Private Placement requires more clarification

News from VC Circle:

Chennai-based BGR Energy Systems, a supplier of systems and equipment for the power, oil & gas, refinery, petrochemical and process industries, has raised Rs 194.4 crore ($49.2 million) from Citigroup Venture Capital International and Reliance Mutual Fund in a pre-IPO deal.CVCI has acquired 2.88 million shares at Rs 450, which translates into Rs 129.6 crore for a 4 per cent of the company. Reliance MF has taken 2 per cent (1.44 million shares) at the same price. The pre-IPO shares will have a lock-in of one year from date of allotment.BGR is present in seven lines of business namely power projects, captive power projects (<100>

Questions:

This publicly available information at the most opportune time of IPO(7th December to 12th December) which clearly shows the merit of the company that is big time investors like CVC and Reliance Mutual fund are interested to invest at 450 Rupees per share and lock in of one year is what the only relevant and meaningful information that should be available to retail investors, who based on such big time investment will invest in the IPO who's valuations are just unimaginable?

R there any SEBI regulations on this?

Is it right way of bringing information(concise(rather selective) information in public at most opportune time)? or there are further covenants to such investment which are not publicly stated?

India Energy Summit, New Delhi

India Energy Summit 2007, New Delhi, 5th – 6th October 2007

Important Observations:

ICICI Project Finance:

1. Equity Kicker: Allowing 20% capacity of developed project for trading in hands of Developer will make Power Project Investment by private parties in PPP mode more lucrative.
2. Major decision variable in Independent Power Project appraisals:
A. Access to fuel
B. Access to market
C. Implementation
D. Project Management

TERI, Mr. Ramanathan

Wind Power Generation:

A. Intermittent generation
B. At least 300KM away from nearest load center
C. No balancing generation

Ravi capoor, IAS

Japan’s Energy requirement remained constant for last 30-40 years (achieved with energy efficiency)?

PGCIL, SK Soonee, ED

Availability based tariff: Datum fixed, Imbalance, fixed cost, variable cost
Unscheduled Interchange: Approx business of 6800 crore in year 2006-2007.

PTC, CMD, Mr. TNT

CMD PTC: 25% stake in India’s first Power exchange but doubtful of feasibility of exchange in India:

A. Trader can not resale power to another trader
B. High Margin money @ 100%
C. MPP requires balance sheet support
D. Absence of strong power transmission
E. Intra State Sell: Exchanges should be regulated by CERC and not by State (SERC)
F. Captives: needs to be connected to Grid. Cap of 4% cost over generation cost against risk of open access

IREDA, CMD Mr. Debasish Majumdar

(Various hindrances to Renewable Energy development in India)

A. ROE of 14% not sufficient for private participation, Risk involved are higher
B. Land: Hydro and Wind projects land acquisition takes long time: needs help from state
C. Insufficient Contractors availability specifically for Hydro projects
D. Regulatory benefits: Depreciation linked with investment cost, required to move towards Production related Tax Credit which will help in increasing PLF
E. RPO obligation: Maharashtra has taken lead in this direction, should spread to other states also.
F. 25MW Wind power project shall be eligible for SOPs available for Mega Projects
G. Access to low cost fund


Secretary, Ministry of Power, Mr. Anil Razdan

A. Incentives shall be linked to Generation
B. Micro and Mini Hydro Project shall be developed in Himalayan states
C. LED’ through solar energy
D. Bio fuels for Localized Load centers
E. Cluster of industries around the Power plants to capture waste heat through (cooling tower)è waste heat can be utilized by near by small scale industries like textile industry etc.

Renewable Energy Ministry, Mr. Vilas Muttmewar
(Developments)
A. Target by 2031-2032 è 54,000 MW for renewable energy, 40,000 MW by wind energy, 6500 by small hydro, 7500 MW by Bio Fuel.
B. National policy on bio-fuel under preparation for accelerated growth.
C. SEZ for manufacturing of machinery for Renewable energy (wind power etc)

Sri Lanka bold enough...

http://www.lankabusinessonline.com/fullstory.php?newsID=1624241866&no_view=1&SEARCH_TERM=1


Sri Lanka too is bold to take steps to remove “Oil Subsidy” and increase “electricity tariff” and hence been able to see rating improved by Standard and Poor. India can learn from its neighbors…

ECB curb: Negative effect on Local Manufacturing

ECB more than USD 20 million per borrowing company would be permitted only for foreign currency expenditure. Accordingly, borrowers raising ECB more than USD 20 million shall park the ECB proceeds overseas for use as foreign currency expenditure for permissible end-uses. The above modifications would be applicable to ECB exceeding USD 20 million per financial year both under the Automatic Route and under the Approval Route.

