Indian firms look to bet big on coal-fired power after long absence

Power Finance

05/03/2024 07:42

By Sudarshan Varadhan, Sarita Chaganti Singh and Sethuraman
N R
       SINGAPORE/NEW DELHI, March 5 (Reuters) - Private Indian
firms have expressed interest in building at least 10 gigawatts
(GW) of coal-fired power capacity over a decade, four sources
familiar with the matter said, ending a six-year drought in
significant private involvement in the sector.
    Adani Power  ADAN.NS , JSW Group and Essar Power are among
the companies that have told India's power ministry they would
be keen to expand old plants or develop stalled projects facing
financial stress, according to the sources and a government
presentation seen by Reuters.
    The potential investments, which have not been previously
reported, could cumulatively cost billions of dollars and
demonstrate renewed appetite in an industry seen by many as
financially unattractive. But they also threaten to undermine
progress made by the world's No.3 greenhouse gas emitter in
weaning its economy off carbon.
    Prime Minister Narendra Modi's government, which has cited
energy security concerns and low per-capita emissions to defend
India's coal dependence, has been trying to attract private
investment to boost its coal-fired capacity by 80 GW by 2032. 
    Coal-fired power plants currently account for half, or about
215 GW of India's total installed capacity of 430 GW, with
renewables accounting for 135 GW and hydro making up 47 GW.
    A spokesperson for the power ministry said the private
sector had agreed to invest in the coal-fired power sector "in
line with the energy requirements of the nation," adding that 
India was ahead of international commitments to cut emissions.
    "The private sector is now expressing interest because of
financial viability and assurance that payments will be made on
time," he said.
    The companies did not respond to requests seeking comment.
    India's Association of Power Producers (APP), which
represents coal-fired power developers, told Power Minister R K
Singh its members were eager to boost capacity, according to a
Dec 4 letter reviewed by Reuters.
    Among the new proposals, Adani Power plans to add 4.8 GW and
JSW 1 GW, according to three sources and a government
presentation dated Nov 21 reviewed by Reuters. 
    Essar Power plans 1.6 GW of new domestic coal-based power
generation in Gujarat state by 2029, one of the sources said.
Another source said Vedanta will add 1.9 GW of capacity.
    The sources - two government officials and two industry
executives - declined to be named as the discussions are not
public. 
    The presentation, made by an arm of the power ministry in
November, estimates that the plants would be commissioned by
2032.
    
    PRIVATE FUNDING DROUGHT
    In the five years to March 2018, private sector investments
drove 56 GW, or over 60% of new coal-fired power, government
data shows. That dwindled to 1.5 GW, or 5% of additions, in the
next five years as projects faced financial stress, shifting the
investment burden onto state and federal governments.
    A total of 24 private sector projects totalling over 23 GW,
or over 10% of current Indian coal-fired capacity, are on hold
or unlikely to be commissioned due to financial stress,
according to power ministry data.
    However, higher coal dependence in the last three years due
to slower renewable installations, heavy power demand, and new
emergency laws enabling higher tariffs have made coal-fired
power attractive again, boosting profits and pushing shares of
generators to record highs.
    APP asked the government to provide more flexibility in coal
and power supply agreements and expansion of existing power
plants, ease clearances, and ensure domestic credit availability
to expedite investments.
    "It will be a big challenge for any private developer to
raise funds," APP wrote in the Dec 4 letter, adding that state
lenders Power Finance Corp (PFC) and Rural Electrification Corp
(REC) should be asked to take the lead.
    PFC and REC did not immediately respond to emails seeking
comment.
    A senior REC executive said it was keen to fund the planned
additions with 70% debt as long as lending requirements are met.
    "REC has made significant progress in reducing
non-performing assets and we would like to keep it that way,"
the executive told Reuters, speaking on condition of anonymity
as the matter was not public.

 (Reporting by Sudarshan Varadhan in Singapore, Sarita Chaganti
Singh in New Delhi and N R Sethuraman in Bengaluru
Editing by Tony Munroe and Raju Gopalakrishnan)
 ((sudarshan.Varadhan@thomsonreuters.com; +65 91164984; Twitter:
https://twitter.com/sudvaradhan @sudvaradhan;))