DATE – 30.04.

2020

POWER

FINANCIAL EXPRESS

Power demand to fall by 1% in FY21: ICRA

According to the rating agency, thermal plant load factor (PLF) is also expected to decline to 54 per cent
in FY 2021 from 56 per cent in FY 2020.

Demand for power is likely to fall by 1 per cent in the current fiscal with discom losses widening by
almost Rs 20,000 crore as the coronavirus lockdown continues to impact economic activities, says Icra.

According to the rating agency, thermal plant load factor (PLF) is also expected to decline to 54 per cent
in FY 2021 from 56 per cent in FY 2020.

“Assuming resumption of full operations by industrial and commercial establishments from July 2020,
while May and June continue to witness partial activity, the demand for power is likely to decline by one
per cent in FY2021,” it said.

According to the agency, electricity consumption from high tariff paying industrial and commercial
consumers has significantly declined due to the lockdown.

“This has in turn impacted revenues and cash collection by discoms from these high tariff paying
consumers as well as other customer segments. As a result, the book loss level for the discoms at all India
level is likely to increase by Rs 20,000 crore in FY2021, ” it said.

Icra further noted that any extension in the lockdown period would have further downside risk for the
demand growth.

“The decline in thermal PLFs would further delay the resolution of stressed thermal assets, a majority of
which are impacted by lack of long-term power purchase agreements,” Icra Group Head and Senior Vice
President – Corporate Ratings Sabyasachi Majumdar said.

On the other hand, delay in collection by discoms would aggravate the payment delays by them to power
generation companies, which are already reeling under large payment dues of more than Rs 92,000 crore
as of February 2020.

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 “In this context, the timely and adequate liquidity support from the respective state governments,
including the payment of regular agriculture subsidy, remains extremely crucial,” Icra’s Girishkumar
Kadam said.

BUSINESS LINE

Telangana power regulator provides bill payment relief to

industrial consumers
The Telangana Electricity Regulatory Commission has announced some bill payment relief measures for
industrial consumers in the State.

Considering the difficulties faced by the industries during the Covid-induced lockdown, the TS
regulator suo-moto passed orders providing relief measures for industrial consumers under Section 108
of the Electricity Act, 2003.

The industrial associations have represented to the government that the industrial units work on a
precarious state of finances and any minor disruptions in their regular flow of works will upset their
production and cash flows and their overall financial health is affected.

While the loss and difficulties of workers and employees is predictable, it is equally difficult for units and
businesses to pay the salaries and wages by taking additional loans while foregoing the production and
revenues. The industrial associations have informed that the Micro, Small, Medium Enterprises (MSME)
units with zero/minimum financial reserves may be worst hit by the current prevailing situation and
requested for relief measures to save the MSME sector in the State.

The requests of the industry associations were discussed in the State Cabinet meeting held on April 19
and Chaired by Chief Minister K Chandrasekhar Rao. After detailed discussions, the government decided
to extend the following relief measures to the industries in the State.

It had decided that the “electricity bills during the lockdown period will be collected as per actual
consumption only and the fixed charges for the same period shall be deferred till May 31 without any
penalty and interest. Further, those industries which pay the bills within due date shall get one per cent
rebate of billed amount.”

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 The State Government conveyed the Cabinet decision to the Commission under the powers conferred
under Section 108 of the Electricity Act, 2003 for necessary action.

The Electricity Regulatory Commission chaired by T Sriranga Rao, Chairman, accepted the directions of
the government for implementation of these relief measures to various industries.

BUSINESS LINE

Maharashtra reduces power tariff

In view of the crisis triggered by the coronavirus pandemic, the Maharashtra government has decided to
reduce power tariff by an average of 7 per cent for consumers in the State. For the industrial and
commercial consumers, the reduction in tariff would be 10-15 per cent, while for residential consumers,
it would be 5 per cent, said State Energy Minister Nitin Raut on Wednesday.

Addressing the media by an online platform, Raut said that for the next three months, industrial and
commercial consumers will not have to pay fixed charges. There will be no increase in tariff for agriculture
consumers, and those using power derived from solar roof sources will not have to pay any additional
charges, he added.

