Indian energy firms concerned about Venezuelan investments

Indian Oil corporation headquarters, Delhi. Photo: Ramesh Pathania/Mint


Utpal Bhaskar Live Mint :Thu, Mar 07 2013. 11 39 PM IST

Companies worried about the country’s hydrocarbon policy in the aftermath of President Hugo Chavez’s death

New Delhi: State-owned ONGC Videsh Ltd (OVL), Indian Oil Corporation Ltd (IOCL) and Oil India Ltd (OIL) are concerned about their investments in oil-rich Venezuela in the aftermath of President Hugo Chavez’s death.

These companies, which have invested billions of dollars in the South American country, have little option but to wait and watch whether the post-Chavez regime continues its hydrocarbon policy.

“We have asked our people to carefully watch the situation and advise us,” said T.K. Ananth Kumar, director, finance, at OIL. “We are carefully looking at the situation and taking appropriate action.”

Vice-president Nicolas Maduro is expected to contest the next presidential election against Henrique Capriles, governor of Miranda state, who lost to Chavez in last October’s poll.

With the election to be called within 30 days, under the Venezuelan constitution, and conventionally falling on a Sunday, it is expected to take place on 31 March.

Some significant investments made by the Indian firms in Venezuela include the one as part of a global consortium that is developing the Carabobo 1 Norte and Carabobo 1 Centro blocks in the Orinoco region.

OVL, IOC, OIL, Spain’s Repsol YPF SA and Malaysia’s Petroliam Nasional Bhd (Petronas) are partners in the $13.63 billion project, where OVL, Repsol and Petronas each hold an 11% share, and IOC and OIL hold 3.5% each. The remaining 60% stake is owned by Corporación Venezolana del Petróleo (CVP), a unit of state-owned Petróleos de Venezuela SA. Initial production has started at this project.

Also, OVL has a 40% stake in San Cristobal project along with CVP, where it has made an investment of $355.7 million.

“There is likely to be continuity between the regimes. One thing that bodes in favour of investors is that the new person may look at things dispassionately,” said D.K. Sarraf, managing director of OVL. “At the same time, there are immediate short-term risks such as forex and economic concerns.”

Private sector refiners such as Mukesh Ambani-owned Reliance Industries Ltd (RIL) and Essar Oil of the Ruias are the largest importers of Venezuelan crude oil. Venezuela has emerged as an important source of crude imports for India and supplied 15.14 million tonnes (mt) from April till December , as curbs imposed by the West on Iran for its suspected nuclear weapons programme affected sales of Iranian crude.

An RIL spokesperson didn’t respond to questions.

“Essar Oil enjoys good relationship with Petroleos de Venezuela SA, the state-run oil firm of Venezuela, and we understand that this development should not impact supply of crude from Venezuela to Indian refiners,” an Essar Oil spokesperson said in an emailed response.

Essar’s Vadinar refinery and RIL’s Jamnagar refinery are among the few facilities capable of refining heavy oil from Venezuela’s Orinoco region.

“There will be some confusion initially. Everybody is careful and watching how things evolve,” an IOC executive said, requesting anonymity. “It will be interplay of various forces. Given the fact that hydrocarbons are the biggest source of revenue for Venezuela, ultimately it is the economics that will bind people.”

Interestingly, Maduro has an Indian connection. He is a devotee of the late Sathya Sai Baba and visited Prasanthi Nilayam ashram in Puttaparthi, Andhra Pradesh, in 2005 along with wife Cella Flores, according to professor A. Anantharaman, spokesperson of Sri Sathya Sai Central Trust.

Supplies from India’s domestic energy sources are limited and the country depends heavily on imports—as high as 80% for crude and 25% for natural gas.

India’s energy demand is expected to more than double by 2035, from less than 700 million tonnes of oil equivalent (mtoe) today to around 1,500 mtoe, according to the oil ministry.

“The succession issue is very important, given the fact that the predecessor’s policies will be followed or not. One has to act diligently,” said Anil Razdan, a former special secretary in the petroleum ministry.

