Energy | Green World Investor

Solar Energy Corporation of India to Supervise Indian Federal Solar Program

31 Jan, 2012

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)

Solar Insolation Map of India to be Developed by CWET as DOE,NASA Data proves Inadequate

30 Jan, 2012

Energy,Solar Energy

Finding accurate Solar insolation data is a difficult problem faced in most countries except Europe and USA. The reason is that there is no history of solar radiation data in most countries as solar power is a relatively new technology. Most of the solar developers rely on data from NASA, DOE and European agencies which focus mostly on their domestic geography. This leads to faulty and inaccurate solar radiation data for other places which are seeing massive solar boom due to falling solar panel prices. India which installed 400 MW of solar power plants in 2011 and should see another 1000 MW in 2012 faces this problems also. There are no devices to record solar insolation in India with data coming from outside.

Note I had written earlier that Solar Radiation Data Absence is one of the major problem being faced by Indian solar developers. The government is now getting into the act with Chennai based CWET to collect solar radiation data in India. This government agency has been instrumental in facilitating the development of wind power in India making it the world’s 5th biggest wind energy market. It has been collecting wind speed information for a long time and now will collect solar insolation data as well . There are some private companies which are selling solar maps as well but a government solution seems best.

Note solar insolation data can make a massive difference in solar project returns with a 5-10% difference in solar data making a 2-3% difference in returns.

Solar Power in India is one of the biggest opportunities in the field of energy in the 21st century and Indian state and federal governments are strongly supporting by providing incentives and subsidies.A number of companies and startups have entered this green industry field lured by the multi billion investment potential in the coming decades.But the Solar Power field is not that easy to crack as many of the small inexperienced developers are learing to their detrminent.India has hardly any history of large scale grid solar projects with only 18 MW installed till date (compare that to India’s total electricity capacity of 178,000 MW).During JNNSM bidding a large number of small no name companies bid absurdly low amounts to win projects and many of them will now be cancelled as most of them are nowhere near financial closure.

The government has decided to cancel JNNSM licenses of companies who won projects and have failed to find debt financing by July 9 .This is more drastic step than just fining the companies according to the conditions set out in the JNNSM.I think the companies would find this to be more suitable as they have little chance of not running into losses at the absurdly low prices bid in the JNNSM.The loser will be the Indian solar energy sector though only in the short term.State governments are pushing for solar energy with Maharashtra,Delhi,Gujarat and Rajasthan providing their own subsidies instead of depending on the central goverment.

Lack of Solar Radiation Data a Big Hurdle

Having good solar radiation data is essential for building solar power plants anywhere.USA and European Union have a well-developed insolation map so that developers and investors in solar energy have no difficulty in getting good data while planning an investment.However Indian developers are at a distinct disadvantage as there is no good primary data to go on.Solar Radiation data makes a huge difference to the economics of a project and no bank will give a loan based on incomplete data.For the inexperienced developers this has become another problem among a host of other problems.With little understanding of the technology and other factors,many of them jumped in and are now in a deep soup.However the prospects of the Indian solar energy are great even with these initial hiccups.The flushing out of the weak hands should help in strengthening the solar energy industry in India in the best traditions of capitalism.

CWET News

Now, an obscure government agency based in Chennai is promising to change that. It hopes to deliver within two years a state-of-the-art solar atlas of India that could clear a major hurdle obstructing speedy development of solar power projects.

The atlas, which will identify the solar hotspots where the sun’s radiation has optimum intensity for power generation, will enable developers to accurately pinpoint locations for projects, according to the Centre for Wind Energy Technology, which is creating the database.

The expectation is that project developers, armed with the information, will be able to predict the plant’s output with reasonable accuracy. Also, they can make a better choice of which solar technology (photovoltaic, solar thermal or any other) to use.

India’s Consumer Companies enter Lucrative Solar Products Business

30 Jan, 2012

Energy,Solar Energy

The Solar Products Business is booming not only from the Solar Power Plants but also in consumer products business. So not are big conglomerates like Mahindra, GMR , Reliance getting into the lucrative booming solar power in India, but now water purifier companies in India are too getting into the act. India’s biggest water purifying company Eureak Forbes which is found in almost every Indian home is going to start selling solar lighting products like torches and lanterns.

The company is going to market solar products under the “EuroDiya” brandname . Diya means Light in Hindi and Euro is the company’s brand. The products are to be sold in the $10-50 range with the technology and products coming from a US company. Note solar consumer products have a massive potential in a country where almost 40% do not have access to a power grid.

Note Solar Lamps can compete economically with substitutes like kerosene lamps which don’t only consumer costly fossil fuels but generate pollution as well. Other companies like D.Light already have a strong presence in the solar lamps business.