Other measures

The power tariffs of Adani Electricity, Tata Power, BEST Undertaking and MSEDCL has already been
reduced after interacting with the management of the companies. Solar energy grid support charge has
been reduced to zero, which will make it possible to promote the solar energy sector. The State
government is also trying to increase the subsidy cap for Marathwada and Vidarbha for the growth of
industries in the State and for the rest of Maharashtra, Raut said.

The decision to reduce power tariff by coordinating with the power companies and the State Electricity
Regulatory Commission will go a long way in boosting the industry and business in the state, the Energy
Minister added.

Companies falling under essential services will be billed according to their usage. Meter readings for the
households will not be conducted. The electricity bill will be generated from the average bill of the
previous month. The March bill will have to be paid by May 15 and the April bill by May 31, he said.

Uninterrupted power

The companies should also take precautions to maintain power supply in their areas. They will have to
prepare a contingency, keeping in mind the month of Ramzan, higher power requirement in summer and
forth-coming monsoon. It has also been decided to honour the best-performing employees who have made
a significant contribution to the uninterrupted power supply during this period, Raut said.

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 The Minister reiterated that the process of meter-reading, distribution of electricity bills, operation of
electricity bill payment centres and campaigns to detect power theft have been stopped to avoid direct
contact with the customers.

THE ECONOMIC TIMES

India adds 7.3 GW solar energy capacity in 2019: Report

India added 7.3 GW of solar energy generation capacity in 2019 and holds a strong pipeline of 23.7 GW
under construction projects, said a report. Mercom Communications India, a subsidiary of global clean
energy communications and consulting firm Mercom Capital Group, has released its report 'India Solar
Market Leaderboard 2020' on Wednesday.

The report covers market share and shipment rankings across the Indian solar supply chain in 2019.

During the calendar year (CY) 2019, India installed 7.3 GW of solar power across the country,
consolidating its position as the third-largest solar market in the world, it said.

India also had a robust pipeline of utility-scale projects under development of 23.7 GW at the end of 2019,
with another 31.5 GW of tenders pending auction, it added.

"The solar market leaders have changed in almost every category compared with last year. With a tough
year ahead, we expect strong, resilient, and innovative companies continue to do well," said Raj Prabhu,
CEO of Mercom Capital Group, in the statement.

The report reveals that the top ten large-scale project developers account for 68 per cent market share in
2019.

ReNew Power was the top utility-scale developer during 2019, while Azure Power owns the largest
project pipeline, the report said.

There are around 29 large-scale solar developers with a project pipeline of 100 MW or more in India.

Large-scale solar installations in 2019 accounted for 85 per cent with 6.2 GW. Also, solar accounted for
41 per cent of new power capacity additions in 2019 behind coal which accounted for 44 per cent.

Companies offering engineering, procurement, construction (EPC) services saw a lot of projects moved
to 2020 due to delays caused by general elections, land, and evacuation issues, among others, the report
said.

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 Mahindra Susten was the top EPC player for utility-scale solar installations in 2019, followed by L&T, it
added.

Tata Power Solar had the largest cumulative rooftop portfolio, followed by CleanMax Solar, the report
said.

At the end of 2019, the top ten rooftop solar installers represented 34 per cent of the total rooftop solar
market share.

In 2019, the rooftop solar market growth came down by 33 per cent compared to CY (calendar year) 2018.

Huawei led the solar inverter market in India in 2019, followed by Sungrow. Other top string inverter
suppliers included Growatt, Solis Inverters, and Delta Power Solutions.

At the end of December 2019, Trina Solar was the leading module supplier to India in terms of cumulative
shipments, while Waaree Energies, Adani, and Risen Energy held the top spot in CY 2019. The top ten
module suppliers accounted for over 62 per cent of the market in 2019.

Ganges Internationale was the top supplier of solar mounting structures in 2019, followed by Purshotam
Profiles and Strolar. Scorpius Trackers was the top supplier of solar trackers in 2019.

Rays Power Experts and CleanMax Solar were the top open access developers as of December 2019.

