Solar Energy Corporation of India to Supervise Indian Federal Solar Program

31 Jan, 2012
Energy,Solar Energy

Solar Power in India has taken off under the ambitious JNNSM government subsidy scheme with almost 400 MW of Solar Capacity installed in 2011 . With various states like Gujarat, Karnataka coming up with aggressive solar subsidy schemes on their own as well, solar power capacity in India should surge by around 1 GW in 2012. This has made India one of the fastest growing solar markets in the globe right now.

India’s JNNSM scheme was managed by MNRE which is the Central Ministry for Renewable Power and NVVN which is the state owned utility’s NPTC trading arm . However note NTPC is a listed company and is getting into the production of solar power as well. So to have a regulator which is also a participant makes little sense. With the first phase of JNNSM to be complete next year, the scheme is being overhauled. The Indian government is going to turn over the supervision of its 20 GW by 2022 Solar Power scheme to a new entirty called Solar Energy Corporation of India.

JNNSM part 2 will start in 2013 and it will need more funding as it proposes to build 4-7 GW of capacity. The funding agency IREDA does not have the resources to finance such a big outgo which could easily see more than $5 billion in funding requirements. Note a number of international financial institutions like Exim Bank , ADB and KFW are already involved in funding solar energy in India.

JNNSM

he Indian Government’s launch of the ambitious Jawaharlal Nehru National Solar Mission(JNNSM) was done with much fanfare with a target of reaching 20 GW of Solar Capacity by 2022 under 3 phases from the 81 MW currently.While the government had the best intentions and had laid down a well defined 10 year plan with subsidy support for both Solar Thermal and Solar PV Technology,it has already run into problems.Due to high interest the government went in for bidding of projects which led to irrationally low bidding from unknown firms.This has put the entire exercise in question with the the biggest private utility saying JNNSM is a failure.Without extensions of deadlines it looks highly unlikely whether the 37 winners will actually put up the plants.

JNNSM is divided into 3 phases with the ultimate goal of reaching grid parity with coal by 2030.I don’t know where they came with the 2030 figure as I think solar should reach grid parity much earlier and should be below coal cost much  before

1)Phase I (up to 2012/2013) – remaining period of 11th five yr plan & first yr of 12th yr plan Target of 1100 MW
2) Phase II (2013-2017) – remaining 4 yrs of 12th five yr plan Target of 3000-10000 MW
3) Phase III (2017-2022) – 13th five yr plan 20000 GW overall

Funding of the JNNSM will be done by

1) Renewable Energy Credits (REC) – State Electricity Regulatory Commissions (SERC) to fix a minimum
percentage of energy purchase from renewable sources of energy

2) NTPC’s Trading Arm NTPC Vidyut Vyapar Nigam Ltd ) is chosen as the nodal agency for entering into a Power Purchase Agreement (PPA) with solar power  developers.NTPC will mix expensive solar power with cheaper coal power .

3) Incentives

  • Zero import duty on capital equipment, raw materials and excise duty
    exemption
  • Low interest rate loans, priority sector lending
  • Coal tax
  • Budgetary Support for MNRE though 2011 Budget has not given anything
  • UNFCCC Funds – Again not certain as no international agreement ( another pipe dream)

Reliance Media Powerhouse in Making Buys stakes in Cable,Broadband and Content

19 Jan, 2012
Energy,Telecommunications

Reliance Industries which is India’s biggest oil and gas company is set to become one of India’s largest media players as well. Reliance with its massive war chest of cash has been buying stakes in both content generation and delivery across the spectrum in India. The company recently bought controlling stakes in one of the largest TV broadcasters Network 18 coupled with its earlier stake in Eanadu . Reliance  earlier bought the broadband spectrum rights for broadband transmission in a deal with over $1 billion.

Reliance Industries the biggest private company in India with billions of dollars in free cash flow being generated by its oil and gas business,is set to make a  massive investment into the broadband business through 4G. Reliance which is primarily an oil and gas company is investing heavily into Retail, Financial Services and Media. The company is set to become a media behemoth after buying substantial chunks into the content business of NW18 and Eenadu network.