Solar Lamps or Solar Lanterns have seen astounding growth in India driven mainly by the lack of access to electricity and the high costs of Kerosene or gas lamps.Note Solar Lamps have been so successful in India mainly due to their economic utility rather than their Green Characteristics.Note 100,000 Indian villages do not yet have electricity which means that the productivity comes to a complete stop in the dark.Poor schoolchildren cannot study in the dark and people cannot work in the night either.Note Kerosene a dirty oil refined product is the main source of energy for millions of Indian citizens.Kerosene is a health hazard resulting in accidental fires and causing a lot of smoke which can lead to various respiratory diseases.Note Kerosene is subsidized by the Indian government and distributed through the Public Distribution System (PDS) which is a massively corrupt and inefficient system.The Kerosene is given in limited quantities and is not sufficient to Light the Darkness for a month or more.The advent of Solar LED Lamps has been a godsend solution to this problem.

Indian Conglomerates entering 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 .

Water Purifier Manufactuers in India

List of Water Purifying Manufacturers/Suppliers/Companies in India

Kent Technologies – Kent purifiers are trusted by over 1 million customers spread across the country and have an established track record of over a decade in the water purification industry. The company is a pioneer in bringing revolutionary Reverse Osmosis (RO) technology to India. KENT started its operations in India in 1999 & is today a strong organization with offices spread across India. KENT has lakhs of satisfied customers to its credit worldwide. Kent offers varied range of products for any application – mineral RO, UF gravity, UV technology & UF tap water purifiers. Be it entry level purifier to technology driven high capacity commercial purifiers. They have two production facilities located in Uttaranchal.

Eureka Forbes – is a part of the Shapoorji Pallonji Group and today it is a 12 billion INR, multi product and multi channel corporation.It started operations in 1982, & today have become the undisputed leaders in domestic and industrial Water Purification Systems, Vacuum Cleaners, Air Purifiers & Security Solutions. It is one of Asia’s largest direct sales organization. It serves more than 131 cities and 398 towns across the country. Eureka provides different ranges of:Domestic water purifiers Aquaguard – UV, RO, UF, UV+RO+UF, Aquasure – RO, UV, storage & Heavy metal remover & Institutional water purifiers.

Hindustan Unilever Ltd. – HUL is India’s largest Fast Moving Consumer Goods Company with categorised business like soaps, detergents, shampoos, skin care, toothpastes, deodorants, cosmetics, tea, coffee, packaged foods, ice cream, and water purifiers. With a market capitalization of Rs. 61,000 crores, the Company is a part of the everyday life of millions of consumers across India. The company earned revenues of Rs. 5,000 crores with a net profit margin 12%. Its parent company is Unilever, which holds about 52 % of the equity. Its portfolio includes leading household brands such as Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair & Lovely, Pond’s, Vaseline, Lakmé, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe, Brooke Bond, Bru, Knorr, Kissan, Kwality Wall’s and Pureit.Pureit’s unique Germkill Battery technology kills all harmful viruses and bacteria and removes parasites and pesticide impurities, giving micro-biologically safe drinking water (meets the regulations by the EPA in USA). It does not need gas, electricity or continuous tap water supply. It makes the water clear, odourless and good-tasting.This technology was developed by HUL, by a team of over 100 Indian and international experts from HUL and Unilever Research Centres.

Indian Renewable Energy Stocks – Bubble Bursting or Investor Panic

26 Jan, 2012

Energy,Orient Green Power,Renewable Energy,Solar Energy,Suzlon,Wind Energy

Quick quiz. What is common to Suzlon, Moser Baer, Indo Solar, Websol Energy systems and Orient Green Power? All these stocks had successful runs on the stock market and hyped as the next game changers in wind energy, semi conductors, solar power and hydel/geo thermal power. Valuations were more on growth stories than through an hard nosed DCF spreadsheet. But now, they trade at record lows(like other stocks but what is different is the pressing fundamental concerns in each case). Is this a bubble finally bursting, or are investors panicking?

