Delays in Domestic Hydropower Projects Force India's NHPC to Focus on Projects in Tajikistan, Myanmar and Bhutan

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Researched by Industrial Info Resources (Sugar Land, Texas)--NHPC Limited (BSE:533098) (Faridabad, Haryana), India's largest hydropower producer, has announced plans to invest $5.6 billion on projects in Myanmar. The decision to invest and shift focus to hydroelectric power plants in neighboring countries, including Bhutan and Myanmar, has been attributed to delays in commissioning domestic power projects. S.K. Garg, the chairman and managing director of NHPC, said that a team of experts are in Myanmar to undertake investigation of sites and a preparation of detailed project reports. According to reports, NHPC has set a target of sourcing 10,000 megawatts (MW) by 2020 from hydropower projects in Bhutan.

Domestic hydropower projects are facing several hurdles, including forestry and environmental clearances; labor; poor geological data; engineering failures; and resettlement. Given this background, the company is likely to slip in achieving its target of 11,674 MW by March 2012. The recently released report by India's Central Electricity Authority (New Delhi) has revealed that NHPC's proposed 45 projects, with a total generating capacity of 11,674 MW, will be delayed, and is expected to begin operations only in the 12th Five-Year Plan (2012-17).

As per an earlier plan, these projects were scheduled to be commissioned during the 11th Five-Year Plan (2007-12), during which NHPC had targeted the capacity installation of 7,886 MW, of which 3,431 MW has been commissioned. During the 10th Five-Year Plan (2002-07), NHPC installed a power generating capacity of 14,393.2 MW. Power ministry officials said that although a capacity addition of hydroelectric power plants has increased, installation and commissioning has declined due to rapid development of thermal power projects.

Several projects in various stages of development are expected to face delays. Environmental clearances have deferred the 132-MW Teesta Lower Dam-III and the 160-MW Teesta Lower Dam-IV projects. NHPC's projects in Arunachal Pradesh are running two years behind schedule. The cost of the projects has escalated by $535.4 million. The 3,000-MW Dibang power project, which is being developed by NHPC, is likely to be commissioned by 2017. Sources say that environmental clearances have delayed the project. The project is likely to take 10 years to complete, which will include nine years for construction and one year for infrastructure development. The project has received technical and commercial clearances and is awaiting land acquisition permits. The 800-MW second phase of the 2,051-MW Prabati hydropower project in Himachal Pradesh is also facing hurdles in construction. Delays have been attributed to engineering faults and mechanical failures. However, officials of NHPC have indicated poor geological conditions as the primary reason for the delay. J.K. Sharma, the project director of NHPC, has said that the company is in a better situation now to manage projects, and indicated that the Prabati project will begin electricity generation in two years.

In Jammu and Kashmir, security reasons have delayed the $937.6 million, 1,020-MW Bursar project; the $1.08 billion, 1,000-MW Pakal Dul project; and the 330-MW Kishanganga hydroelectric power project. The Kishanganga project has been in a state of development for the last 20 years. Industry analysts have said that six-month to one-year delays in large hydropower projects is acceptable, as these power plants yield high-equity returns after commissioning.

According to Garg, India has the potential to generate 149,000 MW from hydropower sources. However, only 25% of these resources have been tapped so far. By 2013, NHPC proposes to commission 11 new projects with a total generating capacity of 4,622 MW. Presently, the company operates 13 power plants with a cumulative generating capability of 5,175 MW. In August 2009, as part of the government's strategy to disinvest stake in public-sector companies and raise funds for expansion projects, NHPC issued an initial public offering (IPO). The government decided to offload 5% of its stake and infuse fresh equity by selling a stake of 10%. The IPO received about 1.3 million applications and was over-subscribed 24 times, with a bid of $29.98 billion. In September 2009, the company was listed in the national stock exchange. After the IPO offer, as stipulated by norms laid out by the Securities and Exchange Board of India (SEBI) (Mumbai), 50% of the management board of NHPC consists of independent directors.

In a related development, NHPC has entered a joint venture agreement with the Orissa Hydro Power Corporation (OHPC) (Bhubaneswar, Orissa) to construct 12 hydropower projects in the state. NHPC and OHPC will hold stakes of 51% and 49%, respectively, in the venture. The first phase of development will include three hydroelectric power plants on the state's Mahanadi River.

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