Reliance has a massive balance sheet which is has used strategically to acquire 4G spectrum (Infotel) and content.The company had revolutionized the telecom space through the Monsoon Hungama campaign when it had provided super cheap telecom  mobile plan with handsets. It could do the same in the Internet space through providing super cheap Tablets like Aakash with super cheap broadband plans on 4G. It already has content to provide its subscribers.Note broadband companies in India provide poor service at high rates, so Reliance can takeover the broadband space in India easily if it executes right.

With voice becoming a commodity with super low or free pricing,data is the only way to earn money for telecom companies in India. If Reliance executes its strategy right,then these telecom companies like Idea,Vodafone,Airtel would see their revenues and valuations crushed.

The company is planning to introduce a big bang plan for broadband  coupling a cheap tablet with a cheap monthly plan. This is on the lines of a mobile phone with a monthly connection. Reliance has a  good chance of winning the broadband market which remains under penetrated and high cost. It poses a direct existential threat to India’s telecom companies which have failed to compete on data effectively.

Reliance in continuation of its strategy in the media industry has bought a small stake in Den Networks one of India’s largest cable networks though one its subsidiaries. The company is slowly and methodically capturing the entire media development and delivery network  in the country. The stake in the cable companies will give it leverage to deliver its broadband and content.

Reliance Strategic Investments, a subsidiary of Reliance Industries, has bought a 1.14% stake in DEN Networks, one of the two listed cable distribution companies in India. As RIL has acquired interests in media firms dealing with content, it makes sense for the Mukesh Ambani-controlled group to invest in a distribution network now, several analysts told ET.

Hedge Fund Employee of Steve Cohen SAC Jailed in New Insider Trading Scandal, Level Global Investors and Diamondback also caught

18 Jan, 2012
Green Investing

More Hedge Fund Employees were arrested by the FBI on Insider Trading Charges . Note Raj Rajaratnam the high profile hedge fund manager of the technology hedge fund is already cooling his heels in jail after being convicted of insider trading by paying money to company and insiders for illegal information. A number of low rung employees have also been jailed for lesser terms. His friend Rajat Gupta who was a former Mckinsey chairman is also facing charges which may result in conviction for passing confidential information to Rajaratnam.

Raj Rajaratnam, a self-made hedge fund tycoon convicted in the biggest Wall Street trading scandal in a generation, was ordered on Thursday to serve 11 years in prison, one of the longest sentences ever in an insider-trading case. But judges have been handing down some tough sentences recently. A former Galleon employee, stock trader Zvi Goffer, 34, was sentenced last month to 10 years in prison and ordered to forfeit $10 million after being found guilty at trial.Prosecutors had made Rajaratnam the central figure of a sprawling criminal case, unveiled in October 2009, that touched some of America’s top companies, including Goldman Sachs GroupInc, Intel Corp, IBM and the elite McKinsey & Co consultancy.

The employees of these funds SAC, Diamondback and Sigma Capital Management have been arrested by the FBI. Note Sigma Capital is a subsidiary of SAC Advisors which is led by the famous fund manager Steve Cohen who has given stunning returns in the past . In the past scandal also fingers were raised that SAC might have indulged in insider trading as well. Arrest of a SAC employee may mean that the employee may be used to get proof against Steve Cohen.Earlier he said that the insider trading regulations were vague

Hedge fund billionaire Steven A. Cohen in sworn testimony earlier this year called the rules on insider trading “very vague” and said sometimes it’s a “judgment call” as to whether a tidbit about a public company is inside information.

The founder of SAC Capital Advisors LLC, one of the hedge fund industry’s best-known firms, offered up his views on insider trading during two days of deposition testimony in February and April this year as part of a long-running civil lawsuit filed by Canadian insurer Fairfax Financial.

Note Insider Trading though illegal in all countries is widely practised as it is very difficult to prove charges and it is not considered too big a crime. In countries like India where the  rule of law is not that strict, it is done quite blatantly and invites only monetary fines at best . This has encouraged a culture of widespread insider trading profiteering.

