China Light & Power (CLP) is the largest foreign power company in India. The Hong Kong-based company’s fully-owned subsidiary, CLP India Pvt Ltd, wants a greater proportion of its portfolio to come from renewables. In an interview with Ranju Sarkar, CLP India MD Rajiv Ranjan Mishra shares insights on his business. Edited excerpts:
What’s the status of the Jhajjar project? Strategically, what does it mean to you?
The construction of the 2x660 Mw project is on schedule. We should be able to commission the first phase by December 2011 and the second by April 2012. This was the first case where a foreign investor had won a project through a competitive bid. Since we had not done a new project before (CLP entered India by acquiring the 655-Mw Gujarat Paghutan project in 2000), being able to win and commission it on time, lays to rest all doubts.
However, we want to bid for the two ultra mega power project (UMPPs) coming up in Orissa and Chhattisgarh, and are seeking to pre-qualify for them. These two will go for bidding at the end of this year and next year. Now, we have the experience to implement large projects and can do UMPPs.
You were an early entrant but did not bid for the initial UMPPs while others entered the sector with big plans and raised money. Do you regret missing the bus?
Every group must decide what is their risk-return appetite, and we have been very clear that there are certain risks we don’t want to take; the fuel price risk is one. If you don’t want to take that, what you are left with is the so-called Case2 projects like Jhajjar where the government acquires the land and gives you fuel linkage and you bid the lowest possible rate. In an ideal world, we would have wanted one more conventional project by this time. But I don’t think when we look around, we have any regrets. In the last four years, we have tripled capacity (once Jhajjar goes on stream). In fact, we have grown nearly four times since January 2007 and that is fairly satisfactory.
How does wind compare with thermal on returns, payback period?
Our return expectations from both are similar. We also have a commitment to reduce the carbon dioxide intensity of our portfolio, which can only be done with much greater investment in renewables. We will remain a mainstream power company, but will have a greater proportion of renewables in our portfolio. Also, we don’t face a competitive bidding scenario in wind projects, and since we are a large investor, we have several projects to choose from. In all, we have 638 Mw of committed capacity in wind energy for which we have executed contracts, and have commissioned 300 Mw.
How do these two energies fare in terms of costs and returns?
Wind power costs between $1.1 million and $1.3 million per Mw. Returns depends on three to four factors — wind resource, the rate declared, generation-based incentives and CDM (the carbon credits you get). The returns are in the same range. We do a lot of analysis, examine the wind resources and do our calculations. Regulators look at the cost and the returns (15-16 per cent return on equity) to arrive at the rate.
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Many companies are entering wind power; what makes it attractive?
There have been two drivers, firstly, across the states rate have gone up.
Second, the tax depreciation that was allowed to individuals was not available to independent power producers, but they have been given generation-based incentives of 50 paise per unit up to a cap (Rs 62.5 lakh per Mw).
