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Interaction | April 2013

We See Major Opportunities in T&D Sector in India

In an interaction with Pradeep Pandey, Manoj Mathur, Director (T&D), Isolux Corsßn India, speaks about the viable T&D business in India, key achievements of the company in T&D market and future plans

How do you see the Indian T & D Market and what according to you are the major flaws in the power sector?

T&D infrastructure in India assumes utmost importance given the scenario in which the distribution of energy resources and consumption centers are extremely unbalanced. Generation projects are primarily trying to locate in pit head or resource rich areas ultimately depending on the huge network of transmission infrastructure for their consumption. Transmission infrastructure is not only required to meet the evacuation needs but also support the open access requirements of the generators. Emergence of power market and power sector reforms after Electricity Act 2003 has further added to the challenge in the operations of the T&D network.

The current installed transmission capacity is only 13 percent of the total required for an installed generation capacity of 211 GW. With a focus on increasing generation capacity over the next 8-10 years, the corresponding investments in the transmission sector is also expected to improve.Power Grid, the central transmission Utility has Rs 20,000 crore investments lined up for the fiscal year that starts in April. Almost Rs 18,500 crore will be spent on 126 ongoing schemes while the rest will be invested in new schemes only. It is clear that the biggest fundamental issue cirumventing the viability of the Indian power sector is the sheer volume or level of Transmission and Distribution (T&D) losses that amount to 33 per cent, a very high level by any standard. Thus there is a pertinent need to reduce the level of these losses. All efforts to bring them under control have not been able to produce any tangible outcome.

Tell us about the key projects under execution in India and other Asian countries?
Isolux Corsan's operations in India are quite new, we have received our first order from Maharashtra State Electricity Transmission Company in 2009, since then we have been awarded three projects in Transmission line by power grid and by some other state utilities. We are expecting few substation orders from Haryana Electricity board and from some South Asian countries like Vietnam, Thailand, Malaysia, Indonesia Bangladesh and Myanmar. The biggest milestone that we achieved in India was getting an order worth 4,300 crore from UP government on Build, Own, Operate and Transfer (BOOT) basis. The plan is to capitalize on the talent that we have in the India office and we intend to oversee projects in other Asian countries from the India office.

What, according to you, is the organization's competitive edge?
For any Organization, its completive edge lies in its trained manpower. At Isolux Corsan, we have large pool of experienced resources with in India and overseas with proven execution skills. We also have strong project management skills with appropriate blend of skilled resources and ability to deliver projects much faster for our clients. Very recently we have erected the tallest transmission line tower in Brazil. Our resources are experts in their field and with their support we can execute projects up to any voltage level in India.

What are your recommendations to expedite T&D development in the country?
Being a highly regulated sector, it has traditionally been dominated by public sector companies under the Central government as well as individual state governments. Even with the enabling policy framework in place after the Electricity Act 2003 through tariff based competitive bidding, the private investment in Power Sector in general and transmission in particular has been far from expectations. The efforts of Power Grid in creating robust transmission network would need to be supplemented by involvement of Private Sector.

Of late the government has taken some important steps which may catalyze the growth in the sector. Like rating program for distribution utilities on the basis of creditworthiness, regulation adherence, subsidy payment etc is a wise step in this direction. Government has also announced the restructuring package for state distribution utilities but there is a need to increase the electricity tariff.

What are the key issues and challenges the company is facing in the power sector? How does it plan to address them?
The general sentiment in the power sector is not very positive these days after the recent coal fiasco which not only adversely impacted the Generation side but had spiraling impact on T&D as well. As I said earlier, the deficit of electricity is huge and the loss during transmission is also very high. There is an immediate need to have robust T&D infrastructure to cater to that. For EPC contractors, the golden days are now over. Nowadays, the environment is extremely competitive and projects are being quoted on wafer thin margins. For most of the established contractors survival in this market has itself become a question mark. For transmission line there is a huge shortage of skilled erection gangs, then Right of Way (RoW) problem is there.

Even as the mess on the downstream distribution side has been partially addressed by the debt recast announced for the power sector, the problems on the generation side remain. The long-term PPA model is beginning to show cracks, with defaults looming large for a number of high-profile projects on account of tariffs quoted by developers at the time of bidding appearing to be untenable now.

The worry then is that if these issues are not addressed adequately, there could be situation where a majority of the stakeholders in the power sector could be deep in the red ù be it project developers, banks and financial institutions, transmission firms or even the distribution utilities.

What are the company's key focus areas for future growth?
As I told you earlier, India is the not only the strategic growth market for the company but we wanted to develop it as a hub to oversee projects in middle east and other Asian countries. Company is targeting to enter not only in the 765 kV or above voltage transmission system but also in the Distribution work under RGGVY. The long term vision is to establish ourselves in the GIS market as we see lot of potential there.

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