Insider Trading in the Indian Stock Markets is quite rampant with promoters of business groups known to indulge in this white collar crime. However it continues to flourish as the market regulator SEBI has not done much about it. Note Insider Trading is very difficult to prove , though the recent conviction and jailing of hedge fund manager in the US Raja Rajratnam and some of his associates shows it can be done if the regulators and enforcers are proactive. India seriously lags behind in cracking down on Insider Trading though in the recent past SEBI has woken up from its stupor.

Indian Wind Energy Developers to focus on Electricity Production than Accounting Gimmicks with Depreciation Removal in new Tax Code

18 Jan, 2012
Energy,Wind Energy

Subsidies of different kinds are given to the Renewable Energy Industry around the world . These incentives or subsidies which they are better known as are in the form of

a) Capital Subsidies

b) Feed in Tariffs

c) Tax Breaks in form of Accelerated Depreciation

d) Renewable Energy Certificates

e) Carbon Credits.

Wind Power in India has been wildly successful and is the 5th biggest in the world because of substantial incentives from the government. One of them has been accelerated depreciation which has made hundreds of companies and rich individuals buy small wind farms. This helps them offset their tax liabilities providing a substantial 2 digit returns. However the big drawback in this from of green subsidy is that it does not incentivize the production of wind energy. Once the wind farm is set up, the incentive to produce lots of electricity is not there unlike the case of Feed in Tariff where your returns are solely based on the electricity generatino.

India is coming up with a new Direct Tax Code in April 2012 which will substantially overhaul the current tax system in the country. In this the accelerated depreciation given to wind power turbines in India will be done away with. This might lead to a dip in the wind power production addition in the country. However in the Long Term its a plus as it would force Indian Wind Energy Developers to focus more on Electricity Production than Accounting Gimmicks

Wind Energy Companies in India that will be Affected

1) Suzlon Energy – Suzlon Energy is the biggest Wind Energy Company by far with 4-5 Gigawatts of WTG Capacity per year.Its subsidiaries Hansen Transmission and RePower are also big players in the Wind Energy in Europe.The Company has seen its revenues and profits take a huge hit in recent times but has been recovering slowly.

2) RRB Energy – The company has a long history and manufactures Wind Turbines at its plants in Tamil Nadu.The Company has a capacity of 300 MW which it is expanding to 700 MW.The Company makes only 2 models with power rating of 600 Kw and 1.8 MW.Merill Lynch has made a small investment in this company.

3) NEPC India – This company was one of the wind energy heavyweights and a stock market darling earlier.However It no longer remains an active player in the Indian market .Heavy Debt and Bad Management drove to this company to the ground despite being a pioneer in the Indian Wind Power Market.

4) Auro Mira Energy – The company is more of a Green Utility rather than a full fledged WEG manufacturer.It has made plans to manufacture Wind Turbines in the future.It has attracted funds from Baring and IFC to push forward its Green Plans.Auro Mira Energy is a Tamil Nadu based Green Utility backed by a clutch of PE investors like IFC etc.It has 2 biomass plants of 7.5 MW and 10 MW and plans to build around 100 MW of hydro and biomass capacity over the next 2-3 years.

5) Regen Powertech - It is a small scale WTG Supplier like RRB Energy which recently set up a small 300 MW manufacturing facility in Tada,Andhra Pradesh recently.The company licenses technology from Vensys to manufacture 1.5 MW gear-less Wind Turbines.The company has managed to supply both big and small wind farms over the last 2 years.The company is supported by the PE arm of Future Group.

6) WinWind – The company is not exactly a domestic company rather one with a Finnish Origin.It is owned by the Abu Dhabi Masdar ,Siva Group and the government of Finland.It has recently established a 1000 MW capacity in Venga,Tamil Nadu and also has a 500 MW plant in Finland as well.The company plans to producer 3 MW Turbines at its Indian plant as well.

