Gas pooling to solve fuel issues: Rel Power

The Rosa Unit II with a 600 megawatt capacity which Reliance Power had commissioned in the March quarter of FY12 has achieved 80% plant load factors (PLF) versus 60% year-on-year. The company’s chief executive, Jayarama Prasad Chalasani told CNBC-TV18.

He also pointed out that tariffs will be dependent on coal supply next year. He also said that the Empowered Group of Ministers (EGoM) have given a nod for excess coal diversion for Chitrangi plant. Also, the company's Samalkot project construction is on track. R-Power is also working with the government to assess feasibility of gas pooling. Chalasani said that he sees pooling of gas available from domestic sources with imported natural gas as the only interim solution to the fuel shortage that has hit gas-based power plants in India, including R-Power's upcoming 2,400MW project at Samalkot, Andhra Pradesh. Meanwhile, the Anil Ambani-led Reliance Group's power generation arm, reported a better-than-expected 24% increase in net profit because of improved operational efficiency at its thermal power plant at Rosa, Uttar Pradesh. The company saw its profitability improve as a result of greater income from its 1,200 megawatts (MW) power plant at Rosa. The asset clocked a net profit of Rs. 335 crore in FY12, up 155%, YoY.  Consolidated net sales also rose 7.7% to Rs. 532.59 crore. Below is the edited transcript of Chalasani’s interview with CNBC-TV18. Also watch the accompanying video. Q: Can you take us through your operations results for this quarter? How exactly did the Rosa plant perform in Q4 in particular and what would your guidance be for FY13? What can we expect in terms of possible PLF, tariffs as well as realizations? A: Rosa plant continues to perform very robust throughout the year including Q4. In Q4 we had 85% of plant load factor (PLF) and availability of plus 90% on this. Another significance of Q4 is the phase II of Rosa 600 megawatts out of the first unit started operating and second unit got commissioned by the end of the year. As we ended the year, the capacity at Rosa has changed from 600 mw base to 1200 megawatt base. So in FY13 the base has doubled to 1200 mw. The 600 mw phase compared to FY11-Fy12 has performed significantly better, 60% of PLF what we had we had over 80% PFL and 87% of availability. Profitability has gone up to Rs 335 crore in phase I, which is a significant jump compared to the previous year. In the month of April we operated the entire 1200 mw plant and we had 92% of availability and we had plus 85% of plant load factor. So, the entire 1200 mw started operating in a very stable manner. Therefore, we expect that the revenues, EBITDA and profitability will continue in a similar manner. It will just double because the capacity base is doubled in FY13. Q: Can you tell us whether you will maintain this 33.5% margin level and how much higher could it be because you did mention that even on your EBITDA you will do better. Your realizations as well this time around you have done close to Rs 5 per kilowatt hours, how much can you manage to do through the course of FY13 you think? A: As far as the Rosa plant is concerned, we are responsible only for fixed cost which is the regulator has fixed. Variable cost portion depends upon the coal availability from domestic sources and thereafter you need to blend the coal either from imported coal or from the domestic market sources on this. So, the tariff would be the function of what is going to be the coal supply in the coming year. If you are able to increase the domestic coal source which we expect from the domestic coal the sources will increase, therefore the blending would be changed on this. As far as the profitability is concerned, you have return on equity and secondly the efficiency of the plant because we have done the debottlenecking last year, it is operating much more efficiently, so that would give you a profit jump. Also, the cost of operations & maintenance (O&M) will bring in increases returns for shareholders from this project on this. Therefore, we believe that in FY13 as well at 1,200 megawatt (MW) we should continue to be somewhere between 25% and 30% for the returns. That is subject to the way the plant performed in the year which went by. We are quite optimistic on this plant. This is our first and also a large 1,200 MW plant. We are setting very good practices for O&M and the efficiency monitoring is does on a minute-to-minute basis. Therefore, we ensure that we don’t lose out on efficiency parameters anywhere, so all these factors are helping us out in performing in much better way. _PAGEBREAK_ Q: A lot for the brokerage reports have highlighted that the key risk for Reliance Power is the uncertainty with regards to the diversion of captive coal for the Chitrangi project. Can you give us some amount of clarity on the current situation and what would be the steps in FY13 that we could expect for Chitrangi? A: I don’t see any uncertainty with respect to the utilization of surplus coal from Sasan coal mines for Chitrangi power project. The government of India has permitted this earlier and based on which the minister of coal has made Chitrangi an approved and used plant for this captive coal block. Therefore, there is no uncertainty to that. But what we had in the recent past was the revaluation of this process by the Empowered Group of Ministers (EGoM) once again. The EGoM once again re-emphasized that the decision taken earlier is the right decision; there is no need to review that. Therefore, I don’t see any uncertainty with respect to the usage of this coal for Chitrangi project. We are just waiting for forest clearance for Chhatrasal coal block which is expected to be issued shortly and thereafter the project would take off. We are ready on ground with Chitrangi project with all the clearances, land and site leveling works. Q: What about Sasan project? When is the coal extraction at Sasan expected to begin and what kind of capacity are you targeting from this plant in FY13? A: The Sasan coal mines are progressing at very good speed. In addition to outsourcing we have commissioned all our large equipments. In fact the largest size of equipments in the country are now operating at Sasan coal mine in terms of 42 cubic metres shovels and large dumpers of 240 tonne size. When I say 240 tonne size it means each truck is equal to four railway wagon size. We have already removed over 4 million cubic meters of overburden. We expect to start production of coal in the next quarter, which is much ahead of requirement of Sasan Power plant. Therefore, coal mining is completely under control. As far as the Sasan Power Plant is concerned as we guided earlier, first unit of 660 megawatt would be commissioned by end of this year - December 12. Thereafter we expect the balance five units to come at an interval of each quarter. One of the major milestones for any power plant is completion of the hydro test for the boiler which we did for Sasan in last month. It has been done in little over 10 months, shortest for any supercritical boiler in this country till date. Q: What about the Samalkot because there is an expectation because of lack of natural gas availability it might actually just be status quo, would you then look for alternative sources of fuel in order to get it up and running or would you just wait it out and see what happens with KG-D6? A: I would talk about Samalkot in two parts, one is the project and another one is gas availability. As far as the project is concerned, two gas turbines have already been synchronized and two of them were done at full speed no load test. So, project is progressing on schedule and would be ready on time. Today we can start generating power in open cycle, if gas is made available to us. As far as the gas availability is concerned, obviously we are all aware that production of gas at KG-D6 has further come down. This has not only impacted upcoming projects, but also the existing operating power plants as well. We are working with the government as association as well as a company that the feasibility of gas pool creation in the country at the national level, so that all projects can operate at certain PLF in intermittent level. We are expecting that within a couple of years domestic gas production from KG-D6 as well as other sources would ramp up. Therefore, we are looking for a solution intermittently for a couple of years. One of the solution we are pursuing and which we are hopeful that some solution will emerge shortly is the gas pooling. Q: For FY13 if you had to just give us a guidance on what kind of capacity addition in total are you expecting to do in FY13 and what are the projects that are expected to be commissioned? What is the outlook? A: If you look at FY13 Rosa is done and Butibori will be done in the next quarter. The first and probably the second unit of Sasan as well will come in and Samalkot would also be ready. As far as commissioning of projects is concerned, we are on track with what we have said earlier. Q: The last time we checked with you the Krishnapatnam UMPP construction was on hold. Any update on that account? A: Currently the Krishnapatnam is subjudice. We have raised a dispute resolution mechanism under PPA. Now it’s in Delhi High Court. Therefore, except saying it is sub judice I don’t think we would be able to comment much more than that.