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Interaction | March 2018

T&D sits with Rs.30,000-crore refinancing opportunity

<span style="font-weight: bold;">Satish Parakh, Managing Director, Ashoka Buildcon told POWER TODAY</span> that the credit risk profile of operational ISTS projects is strong because of assured cash flows, low operations and maintenance (O&amp;M), and low counterparty risk.<br /> <br /> <span style="font-weight: bold;">How do you plan to leverage the opportunities provided by the government in transmission and distribution (T&amp;D) space?</span><br /> From the projects handled, we have developed a core team of project managers and sub-contractors who understand every facet of the activity from design, construction to commissioning and have established a methodology for speedy construction from which we are progressing in transmission work along with established distribution work. We have established setup in Maharashtra and are now focusing on Bihar, Uttar Pradesh and Jharkhand.<br /> &nbsp;<br /> <span style="font-weight: bold;">Comment on the investments made in the sector. How much more fund is likely to be pumped into India's power sector? How is it likely to benefit the sector?</span><br /> The government has identified power sector as its key focus so as to promote sustained industrial growth. India's power sector is one of the most diversified in the world. Electricity demand in the country has increased rapidly and is expected to rise further. To meet increasing electricity demand, massive addition to the installed generating capacity is required.<br /> <br /> India ranks third among 40 countries in EY's Renewable Energy Country Attractiveness Index, on back of strong focus by the government on promoting renewable energy and implementation of projects in a time bound manner.<br /> In September 2017, the government launched the Saubhagya scheme to provide electricity connections to over 40 million families in rural and urban areas by December 2018.<br /> <br /> The initiative would entail an investment of about US$ 310û350 billion. Between April 2000 and September 2017, the industry attracted US $ 12.3 billion in Foreign Direct Investment (FDI), accounting for 3.44 per cent of total FDI inflows in India.<br /> &nbsp;<br /> <span style="font-weight: bold;">Since 14,000 ckm of inter-state transmission system (ISTS) projects are under construction, do you see a refinancing or bond opportunity for the sector?&nbsp;&nbsp;</span>&nbsp; <br /> Inter-state transmission system (ISTS) projects present a Rs 30,000-crore refinancing opportunity for the bond market over the next three years as 14,000 circuit km of under-construction lines come on stream. The credit risk profile of operational ISTS projects is strong because of assured cash flows, low operations and maintenance (O&amp;M), and low counterparty risk. This appeals to bond investors, as is evident from bond issuances of Rs 5,000 crore for operational ISTS projects over the past couple of years. Revenue for ISTS projects is assured through long-term (30-35 years) transmission service agreements, and is delinked from the quantum of electricity transmitted.<br /> <br /> Revenue is contingent on maintaining line availability above 98 per cent. But this is easily achievable through routine O&amp;M, and is not technically challenging. Counterparty risk is quite low for ISTS projects because of the presence of a point of connection, mechanism, managed by Power Grid Corporation of India (PGCIL). CRISIL expects the credit profiles of ISTS projects, once operational, to remain healthy, and present a fairly large, low-risk investment opportunity to bond investors.'<br /> &nbsp;<br /> <span style="font-weight: bold;">Tell us about your current order book position? </span><br /> Our current order book positions in terms of domestic orders are around Rs 1,600 crore from Bihar, Uttar Pradesh and Jharkhand under various schemes. From our experience we are participating in upcoming projects of Rs 10,000 crore in Uttar Pradesh, Bihar, Jharkhand, etc. <br /> &nbsp;<br /> <span style="font-weight: bold;">What are the factors driving growth in India's transmission sector? </span><br /> Significantly, India has turned around from a net importer of electricity to net exporter of electricity exporting around 5,798 million units to Nepal, Bangladesh and Myanmar in 2017.<br /> <br /> Power transmission sector too witnessed an impressive growth over the past three years. In line with the government's 'One nation, One price and One grid' initiative, the transmission sector witnessed as much as 36 per cent (One third) increase in transmission capacity from 530,546 MVA in March 14 to 722,949 MVA in March 17.<br /> <br /> Alongside, the transmission lines saw a 26 per cent (One fourth) increase from 291,336 circuit kilometres (ckm) in March 14 to 366,634 ckm in March 17. Then there has been an 87 per cent increase in Alternate Transfer Capacity to South India from 3,450 MW in March 14 to 6,450 MW in March 17.<br /> <br /> The growth in the sector was aided by simultaneous reforms on the rural front under the Modi government's flagship program to provide electricity across all villages in the country.<br /> <br /> Rural Electrification under Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY) was a program announced in 2014 to connect un-electrified villages and transform the lives of rural people. The number of un-electrified villages in 2014 stood at 18,452. This program, that was given a special focus under the reform programme of the government, achieved a new milestone of more than 13,123 villages of 18,441 electrified as on May 12, 2017.<br /> &nbsp;<br /> <span style="font-weight: bold;">States get locked into buying power from costly but linked-up generators in the vicinity owing to poor or no grid connectivity. Can you suggest any measures for this?</span><br /> The country's lack of energy security is a major constraint in its ability to generate power. The slow pace of tariff reforms is hindering infrastructure investment at the state level in most parts of the country and the centralised model of power generation,&nbsp; T&amp;D is growing costlier to maintain at current levels as well as not allowing the flexibility required to meet growing energy needs. India's shortage of power is hampering its economic growth.<br /> <br /> <span style="font-weight: bold;">Measure to resolve:-</span><br /> The government needs to make an assessment of how best to address the power needs to meet the future growth and prevent such massive power failures.<br /> For economic as well as environmental reasons, India needs to shift to non-polluting renewable sources of energy. Additionally, decentralised off-grid renewable distributed generation sources like solar, wind, hydropower, biomass, biogas, geothermal energy, hydrogen energy and fuel cells are all potential parts of the solution that need to be explored. These sources have the advantage of permitting and empowering people at the grassroots level, while requiring less need for distribution and transmission - with little to no emissions.<br /> <br /> The deployment of large-scale solar and wind projects need to continue at pace to effect the smooth transition from fossil fuels. This is happening already, but more rapid project development is required going forward.<br /> <br /> <span style="font-weight: bold;">The state government has not been able to seamlessly integrate renewable energy into the grid which could impede major developments in the sector. What are your views on this?</span><br /> Yes, the state government has not been able to seamlessly integrate renewable energy into the grid because RE is variable, uncertain, and geographically dispersed, extensively unpredictable, dependent on locations.<br /> <br /> While, it will be possible by integrating smart grid utilising advanced technologies of digital computing and communication has to operate and control the power system within the acceptable ranges of parameters.<br /> <br /> Regulatory mechanism in India gradually coming to be in force encourages to promote distributed generation and renewables and protects the concerned green energy sources to meet the electricity demand at every instant of time along with centralised conventional thermal or nuclear generation.<br /> <br /> Stringent measures need to be complied with in operation while connected to grid, of course taking advantage of advancement in technologies as available to the smart grid which over the years has changed from what it was in the past in terms of operation and control.<br /> &nbsp;<br /> <span style="font-weight: bold;">Can you give us a sense on new projects in the sector outlined by the government? </span><br /> &nbsp;Some government initiatives to boost the country's power sector are DDUGJY, IPDS and Saubhagya Yojana, to provide electricity to all villages. Currently, we are allotted eight projects in Bihar under RGGVY, IPDS &amp; DDUGJY, three projects in Uttar Pradesh under DDUGJY, one project each in Jharkhand, Chennai and Maharashtra under various schemes.<br /> <br /> <span style="font-weight: bold;">- Rahul Kamat</span><br />
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