Ecoppia was the top supplier of solar robotic cleaning systems as of December 2019, it added.

HOME

BUSINESS LINE

Mineral production up 10% in February 2020

Mineral production was 10 per cent higher in February 2020 compared to corresponding period last year.

This is according to data compiled by the Mining and Mineral Statistics Division of Indian Bureau of
Mines. It functions as the nodal agency for statistics on mineral sector and releases this information.

During in February 2020, coal production was at 780 lakh tonnes (lt), lignite at 47 lt, natural gas (utilised)
was at 2257 million cubic metres, petroleum (crude) at 24 lt, and bauxite at 21.9 lt.

During the month under review, chromite production was at 3.95 lt, copper concentrate at 5,000 tonnes,
gold at 162 kg, iron ore at 239 lt, and lead concentrate at 0.32 lt.

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 In the same month, manganese ore production stood at 2.76 lt, zinc concentrate at 1.42 lt, apatite and
phosphorite at 1.36 lt, limestone at 327 lt, magnesite at 0.11 lt and diamond 2,720 carat.

Compared to February 2019, higher mineral production was reported by zinc concentrate (33.2 per cent),
iron ore (31.3 per cent), chromite (18.2 per cent), lead concentrate (14.2 per cent), coal (11.7 per cent),
limestone (4.5 per cent), manganese ore (3.3 per cent), lignite (2.6 per cent) and bauxite (1.3 per cent).

Lower production was reported by copper concentrate (minus 60.7 per cent), gold (minus 29.6 per cent),
natural gas (utilised) (minus 9.6 per cent), petroleum (crude) (minus 6.4 per cent) and phosphorite’ (minus
1.8 per cent).

THE ECONOMIC TIMES

Covid-19 impact: Tata Steel’s struggling UK, Europe units may

not get parent’s support
Tata Sons, the holding company of salt-to-software Tata Group, has refused to commit any further funds
to support Tata Steel’s loss-making UK and Europe subsidiaries. As a result, a bailout by the UK
government seems to be the only chance of survival for these businesses, officials close to the
development said. However, the UK government is unlikely to offer more than one fifth of the funds
required by these businesses, a person with direct knowledge of the development said.

With the UK government keen to support locally-owned businesses first, fund infusion from Tata Sons
was expected to be a fallback option for Tata steel’s European businesses. But support from the Indian
parent now seems unlikely.

The UK arm of Tata Steel has reportedly sought an estimated £500 million ( ₹4,750 crore) from the British
government to survive the coronavirus lockdown period, according to UK media reports.

Tata Sons has to assign funds to meet several other financial commitments and Tata Steel will essentially
have to fend for itself, officials said.

But Tata Sons chairman N Chandrasekaran had warned early this year that the Indian entity cannot keep
funding losses.

Tata Sons plans to keep a war chest ready of over $5 billion (₹38,000 crore), as per the sources cited. The
immediate priority is to keep ready funds of around $1.5 billion (₹11,400 crore) for urgent infusions into
some businesses such as the airlines companies (Vistara and AirAsia) and Tata Motor's loss-making
Jaguar Land Rover (JLR ) unit.

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 Tata Sons did not comment for this story.

“European steel demand has sharply reduced compared to normal conditions and many of our customers
paused production, including European car manufacturers. We therefore reduced production at some of
our European mills to match this lower demand. Our European business is focused on preserving cash and
liquidity to tide it over during the challenging period,” a Tata Steel spokesperson told ET.

Though Tata Steel’s India operations are the most profitable in the industry, Tata Steel Europe has burnt
free cash flow of nearly ₹26,000 crore between FY14 and FY19. However, some of that is masked by the
debt arrangement between the parent company and Tata Steel Europe.

Post the Corus acquisition in 2007, Tata Steel had set up an off-balance sheet arrangement in order to
effectively shield Tata Steel shareholders from the high debt levels incurred by the European assets.
However, in the face of mounting losses and continued cash burn at Tata Steel Europe (TSE), Tata Steel
management has, in order to stem some of the cash losses, replaced over time most of the external debt
on TSE’s books with inter-group debt.

