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Indian Power Sector

Discussion in 'World Economy' started by Zer0reZ, Jun 15, 2017.

  1. Zer0reZ

    Zer0reZ 2nd Lieutant FULL MEMBER

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    The 23-bank consortium that lent money to Essar Energy Holdings Limited and its affiliates has given its consent to the $12.9 billion acquisition pending since October 2016. The approval will pave the way for Rosneft and others to acquire 98% stake in refining and retail business of Essar Oil.

    [​IMG]

    New Delhi (Sputnik) – At the company’s annual general meeting in Sochi on Thursday, Igor Sechin, CEO of Rosneft Group, said the deal could be considered closed. “Please be informed that the legal decision was received yesterday, which guarantees the entry of the company in Essar Oil’s capital,” Sechin told shareholders.


    The consortium, led by India’s largest bank State Bank of India Ltd and ICICI Ltd, has agreed to dispense shares of Essar Oil to facilitate closure of the stake sale to Rosneft and the investment consortium led by Trafigura and UCP, sources told Sputnik.

    Deal was signed during the bilateral summit between India and Russia in Goa last October. Essar Global had decided to sell its stake after the company was struggling to pay the debt of its refining and retailing oil business. According to the agreement signed last year, Rosneft will take a 49% stake in Essar Oil, which controls India’s second-largest oil refinery, while Russian investment group United Capital Partners and commodities trader Trafigura will take 24.5% each. Rosneft acquires 49% of the Vadinar refinery, one of the most sophisticated refinery in the Asia-Pacific region, possessing a complex infrastructure. The deal will pave the entry of Rosneft into India’s retail market as it will also own a vast network of 2,700 Essar-branded retail outlets across India.

    Sources close to the consortium said that approval comes after Essar Global had assured that company would invest a part of the proceeds of deal in Essar Steel, which is one of the largest debt-ridden companies of India. Life Insurance Corporation of India, according to sources, has also given its approval for the transaction.
     
  2. Zer0reZ

    Zer0reZ 2nd Lieutant FULL MEMBER

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    Rosneft, Trafigura to Spend $13 Billion to Buy Indian Refiner
    By Saket Sundria and Unni Krishnan
    October 15, 2016, 2:14 PM GMT+5:30 October 16, 2016, 3:46 AM GMT+5:30

    • Equity value about $5.8 billion; approvals seen by year-end
    • Deal will help Essar Group cut debt by more than 50%: Ruia
    India’s billionaire Ruia brothers agreed to sell a 98 percent stake in their refinery unit to Rosneft PJSC, Russia’s biggest listed oil producer, and a consortium of Trafigura and United Capital Partners for about $13 billion.

    Essar Group will sell 49 percent of Essar Oil Ltd. each to Rosneft and the consortium for an enterprise value of 728 billion rupees ($10.9 billion), the Indian conglomerate said in a statement on Saturday. The equity valuation will be about $5.8 billion, the price at which the company was delisted, Essar Group director Prashant Ruia told reporters at a briefing in Goa, India.

    deepening energy ties with India, which is expected to surpass Japan as the world’s third-largest oil user this year to become the fastest-growing crude consumer through 2040, according to International Energy Agency estimates. India’s state-owned energy companies are investing $5.5 billion to buy stakes in Rosneft’s Vankor and Taas-Yuryakh fields.
    The transaction -- which Essar said is the biggest tranche of foreign direct investment in India -- was announced on the sidelines of the BRICS Summit, attended by Indian Prime Minister Narendra Modi and Vladimir Putin. It has the support of both their governments, Ruia said. He added that he doesn’t see sanctions on Russia affecting the deal.

    For Trafigura, the world’s third-largest oil trading house behind Vitol Group and Glencore Plc, the acquisition is its largest energy deal and marks a deepening of its relationship with Rosneft. The trading house is already providing short-term trade finance to the Russian company and is trading a significant chunk of its oil production.

    Trafigura, which is owned by its senior employees, said it will finance the purchase through bank finance using its stake in the refinery as collateral plus its own equity. Trafigura said it didn’t plan to tap the bond market for the deal.

    The Trafigura consortium includes the trader itself with a 49 percent stake, UCP with another 49 percent and Essar with 2 percent. Trafigura will effectively control 24 percent of the refinery. For the trading house, it’s the second attempt to enter the Indian oil refining market, after a failed deal five years ago.

    [​IMG]
    Deleveraging
    Rosneft and Essar had signed a non-binding pact on the deal in July 2015. Rosneft had also signed a pact to supply Essar Oil about 200,000 barrels of crude per day over 10 years.

