Shares of power generation firms fell, with Tata Power Company and NTPC hitting 52-week lows.  Tata Power Company fell 1.45 per cent to Rs. 985.95. The stock hit 52-week low of Rs. 982.20 today. NTPC fell 1.25 per cent to Rs. 161.35. The stock hit 52-week low of Rs. 161.15 today.

Among other power sector stocks, Reliance Infrastructure, Reliance Power, Power Grid Corporation of India and Torrent Power fell by between 1.54 per cent and 3.84 per cent.

Index heavyweight Reliance Industries (RIL) weakened in volatile trade.  RIL shed 2.16 per cent  to Rs. 807.30. The stock was volatile. The scrip hit high of Rs. 822.80 and low of Rs. 805 so far during the day. The company has denied inflating costs on its D6 gas field in the Krishna-Godavari (KG) basin. RIL clarified that audits by three independent experts had found that costs in the KG-D6 field were not inflated and the company had adhered to the PSC (Production Sharing Contract). With regard to Comptroller and Auditor General of India’s (CAG) observation that an operator has an incentive to keep costs high, independent auditor Ernst & Young (E&Y) said any increase in capital expenditure is rather detrimental to both the contractor and the government. Consultant Daniel Johnston commented that the appraisal activities which RIL has carried out in relation to the various discoveries in the KG-D6 block are consistent with good international petroleum industry practices (GIPIP).

RIL said that the independent reports by E&Y, IPA and Daniel Johnston & Co. Inc. entirely validate RIL’s stand in its responses to CAG. The independent nature of these studies conducted by globally reputed consultants has acknowledged RIL’s commendable efforts in bringing to stream India’s first deep water hydrocarbons production facility in record time, RIL said. The fact that energy major BP has entered into a strategic partnership with RIL in this block, further vindicates RIL’s position, RIL said. With its newly established partnership with BP, RIL is confident of unlocking the full potential of KG-D6 and other blocks, thus bringing greater benefit to the nation, RIL said.

RIL issued the statement after trading hours on Friday, 9 September 2011, after CAG said in its final report submitted to the parliament on Thursday, 8 September 2011, that RIL initially estimated capital expenditure of D-1 and D-3 gas discovery at US $2.4 billion, which it later revised to US $8.8 billion. The CAG report also said that RIL started implementing the revised capex plans even before they were approved by the government. The report also found that RIL didn’t relinquish some least-priority areas in the KG D6 block, which the government could have given to other companies for further exploration.

ONGC rose 0.21 per cent. The company, early this month, filed prospectus for about Rs. 11000-crore follow-on public offer with the Securities and Exchange Board of India.
India Infoline

Its current portfolio of projects includes 11 road projects, three metro rail lines in Mumbai and Delhi, and five transmission line projects. “There is a lot of interest by parties who want to have a share in our roads, metro and transmission businesses. We are talking to some of them,” Chief Executive Officer Lalit Jalan said the Reuters Global Real Estate and Infrastructure Summit.

“Foreign funds are very keen, also foreign strategic partners, private equity firms. So if interests coincide, and we agree to do something, we’ll inform,” he said, but declined to identify the interested parties. He said the businesses have very large growth opportunities, and was therefore attracting strong interest.

Reliance, which earned revenue of Rs 100 crore ($22.3 million) from its road business last year, expects this to jump to Rs 1,000 crore in the current fiscal year, as 10 of its 11 road projects start generating revenue during the year.

Focus on power, Metro projects
Reliance, which distributes power in both Delhi and Mumbai, hopes to bid for licences in more cities as the sector gradually opens up over the next couple of years. Government aims to halve its peak-hour power shortage of nearly 14 per cent within two years and utilities, mainly from private sector, are expanding capacity to satisfy a rapidly urbanising population and rising industrialisation. Reliance sees huge growth potential in the sector as the country targets adding 1,00,000 Mw generation capacity in five years and attracting private investment in distribution and transmission, Jalan said.

The company already has exposure to generation through a 38 per cent stake it holds in group firm Reliance Power, which is building 35,000 Mw of capacity.
Agencies

“Is it fair to charge four different tariffs to consumers within Mumbai for using the same power,” Chavan asked the representatives of state power regulators while addressing the national summit of Forum of Regulators (FOR). “There has to be some other way to deal with the problem. We have to find a solution urgently,” said Chavan, emphasizing the need to redesign strategies in order to permanently end all disparities.

