMPP, 3800 MW-IPPs) is in advance stage of construction with likely commissioning in 2013-14. This capacity pertains to 2 captive coal blocks in state sector, 3 blocks of UMPP and 3 in Private Sector. Out of these 9 blocks, FC received for 2 blocks of Sasan UMPP and Mine plan approved for 4 blocks, exploration to be carried out in 2 blocks, ToR cancelled for 1 block. In addirion, mine plan approved for 8 blocks, but construction yet to start for the power plant. In remaining 9 blocks, neither mining plan got approved nor construction of power plant started. One block of already awarded for Sasan UMPP, one block of Orissa UMPP and two blocks of Chhattisgarh UMPP also fall in "No-Goarea"

Metis Power & Coal Weekly Sectoral Post | April 2-8, 2011

Conclusion In order to meet the targets for additional capacity generation it is essential that there should be enough coal available for thermal rd power generation as it holds a share of 2/3 of the total power generated. As CIL provides major chunk of coal to the power sector in India it is important that it should honour its commitments so that shortages can be fulfilled and the targets for capacity augmentation becomes a smooth process. Immediate measures should be taken by CIL in order to make coal available to the power sector which can be done through enhancing coal production by optimum

exploitation of authorised capacity of mines, coal stock at mine-head be liquidated (about 53 MT is reported by CIL at present), Committed liability towards Power Utilities as per linkage/LOA be honoured before resrting to e-auction at a premium over the notified price and importing coal to bridge the shortfall in production. It is important that immediate measures like optimum exploitation of authorised capacity of CIL mines. An emergency production plans needs to be formulated by CIL, so that it becomes easier for electricity generation target to be fixed for the current fiscal.

Metis Power & Coal Weekly Sectoral Post | April 2-8, 2011

Power Exchange Prices & Volumes

Metis Power & Coal Weekly Sectoral Post | April 2-8, 2011

Fuel Statistics
Coal Price Trend till March 2011(in US$/ton)
160 140 120 120.74 100 80 Newcastle 60 40 20 Richards Bay

122

Henry Hub Natural Gas Spot Price ($/mmbtu)

4.35 4.3 4.25 4.25 4.2 4.15 4.1 4.05 Price ($/mmbtu) 4.21 4.22 4.17 4.31 4.32

Metis Power & Coal Weekly Sectoral Post | April 2-8, 2011

345 305 265 225 185 145 105 65 25 Aug-10 98 245

Coal Price CFR, India (in Us$/ton)

245 262 268 279 297 288 297 295

100

112

119

129

136

131

134

133

Coking Coal Non-coking Coal Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11

India Monthwise Coal Import in MT

3500000 3000000 2500743 2500000 2000000 1511654 1500000 1000000 500000 0 895642 854648 1013908 835299 2246367 1800384 2000967 2958016

Please note that the information published in this newsletter originates from various sources and is accurate to the best of our knowledge. However, Metis Business Solutions Pvt. Ltd. does not accept any type of responsibility for loss caused to any person or any corporate entity who acts or refrains from acting in reliance on the material in this publication, whether such loss is caused by negligence or otherwise.

Metis Power & Coal Weekly Sectoral Post | April 2-8, 2011

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Metis Daily Sectoral Post (Power & Coal sector)
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Metis Power & Coal Weekly Sectoral Post | April 2-8, 2011

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Metis Power & Coal Weekly Sectoral Post | April 2-8, 2011