Anil Singhvi, chairman of corporate advisory firm Ican Investment Advisors, says Tata sons will do well
not to put good money after bad. “Most of their overseas venture and tieups have been money-guzzlers,
be it Docomo or Corus,” he said.

Since the acquisition in 2007, the UK business has not been able to generate profits. Analysts say at least
₹30,000 crore capital has been deployed in the Europe and UK operations since 2007. This has raised
concerns of a major impairment or write-down in Tata Steel’s book and criticism over why should such
bleeding businesses be supported by Tata Sons.

Tata Steel saw a significant increase in its overall debt in FY19, primarily because of the Bhushan Steel
and Usha Martin acquisitions. But it has reduced its consolidated gross debt to ₹1,09,900 crore in the
December 2019 quarter from ₹1,11,600 crore in September 2019.

Net debt stood at ₹1,04,600 crore at the end of December 2019. In January, the company repaid $500
million (about ₹3,500 crore) of debt and refinanced 1.75 billion (₹14,000 crore) of loan at better terms
and better prices.

“Most of the subordinated inter-company debt, roughly £4.3 billion (₹40,700 crore) of the £5.3 billion
(₹50,200 crore) inter-group debt at the end of FY19 on TSE’s balance sheet, is effectively equity – while
Tata Steel Europe accrues interest on sub-ordinated debt of £4.3 billion, TSE doesn’t pay cash interest on
these loans,” said Satyadeep Jain, analyst, Ambit Capital.

BUSINESS LINE

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 Despite Covid crisis, Essar Ports hopeful of ‘reasonable
performance’ in current fiscal
The ports sector is categorised under essential services and kept away from the lockdown directives, but
a dip in demand and disruptions in cargo movement, coupled with reduction in cashflows and revenues,
are posing challenges for the sector

Ruias-led private ports operator, Essar Ports Ltd, said it is expecting to sustain a reasonable performance
in the current fiscal, despite the ongoing crisis.

Rajiv Agarwal, MD & CEO, Essar Ports Ltd, said the company posted 23.5 per cent growth in cargo
handling during 2019-20, and “with all our terminals operational, we expect to sustain a reasonable level
of performance in the ongoing financial year".. Essar Ports has four terminals with a combined handling
capacity of 110 million tonnes per annum.

The company has its key customers in steel, oil and power industries, which manufacture products under
the essential services category. “Given that we facilitate the cargo requirements of these businesses, we
have sustained operations even during this crisis,” said Agarwal adding that the company faced some
lockdown-related issues in operations and manpower availability but the supply chain and operations
remained unaffected.

In an e-mail response to BusinessLine queries, Agarwal said that on account of lower throughput
following disruptions in cargo movement, the ports sector was facing liquidity and cashflow issues, loss
of business/ revenue and delay in projects and commissioning of new facilities.

“The revival is also expected to be gradual. To overcome the challenges, the Centre needs to look at
several measures which will not only boost demand but also provide relief for the industry players to
function in smooth manner,” Agarwal said.

Pointing to measures like reduction in interest rates, moratorium from repayment of principal and interest,
waiver on payment of royalty & licence fees by concessionaires, and waiver of fixed energy charges, he
expressed hope that these would help in overcoming the problems plaguing the sector.

On the measures announced by the government Agarwal said, “through different Ministries and the RBI,
the government has been prompt in introducing measures time and again to boost the economy, and to
ensure the industry is running with minimal impact.”

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 GLOBAL

Stanmore Coal forecasts zero exports for June

Stanmore Coal has flagged a reduction in its coal exports starting June, forcing the company to slash its
earnings guidance for the 2020 financial year.

The 250,000 tonnes of sales are expected to be deferred until later in the year. There is now no sales
forecast for June.

Stanmore anticipates its unit costs per tonne to increase accordingly, from $107 per tonne sold (ex-royalty)
to $109 per tonne.

The company adjusted its underlying earnings before interest, taxes, depreciation, and amortisation
(EBITDA) guidance from $92–$100 million to $80–$85 million for the current financial year.

Stanmore is also faced with a significant fall in coking coal prices, with Platts premium low-volatile (PLV)
hard coking coal prices falling from $US163.5 ($251.2) per tonne in mid-March to $US118.5 per tonne
as at April 24.

