‘We are open to acquisitions in the Indian hydro power market’
In an attempt to keep Infraline Energys’ readers abreast with the key issues and challenges engulfing the sector, Infraline Energy tries to bring forth the opinion of key personnel whose decisions and opinion play a vital role in shaping the sector. Please find below excerpts from the interview that Infraline Energy conducted:
With the new hydro policy expected to be finalised soon, the sector is abuzz with new opportunities for developing mega projects. It is felt that while enough attention is being given to renewable energy, the hydro sector also needs to up the ante when it comes to meeting India’s energy needs.
In this regard, InfralinePlus speaks to Mahadevan Anand, Managing Director, ANDRITZ HYDRO Pvt. Ltd - a global supplier of electromechanical systems and services for hydropower plants - on the challenges being faced by the hydro sector and the company’s growth plans.
How was Andritz's growth performance last year in India as well as globally?
Andritz has shown a steady and continuous growth in India for the last couple of years. In spite of a complete slack in the power sector, we managed to book some good orders from the India region as well as the South East Asian markets. Looking at the anticipated orders expected in 2017, we are also enhancing our capacity and increasing manpower.
Globally too there is a slump in the hydro markets but the Andritz Group has outshined in the pulp and paper segment. Additionally, the company has made important acquisitions in China. Further, slow markets and competitors that are aggressively reducing their costs force us to have a close eye on maintaining our competitiveness. The acquisition of companies with complementary products has been key for Andritz’s global success. However, in India, with our existing state-of-the-art manufacturing set-up, we are also looking at expanding these units by increasing the bays, which could happen as early as Q1 2018.
We are also open to acquisitions in the Indian market for specific products which is very preliminary to talk about at the moment but we have our eyes open. A very important milestone was achieved in 2016 with the synchronising of all 6 units of 200 MW of the Teesta III hydro project in Sikkim which added 1200 MW to the national grid. Andritz is proud to be the core contractor for this important project.
What are the company's growth plans for India? What will be its major focus areas for the next 2-3 years?
Andritz is planning to double its order intake in the coming 1-2 years by focussing on key markets. We are readying a work force of over 1500 skilled employees to tackle the ambitious growth plans. We will continue to focus on the hydro market and high capacity multi-purpose projects. Additionally, we are ready to increase our efforts in the air pollution control segment, which has just begun to take-off in India. Looking at the Indian market in totality, we may also bring in more products and technology in diversified areas.
We are eagerly waiting for India’s beleaguered hydro sector to pick-up speed and with the much awaited Hydro Policy which is expected within 2017, we would be keen to continue our leading position in this space. The policy will surely bring in much needed relief for hydro power developers who have been intending to develop mega hydro projects.
While Andritz has already contributed with supplies aggregating over 22,000 MW in India and Asia, we are clearly focussing on clean green renewable energy specifically in the hydro power domain and continue to sustain our leading position in the market.
What are some of the most promising and emerging technologies for the hydro power segment? What are some of the new solutions that Andritz plans to offer to the market?
Global technology providers like Andritz focus and invest huge amounts on R&D. We have developed technology in plant automation, turbine efficiencies, created a complete water-to-wire solution for hydro project developers and also are the first foreign company to set up an advanced coating facility in India for under water parts to increase plant life.
Another important and critical area is the complete operation and maintenance of hydro plants which we are now actively involved. We also undertake annual maintenance contracts for the plants limited to the power house. Further, we now have the complete expertise in the service & rehabilitation of hydro power plants. While we now have this diversified portfolio, we have also broad based our manufacturing capacity to address the mini hydro market by being capable of manufacturing and supplying turbines from 300 kW to 800 MW unit size in India.
What are your expectations on equipment orders in the hydro power segment in the next one-two years?
While we are expecting the government in India to revive the hydro market, foreign companies like Andritz who are perfect examples of “Make in India” are not allowed a free hand at bidding for projects through the G2G bilateral route.The preference is mainly given to certain government-owned equipment suppliers, which nullifies the very purpose of Make in India. We are however hopeful that projects totalling near 3000-4000 MW could be tendered in the coming one-two years in the Indian market.
What is your outlook for the power sector in India in the next few years?
With the focus shifting to environmental concerns, coal is surely not the solution for the future. Renewable energy like solar and wind are not alone capable of justifying power demands for the country. The only alternative is from hydro power which is a clean energy source. Unless the policy makers take cognisance of its importance, we do not expect any big developments to come by. Solar power is picking up steam but hopefully the trending levelised tariffs could end in a bubble burst. We expect initiatives like UDAY, Make in India, RPO and HPO to come to aid in putting greater thrust in India’s power sector.
The government intends to bring hydro power under the ambit of renewable energy, along with small hydro. How will it impact the sector's growth?
There are talks of the new Hydro Power Policy and bringing all hydropower projects under the ambit of renewable energy (RE). This if implemented, would extend the benefits of RE to all hydropower projects including subsidies (Rs. 1.5 to 20 Crore/MW), tax benefits and power off-take (RE defined projects get preferential sale of power). This in particular is aimed at bringing relief to private developers. This will work absolutely fine if hydropower comes under the RE ambit especially considering the fact that the share of RE has increased over 14% from a mere 3% share in 2005.
The government is considering several ideas to reduce the cost of power generation from hydel sources, including the possibility of gradual escalation of tariffs. Your views?
This is a very crucial issue today. Hydro power projects under implementation for the last couple of years have faced inherent delays leading to tariffs reaching as high as Rs. 5.5-6.5/unit. Such uneconomic values make the entire proposition unviable for commercial use. Front loading of equity could be one way to reduce tariffs, introduction a minimum 15% through HPO, lower interest rates and tax holidays are other ways to help reduce the saleable tariffs of hydro projects. There are discussions on these issues, which we hope will fructify in the coming months.
More than 6,000 MW of hydro projects in India are currently stressed. How has the slowdown in the hydro sector in last few years impacted the sector's growth. Has financing been a concern?
I would rather say that the hydro sector is in coma rather than a slowdown. We have not seen any new projects come up in the last 4-5 years. In spite of over 83,000 MW of untapped hydro potential in the country, we have utilized less than 10% of this potential. The hydro share in India has been dwindling constantly for the last 10 years. Today hydro contributes to about 14% against the thermal figure. Secondly, there has been no fresh infusion of equity in projects and debt financing has almost come to nil. These negative traits continue because of project cost overruns coming from geological problems, untimely clearances, debt ridden IPPs and no clear mandate from policy makers.
Infraline Energy would like to thank the contributor for his/her valuable time and opinion shared on the topic.