Suzlon cherishes an ambitious vision of being the technology leader in the wind sector, and among the top three wind companies in all the key markets of the world. It expects that by 2015, total worldwide installation of wind energy would cross 442 GW which is almost 2.3 times of the current installation. This will cover about 7.5% of the global electricity supply by then, as opposed to just 4% now. But the solar bubble collapse in Spain, France and Germany(where subsidies were almost withdrawn) has put concerns on the very business model of solar(preferential feed in tariffs at peak hours(morning/noon)), as mentioned by First Solar in its 10K filing. So with gradual withdrawal of subsidies to wind energy generators, will Suzlon be able to regain pricing power for its equipment? Even in India, the most recent round of wind energy purchase tenders, saw bidders discount the CERC approved tariffs of Rs 17.91 by nearly 30%-35%, indicating that new players are willing to slash prices to gain market share. This would impact supplier pricing as well.
Moser Baer, Indo Solar and Websol Energy systems, wanted to capitalize on the boom in demand for solar photovoltaic cells. Indo Solar wanted to take benefit of the 25% capital subsidy scheme for project capex over Rs 1,000 crores( as per the Special Incentive Package scheme announced by the Ministry of Communications and Information Technology, Government of India). But the global over supply(especially from China) backed by costs increases in key raw materials, led to EBITDA margin compressions, and short of domestic protectionism, I do not see a bright future for these stocks. While they are all trying vertical integration, entering into adjacent industries etc, the core business model is facing challenges due to global supply scenario, and price driven market.
Orient Green Power is a slightly different proposition though. In 1H’12(Sep11 half year) alone, it added 80MW of wind energy, and had 300MW generation capacity(250MW wind+50MW biomass) in operation. However, with 250MW capacity wholly in Tamil Nadu and that State Electricity Board being in financial distress, investors seem to have discounted the stock which trades at P/BV of 0.5, despite its aggressive growth plans to reach 550MW capacity by Jun’12! At market cap of Rs 610 crores(with debt of Rs 190crores), the company had an EV of Rs 800 crores(assuming the Rs 170 crores of cash offset the current liabilities of Rs 195 crores, as the loans and advances of Rs 808 crores would presumably not be liquid), which would imply an EV of Rs 2.67 crores/MW, nearly half the estimated Rs 5.3cr/MW replacement cost of that capacity.

So have the factors affecting thermal power stocks(bankruptcy like status of SEBs, increased fuel costs, project execution delays) rubbed off disproportionately on these stocks as investors blindly herd together to sell power stocks? Or is it that the favourable economics may change? For export oriented equipment manufacturers like Suzon, the subsidy withdrawal story may play out, but for domestic generators, the national solar mission and other such plans would seem to give a secure price floor and assured market to sell the generated power. These stocks are worth tracking though, as a hedge against the general power sector decline.

The paragraphs below features previous GWI takes on the above Green Stocks and is not part of Anand’s article

You can read about the GWI List of Green Companies in India

Previous GWI take on whether Suzlon is a falling Knife

Suzlon History

Suzlon,the Indian Wind Turbine making company has languished in red ink since the beginning of the Global Financial Crisis in 2008.The company started by Tulsi Tanti in 1995 was a shining example of Asian CleanTech with a 10% global marketshare and ranking amongst the top 5 Wind Turbine Makers .Suzlon buoyed by its success had bought controlling equity stakes in Turbine Gears producer Hansen Transmission and European Wind Turbine producer Repower.Suzlon wanted to leverage Repower’s technological expertise to enhance its own product offering.Like other Indian companies with global ambitions like Hindalco,Tata Steel and Tata Motors,it took on a lot of debt to buy these companies at the peak of the global economic cycle.The GFC resulted in a twin whammy for Suzlon.On one hand its end markets collapsed as project financing disappeared and on the other hand its huge debt burden became unsustainable.The company has failed to recover from the GFC as competition in the Wind Turbine industry has increased with the rise of Chinese players like Sinovel,Goldwind and A-Power.With the 2 biggest markets of USA and China dominated by domestic players,Suzlon has become a shadow of its former self.While other Indian companies have recovered strongly with the Global Economy,Suzlon continues to lose huge amounts of money.Its recent 2Q10 results were quite bad resulting in the share shedding 6% to Rs 50.This is almost 90% below its peak price in the heady days of 2008 .So is Suzlon a Fallen Angel which could turnaround to become a multibagger or a Falling Knife luring investors into further losses.Here are the pros and cons of the argument.

Orient Green Power IPO Analysis

Orient Green Power Ltd (OGPL) is India’s Largest Green Utility and is one of the areas that is a good way to invest in India’s Green Energy Sector.The company is owned by the Shriram Group and a couple of PE Players will issue around Rs 900 crores (~$180mm) which will result in a market cap of $450mm.OGPL is a relatively new company setting up and acquiring most of its 200 MW capacity in the last year which comprised of 152 MW of Wind Energy and the rest is Biomass Energy.The company plans to increase this capacity 4 fold to around 1000 MW in the next couple of years with Power Plants in India,Europe and Sri Lanka.The centerpiece of this expansion will be a 300 MW Wind Energy Plant in Tamil Nadu for which $10 million has been already been spent.The company’s past profits and cash flow have been negative which is not exactly a concern given that most of the capacity was set up in the last year or so.I like the company’s growth plans and the sector in which it operates.India suffers from a huge power deficit and Renewable Energy is being heavily promoted through Government Subsides and Renewable Energy Mandates by the CERC.Trading of Renewable Energy Certificates (RECs) should start in a year or so giving additional revenue streams to Green Energy Producers.Here are the pros and cons of the issue

