India’s Power Ministry recommends National Hydroelectric Power Corp. (NHPC) purchase private equity shares to ensure the US$1.48 billion 1,200-MW Teesta Stage-III hydroelectric project on the Teesta River in the northern district of Sikkim is completed.
The amount of the proposed equity purchase is not immediately available.
Sikkim is a mountain-girdled state in the eastern Himalayas bordered on the west by Nepal, north by Tibet, east by Bhutan and on the south by the Darjeeling district of West Bengal. Teesta-III includes a 60-meter-high concrete-faced rockfill dam, a 13.33 kilometer headrace tunnel, 980 m tailrace tunnel and an underground powerhouse for its six 200 MW turbine-generators operating under a head of 800 meters.
Andritz VA Tech Hydro supplied developer Teesta Urja Ltd. (TUL) the complete electro-mechanical package for six vertical Pelton units at Teesta-III and the units were scheduled to go on line by August 2011. But as of this week according to information from TUL, Unit No. 1’s scheduled commission date is September 2015.
With Teetsa-III and additional hydro projects in India, at issue are time and cost overruns that prevent projects from meeting scheduled commission dates. In recommending NHPC purchase private equity shares — the Indian government has an estimated 86% stake in NHPC — the government’s move is intended to encourage continued foreign investment in India’s hydroelectric initiatives.
In the first quarter of this year the ministry announced its support to back a joint venture between the Sikkim government and NHPC to purchase interests in TUL held by six global private equity funds and the Athena Projects Pvt. Ltd. (Athena).
Private equity investors in TUL include U.S.-based Morgan Stanley Infrastructure Partners, General Atlantic, Goldman Sachs Asset Management, Everstone Capital and Norwest Venture Partners and UK’s Ashmore Investment Management.
TUL was formed in 2003 and began its Teesta-III development on a build own operate transfer basis with its partners.
According to Indian government data published in April 2015, the country has at least 21 hydropower projects that have time overruns of five or more years. This, according to the government, could dissuade foreign investment if investor returns are prolonged due to lengthy time overruns.
Organizers said, “The project on completion would supply 12% free power to the state government for the first 15 years and 15% free thereafter. Full ownership would be transferred to the government after 35 years, which would significantly contribute towards [gross domestic product] revenues and overall development of Sikkim.”
Currently, Teesta Stage-III is the largest public-private partnership hydroelectric project being constructed in India.
Published reports indicate up to the mid-1960s, the share of hydropower as a proportion of India’s overall installed electricity generation capacity was 46%, which meant that nearly one in two units powering the country’s electricity grid was a hydro unit. However, despite the advancement in civil engineering technology and the increasing pressure on governments to reduce the country’s carbon footprint by harnessing clean energy sources, research indicates hydropower, as a proportion of India’s overall installed electricity generation capacity is about 18%.
India ranks fifth in the world in terms of usable hydroelectric potential, with an estimated potential of 148 GW, making it one of the most important potential energy sources. India has around 41,000 MW of installed hydropower capacity while an additional 13,000 MW is under construction.
This puts the total tapped capacity at around 33% of the country’s potential.
The test, though, is to salvage the under-construction projects as a first-step towards overturning the overtly negative investment sentiment towards hydro projects.