He also suggested that all state governments directly pay subsidy to consumers on power tariff through their budgets and reduce losses incurred by power distribution companies. Chavan further added that forming separate regulators for coal, petrol, water, toll and other prominent public commodities would help curb power costs. “The central government should now think of regulating prices of coal, petrol, water, and transport toll through competent regulatory commissions,” he added. Pledging that the state would eliminate load-shedding from 2012, the chief minister demanded a robust transmission network to make supply a ’seamless’ affair.

Pramod Deo, chairman of Central Electricity Regulatory Commission (CERC), V P Raja, chairman of Maharashtra Electricity Regulatory Commission were present at the meet. Deo said states can give whatever subsidy they want to reduce the tariff for consumers but should not intervene in the tariff control process of the regulatory commissions. He pointed out that policies like free power, waiving of bills and not releasing subsidy by the state governments has led to the financial ruin of power distributors in the country.

Earlier, power utilities like Reliance Infrastructure had demanded uniformity in tariffs across Mumbai. But MERC and experts ruled out the plan, blaming the complex nature of the generation and supply business. However, MERC suggested some long-term measures that utilities can take to deal with extreme discrimination in rates.

He expressed happiness over the increasing power generation. He also made it clear to the project affected people of Jaitapur that there was lot of difference between the compensation given by central and state governments.

It may be recalled that, after protracted legal battle with Anil Dhirubhai Ambani Group (ADAG) company R-Infra,  Tata Power won the right to enter in to retail business in Mumbai as supreme court upheld TPC’s contention that, it had not only license to supply to bulk consumers but also to retail consumers.

In November 2009, when the company started its retail expansion in Mumbai, it already had 26,000 direct consumers. However, within a year, its retail consumer base rose to 1-lakh, a press release issued here today said.

TPC’s consumer mix at present comprises of 78 per cent residential, 5 per cent industrial and 17 per cent commercial, added the release issued by the company. The consumption of residential group is expected to double in the next fiscal (FY12), the release said.

“The last one year has seen a heartening response from the consumers of Mumbai and this further reiterates their trust in a company that has served them for almost a century now,” the company’s Managing Director Prasad Menon said.

The companies, part of the Anil Dhirubhai Ambani Group, and their top executives have also agreed to abide by conditions set out by Sebi, four persons with knowledge of the development told ET.

The move will remove a persistent source of uncertainty that has dogged the companies for years. “The move is positive for Reliance Infra because the company will be able to access the capital markets without this shadow of regulatory uncertainty.

The company could have litigated all the way to the Supreme Court but that could have dragged on for years and simply made no sense,” said one of the four people. RNRL is in the process of being merged into Reliance Power , another ADAG company. So the proposed settlement is not particularly consequential for it.

These conditions are mainly pledges to tighten internal processes and are not particularly onerous, the people said. They are a standard part of any consent agreement. The settlement, which will involve a total payment of close to Rs 50 crore by the two companies, is close to being concluded after the consent terms were accepted by a three-member internal Sebi committee headed by retired Mumbai High Court judge Hosbet Suresh.

The panel’s conclusions are likely to be endorsed by two whole-time members of the Sebi board, three of the four persons mentioned earlier said. The ruling of the two board members is final.

ADAG officials declined comment for the story. Reliance Infrastructure, which distributes electricity in the suburbs of Mumbai and in parts of Delhi , is one of the flagship companies of the Anil Ambani Group . It also owns close to 45% of Reliance Power, which is implementing 25,000 mw of projects.

If the final figure endorsed by the regulator is close to Rs 50 crore, it will be among the highest fees to be paid since it was introduced in 2007. These negotiated settlements are common in the US where the Securities & Exchange Commission, or SEC , approves a large number of consent orders every year.

In India , a firm or person facing a probe can submit an application seeking a consent order, without admission of guilt and without denial of liability. Sebi has the right to refuse to enter into consent proceedings if the violations are be particularly egregious.

If the regulator agrees, the entity facing the probe has to finalise the terms with Sebi officials. These terms then go through a two-stage vetting.

First, they have to be endorsed by a panel headed by a retired high court judge, currently Hosbet Suresh. The panel’s conclusion then has to be endorsed by two full-time members of the Sebi board. Full-time members are officials in charge of executive functions as distinct from part-time board members.

Complex Case

At the heart of this case is a show-cause notice issued on June 7, 2010, by Sebi to the two companies and their top executives.

The notice came in the wake of a probe by the regulator and government agencies into dealings of Pluri Emerging Companies, an obscure foreign portfolio investor, which purchased participatory notes with stocks such as RNRL and Reliance Infrastructure as the underlying.

