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KSK Energy Ventures

BSE: 532997|NSE: KSK|ISIN: INE143H01015|SECTOR: Power - Generation & Distribution
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Chairman's Speech (KSK Energy Ventures) Year : Mar '15
Dear Shareholders,
 
 Power generation in India has been on the increase with generation of
 1,048 Terawatt hours (TWh) during 2014-15 on the back of doubling of
 installed capacity in the sector over the last decade.  However, lower
 than 60% Plant Load Factor (PLF) experienced by private owned coal
 fired power plants across India during the year only goes to reflect
 the significant asymmetry that has occurred over the last three years
 with respect to fuel and transmission issues in the sector requiring
 corrective action for the sector as a whole.
 
 The Group''s gross generation of 6.16 TWhs during 2014-15 in spite of
 achieving an installed capacity base of 2072 MW only confirms to the
 overall sectoral trend of moderated PLFs. However, with the various
 challenges at 540 MW Sai Wardha and the 1,200 MW KSK Mahanadi power
 plants now being addressed, it is anticipated that gross generation
 could achieve 9 TWhs during 2015-16.
 
 Whilst the issues at Sai Wardha have seen certain improvement during
 the period and thereafter on account of partial resolution through Fuel
 Supply Agreement amendments, the full resolution with respect to price
 is anticipated for achievement during the current year.
 
 As regards, 3600 MW KSK Mahanadi power project, the same is India''s
 truly private sponsor driven Ultra Mega power Project with major
 achievements on the ground along with various ancillary infrastructure
 by group companies as below:
 
 * Power plant built over 2000  acres of land
 
 * c.72 kms of dedicated water pipeline from Mahanadi River
 
 * c.42 Kms of railway line from Howrah-Bombay Line
 
 * c.60 kms of transmission corridor
 
 Therefore substantial completion has been achieved at the power station
 with entire Balance of Plant for the project i.e DM plant, cooling
 water system, coal handling system, ash handling system, fuel oil
 system, chimney, ESP along with power evacuation system for the plant
 been completed, common civil works, boiler foundations for the
 construction units. This accounts for the substantial completion of the
 overall facility and the Company is currently in discussions with both
 Government and project stakeholders regarding the terms of existing
 drawn and undrawn financial facilities in order to match these to the
 current development and additional financing plans for KSK Mahanadi.
 The plan forward has now been agreed by the Consortium of Project
 Lenders and regulatory dispensation is currently being sought. The
 outcome of all of the above may impact on the timing of the strategic
 development of the remaining four units.
 
 However, in line with the overall Indian sector, the Company has
 suffered fuel supply setbacks during the year, wherein both the Fuel
 Supply Agreements with Goa Industries Development Corporation and
 Gujarat Mineral Development Corporation have become inoperable on
 account of the cancellation of their respective coal blocks by Hon.
 Supreme Court of India.  In a recent development, the tapering linkage
 contract has been discontinued by the Ministry of Coal and an alternate
 Memorandum of Understanding based supplies has been proposed as an
 interim arrangement until 31st March 2016. It is now expected that the
 Ministry of Power and Ministry of Coal are currently planning a
 comprehensive new plan and structure wherein the coal supply plans
 would be formulated to address needs of those power plants that have
 physically progressed on the ground and with PPA commitments to DISCOMS
 already made. KSK Mahanadi together with multiple DISCOMS supply PPAs
 is pre- eminently qualified for favourable consideration and
 accordingly it is expected that necessary coal requirements of KSK
 Mahanadi could be suitably addressed.
 
 As regards the operational 1200 MW, in addition to Andhra Pradesh State
 Discoms, commencement of power supplies to the States of Tamil Nadu and
 Uttar Pradesh would enable achieving higher PLF during 2015-16 and
 associated operational and financial performance. Further, interim coal
 imports from overseas through appropriate collaborative arrangements
 that have been put in place and facilitated by working capital lenders,
 will provide sufficient fuel for the planned generation from KSK
 Mahanadi.
 
 The year continued to be a difficult time for the entire power sector
 in India and management have maintained their efforts to address
 various challenges in the operating projects. KSK''s bold growth
 initiative, from start-up to becoming a leading independent power
 producer targeting c.3% of total Indian power generation by 2017 (upon
 completion of all units of KSK Mahanadi), demonstrates KSK''s long term
 strategy and, upon successful resolution of various issues,
 demonstrates the potential for profitability in this key area of the
 Indian economy.
 
 I reiterate that KSK''s performance during the year would not have been
 possible without the valuable and appreciated support of its
 shareholders who have enabled us to pursue appropriate business
 opportunities in these challenging times.
 
 T.L. Sankar
 
 Chairman
 
 
Source : Dion Global Solutions Limited
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