In India, CLP will be only investing in non-carbon generation technologies which means renewables and in power transmission along with distribution whenever it is available.
New Delhi: CLP India, a wholly-owned subsidiary of Hong Kong-based CLP holdings, has chalked out plans to double its existing 3,000 Mw power generation capacity over the next 3-5 years. The reduction in solar panel prices in the past few years was way more than anticipated, Managing Director Rajiv Mishra says. He also shares his views on the fast-evolving renewable energy market in India, in an exclusive interview with ETEnergyworld.
Give us an overview of the company’s presence in the energy space? What are your expansion plans in India?
CLP is a Hong Kong-based utility established in 1901. It is a listed company with a market capitalization of over $ 30 billion and it is one of the oldest companies in the Asia Pacific. Our businesses are in Hong Kong, China, Australia, and India. In Hong Kong and Australia, we are vertically integrated where we have our own power generation and distribution. In India, we are present since early 2002 and are only in power generation. We have a generation portfolio of three Gigawatt (Gw) consisting of supercritical coal-fired power plants, a gas-fired power plant, nearly one Gw of operating wind farms and 270 Megawatt (Mw) of operating solar. As a group, we have a very intensive carbon reduction target. In India, we will be only investing in non-carbon generation technologies which means renewables and in power transmission along with distribution whenever it is available. We have plans to double our capacity over the next 3-5 years. We could be investing in setting up between 700 Mw and 1,000 Mw of capacity every year.
Tell us about CLP’s focus in the renewable energy sector? Will it continue to be a profitable business?
We started with a wind energy project in 2008. At that time solar was disproportionately expensive. So, we also had to consider the energy source according to its economic viability. As we go along we expect the balance to change. In the last 3 years, the reduction in the solar panel prices was way more than anyone would have anticipated. Therefore, perhaps people made money, but, maybe in retrospect, it gave inherent buoyancy to the bidding process. Everything is competitively awarded and the processes are transparent as well. We hope right bidding behavior will deliver a very competitive product which also makes money.
Some investors in the green energy space are jittery over the continuous fall in solar prices. What is your view on the viability of solar projects?
My view is that as long as the duty is predictable and known upfront to everyone, it is easy to quote the price. What investors do not want is surprises. We are firm believers of free trade across the world. We have seen the advantage of imports in thermal power when the bidding started where the equipment was from China. At that time, the equipment was imported from China because there were a lot of problems. In solar, the fact that we have bids of as low as Rs 2.44 per unit was not because of local manufacturing. Sometimes distortions come in and the government needs to take a decision which one can understand. As an investor as long as these things are known in advance before one makes the bid or it is introduced in the existing projects that are already under construction, there may not be an issue.
So, as an investor, what is your assessment of the efficacy of the current bidding process in the solar sector?
India is among the first countries to have introduced competitive bidding and we have gained a lot because of our scale from investors. But all of these things will last only if people can make money. There have been instances of delay in payments by some states. But these things do not work and we hope the whole system is sustainable.
If an unsustainable bid has been made, it is better for the country that it fails right up front and does not get financed. At least we will not have a bad debt problem. In such a case it is better that the bidder pays the penalty or loses the liquidity or even the bank guarantee and walks out of the project rather than going through with it, getting it financed and then default. Sometimes these failures can bring indiscipline in the market.
CLP has a strong presence in the wind space and the government is working on a mega 1 Gw tender for offshore wind. How lucrative is offshore as a business opportunity?
We are certainly interested in offshore wind project but as a group, we do not have experience in this sector. Therefore, it is likely that we might like to do our first project in partnership. Once we gain enough experience, we will expand from there. We are in touch with the usual suppliers in the sector.
The country may have to rely on imports for offshore wind equipment rather than local development. What is your view?
Initially, the equipment in the offshore wind has to be imported. Once the players see the scale in India, that may start manufacturing here. Wind turbine cost across all geographies is not low. So, this is the price we should be willing to pay. In solar, the first project was awarded at Rs 16 per unit. Initially, one may have to pay a higher cost but in the long run, it will come down. The current government has shown a long-term demand and that gives confidence as long as they keep awarding projects for people across the supply chain to make the necessary investments.