Participatory notes are derivative instruments that allow offshore entities to trade in Indian stocks anonymously.

Pluri had bought the participatory notes from Hythe Securities, another FII , which in turn had bought them from Barclays Bank , a British bank.

At that point, the Enforcement Directorate was probing Pluri for a series of allegedly fraudulent transactions involving the siphoning off of funds from the accounts of two Anil Ambani-promoted firms in the London branch of UBS and the use of these funds to buy shares in India. The proceeds of foreign loans raised by the ADAG firms were parked in these accounts.

East North Interconnection Company Limited, a wholly-owned subsidiary of Sterlite Technologies Limited today announced that it has arranged  of  Rs 700 crore debt for its Ultra Mega Power Transmission Project (UMTP) awarded to the company, last year, a company statement said adding that SBI Caps was the sole arranger for the debt.

The East-North interconnection mega transmission project aims to evacuate power from the North-East and Eastern states to the Northern region of India is the first mega independent power transmission project to be awarded in India.

The project involves establishment of two 400 KV Double Circuit transmission lines that would respectively connect Assam with West Bengal and Bihar   The project has been awarded on a ‘Build, Own, Operate and Maintain’ (BOOM) basis for 22 years which quoted lowest tariff for the project.

East-North Interconnection Company Limited (ENICL) was a special purpose vehicle (SPV) created for the East-North interconnection mega transmission project by the Power Finance Corporation (PFC), which was nodal agency for the project.. On March 31, 2010, STL completed the process of 100 per cent acquisition of ENICL from PFC.

The other two projects under UMTP scheme floated by the power ministry to augment country’s transmission capacity have been bagged by the Anil Dhirubhai Ambani Group (ADAG) company R-Infra.

MERC has received EoIs from Maharashtra Electricity Distribution Co (MahaVitaran), Torrent Power, DPSC Ltd, Lanco Infrastructure, GMR Energy, Indiabulls Power, Tata Power, and Enzen Global Solution.

However, MERC and R-Infra differ on the issue. MERC claims that EoIs were invited pursuant to section 86 (1)(d), along with section 14, of the act, R-Infra argues that there is no provision in the act for licence bidding.
An R-Infra executive said, “The company is opposed to EoI. As per electricity laws, the regulatory commission cannot refuse licence to any applicant, provided he meets the qualifying criteria of credit-worthiness, capital adequacy and code of conduct.”

MERC sources said consumers would get multiple choices to meet their power demands in the suburbs of Mumbai. They said that R-Infra, in its petition, indicated that if the petition was rejected, it could be converted into the company’s EoI. – Business Standard

In a statement issued by the Thackeray he has demanded that,  state government should give subsidy to R-Infra, if it wants to give the higher tariff to R-Infra or otherwise it should withdraw the tariff hike.  And warned if our demand doesn’t get positive response from the government and the distribution utility then, we will launch an agitation against the tariff hike.

In its annual revenue requirement (ARR),   R-Infra which supplies power to around 2.8 million consumers in suburban Mumbai had asked for tariff hike amounting to Rs. 1300 crore.  However the power regulator only approved the hike to the extent of Rs. 1,000 crore.

It may be recalled that,  R-Infra’s power tariff hike was last year stayed by the MERC on the advice of the state government just before the October assembly polls.  The Shiv Sena had held violent agitation against the tariff hike. 

Subsequently power regulator appointed a Hydrabadbased staff administrative college as an agency to scrutinise to R-Infra’s accounts book and overall functioning.  However the investigative agency did not found any anomalies in the functioning after which stay was lifted earlier this year.

 The R-Infra who has no firm tie ups for power apart from its 500 Mw generation unit, needs to buy around 600 Mw to700 Mw of  power in the spot market every day, which makes its power costliest among all the three power suppliers in the Mumbai which includes Tata Power and BEST.

The Enterprise value of these assets has been valued at Rs. 1095 crore by the advisory firm KPMG, said press release issued by the Reliance Power.  With the transfer of 433 Mw of generation assets,  Reliance Power’s total generation portfolio has crossed 1,000 Mw mark as 600 Mw capacity at Reliance Power’s Rosa plant being already commissioned.

The assets of R-Infra which were transferred to Reliance Power include 220 Mw  plantat Samalkot in Andhra Pradesh, 165 Mw at Kochi in Kerala and 48 Mw plant in goa and all plants are gasbased plants. 

The press release also mentions, there is considerable scope for capacity expansion at all these sites, perhaps indication of both brothers reaching to the agreement on gas supply.