Indirect Effect on "Local Indian Manufacturing Industry":

I believe the move to curb the ECB will have negative effect on "Local Indian Manufacturing Industry" because the curb on ECB will provide impetus to "importing plant equipments and associated machinery for Infrastructure Projects" rather than purchasing them from Indian Manufacturer or for that matter of fact even the so called "Technology Transfer" that is invariably attached and expected in big ticket infrastructure investment would be an distant dream.

Financing the "imports" will definitely will have an added advantage of at least around 200-300 basis points are rupee expenditure financing by ECB is restricted with this move.

When we are talking about investment of around 350 billion USD in next 5 Years (I think the figures are revised up to 425 billion dollars) than such a move definitely will hinder the growth of Manufacturing Industry in India.

Just by simple calculation if we see, out of 425 bn USD if "other than government investment" comes to around 200 bn USD than taking just 25% of that amount that is around 50 bn USD would have gone to Local Manufacturing Industry and curb on ECB will definitely work against this investment, as be it any infrastructure or for that matter any project, corporate will not be able to fund the investment in rupees by raising cheap ECB pursuant to the above restriction.

I think in this complex world RBI needs to develop better filter to achieve the desired results rather just putting blanket restriction such as curbing ECB.

123agreement Concern

Article 6 Nuclear Fuel Cycle Activities

Subsection (iii): Part of subsection (iii) (14th line)says that "The parties agree on the application of IAEA safeguards to all facilities concerned with the above activities".

Regarding this statement does it means that ALL the facilities involved in REPROCESSING will come under safeguard whether they were already installed or the only those that will be installed pursuant to this agreement. Absence of "Pursuant to this agreement" is making me restless.

Will all our Reprocessing facilities will come under safeguard?

Let me know if some body has got some clarity on this part.

Wind-generated power not better than nuclear

This is one debate which is going to rock the corridors of power or electricity generation for days to come, specifically when it comes to china, India and Indo-US Nuclear deal. I am fortunate to be part of both kind of power generation in one or other capacity in my professional life of 5 years.
Cost comparison: well cost is always illusion because it depends what you are comparing as it is always said “if u compare oranges with apples” than you are on wrong footage. Similarly if you compare cost in terms of capital cost or even may be cost inclusive of fuel as technically cost of power generation has got three heads:
1) Capital write-off,
2) Maintenance,
3) Fuel
Even comparison which takes into consideration all three major (so called visible major) than also it is not far from apple compared with oranges. Why? Well let me add to this.
Nuclear Power with my experience and publicly available figures cost around 6.5 crores per Megawatt of generation. Typical construction & commissioning time required is to the tune of minimum 7 years (at least today this is the minimum time that is required to put a reactor of scale of 1000mw, though we may claim to achieve the same in 5 years). With better project management (read private players), lesser government interference and assured equipment/material supply probably this time can be shortened to reasonable time period of around 4 years( I may be optimistic but I think this is achievable). Question that baffles all and nuclear industry in general is about the disposal of waste material (Radiation). Department of atomic energy and for that matter of fact nuclear industry world over has always preferred to remain silent over this issue. I think better governance, more transparency and public awareness should help in this regard. I don’t know why nuclear industry always wants to be under veil. Why can’t we have publicly available plans, cost analysis, project planning, yearly investments, cost overruns etc for nuclear establishments? As far as I believe waste disposal and handling nuclear radiation is not difficult task. But at most care should be taken during commissioning nuclear power plants with zero tolerance for any deviation from quality. The equipments quality, procedures followed should not be compromised at any cost and there should be strict regulation with severe criminal liability on the responsible person at the helm of installation. As far as I understand the biggest problem that Indian nuclear industry is facing today is “availability of fuel”. With the 123 agreement with US I believe availability should improve in short term (but at higher cost). I am yet to understand why there is so much of gap between the nuclear fuel availability with Department of atomic energy and the projections of nuclear power that are being made( leave apart question on the huge investments that have been carried out in last 3-4 years likes of Tarapur, Kaiga and Rajasthan). Any naïve financial planner who believes that investments being done are from hard earned money of common tax payer should have behaved rationally while projecting the installed capacity and the availability of fuel. Coming back to 123 agreements though it is always thought to be a business development gimmick by US the likes of Vice president Dick Cheney (who is known to be the one of the biggest beneficiary of “Bird flu” gimmick) I believe India stands to gain out of this agreement, at least department of atomic energy will loose the stranglehold it has on “Nuclear Technology” which if taken care properly is comparable to any other form of energy.