An Indian government official said Venezuelan supplies to India were unlikely to be affected. He declined to be named.

The concerns come in the backdrop of India’s overseas equity investments suffering even as Indian state-owned firms invested Rs.64,832.35 crore towards the overseas energy security efforts.

“ONGC Videsh Ltd (OVL) has produced about 8.753mmt of oil and equivalent gas during the year 2011-12 from its assets abroad in Sudan, Vietnam, Venezuela, Russia, Syria, Brazil, South Sudan, and Colombia. The estimated crude oil and natural gas production in 2012-13 is about 6.865 million metric tonne (mmt). The reasons for lower overseas production are geopolitical problems in South Sudan and Syria,” said the economic survey presented last month.

OVL’s D.K. Sarraf said that in an attempt to lower political risks, the company had invested in properties in different parts of the world, being ruled by different types of governments.

Yogendra Kalavalapalli in Hyderabad contributed to this story.

 

Banks Rs 56k crore loans to power sector under stress- Crisil

Souece :20 OCT, 2011, 12.44AM IST, ET BUREAU 


MUMBAI: The Rs 56,000-crore exposure of banks to the power sector could be under stress, according to a study by rating agency Crisil. 

The trouble stems from two areas - mounting losses by distribution companies, which have doubled to Rs 40,000 crore in 2010-11 from 2008-09 levels. 

The other cause of concern is availability of fuel and its pricing. 

The Crisil study estimates that the advances to the sector will grow at 23%, based on pending disbursements and distribution losses which will have to be funded by banks, which is currently at Rs 4.8 lakh crore. Of this, 12% of the total advances, or Rs 56,000 crore, is at risk, if no reforms are made to bring the distribution companies out of the red andtariffs revised. 

The gap per unit between the supply cost and the tariffs charged by distribution companies has been rising, the study mentioned. 

There will have to be a 50% tariff hike in order for these power distribution companies to break even. "A 50% rise in tariffs is a tall order. This calls for tremendous amount of political will," said Roopa Kudva, MD & CEO, Crisil. 

States like Bihar, Jammu and Kashmir, MP, Punjab and UP are in the highest risk category in terms of the state governments' ability to support the state power utility companies by capitalising them. Lenders' exposure to such states and the utility companies is about 40% or Rs 1.2 lakh crore. 

The level of debt of distribution sector is also estimated to rise to over Rs 3 lakh crore in 2011 from Rs 1.75 lakh crore in 2010.

As power projects trip, banks like SBI and ICICI may have to look at recast of loans

S0urce : ANITA BHOIR & RUCHIRA ROY,ET:1 OCT, 2011, 02.32AM IST,
State Bank of India and ICICI Bank are among the dozen lenders staring at the possibility of restructuring loans to the crisis-hit power sector that has been hobbled by state electricity board defaults and delays in new projects. 

A sector that only a few years ago was a gold mine of opportunities for investors and lenders, is turning out to be an unwanted child with both private equity investors and lenders. So far this fiscal, private equity investment in the sector has halved while lending has slowed to a trickle due to a number of reasons.

At least for the record, no power producer has defaulted so far, but the state of affairs has begun to ring alarm bells with some estimates showing that losses on loans could squeeze the banking system and revive memories of what happened when the textile industry went through a similar crisis in the 1990s.

For some, it is like revisiting the nightmare of Dabhol Power after its parent Enron went bankrupt in 2001. The RBI is inspecting banks to assess the potential damage. "So far, there have been no delinquencies as the projects are in the implementation stage, and if there are any stress, banks will restructure the accounts at the individual level,'' said Romesh Sobti, chief executive at IndusInd Bank that has loaned Rs 895 crore, or 8.9% of its total loans, to power sector.

"State electricity boards have always been in bad financial health, however, they carry a sovereign guarantee, hence the chances of default are very less.'' ICICI leads the list of banks with the highest exposure to the power sector.

