"From March onwards, we have not been getting gas for our power projects," says A Issac George, Director & CFO, GVK Power and Infrastructure. One of the reasons why this has happened is because all the gas was diverted to fertiliser plants, he adds.
The shift to power projects may be a positive development, but it all depends on the quantum of gas that will be made available for the power sector, he says. Unless and until the quantum of gas is enough to operate power projects at 70-80 percent capacity, it will not make much sense because the losses on account of heat rate would be substantial, he adds.
Below is the verbatim transcript of A Issac George's interview on CNBC-TV18
Q: In the last few weeks, we have seen the government moving ahead on the clearing fuel supply agreements (FSA) logjam as well promising gas to some of the gas-based power companies, is the situation better on the ground for power companies?
A: We are in the same situation as we were a couple of months back. From March onwards, we have not been getting gas for our power projects. Two of our power projects are still shut down for want of gas. The third gas power project that we have operates only at 50 percent capacity.
One of the reasons why this has happened is basically because all the gas was diverted to fertiliser and power projects have not received the gas. Now with the shift that we are looking at possibly there would be some sort of positive development but one does not know what is the quantum of gas that would be available for the power sector. That is very critical.
Please understand that these power projects have to operate at a minimum load so that they operate efficiently. So unless and until you get gas to operate the power projects at something like 70-80 percent capacity, it will not make much sense because the losses on account of heat rate would be substantial. So I cannot comment on this unless and until I know what is the quantum of gas that would be available for power projects.
Q: You spoke about power but what about the infrastructure space, we did see CCI agreeing to reschedule premiums for public private partnership (PPP) highway projects, if that comes through how much of an improvement could it be for infrastructure projects like yours?
A: That is pretty positive. What the government is now proposing is that premium payment can be backended with NPV remaining the same. The question that we have a concern on is there discounting rates that is used for arising of the NPV. That is – we have been given to understand earlier that discounting rates will be 10 percent, but now I have given to understand that it is going to be 12 percent. That will make a substantial difference. It can make or break projects. One has to look at the possibility of bringing it back to 10 percent because basically, the discounting rate is a factor of so many things for example, government yield on bonds etc are the parameters which are used to arrive at the same rate. So I did not understand the logic of taking the discounting rates from 10 percent to 12 percent.
Q: We may be getting ahead of ourselves in that. Do you expect other bidders to challenge because you are changing the terms of contract?
A: There is a possibility, but if the government has the will, I am sure things can go through without any problem.