Distressed Thermal Power Projects in India

In India, Thermal power plants account for 66.9 per cent of the total installed capacity and more than 50% of the power generating capacity will be depended upon coal for another 20-25 years. Power demand typically exceeds supply by about 10% at peak times.

Power plants have to depend on costly imported coal that further result in increased operating costs are increased, leading to profit minimisation of the generating companies and costlier per unit cost of electricity.

India does not have an overarching energy strategy — instead it has a number of disparate policies.  Rather than promoting an overarching energy strategy, to date India has developed a cluster of energy business models and policies that have not been productive. Some of the related challenges to the power generation industry are as follows:

• The coal sector in India is heavily regulated with two state companies representing 90 per cent of the supply. The coal sector is closed to private investment. Foreign investment is allowed only in captive coal mines. Power plants in India operate with low levels of reserve coal supply, many of them with just one day of coal reserves.
• In 2012, 29.78 per cent of the plants were owned by the central government, 41.1 per cent were owned by different state governments and 29.11 per cent were owned by private companies. Plants owned by the private sector have the best performance in terms of availability and load factor. This highlights the inefficiency in the state and central electricity plants.
• For the coal fired power plant; land acquisition, environment clearances are issues but the major issue is the supply of coal. The domestic coal supply is hindered by delays in mining projects. 
• The gas sector also faces similar issues of stagnating production and lack of investment. In addition, there is demand for an integrated national gas grid from industry but no steps have yet been taken in this direction.
• The exploitation of renewable sources of energy remains commercially unviable. While the focus on renewable energy is important to minimise the adverse environmental consequences of power generation using fossil fuels, at current levels of cost per unit, even after subsidies, it is uneconomical. Much more research and development is necessary in order to make it viable.
• Scaling up renewable generation means resolving fundamental challenges of supply volatility, grid integration, geographic dispersion and un-competitiveness. Bearing the higher costs of renewable power sources is the biggest hurdle.

Thus a number of complex interconnected issues have been affecting large number of power projects in the country wherein the operational power projects have become financially less attractive and under-construction power projects are facing huge delays. This situation is creating sub-optimal utilisation of installed capacity, non-performing assets and capital inefficiencies. The sector therefore needs multiple remedial measures.

With this frame of mind, InfralineEnergy is coming out with a research study on “Distressed Thermal Power Projects in India: Acquisition Opportunities”

The major focus of the work would be on identification of distressed thermal power projects in India and mapping of various key issues responsible for such situation. Besides this, the report would also highlight the potential opportunities for investors and the systemic challenges that can arise in case of ownership transfer under the current policy, regulatory and legislative framework in India.

Read more on http://www.infraline.com/ReportDetails/273/Distressed-Thermal-Power-plants-in-India.htm

                      Infraline Energy Power Research Team

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