It has given Rs 37,233 crore, or 5.9% of its total book, followed by State Bank with Rs 36,915 crore, or 2.5% of its total book. Axis Bank ranks third with Rs 17,110.60 crore, or 5.7%, annual reports of all the banks show. State Bank and ICICI Bank officials declined to comment, citing silent period ahead of their quarterly earnings.

"Our power sector book continues to perform satisfactorily,'' said an Axis Bank spokesman. "The projects are progressing as per schedule and most of them are expected to become operational over the next 2-3 years. With the longterm outlook positive, the portfolio is expected to perform satisfactorily....''

Lack of major reforms in the power sector is hurting the economics of the industry. In most cases, the state-owned electricity companies are monopolies in distribution, and sell power at heavily subsidised rate to consumers, especially farmers.

Years of uneconomical operations have pushed many, such as Rajasthan and Tamil Nadu's distribution companies, into losses, followed by default to power producers. The state-owned power distribution company in Tamil Nadu has seen its losses rise to Rs 38,000 crore in fiscal 2011 from Rs 4,900 crore in 2006. Its debt is up at Rs 40,300 crore from Rs 9,300 crore over the same period.

"Structural reforms are required in the transmission and distribution," said RK Bansal, executive director, IDBI Bank Ltd. "State regulators will have to make sure that they increase tariffs as fast as they can. The delay is largely in new power projects.

In one case, there has been a delay in implementation which can be handled.'' Scores of power projects, including JSW Energy and Reliance Power, are also facing delays due to nonavailability of fuel, such as coal and gas, and land acquisition. The government's flip-flop in mining, and environmental policies have also hurt.

Some, such as Tata Power and Adani Power, are importing coal, but even that is becoming unviable given the surge in coal prices. These issues may manifest themselves as losses to banks. "Our supervisors are assessing the situation in each bank and also the entire banking sector,'' Reserve Bank of India Governor Duvvuri Subbarao told ET in an interview earlier this month. 

RPower gets Rs.400-crore Exim-Bank loan

Source :The Hindu:NEW DELHI, September 2, 2011

Giving a thrust to its ambitious renewable energy programme, Anil Ambani-owned RPower on Friday announced that it had secured a Rs.400-crore loan from the U.S. Emport-Import Bank for a 40-MW solar plant being set up in Rajasthan.

The company is developing the country's largest solar photo voltaic (PV) project with 40-MW generation capacity, which is scheduled for commissioning by March, 2012. The U.S. Exim Bank approved the loan at its meeting on August 25.

A long-term Power Purchase Agreement (PPA) for the PV project has been signed with group company Reliance Infrastructure at the Maharashtra Electricity Regulatory Commission (MERC)-approved tariff. 

The company had already placed equipment orders with a U.S. supplier for the project which will be eligible for carbon credits.

The 40-MW solar plant is the first plant in a series of solar energy projects planned by the company. 

This would be followed by commissioning of another 100-MW solar plant in Rajasthan, which would be a concentrated solar power (CSP) project to be commissioned by May, 2013. 

The long-term power purchase agreement for the CSP project was signed with NTPC Vidyut Vyapar Nigam Ltd (NTPC's) power trading arm) at a tariff of Rs.11.97 per unit.

The company already has wind projects in operation with capacities of around 100 MW in Gujarat, Maharashtra and Tamil Nadu.

Planning Commission sets 20,359 MW capacity addition target

Source : :PTI May 17 2010 , New Delhi

The Planning Commission today set targets to augment the country's infrastructure this fiscal, including
adding 20,359 MW of power generation capacity and 2,500 km of highways, its Deputy Chairman Montek Singh Ahluwalia said here.

The goal for at least the power sector is ambitious given the failure to meet even last year's subdued target.

The plan panel had set 14,507 MW power generation capacity target in 2009-10, but actual addition was just 9,585 MW.

Similarly, the target for highway last fiscal was 3,165 km, while the actual completion was 2,008 km.

The investment target for roads has been pegged at Rs 35,680 crore in 2010-11, higher than Rs 29,934 crore in the last fiscal.

Again, the actual investments that came in into the sector last fiscal was Rs 11,608 crore.