    Conclusion of the sale would help Essar Group generate funds to repay lenders after it loaded up on debt to fund an $18 billion spending spree.

    Essar Oil runs the Vadinar refinery in the western state of Gujarat, which can process about 400,000 barrels a day. Most of the refinery’s output is sold locally, either through its own outlets or to government-owned fuel retailers.
     
  3. Zer0reZ

    Zer0reZ 2nd Lieutant FULL MEMBER

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    India Increases Energy Import From US per Trump’s Suggestion

    A week after US President Donald Trump suggested India purchase more energy from the US, the country's biggest refiner, Indian Oil, issued a tender to buy two million barrels of sour crude from the US and Canada.

    New Delhi (Sputnik) — Indian Oil intends to receive the sour crude from North American sellers at Paradip port between September 25 and October 4 or at Vadinar refinery in the western part of the country during the first week of October. Indian refiners are scouting for cheaper heavy crude oil grades from Iran and Iraq in recent years but now they want to diversify the import.

    “Currently, Indian refiners are buying two-thirds of total imports from countries like Saudi Arabia, Iraq and Iran. Now, India is trying to diversify the supply sources of crude oil that we import. For this intention, Indian companies are scouting for energy needs from all parts of the world, including Russia and the US,” Narendra Taneja, India’s prominent energy expert, told Sputnik.

    Indian Oil wants sellers to take responsibility for delivery at port mentioned in the tender. “Prices of crude are almost the same at all places. If the responsibility of delivery is with the sellers, then the expenses will be included in the cost of crude,” Taneja added.

    Resource diversification is also part of India’s policy which it is applying its buying power to get best prices. “It has nothing to do with Middle East crisis as supplies were never interrupted in the past despite bad conditions in the region. It is part of our energy security strategy which intends to diversify the supply sources that we import,” Taneja said.

    As India is migrating towards global standard fuels by April 1, 2020, Indian oil companies are investing $13.5 billion for refinery upgradations. India has created oil reserve in its underground rock caverns of storage capacity 5.33 million metric tons of crude oil at three locations.

    Earlier this year, Petroleum Minister Dharmendra Pradhan said ADNOC of UAE, Saudi Aramco of Saudi Arabia and Shell have expressed their interest in storing crude oil in the strategic petroleum reserve facilities. India needs to import 80 percent of its total oil requirement.
     
  4. Zer0reZ

    Zer0reZ 2nd Lieutant FULL MEMBER

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    Vietnam renews India oil deal in tense South China Sea
    HANOI/NEW DELHI (Reuters) - Vietnam has extended an Indian oil concession in the South China Sea and begun drilling in another area it disputes with China in moves that could heighten tensions over who owns what in the vital maritime region.

    The moves come at a delicate time in Beijing's relations with Vietnam, which claims parts of the sea, and India, which recently sent warships to monitor the Malacca Straits, through which most of China's energy supplies and trade passes.

    Vietnam granted Indian oil firm ONGC Videsh a two-year extension to explore oil block 128 in a letter that arrived earlier this week, the state-run company's managing director Narendra K. Verma told Reuters.

    Part of that block is in the U-shaped 'nine-dash line' which marks the vast area that China claims in the sea, a route for more than $5 trillion in trade each year in which the Philippines, Brunei, Malaysia and Taiwan also have claims.

    A senior official of ONGC Videsh, who asked not to be named because of the sensitivity of the matter, said interest in the block was strategic rather than commercial, given that oil development there was seen as high-risk with only moderate potential.

    "Vietnam also wants us to be there because of China's interventions in the South China Sea," the official said.

    Vietnam's state-run PetroVietnam declined to comment on the concession, which was first granted to India in 2006 but had been due to expire in mid-June.

    Conflicting territorial claims over the sea stretch back many decades but have intensified in recent years as China and its rivals have reinforced their positions on the rocks and reefs they hold.

    Far to the south of block 128, drilling has begun in a block owned jointly by Vietnam's state oil firm, Spain's Repsol and Mubadala Development Co of the United Arab Emirates.

    Deepsea Metro I, operated by Odfjell Drilling Ltd., has been drilling in the region since the middle of last month on behalf of Spain's Repsol SA, which also has rights to neighbouring block 07/03, Odfjell said.

    Odfjell declined to comment on the specific location of its vessel, but shipping data from Thomson Reuters Eikon showed it was in oil block 136/3, which also overlaps China's claims. Odfjell's Eirik Knudsen, V‎ice President for Corporate Finance and Investor Relations, referred further queries to Repsol, which declined to comment. PetroVietnam made no comment.

