Thermal Power: Revival Plan
The capacity utilization of existing thermal power plants (under 60%) has been a big concern. A new Government policy, Shakti aims to resolve the issues and revive 30,000 MW of power plants. This apart, another growing concern is that an aggregated project capacity of around 20,000 MW has been stalled due to financial issues.
Despite UDAYbeing launched to reform Discoms, the situation on the ground remains unchanged. The hiring trend continues to be downward with few opportunistic hires, and with a higher focus on financial reengineering leadership roles.
India is emerging as a global leader in renewable energy capacity additions, with disruption seen in tariffs in the last 1 GWauction conducted in early 2017 (INR 3.46/ unit)/Consequently, the sector continues to attract investment and projects are getting executed at a furious pace. To support these low tariffs, and remain at the forefront, , India has the opportunity of turning into a manufacturing hub. Some measures taken in this direction are
• LM Wind Power, set up a new plant at Gujarat
• Gamesa, built a Greenfield at Andhra Pradesh, investing ₹ 500 crore. Windar, an associate company of Gamesa, is building its second plant near Chennai
• Vestas, recently commissioned a blade plant in Gujarat, investing ₹350 crore
• German wind turbine company, Nordex, commissioned its first plant, near Chennai
• Brazilian company, WEG, manufacturing motors, has announced wind turbine production in India
• Chinese company, Envision, will soon launch a product in India
• Senvion, erstwhile RE Power, acquired a manufacturing plant in India last year
To maintain the momentum and ensure that new projects are delivered within timelines, companies are actively bolstering their teams in Finance &Treasury, Business Development and demand for leadership talent is high. With several new players in the market, we are also seeingan unswing in talent acquisition- especially in senior roles for Project management, execution and procurement functions.
Talent apart, Technology upgradation in the hardware will also be key in achieving financial closure for these aggressive tariffstructures. This will also be a critical factor- with several global players introducing their new products in the market.
Developers and technology providers are also establishing closer ties to spread the risk over a longer time period to provide financial viability. The sector gets high visibilitydue to the global focus and availability of capital helps attract high quality talent.
Solar Energy – the dominating future!
Large investors are scouting for deals in Solar power sector, with a war chest exceeding $100 billion in investment in the next five years.
• CDPQ, Azure Power,APG Asset Management, and Piramal Enterprises have created a platform to invest into solar power
• IDFC and Actis PE platforms for renewable are looking to acquire assets
Solar tariffs fell to INR 2.62/perunit in the last auction where we saw several new players entering the scene including South Africa’s Phelan Energy Group and Avaada Power, Mahoba Solar, Natems Power, Mira Zavas and Cambronne Solar.
Technology will continue to be a defining factor, with the global suppliers focussing on R&D to stay relevant amidst the competition from China.
Given these historically low tariffs, once again the focus will be on projectfinance and supply chain and execution. With Chinese capacities being underutilized, there is an opportunity to get better deals. To ensure profitability amidst this competitive bidding and deliver in a cut-throat environment, organizations will need spruce up talent in the Finance, Procurement, Supply chain and Project management teams.
Trends: Consolidation, Mergers & Acquisitions & Regulatory
Another area of expertise in demand is M&A and strategy. This is mainly due to the consolidation of assets and the creation of aggregation platforms by various PE funds. Some acquisitions that have been successful in the recent past are:
• India Power Green Utility, acquired a 49% stake in two solar projects from Punj Lloyd Infrastructure
• International Finance Corporation investing $40 million (Rs 260 crore) in Tata Cleantech
• Actis-backed Ostro buying solar projects from Suzlon for USD 150 Mn
• Eastspringlooking to invest in Continuum Wind Energy
• JPMorgan-backed Leap Green to buy Inox’s wind assets
• ReNew Power to sell 10% stake to Japan’s JERA for USD 200 Mn
‘Open access’ in energy trading is another area that is being explored. The entire section will witness plenty of activity commercially which will in turn lead to significant impacton talent requirements. Rooftop Solar is another slowly emerging area.
The planned IPO of IREDA will enhance its ability to mobilise funds. The company is vying for around 20 per cent of the loan market share with plans to disburse INR 13,000 crore in FY18