India’s money-losing state power retailers may be scaring off power plant investors, according to Sembcorp Industries Ltd., compounding the industry’s woes that have left about 20 per cent of the country without electricity.
Delayed payments by the distributors and their reluctance to sign long-term purchase contracts are risks for investors, said Vipul Tuli, chief executive officer at the Singapore-based company’s India unit. It joins Spanish wind power producer Acciona SA and Goldman Sachs Group Inc.-backed ReNew Power Ventures in voicing concerns over the precarious business environment in India’s power industry.
“The lack of long-term offtake contracts and growing receivables are eroding returns for investors,” Tuli said in an interview Dec. 1 in New Delhi. “India must be competitive with other countries in terms of sustainable long-term infrastructure returns in order to attract investments.”
Sembcorp, controlled by Temasek Holdings, has 2,748 megawatts of installed generation capacity in India, including three coal-based units of 660 megawatts each. One of those units has yet to find long-term buyers for its power. A fourth, also without a contract, is yet to be commissioned, Tuli said.
Long-term purchase commitments aren’t available for almost 22 gigawatts of India’s thermal plants, about 7 per cent of the country’s total power generation capacity, according to T.K. Barai, a member of the Central Electricity Authority, the planning wing of India’s power ministry. That’s forcing generators to sell in short-term markets where tariffs are lower.