Interview with Ratul Puri

“The company will stay away from aggressive bidding”

Hindustan Power Projects Private Limited (HPPPL), formerly known as Moser Baer Projects, plans to undertake significant capacity addition, both in the conventional and renewable energy segments, in the coming years. The company has recently achieved a significant milestone with the commissioning of Phase I of the Anuppur thermal power plant. Ratul Puri, chairman, HPPPL, believes that the company is on track to achieve its target of 7 GW of installed capacity by 2020. Excerpts from a recent interview…

How would you rate the performance of the power sector in the past one year?

In the past one year, the performance of the power sector has been quite positive. The biggest development was the announcement of the Ujwal Discom Assurance Yojana to overcome the financial constraints being faced by the state power discoms, which are weighed down by a collective debt of Rs 4.3 trillion and losses of Rs 3.8 trillion. This has resulted in a situation where the discoms were not buying electricity.

Another positive for the sector was the increase in the pace of rural electrification in line with the government’s objective of providing 24×7 power for all by 2019. The government also addressed generation-side challenges by ensuring coal linkages and coal supply to thermal power plants (TPPs). Further, the growth in Coal India Limited’s (CIL) output over the past one year was among the highest in decades.

Meanwhile, India achieved the highest capacity addition in the solar and wind segments along with growth in coal mining. Moreover, falling solar tariffs was one of the key developments in the sector, which attracted the attention of global players. However, the hydro sector hardly saw any development and, therefore, the government’s focus on creating a new hydro policy is well timed.

What are the biggest issues impacting power producers today and how can these be addressed in the short to medium term?  

Today, the major challenge faced by power producers is their inability to address the issue of suppressed power demand. Due to their weak financial position, the discoms are unable to procure power. As a result, a large number of citizens do not have access to 24×7 power. Mounting aggregate technical and commercial losses as well as operational

inefficiencies have adversely affected the financial health of state discoms, which are currently plagued with humongous outstanding debt. As a result, power generators, particularly thermal power producers, are left with unsold power and backing down a plant is not a viable commercial option as it takes days to get it running again. Also, running a TPP at low capacity increases the per unit cost of generation and thereby takes a toll on the financial health of power producers.

While fuel supply to TPPs has increased substantially with coal auctions, improved logistics and higher production by CIL, the sale of power by gencos is a challenge. In fact, TPPs aggregating over 21 GW of capacity lack firm power purchase agreements and several other plants are suffering from poor returns due to regulatory restrictions on cost recovery.

Further, solar power tariffs have come down sharply from about Rs 15 per unit a few years ago to Rs 4.34 per unit now. This has encouraged the states to increase their solar power capacity. There is also a need to focus on hydropower generation, which is vital for grid stability. The success of the country’s renewable energy plans will depend on the ability of discoms to absorb hydropower.

India’s goal to provide uninterrupted and affordable power for all requires that the entire power industry as well as the coal and gas sectors function seamlessly. It involves  ensuring that electricity producers get supply of affordable coal and natural gas, competition drives down tariffs, the transmission network is congestion- free, and power distributors become more efficient by eliminating power theft. The government will have to work on these areas to achieve the desired goal.

What were some of the significant business highlights for the company last year?

The company has achieved major milestones, commissioning a capacity of 600 MW for solar and 1,200 MW for thermal. Both the landmarks were very significant for the sector, which is struggling on account of the economic slowdown and financial constraints.

What are the various power projects that are proposed to be set up by the company? What is their current status?

The company is on track to achieve its goal of commissioning 7 GW of capacity by 2020 from solar, hydro, wind and thermal sources. We have recently commissioned the 1,200 MW Anuppur TPP Phase I project. We have also commissioned around 600 MW of solar capacity.

How are HPPPL’s plans for the solar power segment shaping up? What are its targets in this regard?

With a current solar capacity of around 600 MW, we are on the path of achieving a total solar capacity of 2 GW over the next couple of years. Apart from following the conventional route for securing debt, such as through commercial banks and non-banking financial companies, the company will explore options like green bonds and approach international financial institutions for developing projects.

Our clean energy arm is the largest solar farm developer in the country, generating carbon savings of around 720,000 tonnes per year. We recently commissioned a 30 MW solar farm at Mansa in Punjab. The mid-sized grid-connected solar farm was commissioned at an investment of Rs 2 billion. It will tap the vast solar energy potential of Punjab, which is estimated at 4-7 kWh per square metre of solar insolation, and enable the state to achieve its renewable purchase obligation targets. The project will feed 50 million units of clean energy annually into the 66 kV grid, sufficient to meet the daily energy needs of 24,000 households.

What is the outlook for large hydropower plants in the country?

There is a need to urgently revive the hydro sector. Hydropower is an excellent long-term source of clean and renewable energy for India. Most importantly, hydropower projects can be an ideal foil to solar and wind projects, with their ability to store energy and release it as per demand. The bulk of hydro generation takes place during the monsoons, when solar output is low.

What are the company’s plans for launching its initial public offering (IPO)? How would you utilise the proceeds of the IPO?

We may go in for a public issue in 2017. The time and size of the issue will depend on the company’s funding requirement.

What are HPPPL’s key priorities?

The power sector requires 10-12 long-term players to undertake significant investments. HPPPL is among the very few companies to have weathered the economic slowdown and has managed to commission a significant thermal power capacity of more than 1,000 MW as well as a solar capacity of around 600 MW by adopting the risk mitigation approach. The company will continue in the same spirit and stay away from aggressive bidding or following an irrational approach.

What are some of the challenges facing the company and how do you plan to address these?

A key challenge for the sector is unlocking the suppressed demand, and we believe the government is taking steps to correct this situation.

What is your roadmap for HPPPL for the next two to three years?

HPPPL has a vision of commissioning 7,000 MW of power by 2020. We are currently at an advanced stage of commissioning combined power assets at an estimated investment of Rs 360 billion.

What is the overall outlook for the power sector?

The outlook is positive thanks to the policy initiatives taken by the government in recent years. India is on a growth path with high GDP growth, a negligible current account deficit and significantly reduced fiscal deficit. The power sector has seen major movements and changes in recent times. The aim to supply 24×7 power for all by 2019 had seemed a distant dream, but now seems to be achievable in the near to medium term. It is important to recognise the tremendous work undertaken by the government as well as other stakeholders to address the challenges. At the same time, we need to be cautious as there are still many issues that remain unaddressed. The government has overcome problems facing the entire power value chain, which has generated interest among investors and project developers. The impact of these initiatives, however, may only be visible over the next year.

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