7) Pioneer Wincon – The company is a JV between the Pioneer Group and Wincon of Denmark.It makes small 250 KW Turbines and is a bit player with 30 years of operations in India.The Company remains a small static player in the Wind Energy Market of India.

8) Chiranjeevi Wind Energy – A Small bit player like Pioneer Wincon which engages mostly in the sale of small 250 KW Wind Turbines.Like Pioneer Wincon it has sold a number of these Turbines to small companies mainly in the Southern Part of India.

9) Lietnar Shriram Limited - The company is a 50:50 JV betwen the Shriram Group of India and Lietnar of Italy.The company makes gearless turbines of 1.5 MW capacity and has supplied to small farms in Maharashtra.The company has a major inhouse customer in the form of Orient Green Power which is building a 300 MW farm in Tamil Nadu using Lietnar Shriram Wind Turbines.

10) Kenersys - The company is part of the Baba Kalyani Group which is a major forgings manufacturer in India.It was bought over in 2007,when the Kalyani Group and PE firm First Reserve bought over the German company RSB Consult.The Company mainly  makes 2 and 2.5 MW turbines and has production facilities both in India and Germany.It has wind design capabilities between 1-3.6 MW and with a powerful parent, it could become a success in the future.Amongst the newer wind energy companies like Lietnar,RRB Energy,Regen and WinWind,it looks like the one with most potential

Source – http://www.bloomberg.com/news/2012-01-17/india-may-end-tax-break-for-wind-farms-this-year-official-says.html

How Massive 1000 Megawatt Solar Energy Farms in Chinese Deserts will Boost 2012 Demand

16 Jan, 2012
China,Solar Panels

China add the most electricity capacity annually in the world at around 100 GW and its total electricity generation capacity is second only to the USA which it will surpass in the next few years. China is highly dependent on thermal power for its energy needs which is becoming scarce and expensive by the day. Not to speak of the big disadvantages of coal as a fuel which causes thousands of deaths each year. Solar Energy has now reached grid parity in many parts of the world thanks to the low cost cheap solar panels being made by Chinese solar panel producers. With many countries now thinking of putting an anti dumping duty on Chinese solar modules, the government is looking to boost domestic demand . Chinese solar panel Tier 1 players like LDK, Suntech, Trina and Yingli besides some others are the biggest beneficiaries of this new solar policy from China.

China is looking to set up massive 1000 MW solar energy farms in its desert regions of Qinghai, Mongolia ,Tibet and others .Some of these regions have the highest solar radiation in the world with over 2700 hours of sunshine. What this means is that solar power can be profitably be generated at 8c/ Kwh .Though higher than coal generate power , this price is constant for 30 years even as thermal, gas and other forms of fossil fuel will keep going up besides increasing carbon emissions. These massive 1000 MW farms can be now be built quickly as Chinese solar companies have massive capacity which can supply solar panels at a very cheap price of as low as 80c/ watt.

China raises Solar Energy Capacity Target to 50 GW from 20 GW in 2020

China’s Solar Panel Manufactures have enjoyed a massive boom phase though domestic solar electric capacity has failed to keep up.China has been rewriting its renewable energy plan  in the wake of the Fukushima Nuclear Energy Disaster in Japan.Note there has been a strong global backlash against nuclear energy around the world and 7 nuclear plants in Germany have been closed all but in name.Other countries like South Korea,Italy,Switzerland are rethinking of what do about their nuclear reactors giving the massive tail risks with nuclear generation.China had a target of only  20 GW of solar by 2020 has decided to raise the target by  150% to 50 GW according to the country’s leading energy planning authority NDRC.Note China installed more than 15 GW of Wind Energy in 2010 alone becoming the world’s largest Wind Energy Market by far.Solar Energy strongly lags Wind in China despite China having the biggest solar panel manufacturing industry in the world.Its Golden Sun and other Solar Subsidy programs have been small in absolute terms compared to its huge electricity capacity.Note Wind Power in China has reached a saturation level with almost 18 GW installed in 2010 ,with such a high level further growth looks quite difficult.