“Although this recent fall in prices is significant, it will not impact 2020 financial year underlying
EBITDA materially, given the company sells largely on contract prices which are 50 per cent set for the
June quarter,” Stanmore stated in an ASX announcement.

Stanmore’s production guidance remains on track at 2.35 million tonnes. The company operates the Isaac
Plains complex in the Moranbah town of Queensland, which generates coking coal and thermal coal.

Earlier this month, Singapore-based Golden Investments made a takover offer for all of the shares in
Stanmore that it did not already own or control.

Days later Golden Investments acquired more than 50 million Stanmore shares, giving the former a 51
per cent interest in the company.

Stanmore previously stated that the takeover offer represented a “compelling opportunity,” given the
declining prices of Stanmore’s shares since July last year and the potential impact of coronavirus
pandemic on global economies.

The offer from Golden Investments closes on May 18.

Poll: Queenslanders support renewable energy over coal

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 The QDOS Research poll, commissioned by Solar Citizens, found that 78 per cent of respondents would
be more likely to support the Queensland Government spending on renewable energy generation than on
new coal-fired power, and 62 per cent of people agree the Government should develop a plan to gradually
transition and generate all electricity from clean sources like solar and wind.

Climate Change was a major concern, with 70 per cent of those polled saying they were concerned about
climate change in Queensland.

“These results show that Queenslanders are concerned about the threat of climate change and support
more government investment in clean energy solutions. The Government should listen to these concerns
and pave the way for more renewable energy jobs and investment,” said Ellen Roberts, Solar Citizens’
National Director.

These polling results come as state and federal politicians debate the need and viability of a new coal-
fired power station in North Queensland.

The Federal Government has provided $4 million for a feasibility study into a new coal-fired power station
in Collinsville, despite the Queensland Energy Minister, Anthony Lynham, expressing deep concern over
the project.

“Building a new coal-fired power station in Queensland would require extensive government subsidies
and it’s clear that the majority of Queenslanders don’t support the idea,” Ms Roberts said.

“Queensland Opposition Leader, Deb Frecklington, is staying silent on the issue, but 65 per cent of LNP
voters polled said they support spending on renewable energy ahead of coal-fired power.”

Further results showed that 22 per cent of people surveyed were unsure who they’d vote for when
Queensland heads to the polls in October. A majority of those who were unsure of their voting intention
rated a negative association with coal-fired power and coal mining.

“Queenslanders clearly support more investment in clean energy projects and if governments take action
now it will boost the struggling economy,” said Ms Roberts.

“Renewables can unlock the energy trifecta for Queenslanders: lower bills, less pollution and more
regional employment.

“We can utilise our impressive solar and wind resources to produce an abundance of cheap electricity and
help revive Australian manufacturing.”

South African renewables call for end to construction shutdown

South African solar representatives have come on board a campaign to ensure the installation of renewable
plants can resume in May, coinciding with a relaxation of national lockdown measures.

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 This week, a letter co-signed by national bodies for PV (SAPVIA), wind (SAWEA), energy storage
(SAESA), thermal solar (STASA) and broader renewables (SAREC) called on the government to include
green energy construction in the list of sectors allowed back to work starting next month.

The government of president Cyril Ramaphosa – who is consulting the country over which activities
should resume when South Africa’s lockdown eases from level 5 to 4 on 1 May – should consider
renewables’ contribution to electricity supply and economic recovery, the associations said.

In their missive, the organisations argued the green energy sector is already “accustomed to operating in
a controlled environment” and has enacted “strict health [and] safety protocols”. Any additional
requirements can be “easily accommodated” if construction resumes, the letter said.

To bolster their case, SAPVIA and the other associations pointed at the 2.23GW large-scale enewable
pipeline they said currently lies under construction. According to their records (see table below), solar
accounts for a 800MW-plus share of that total.

There is also, the letter said, the separate 800MW pipeline of embedded generation projects to consider.
These privately-owned facilities “provide mitigation to the high risk of load shedding as the economy
reopens,” the associations claimed.