    Competing Maritime Claims
    When asked about the activity, Chinese foreign ministry spokesman Geng Shuang said China opposes anyone "carrying out unilateral, illegal oil and gas activities in waters China has jurisdiction over".

    "We hope the relevant country can act on the basis of maintaining regional peace and stability and not do anything to complicate the situation," he told a briefing in Beijing.

    Chinese General Fan Changlong cut short a visit to Vietnam and a friendship meeting at the China-Vietnam border was cancelled around the time the drilling began.

    The centuries-old mistrust between China and Vietnam is nowhere more evident than in their competing maritime claims, despite their shared communist ideology and growing trade.

    Asked about the most recent drilling, Vietnamese officials said their Chinese counterparts have started raising concerns about cooperation with both Repsol and ExxonMobil Corp. of the United States, which is developing the $10 billion "Blue Whale" gas concession off central Vietnam.

    They said Chinese officials also expressed concern at Vietnam's evolving security relationships with the United States and Japan, both of which have offered moral support for its South China Sea claims and help for Vietnam's coastguard.

    Tensions with China were being contained, however, and had not yet reached crisis proportions, they said.

    "We know they are unhappy again, but we are resisting the pressure – it is a traditional part of our relations with Beijing," one official said privately. "Other parts of the relationship remain strong."

    Underlining the relationship between India and Vietnam, Vietnamese deputy prime minister Pham Binh Minh told a forum in New Delhi this week that India was welcome to play a bigger role in Southeast Asia - and specifically the South China Sea.

    Hanoi's growing defence and commercial ties with India are part of its strategy of seeking many partnerships with big powers while avoiding formal military alliances.

    The pace has picked up since Indian Prime Minister Narendra Modi's administration took office in 2014 and sought to push back against China's expanding presence in South Asia by raising its diplomatic and military engagement in Southeast Asia.

    India is providing naval patrol boats, satellite cover to monitor Vietnam's waters and training for its submarines and fighter pilots - more military support than it is giving to any other Southeast Asian country.

    On the agenda are transfers of naval vessels and missiles under a $500 million defence credit line announced last year.

    Next week, the navies of India, the United States and Japan will hold their largest joint exercises in the Bay of Bengal.
     
  5. Zer0reZ

    Zer0reZ 2nd Lieutant FULL MEMBER

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    Cash-strapped Venezuela offers India's ONGC oil stake: sources

    NEW DELHI/CARACAS (Reuters) - Cash-hungry Venezuela has offered Indian oil company ONGC Videsh an increased stake in an oil field, according to two sources close to the proposal, as the country seeks to shore up its bruised energy industry and strengthen ties with New Delhi.

    State oil firm Petroleos de Venezuela SA (PDVSA) has proposed selling a 9 percent stake in the San Cristobal field to ONGC Videsh (OVL), a subsidiary of India's state-owned top explorer Oil and Natural Gas Corp (ONGC.NS), the sources said this week.

    ONGC Videsh already holds a 40 percent stake in the field, which produces around 22,000-23,000 barrels per day (bpd) of oil. While the amount of the sale would be relatively modest, according to analysts, any extra income would be welcome for PDVSA.

    Venezuela, struggling under triple-digit inflation and Soviet-style product shortages as its socialist economy unravels, has been hit hard by the falling price of oil, its economic lifeline.

    The OPEC nation's oil output has slipped and PDVSA PDVSA.UL is struggling to maintain investment in its oilfields, which hold the world's largest crude reserves.

    The state company already offered Russian oil major Rosneft (ROSN.MM) a stake in a joint venture in an extra-heavy crude project in the Orinoco Belt, sources told Reuters in March.

    The sources, who asked to remain anonymous because they are not authorized to speak about the negotiations, said PDVSA was still negotiating with ONGC and no deal was certain.

    Under Venezuela's hydrocarbon law, the state must maintain more than 50 percent of all oil ventures, hence PDVSA can only offer up to 9 percent to the Indian firm.

    "ONGC is still evaluating the options," one of the sources said, adding the purchase could be challenging given the Indian company's revenues are suffering due to lower oil prices.

    ONGC Videsh managing director N. K. Verma declined to comment. PDVSA did not immediately respond to a request for comment.

    Legal Quandary
    Another potential complication is Venezuela's murky legal framework during a power struggle between the opposition and the unpopular leftist government of President Nicolas Maduro.

    A controversial decision by the Supreme Court in April gave the government the right to cut oil deals but the constitution mandates that the National Assembly, controlled by the opposition, must approve contracts of "national public interest."

