INDIA NEED MORE COAL ENERGY

REUTERS - March 5, 2024 - 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, opens new tab, 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.

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