PTC India offers Nepal help to set up power trading firm

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    PTC_IndiaNew Delhi: Power trader PTC India Ltd has offered to set up a state-owned power trading organization to maximize the benefits of electricity commerce in Nepal—part of a region where energy security has become increasingly important to development efforts. The company is partly owned by the Indian government. “We have offered Nepal to set up a power trading firm to manage the purchase and sale of electricity. Given the potential, there will be more projects coming up there. We are ready to handhold them,” said a PTC executive, requesting anonymity. The offer was made to the Nepali government, which is in the process of setting up a state-owned power trading organization. It comes in the backdrop of Indian and Chinese firms competing to develop hydropower projects in Nepal in an attempt to build commercial and diplomatic relations with a country that is strategically located between them. Nepal has a hydropower potential of around 83,000MW. The promise of greater electricity trade has prompted Bangladesh and Nepal to set up state-owned power traders with the eight-member South Asian Association for Regional Cooperation (Saarc) signing a framework agreement on electricity trade at its Kathmandu summit in November. An interconnected grid planned under the agreement will allow power to be traded like any other commodity to meet the electricity demand of the region. Saarc groups India, Pakistan, Nepal, Bhutan, Bangladesh, Sri Lanka, Afghanistan and the Maldives. Mint reported on 18 March about Bangladesh and Nepal setting up state-owned power traders. While India buys 1,450MW from Bhutan, Bangladesh and Nepal get 500MW and 150MW from India, respectively. Nepal and Bangladesh have a shortage of about 550MW and 10,000MW, respectively. In comparison, India has a power generation capacity of 258,701.46MW and plans to add 88,537MW by 2017. The Nepal Embassy in New Delhi said “it does not have any information on this”. The offer also comes amid PTC India’s declining share in India’s power trading market. According to the PTC website, the power trader was set up in 1999 as a government initiated public-private partnership. “PTC India, a GoI initiative, is a pioneer in starting a power market in India. The company has maintained its leadership position in power trading since inception. However, growing competition with lower entry barrier has led to a decline in PTC’s market share from 50% to 30% at present. PTC has also been authorised by the Government of India to trade electricity with Bhutan and Nepal. Its trading volumes and PAT (profit after tax) have grown at CAGR (compound annual growth rate) of 20.5% and 15.7% to Rs.3,513 crore and Rs.197.5 crore, respectively, over FY09-14,” ICICI Securities wrote in a 9 February report. Currently less than a quarter of the traded volumes are sold through long-term power purchasing agreements (PPAs), which offer stable business and better margins. This exposes the company to the vagaries of the merchant power market, including risks like the rise in competition, price swings and demand suppression. To mitigate the risk, PTC India is planning to increase the share of long-term contracts in total volumes to 50% by end 2016-17. “PTC’s 3QFY14 APAT of Rs.284 million (-36% YoY) is significantly below our estimate of Rs.425 million. The volumes during the quarter reduced 6% YoY because of lesser demand and corridor constraint at Bangladesh and transmission network congestion in India (for power flowing towards the Southern Region, within Southern Region and from the Western Region and Eastern Region to Northern Region). During the quarter, 61% of contracted power could not flow because of transmission constraints in the network,” Emkay Research wrote in a 6 February report. India has power grid links with Bhutan, Nepal and Bangladesh and has plans to develop transmission links with Myanmar, Pakistan and Sri Lanka.

    Elizabeth Roche contributed to this report.

    Source : Livemint