Wind Power & Comparison costs around 6 crores per Megawatt of Installation. I used word installation because it is one megawatt of installation that costs around 6 crore as on today in India. With PLF of around 30-35% (Maximum that is achievable in India today) as compared to PLF of 95% with nuclear power which is pretty much realistic ( Probably India nuclear power is best in this regard with likes of generating stations such as Kakarpara, surat having world record on their name) nuclear power is clearly winner. Coming back to wind power, there are no fuel costs for the entire life time. Construction and Commissioning time for a wind power plant of 500MW capacity can be achieved (depending upon the availability of land) reasonably in time of around 2 years with wind power developers boasting the capacity of any way around 3000MW/Yearly (Suzlon alone boasts capacity of around 2000 plus commissioning turnkey capacity). But than if look in to the units generated by a wind plant it can never be comparable to nuclear power of similar capacity because of limitation of PLF. Today’s wind power industry is heavily dependent on depreciation benefits at least for “typical Indian customers”, though lately customer profile is changing drastically. Going green, Carbon credits, RPO (Renewable Purchase obligation targets) is increasingly becoming reasons of investments. Specifically when it comes to requirement of power at level of Giga watts or Terra watts wind power and for that matter of fact any renewable energy source is not in position to suffice the demand, its only and only nuclear power that can produce power of that level.


http://www.times-news.com/opinion/local_story_204105550.html?keyword=secondarystory
http://www.atimes.com/atimes/South_Asia/IG24Df03.html

Wind-generated power not better than nuclear

This is one debate which is going to rock the corridors of power or electricity generation for days to come, specifically when it comes to china, India and Indo-US Nuclear deal. I am fortunate to be part of both kind of power generation in one or other capacity in my professional life of 5 years.

Cost comparison: well cost is always illusion because it depends what you are comparing as it is always said “if u compare oranges with apples” than you are on wrong footage. Similarly if you compare cost in terms of capital cost or even may be cost inclusive of fuel as technically cost of power generation has got three heads:
1) Capital write-off,
2) Maintenance,
3) Fuel

Even comparison which takes into consideration all three major (so called visible major) than also it is not far from apple compared with oranges. Why? Well let me add to this.
Nuclear Power with my experience and publicly available figures cost around 6.5 crores per Megawatt of generation. Typical construction & commissioning time required is to the tune of minimum 7 years (at least today this is the minimum time that is required to put a reactor of scale of 1000MW, though we may claim to achieve the same in 5 years). With better project management (read private players), lesser government interference and assured equipment/material supply probably this time can be shortened to reasonable time period of around 4 years( I may be optimistic but I think this is achievable). Question that baffles all and nuclear industry in general is about the disposal of waste material (Radiation). Department of atomic energy and for that matter of fact nuclear industry world over has always preferred to remain silent over this issue. I think better governance, more transparency and public awareness should help in this regard. I don’t know why nuclear industry always wants to be under veil. Why can’t we have publicly available plans, cost analysis, project planning, yearly investments, cost overruns etc for nuclear establishments? As far as I believe waste disposal and handling nuclear radiation is not difficult task. But at most care should be taken during commissioning nuclear power plants with zero tolerance for any deviation from quality. The equipments quality, procedures followed should not be compromised at any cost and there should be strict regulation with severe criminal liability on the responsible person at the helm of installation. As far as I understand the biggest problem that Indian nuclear industry is facing today is “availability of fuel”. With the 123 agreement with US I believe availability should improve in short term (but at higher cost). I am yet to understand why there is so much of gap between the nuclear fuel availability with Department of atomic energy and the projections of nuclear power that are being made( leave apart question on the huge investments that have been carried out in last 3-4 years likes of Tarapur, Kaiga and Rajasthan). Any naive financial planner who believes that investments being done are from hard earned money of common tax payer should have behaved rationally while projecting the installed capacity and the availability of fuel. Coming back to 123 agreements though it is always thought to be a business development gimmick by US the likes of Vice president Dick Cheney (who is known to be the one of the biggest beneficiary of “Bird flu” gimmick) I believe India stands to gain out of this agreement, at least department of atomic energy will loose the stranglehold it has on “Nuclear Technology” which if taken care properly is comparable to any other form of energy.

