We do not speculate on fuel: CLP Power MD

Q&A: Rajiv Mishra, managing director, CLP Power India

After making an initial investment in a 655 mw gas-fired power station in Gujarat in 2002 and then moving on to the wind energy space, CLP Power India, the Indian arm of Hong Kong-based CLP Holdings, recently synchronised its first thermal power unit at Jhajjar in Haryana. Coming at a time, when most of the new players are stuck with investment giving rise to concerns among financial institutions, CLP Power India managing director Rajiv Mishra tells Jyoti Mukul that they are not financially constrained but opportunity constrained. Edited Excerpts:

With your first coal-fired unit at Jhajjar getting synchronised, how do assess the company’s journey in India?
The parent company has an overall market capitalisation of $20 billion and is among the largest Asia Pacific power company. We have been in India for 12 years now and are India’s largest foreign investor in power and renewable energy sector. We have 2,700 mw of gas, coal and wind power generation plants of which 655 mw gas-fired plant in Gujarat has been operating for 12 years now. We have recently synchronised first of the two coal-fired (1,320 mw) units at Jhajjar. We expect to commission the second unit in a couple of months. We also have 740 mw wind out of which approximately 500 mw are already commissioned. The balance will be commissioned until March next year.

 

How do you perceive the current fuel supply situation both for coal and gas-fired stations?
I would say that our entire fuel is tied up and yet we are facing problem. Gas is available as in regassified LNG but it is expensively priced. In case of gas, there is availability but the problem is of affordability. In the case of coal, it is both. There is clearly a shortage in the domestic market but we have just commissioned our first coal unit. For the entire 1,320 mw, we have 5.2 million tonne linkage with Coal India. At the moment, we got coal just for commissioning. The period of steady supply has not started. But it is clear that the solution will be a combination of supply from CIL as well as imports. For instance, we have been recently informed by the Central Electricity Authority that our plant will have to import 1 mt in 2012-13. That tells you the expected import quantity.

What kind of problems do you visualise in the sector and when do you see them being resolved?
We are optimistic about the Indian power market in the long-term. There is tremendous scope because India has one of the lowest per capita consumption in the emerging world. In the immediate, there are two major challenges—supply of fuel and the offtaker’s ability to pay. For any new investment, we have to make sure that those two are in place. We would happily invest in projects which mitigates these two risks. It is very project specific philosophy that we adopt. In the current market, we will be happy to bid for a domestic coal-fired UMPP which comes with its own coal mine. But in projects, where one or both are not present, it would difficult to get board approval. We will be interested only in pit head ultra mega power plants. We remain optimistic in the long-term.

How comfortably are you placed with the gas supply for the Gujarat plant?
Our total requirement for full capacity is 3.14 million standard cubic metre a day gas of which 30 per cent is domestic which has been tied up with Cairn for 0.98 mscmd and Reliance for 0.98 mscmd. The remaining 70 per cent is imported regassified LNG of which 0.36 mscmd is contracted RLNG and 1.8 mscmd is sourced on spot basis.

What has been the per unit increase in power cost due to gas price hike and have you been able to pass it on?
The per unit fuel cost currently works out for power on RIL gas as Rs 1.61 a kwhr, on contracted RLNG Rs 3.8 and spot RLNG Rs 6.23. These are only indicative and depend on many factors such as load factor/load variations/fuel –mix proportion but for us fuel is a pass through. We only take up project where we have the ability to pass on fuel cost. We do not take speculative position on fuel. We do not believe power producers are in best position to do that. The year before, spot prices of gas were higher.

What are your plans for the future? Will you tie up with any company?
Our total project investment is Rs 12,000 crore. We could easily double and trible our capacity if the right opportunity is available. We do not have fixed megawatt target. We have the experience and expertise but one has to be realistic. We do not want to get into distribution. In transmission though we did bid but we did not win the projects. All our investment is wholly-owned but if there were partnering opportunity, we would like to tie up where we have majority.