(The author Anandh Sundar is from the IIM Ahmedabad 2010-12 batch, and a ranker in CA/CS/CWA exams. He blogs at http://financeandcapitalmarkets.blogspot.com/, and http://specialsituationsindia.blogspot.com/ and has a keen interest in investing)

Indian Imports of Chinese Solar Cells to Continue despite Indian Panel Factory Closures

19 Jan, 2012

Energy,Solar Cells,Solar Energy

The Indian government is not going to impose any new duties on imports of Chinese solar cells. This is despite the petition by the Indian solar panel manufacturers to give a level playing field. Note Chinese solar panels have virtually destroyed the solar manufacturing industry in the West with big companies falling under the relentless price pressure where solar panel prices have gone down by 60% in one year. Only the Koreans seem to be standing up to the Chinese government backed top tier solar companies from China. The rest have mostly folded up and are facing survival questions including those from Taiwan. Indian solar companies were never that big and cost competitive anyway given the headstart and support of the Chinese backed companies. The price crash in 2011 has seen most of them close their factories as they can’t even cover their costs at the Gross Margin Level.

Indian Solar Panel Companies are asking for protection from cheap imports from China and other countries. Note the prices of solar panels have fallen by 60% in 2011 due to a number of reasons such as cheap raw material polysilicon prices,high competition between majormodule manufacturers, dropping processing costs. The biggest reason for the solar panel price crash has been the support of the Chinese and other Asian government to their respective domestic solar industries.

It is a fact that many of the major solar module companies would be bankrupt right now without government support. LDK is the prime example of a zombie company flourishing on the back of Chinese government support. Indian solar panel makers have got some protection with the federal subsidy policy JNNSM mandating that cell and modules be made in India.However thin film solar panel technlogy is exempt which means that they are not fully protected.Besides state government solar polices don’t protect them at all. The consequence has been that most of the solar panel companies are running at 0 to 20% utilization as orders dry up.

The Indian Solar Companies were hoping that like the US government , India too would impose some sort of anti-dumping duty on imports of Chinese solar cells and panels. But the government seems in no mood to oblige. Note the import duties would hurt the powerful Indian utilities and developers who need the cheap solar panels. There is some protection for the solar players in the federal subsidy scheme JNNSM but nothing for the state subsidy programs. It looks likey that most of the Indian solar cell and panel producers will be wiped out given the current state of affairs.

Read our previous stories on Domestic Content Controversies on Indian Solar Panels.

USA Opposes India’s Solar Energy Domestic Content Requirements

USA has opposed India’s Local Content Requirements for the Federal Solar Energy JNNSM program.Note according to the JNNSM rules,solar panels will have to be produced in India for the first year and solar cells will also have to produced from the second year.There is also a proposal that the local content requirements may be extended beyond 2013 and will also include solar inverters.US administration is opposed to these rules as it will lead to export hurdles for its solar companies Sunpower and First Solar.India installers and developers have also opposed the move as it will lead to lesser choice amongst suppliers and probably higher costs.

Why Germany could join USA, India in Anti Dumping Duty on Chinese Solar Panels Imports

Solar Trade Wars are becoming the norm in the globe these days with the major one between USA and China.The instigator is the German solar company Solarworld which helped started the ITC Case in the USA. India too is thinking of putting some kind of import duty to protect its domestic solar panel producers which are dropping like flies. Chinese solar panel producers have swamped the world with super cheap solar modules. though a part of their low prices can be explained by competitive advantage, another part is due to the labor, capital subsidy given by the Chinese government. It would not take a rocket scientist to say that some of the biggest Chinese solar companies are insolvent and would be dead within a month without Chinese state loans.

The government says it has no objections to Imports of low-priced Chinese solar cells as long as they meet prescribed quality standards. This comes as a setback to domestic manufacturers battling cheaper Chinese imports. Last week, the government rejected a plea of domestic players seeking imposition of import duty on finished solar equipment.

“The market will always bend towards the products which are low-priced. But, yes the quality matters,” said Tarun Kapoor, joint secretary, ministry of new and renewable energy. Kapoor, however, said, “We support what is legal, this is a case and we support WTO-accepted norms. It is not country specific, it’s rule specific.”

India’s National Solar Mission gives preference to domestic manufacturers. However, this is only at the central level and states are not obliged to follow this policy. “There’s only one scheme that offers this provision and it’s not a law,” Kapoor said. “We give the projects to developers who in turn are free to choose the products. If the prices are low and quality is good, then obviously, anyone would go for it.”

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.

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