3 Signs of Trouble for Chinese Wind Energy

1) Sinovel has canceled shipments of Electrical Control Systems (ECS) for its Wind Turbines from American Superconductor due to high inventory levels and refused past payments as well.With the biggest Manufacturer of Wind Turbines reporting inventory problems,the situation of the rest can’t be that good

2) The Chinese National Energy Bureau was considering tighter procedures that would include requiring local governments to get the written approval before going ahead with wind projects with installed capacity of less than 50 MW.Earlier it used to be more than 50 MW

3) Hundreds of Wind Turbines have not been connected to the Power Grid due to lack of capacity or transmission lines.China emphasises on investment without factoring in returns is one cause of these orphan wind turbines.

Qinhai to build 1 GW solar power plant

The government of Hainan Tibetan autonomous prefecture and GSF Capital signed amemorandum on Sunday, planning to build a 1-GW solar power base in this underdeveloped prefecture and bring abundant electricity for the local people.
The country plans to build solar power plants mainly in Tibet, Inner Mongolia, Ningxia,Gansu, Qinghai, Xinjiang and Yunan.

India Engineering Conglomerates GMR and L&T Raise their Solar Ambitions

14 Jan, 2012
Energy,Solar Energy

The Indian Solar Power has been one bright spot in the gloomy infrastructure and engineering sectors in 2011. With share prices crashing with growing corruption, land acquisition and financing problems, Solar Energy has surged in India thanks to government support and subsidies . While a number of Green Technology companies have started up to capitalize on the growing renewable energy trend, the established construction companies in India have not been far behind . While utilities like Tata Power, Adani, Reliance Power, NTPC have already built or are setting up power plants based on solar panels , L&T has become a major solar EPC players . L&T is now raising debt with a $100 million issue to fund its solar expansion plans .

The travails of Indian Infrastructure Stocks

India’s Infrastructure Sector which was considered the ideal play on India’s fast growing GDP and its huge infrastructure requirements long commanded nosebleed valuations.While realty stocks which are closely related to the infra ones had long collapsed after the GFC in 2008 ,the infrastructure stocks had retained their preeminence in the stock market rally.However end 2010 and 2011 has seen a vicious change in their fortunes.Stocks like IVRCL,IRB,Punj Lloyd,L&T,Gammon etc have seen their stock prices nosedive.The stocks have corrected far more than the broader market which has itself fallen more than 15% in  2011. The problems related to the infrastructure stocks are varied and they have converged for investors to totally lose confidence in this sector something akin to the realty sector

The GMR Group which has its fingers in a number of sectors has also managed to complete a 25 MW solar pv plant and is looking to set up more . Note other industrial groups particular Mahindra Solar One has also become very aggressive in the solar energy area. With multiple entries into the Indian solar industry, one can only hope that overcompetition does not make solar energy another instanace of the larger electricity industry which is going through a sever downturn.

It plans to grow the installed capacity to 100 mw from 25 now, said the company.GMR has also commissioned its first 25 Mw solar power project Gujarat with a total investment of Rs 360 crore.The project was awarded in October 2010 under the Gujarat SolarPolicy. Power from this plant will be supplied to Gujarat Urja Vikas Nigam Ltd on a 25 year Power Purchase Agreement under the Gujarat State Solar Policy.

GMR Energy is currently operating 808 MW of power projects and is in the process of executing another 7500 mw. “Out of this, 2500 MW capacity will become operational in 2012 through commissioning of Projects at Vemagiri in AP, Kamalanga in Orissa and Warora in Maharashtra,” the company said.

L&T Infra Raising $100 million in External Commercial Borrowings

L&T Infra Finance, a subsidiary of L&T Finance Holdings on Thursday said it has raised close to $ 100 million through the External Commercial Borrowing (ECB) route this fiscal, largely to fund solar power projects.“We have raised $ 100 million through ECB route so far this fiscal, mostly to fund solar power projects,” L&T Head Financial Services, Mr Shiva Rajaraman, told PTI.

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