Wind Power & Comparison costs around 6 crores per Megawatt of Installation. I used word installation because it is one megawatt of installation that costs around 6 crore as on today in India. With PLF of around 30-35% (Maximum that is achievable in India today) as compared to PLF of 95% with nuclear power which is pretty much realistic ( Probably India nuclear power is best in this regard with likes of generating stations such as Kakarpara, surat having world record on their name) nuclear power is clearly winner. Coming back to wind power, there are no fuel costs for the entire life time. Construction and Commissioning time for a wind power plant of 500MW capacity can be achieved (depending upon the availability of land) reasonably in time of around 2 years with wind power developers boasting the capacity of any way around 3000MW/Yearly (Suzlon alone boasts capacity of around 2000 plus commissioning turnkey capacity). But than if look in to the units generated by a wind plant it can never be comparable to nuclear power of similar capacity because of limitation of PLF. Today’s wind power industry is heavily dependent on depreciation benefits at least for “typical Indian customers”, though lately customer profile is changing drastically. Going green, Carbon credits, RPO (Renewable Purchase obligation targets) is increasingly becoming reasons of investments. Specifically when it comes to requirement of power at level of Giga watts or Terra watts wind power and for that matter of fact any renewable energy source is not in position to suffice the demand, its only and only nuclear power that can produce power of that level.

http://www.times-news.com/opinion/local_story_204105550.html?keyword=secondarystory

http://www.atimes.com/atimes/South_Asia/IG24Df03.html

Blue ocean Employee experience

Is it blue ocean or Red ocean or rather a necessity. In today's world were employee's expectation are far bigger than just compensation, don't HR Manager and higher management should tackle this issue proactively. I don't think giving employee a satisfactory role and working could be called as Blue ocean Strategy any more. In fact it is must in today's world. I do agree its different from traditionally what we have been doing all the years, but than there is only one thing which is permanent and that is change. We cannot be in a business if don't take care of the aspirational needs of an employee in today's world. If we will not than those aspirations would not let those employee to work faithfully to the organisation, and they would always be in dilemma to look for other avenues. I personally too believe that satisfaction of aspirational needs is one of the most important parameter as far as longevity of an employee with an organisation is concerned. Personally i have observed the same in my professional life of around 5 years. One thing that today's young manager's are not ready to compromise is their aspirational needs. Well if HR Manager's or Higher Management thinks that it is too difficult to cater to "Growing Aspirational needs" or if worst if they think that this is something they don't think that need to be bothered about than i believe its end of days for that organisation. Human capital is the most imporatant capital in today's world whether we accept it or not.

Reference:

http://epaper.timesofindia.com/Repository/ml.asp?Ref=RVRNLzIwMDcvMDcvMDkjQXIwMTUwMQ==&Mode=Gif&Locale=english-skin-custom

ONGC CMD or INDIAN CRICKET TEAM SELECTION SIMILARITY

ONGC CMD selection and Indian cricket team selection: Can you see some similarity? Both are act of irresponsibility. How?
ONGC the numeruno “Navratna” of India was with out leader for almost a year. Is there any body responsible? Is there any body accountable?
Similarly India cricket team selectors were sleeping till yesterday and finally they took a decision in ways which even the most naïve companies HR would not have followed by officially declaring the candidature of Mr. Ford with out his confirmation. Rest story is known to all of us. Is there any body responsible? Is there any body accountable?
Both act of irresponsibility will cause damage to the image of India, to the common tax payer of India in one or the other way.
Can we use RTI in this kind of cases?