South Africa’s plans for a phased reopening of its economy in May follow the roll-out of strict lockdown
measures on 27 March. The quarantine has paralysed the work of solar EPCs – Spain’s Gransolar included
– and brought delays to the processing of IPP project applications.

In South Africa, the COVID-19 pandemic comes after bumpy years for its REIPPP renewables
procurement programme, launched in 2011. In early 2019, the government said it was mulling the
renegotiation of existing PPAs to ease the financial burdens of offtaker and state-run utility Eskom.

Renewable players – who have faced off a REIPPPP legal challenge from coal truckers – hailed last
October the government’s allocation of a new 6GW of solar, coupled the following month by plans for
three new ”fast-tracking” renewable energy zones.

Coronavirus effects on a cement supplier

The headline from the cement section of FLSmidth’s first quarter results summed up what may be the
current situation for many companies supplying the sector: “service relatively stable – cautious on
capex.” The general picture across both its mining and cement businesses was ‘significantly’ increased
demand for local resources, remote support and digital products. On the mining side FLSmidth pointed
out that it was impossible to assess the impact of coronavirus on its business because of the difference
between government policies. Some places continue lockdowns or impose additional restrictions but
others are starting to ease them. This point has ramifications for multinational cement producers and other
suppliers too. It seems likely to continue during the coming months as lockdowns ease at different rates
in different countries.

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 On cement specifically, FLSmidth provided a good global view of what the pandemic and government
responses are actually doing to the industry. It reports that around 80% of the world's cement plants
(excluding China) are currently in operation with some operating at reduced capacity. It described the
market for services as ‘relatively stable’ in the first quarter but that cement consumption was being
reduced by lower construction activity, plant shutdowns and restricted access to sites leading to reduced
demand for technical services and commissioning. By region it identified the biggest impact to its business
from coronavirus in India and the Middle East. Generally, it says that cement producers are suspending
capital investments until the impact of coronavirus on economies is clearer. There has been some good
news though, with the supplier noting that several of its customers have been looking for services that can
reduce their operational costs.

The European Commission tackled this pervading sense of uncertainty in its roadmap towards lifting
coronavirus containment measures that was published on 15 April 2020. The Committee for European
Construction Equipment (CECE) was keen to share this with its members this week, pointing out how the
European Union (EU) plans to lift border controls and re-start economic activity.

The plan is to ease travel restrictions between border regions for cross-border and seasonal workers, and
then between European areas with low coronavirus infection rates. External borders can later be reopened
with access by non-EU residents to the EU scheduled for a second stage. To re-start economic activity the
EU recommends, again, a phased approach focusing on sectors that are ‘essential’ to facilitate economic
activity such as transport. The commission says it will also create a rapid alert function to identify supply
and value chain disruptions, relying on existing networks such as Enterprise Europe Network (EEN),
clusters, chambers of commerce and trade associations, small and medium enterprise (SME) envoys and
more. Whether the EU can actually coordinate a return to normality following its poor response in aiding
Italy at the start of the European outbreak of coronavirus remains to be seen. Yet, its historical roots as an
economic community dating back to the Treaty of Rome in 1957 suggests it may be more successful when
coordinating technical aspects of trade.

Detailed above are the views and plans of just one supplier and one continental organisation, although
they are both prominent. The takeaway from this is that uncertainty is a major problem so far for the
cement industry in the wake of the coronavirus outbreak. Companies have faced a cash crunch in the short
term as economies slowed down and they are reluctant to release cash until the future becomes clearer.
Large parts of the cement industry and its suppliers are very international, which exposes it to even more
uncertainty. Different countries enforcing different restrictions and different easing strategies at different
times create a major headache for everyone and a block to investment. Making cement is undeniably an
essential industry and this realisation by legislators can be seen in some countries that at first shut down
their plants before understanding that they needed them open after all! Suppliers should benefit from this
too, although at reduced activity levels. We don’t know what kind of recovery will come – hopefully one
releasing plenty of pent up demand. Yet one thing is certain. The work of the regional cement associations
and those representing suppliers is going to be crucial in the coming months.

******

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