    Opposition lawmakers say oil deals which bypass the legislature are therefore null. They have been warning foreign companies away from what they say are firesale deals that throw a lifeline to Maduro's government.

    "Any change to the shareholding structure of a joint venture should be approved by (congress)," wrote Jose Guerra, president of the congressional finance committee, in a message to Reuters.

    Asked if such a change would be approved by the legislature, he responded "I don't think so. The government has refused to present those issues to (Congress)."

    The business climate remains poor in the volatile and violent South American country, which is labouring under shortages of food and medicine. More than three months of protests have left at least 90 people dead.

    Recent comments by a Socialist Party candidate about a new legislative superbody created by Maduro have also spooked some in the oil sector. Hermann Escarra, a constitutional lawyer, suggested during a speech at PDVSA that the future constituent assembly could rewrite parts of the constitution that allow joint ventures with foreign oil companies.

    Still, as Maduro's government has no easy sources of financing beyond the oil sector, foreign oil companies stand to get a good price for assets on sale.

    The second source said there was no clear figure for the potential deal, although a decision was expected this year.

    Although it is tricky to estimate a price without full details, a 9 percent stake in San Cristobal could be worth $50 million to $100 million, estimated Luisa Palacios, senior managing director at Medley Global Advisors. She based her estimate on Rosneft paying $500 million to raise its stake in the Petromonagas joint venture last year.

    The number is likely to be on the lower end of that range due to Venezuela's political turbulence and business climate, she added.

    Boost to Bilateral Relations?
    The potential deal could also help once closer relations between Caracas and New Delhi that have taken a hit as Venezuela's economy unravelled.

    PDVSA spent at least a decade trying to build business ties and boost shipments to refineries in India.

    But the Caracas-based company was forced to abandon the fight for coveted market share there because of its declining output and heavy obligations under oil-for-loan deals with China and Russia, a Reuters analysis showed in March.

    Changing trade routes, triggered by rising shale oil production in the United States, turned New Delhi to cheaper oil from Africa and the Middle East.

    Venezuela's downward spiral also hurt Indian oil companies, which are owed late dividends.

    There are signs the situation may be improving, however.

    After years of negotiations, PDVSA last year agreed to clear a pending dividend of $540 million on ONGC Videsh's investment in San Cristobal.

    In return, the first source said, ONGC Videsh was now aiming to arrange a $325 million loan for development of the block this year.
     
  6. Zer0reZ

    Zer0reZ 2nd Lieutant FULL MEMBER

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    The debt threat lurking behind India's zombie power plants

    MUMBAI (Reuters) - In the central Indian village of Raikheda, the construction of a thermal coal power plant once promised jobs and economic progress.

    Years after its completion though, the debt-saddled project that promised power supply to hundreds of thousands of homes, sits mostly idle. It is unable to buy coal to power the plant or sell electricity to utilities. Dozens of nearby stores that were reliant on the project's success have shut down.

    Raikheda is not alone.

    A Reuters analysis of India's power output data shows over 50 coal- and gas-fired power plants in India are largely mothballed, or operating at a bare minimum.

    They are symbolic of a broader power sector struggling to service and pay off billions of dollars in loans, a major debt risk for the banking sector that could come to a head in coming months and ultimately leave tax payers picking up the bill.

    After steel, power firms make up the second-biggest portion of India's $150 billion mountain of bad debts. Steel made up roughly a fifth of the bad debts and power more than 12 percent.

    Last month, the central bank ordered commercial banks - the main financiers of infrastructure projects in India, including the semi-complete, or largely mothballed power plants - to resolve non-performing debt problems in six months, or push defaulters into bankruptcy.

    That could leave the state-dominated banking sector with the bad debts and hasten a government recapitalization of the sector.

    "These loans aren't going anywhere," said Supratim Sarkar, group head of structured finance at SBI Capital Markets in Mumbai. "The government will have to take care of the banking sector."

    GMR Infrastructure (GMRI.NS), which also operates the New Delhi airport, built the Raikheda plant in the central state of Chhattisgarh with around 80 billion rupees ($1.24 billion) in loans. GMR did not respond to multiple requests for comment, although earlier this year it announced a debt restructuring for the Raikheda plant.

    GMR commissioned the first phase of the 1.4 gigawatt Raikheda station in 2014 and its second in 2016, but they are fired up only occasionally to keep the power systems operable.

    During construction thousands were employed at the site and the local economy was bustling. Many farmers sold land in exchange for jobs at the plant.

    Next Domino to Fall

    India's stalled or stranded power projects account for nearly 50 gigawatts of electricity production capacity, or roughly 15 percent of India's total of more than 300 gigawatts.

