SUPPORT EXISTING FOR AND

Transcription

1 Indian Biomass Power sector 1 FINANCIAL FRAMEWORK TO SUPPORT EXISTING FOR AND NEW BIOMASS POWER PLANTS MNRE Workshop on Biomass Sector - 9 th June 2014 Indian Biomass Power Association

2 Why Biomass Power? 2 Energy security and diversity: Biomass Power can contribute to energy security by providing more diversity in energy supply. Environment : Biomass Power also help reduce local air pollution and emissions of other pollutants, such as sulphur dioxide and nitrogen oxides. Economic benefits : the development and deployment of renewables can form part of comprehensive strategies aimed at more sustainable economic growth Energy access and affordability: renewables can play an important role in providing electricity access modern energy services

3 Biomass power- For Rural Development 3 Biomass is clean, reliable and firm power to the grid. Distributed Power Reduced T&D losses Rural energy access, Rural Employment & Enhancing rural income, 1 MW require tons of Biomass annually and almost Rs 3 crores / Mw flows in the rural economy. Rural employment opportunity of 350/400 people per MW Fuel Sourcing - Improves the Lively hood of the Rural Community.

4 Why Biomass plants have suffered 4 Regulation and policy have not kept track with the changing economic conditions, which has huge affect on Biomass plant operations. There has been huge delays in regulatory process and decisions forcing developers to suffer losses. The policy support to cover fuel price risk are not in place for Biomass sector pass thru/annual reset Expansion of Wind and Solar sector are live examples that if promotional and policy supports are provided, the sector can perform well.

5 Why plants have run into problems? 5 Regulations not considering Fuel cost year on year. Fuel prices have increased by more than 15 to 18% per annum under recovery of costs. Resulted in tariff not able to support interest, repayment, fuel and other costs. In adequate / delayed tariff revisions. The rate of Interest on debt has increased to 15 to 17%, almost 3 to 4% higher than the rates taken in fixing tariff. Banks charge higher interest due to risks envisaged by them.

6 Current Investment Biomass Power Total installed capacity 1265 MW Investment in the Biomass Sector Rs 6500 Cr Equity deployed Rs 1900 Cr Operating Plants 650 MW Cash flow for Fuel (650*10000*2500) Rs 1625 Cr /Year

7 Financial Status of Current Biomass Plants 7 More than 60% of the installed capacity - Closed or operating in losses. The Net worth of the developers have eroded. Working capital for purchasing biomass fuel in cash from rural population adversely affected. Tariff allowed has not supported higher fuel cost, higher interest cost, operating cost and repayment. Developers have been accumulating losses on each day of operation. The long time taken for fuel price revision has led the sector to virtual closure. The losses have been more for plants commissioned in the last 3 to 5 years - due to high level of inflation and increased cost of borrowings. In adequate Policy support also impacted the Sector

8 Myth - Biomass Power is expensive and would affect consumer tariff 8 Biomass power evacuation has low transmission losses. Energy generated in rural India gets distributed with in the periphery. Biomass % vis-à-vis installed capacity in the Country is less than 1 %. Increased tariff for this RE Power will have no impact on consumer tariff due to its low base. It supports States need to meet its Renewable Purchase Obligations. Biggest benefit apart from providing clean power is that significant portion of tariff about 70% plus gets back in to Rural Economy thru Biomass Fuel purchases. It also provides much needed employment in rural India.

9 Present Financial Support for Biomass Sector Generation Related Debt Related Capital Subsidy - Meager at Rs 20 Lacs per MW Accelerated Depreciation - Implemented Partially Generation Based Incentive - Not available like Wind and Solar. Generation Tax ( E Tax ) -Applicable Interest on Term Loan / Working Capital - High over 15% mostly Extended Tenor for the Debt Not available Debt Restructuring with less support

10 Financial Support Needed Prime Objectives 1. To reduce the burden due to the Debt Through stable long-term contracts or reliable feed-intariffs because high debt costs restrict the ability to fine tune financing in response to policy signals 2. To improve the cost effectiveness on the debt usage 3. To Refinance the high cost debt.

11 Financial Initiative 11 Debt restructuring be done for Biomass sector without downgrading the asset. Interest support at BR / PLR rates without any premium by banks. (RBI has given this support to various sectors like Exports, Retail, Agri etc.) One time Interest subvention of past interest charged in excess of BR / PLR rate and reducing this from the outstanding TL. Debt restructuring up to 80% of the project residual life for a maximum tenure of 15 years with 2 years moratorium. IREDA may support financing 30% loan at 2% interest through funds from NCEF to the existing Biomass power plants as an immediate step.

12 What needs to be done in Debt Restructuring Secretary has already chaired a meeting with JS banking, Ministry of Finance to discuss debt restructuring. RBI and Banking segment of Finance Ministry to be pursued strongly by MNRE for supporting debt restructuring for the Biomass sector. Similar assistance has been provided in the past to the Shipping sector, Reality sector etc. Recently RBI allowed retail loans to be given at BR rates. 12

13 Analysis of current scenario 13 State Total capacity (MW) No. of plants No. of plants requiring DR Capacity requiring DR Rajasthan Tamil Nadu Maharashtra Madhya Pradesh Odisha Andhra Pradesh Punjab Haryana Total % of capacity requiring DR to total installed capacity 77.94%

14 Interest Subvention workings 14 Workings for interest subvention Capex per MW (Rs. In crores) 5.50 % of debt 70% 3.85 Tenure of loan including moratorium (yrs) 10 Moratorium (yrs) 2 Servicing period 8 Interest rate Revised interest rate(br/plr rate) 10.25% Interest Subvention on BR/PLR rate 3.00%

15 Financial Implication- Estimates 15 One-time interest subvention per MW (Rs. In crores) 0.30 Capacity requiring debt 650. restructuring (MW) 90 Total budget for one-time interest subvention for past higher interest rates (Rs. In crores) Interest subvention for the remaining period 0.22 Capacity requiring debt restructuring (MW) 0 Total budget for interest subvention (Rs. In crores) 140.9

16 NCEF - Proposal for Support 16 For Existing Plants For newer Plants No of Plants Capacity MW Capex Deployed *Rs4.50 Cr Rs 2925 Crores Debt 70 % Rs 2048 Crores Estimated Outstanding as of Mar 14 Funding Support from NCEF 60% of the above Rs 1229 Crores 30 % Rs 369 Crores Capacity MW Capex Deployed for *Rs 6 Cr Rs 1800 Crores Debt 70 % Rs 1260 Crores Estimated Outstanding as of Mar 14 Funding Support from NCEF % Rs 378 Crores

17 17 THANK YOU Revival of Biomass plants possible.