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The signal is loud and clear: Investment in the power sector is likely to enter a lull phase in the 13th Five-Year Plan period (2017-2022). After the 12th Plan ending in 2017, the power sector is looking at an empty pipeline, both by capacity addition and capital investment.
"The pipeline is clearly dry for future projects. Stranded projects might start in another two to three years but then financials of companies would still remain an issue," said the chief executive of one of India's top private power companies.
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Around 48,389 megawatts (Mw) of projects of the targeted 88,537 Mw for 2012-17 have been commissioned and the balance is expected to come on stream during the last leg of 2015-17. Half of the commissioned 46,000 Mw in thermal (coal- and gas-based) is stuck mainly because of fuel supply issues.
In 2011-12, more capacity was added than targeted. A record 52 projects, most of these allocated in 2007-09, were commissioned by the private sector. The next financial year, too, saw capacity addition of 20,121 Mw, including in ultra mega power projects (UMPP) of 4,000 Mw, compared with the targeted of 15,154 Mw. Of the four UMPPs awarded, Mundra (Gujarat) and Sasan (Madhya Pradesh) have been commissioned but are battling tariff-related issues.
Capacity addition started slowing down in 2013-14, when less than 40 per cent of the target was met. Local gas supply dwindled, coal linkages with state monopoly Coal India were left unmet and captive coal allocations went under litigation. In 2014-15, 5,658 Mw capacity has been added so far, against the target of 14,988 Mw till March.
The Union government is looking to auction close to 40 million tonnes of coal to the power sector. It also plans to kick-start at least 28,000 Mw of coal-fired plants.
"But all these projects are stuck and awaiting coal block allocation after they lost mines because of the September Supreme Court judgment. Where is the new capacity? There is no new capacity coming in till 2017," said senior executive of one of the top privately held power generation companies.
Even for power projects that would be awarded next financial year, if they find any takers, they would be commissioned only after 2019. The two UMPPs, in Tamil Nadu and Odisha, the government bid out found no takers except state-owned companies NTPC and NHPC. The private players pulled out of the bid citing regulatory issues in the bid document. The whole bidding process is expected to be scrapped.
"Our company is not looking to invest in any new project for another two financial years at least. There isn't a conducive environment to do that," said a senior executive of one of the UMPPs.
The major deals in the power sector this year involved only transfer of equity and debt. "New players are unlikely to come in the power sector at this point of time. Look at the big names in the power industry - they are just scouting for projects to acquire. Not a penny of fresh capital investment is going to come in the power sector," said A K Khurana, director-general, Association of Power Producers, the apex representative body for private power companies.
Adani Power is acquiring a 1,200-Mw Udupi plant from Lanco Infrastructure for Rs 6,000 crore and another 600-Mw Korba West power plant from Avantha Group for Rs 4,200 crore. Both the sellers were looking recasting their debt through these deals. Recently, Tata Power acquired a 540-Mw thermal plant from Ideal Energy for an estimated Rs 3,500 crore, again a transfer of debt.
A power sector executive said: "As an investor, all I need is long-term fuel-supply assurance and power-purchase agreement. Growth in the sector would come only when bidding happens in case-I or case-II projects. We would not take up projects only on assurance of fuel linkage from Coal India." In case-I projects, clearances, land and other infrastructure are provided by the government authority. In case-II bidding, project promoters take up the responsibility of setting up the power project with the state or central government acting just as a facilitator.
Though the power industry appreciates the speed with which the National Democratic Alliance government went ahead with changes in law for auctioning coal blocks and commercial mining, they didn't have any high hopes. "The onus is on the government to accelerate the growth of the sector. Power demand would keep going up but if there is no policy environment, '24X7 power for all' would remain a distant dream," said a chief executive of one of the India's largest power company with interests in generation, transmission and distribution.