    A woman walks under high-tension power lines near a coal-fired power plant in New Delhi, India, July 20, 2017. Picture taken July 20, 2017.
    Adnan Abidi
    That is potentially critical output in a fast-growing economy where total power-supply capacity is, on paper, sufficient to meet demand. But blackouts are not unusual during peak hours.

    Several stranded projects are owned by the likes of Essar Power, GVK Power (GVKP.NS) and Reliance Power (RPOL.NS), who rushed to set up power projects in the past decade when tariffs were rising.

    But the plans came unstuck as the financial health of government-owned, state-level power distributors weakened, leaving them unwilling to meet the prices demanded by power plants, while coal and gas supplies failed to keep up with the needs of the newly opened power plants.

    After heavy investment to construct the plants but no sales to generate income, many of these plants are now weighed down with debt.

    Brokerage CLSA estimates the power generation sector accounts for 43 percent of the debt on domestic bank watchlists, which represent credit deemed at risk of going sour but not yet classified as a non-performing loans.

    In 2015, India budgeted about $11 billion for a four-year bank bailout program, although analysts say this amount falls woefully short of requirements given Basel III norms and the provisioning needed for bad loans.

    Indeed, S&P Global Ratings analyst Deepali Seth-Chhabria estimates Indian banks will need 2.5 trillion rupees ($39 billion) for recapitalization.

    Policy Missteps

    Compounding the risks for the coal and gas-fired power sector, India's most-populous state of Uttar Pradesh recently rescinded eight power purchase deals the prior government had inked, deeming them too costly.

    And a shift in government policy in favor of clean energy further undermines the prospects of power plants reliant on coal.

    Earlier this year, GMR said it had agreed with banks to a strategic debt restructuring (SDR) for its Raikheda plant, giving lenders an equity stake in the asset and the ability to force a sale. At a conference in June, GMR said banks are still looking for potential buyers.

    So far, the use of SDRs have seen little success, analysts said.

    "Valuations of projects are the main reasons why SDRs have not yielded the desired results," said R. Venkataraman, senior director at business consultancy Alvarez & Marsal in Mumbai.

    With promoters of these projects also not keen to give away control, many of these cases will go to the bankruptcy court, he said.
     
  7. Abingdonboy

    Abingdonboy Major Technical Analyst

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  8. Zer0reZ

    Zer0reZ 2nd Lieutant FULL MEMBER

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    China Takes Indirect Route to Acquire Stakes in India’s Biggest Oil Refineries

    Chinese oil firms’ interest in picking up stakes in global oil firms like Saudi Aramco and Rosneft, which have or are going to have stakes in India’s biggest oil refineries, is being seen as China’s attempt to enter India’s oil sector indirectly.

    New Delhi (Sputnik) — Anticipating a major surge in the stakes of global firms in India's energy sector, Chinese oil and gas firms are spinning a plan to take an indirect entry into India's biggest oil refinery. Last week, Chinese state-owned oil firms PetroChina and Sinopec had written to Saudi Aramco seeking a 5 percent stake in the company, which is soon going to be listed on exchanges based in London and New York.

    The development comes a few days after Saudi Aramco's president and chief executive officer, Amin Nasser, exhibited a keen interest in the 60 million ton oil refinery that India's state-owned firms — Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd and Hindustan Petroleum Corp. Ltd — are setting up at a cost of approximately $40 billion on the western coast of the country.

    "Saudi Aramco is a very big company. If Chinese firms buy a stake in Saudi Aramco, it would have a minority stake only and it will not have much impact on India. Oil firms from Gulf countries already have a stake in American companies such as Exxon Mobil and BP. I do not think a minor stake of Chinese will have any threat to India," SC Tripathi, a former oil and gas secretary, told Sputnik.

    Apart from Saudi Aramco, Chinese firm CEFC China Energy is also in the process of pumping in approximately $9 billion into Russia's Rosneft. Earlier this year, Rosneft had completed the purchase of a 49.13 percent stake in India's Essar Oil, which has a 20 million ton refinery in Jamnagar. After the completion of the CEFC-Rosneft deal, it is estimated that the Chinese firm will have 7 percent stake in the Jamnagar refinery, which is India's biggest private oil refinery.

    Meanwhile, despite the recent border standoff, India's Ministry of Home Affairs denied charges of hindering security clearances for Chinese firms aiming to directly enter into the Indian oil sector through the foreign direct investment route. In the last three years, there has been a 37 percent increase in Chinese investments in India, including in the sensitive sector of telecom.
     
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