Power Situations Facts and Solutions: Naked truth/Blatant Lie

From 19th feb Financial express:

Govt wants to clear its face on load shedding for which it is completely responsible. Under the head of Measures for reducing power distribution losses it says that in the coming 5 years 14254 crores would be spent to improve the capacity of distribution system: what does this means? Cant government have outcome based targets like improving the efficiency by certain percentage rather than outlay based targets. I would like to ask our honourable PM/FM why still this kind of "irresponsible targets are allowed". It further says that certain portion of this cost is already been completed what does this mean to public? how to verify what has been done and what is left?
It says last year we successfully cut the losses by 3.25%? 3.25% of what? It says above programs( which are not mentioned just referred as 22 new schemes) would cut the losses even further!!! Are we fool to allot money for "would cut the losses even further".
It say we have not been smugly idle; I don't know what is the new definition of being Idle? Will dabhol ever get solved?
It sites tata power 500MW shutdown for annual maintenance as one of the reason for acute shortage/load shedding: why we are paying so much of money and benefits to this politicians if they can not even plan for such regular events?

Lastly still the advertisement has courage to say that the efforts to make power available are going on "Full steam ahead". Only time can prove that how blatant eye wash this is.

Dreams unlimited Zero Output

Nuclear Power Corporation of India (NPCIL) intends to set up 16,900 MW of extra nuclear capacity at an investment of Rs 1,01,400 crore ($23.03 billion) during the 11th Plan (2007-2012).
Today's ET news. This is 100th time that NPCIl has revisited their plans and each time plans gets bigger and bigger. But where is the fuel to run such huge capacity. Installed capacity of approx 3500Mwe as on today is no were near its 80% capacity factor because of unavailability of fuel. Such huge investments without ensuring fuel supply will be as good as throwing good money behind bad money.

Call them breeder , fast breeder or advanced PHWR , nothing is proven yet as good as building castles in air.

With such ambitious plans of growth what about the Human Resource development. Engineers are leaving the organisation like any thing.

Four reactors are under construction two units at kaiga and two at Rajsthan where from the fuel will come if the existing reactors requirements are not fed completely.

think...think....

PSU's dilemma

Today reading an article in ET about ONGC's CMD being declared not fit memorised me the older days of my working in one of the PSU of Department of Atomic Energy. Though at that time the victim post was station level post rather than CMD's level post. I doubt how PSU's will even catch up with private sector if things will go like this. We (When part of an PSU) still say we have created record of achieving something that was never achieved but deep down my heart i know how much early that could have been achieved( so actually we were late). Wise people suggest me "work in the system work for the system". But which "system". System should be System at least. Coming back to ONGC's CMD news the vaccum created gives very bad signal not only the present employees in the organisation but also future aspirants. I being pursuing Management Program at one of the premier B school can very well gauge mood among the prospective employees, they are not at all looking towards PSU. PSU dont get takers at B schools. How long PSU's will survive with out infusion of young and managerial talent. On the other hand see how B school aspirants are lapping job offers from Reliance, Aditya Birla Group , Essar group, Tata Group, Jindal group etc. There is no concept of succession planning at PSU because till the time I am at top I will keep on trying to extend my tenure as long as possible. I dint see any wrong in extension per se if they are backed by performance rather Previous ONGC's CMD exit was premature by any standard he could very well have been given extension but then extension has to be decided based on meritocracy and not based on how many times you have raised voiced against. With my limited experience both in PSU and MNC I could really figure out the difference at least in terms of succession planning. With PSU succession planning is an alien concept but this is very well planned in MNC. Even the likes of GE's Jack welch used to have succession plan in line and proper grooming is carried out not for months but for years. Many Indian conglomerates have started succession planning these day. Leadership programmes are nuances of succession planning only. Hope things will improve or at least so called systems of inefficiency will see the sun of privatisation.