To make projects commercially viable, state-run NHPC has made a strong pitch for returns during the period of construction of projects, as well as different rates for peak-demand scenarios.
In a submission to the power ministry and the Central Electricity Regulatory Commission (CERC), NHPC said the clause of 15.5 per cent return on equity applicable for hydro and thermal power projects needed to be revisited, considering the long gestation periods required for their commissioning. As hydro projects usually take six to 10 years, after tackling issues related to clearances and settlement of demands by locals, returns during the construction period would make these more feasible.
Speaking to Business Standard, NHPC Chairman and Managing Director A B L Srivastav said, “If the construction of hydro project does not begin, say, for two years, owing to implementation issues, the developer does not get returns. I want to reiterate hydro power projects have long gestation periods and, therefore, returns during construction need to be considered by the power ministry and the CERC.” He said hydro power was used during peak demand periods and, therefore, to incentivise investors, different rates during these periods needed to be considered. NHPC had stated its case to the power ministry and the CERC, and it was up to these to take a decision, he added.
Srivastav said 1,200 Mw of hydro power projects carried forward from the 11th Plan period would be completed in a year. NHPC would also strive to achieve the proposed capacity addition of 4,000 Mw during the 12th Plan, he said.
NHPC, along with other hydro project developers, currently faced both pre-construction as well as post-construction delays, he said. “Pre-construction delays relate to forest and environment clearances, while post-construction ones result from geological surprises and demands by locals,” he said, adding in some cases, NHPC also faced contractual problems. These problems, by and large, were mutually discussed and resolved on a project-to-project basis.
However, Srivastav argued the hydro sector needed more attention from stakeholders. “This is a resource that must harnessed, as raw materials cannot be stored for even a moment,” he said.
NHPC also has to tackle commercial and implementation issues. “Steps are needed to take decisions early to ensure clearances are in place on time,” Srivastav said.
Once these are secured, there is no reconsideration on these. All agitations and demands for scrapping a project should be taken on a firm basis to send positive signals to investors. Once decisions are taken, these should not be reversed. Otherwise, the investor community would be shaken," Srivastav said.
He added during 2012-13, the company would raiseRs 3,000 crore through term loans from banks, private placement of bonds and internal resources. “NHPC has a cash surplus ofRs 6,000 crore. We have not considered exploring the option of external commercial borrowings (ECBs) at this juncture. However, we may opt for ECBs if we find these commercially viable compared to domestic options," he said.
On NHPC's diversification, he said the company planned to expand into thermal, solar and wind power generation. He, however, added this would be done only after amendments to the Memorandum of Articles. “We are looking at fuel-rich states, including Madhya Pradesh, Chhattisgarh, Odisha and Jharkhand, for entering into thermal power generation. NHPC is open to a joint venture and the details in this regard would be worked out in course of time. For solar and wind projects, the company is looking at Jammu and Kashmir, Madhya Pradesh and Rajasthan. However, all these investments would be carried out in the 13th Plan," he said.
The company also planned to utilise its expertise in hydro power development in Bhutan, Myanmar, Tajikistan and Nigeria, Srivastav said.
