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Home News Power Sector News Orissa experience - AES to scale down India operations

Orissa experience - AES to scale down India operations

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AESIn a sign of deteriorating confidence in India's power sector, US-based electricity producer AES Corp., one of the last two significant foreign investors remaining in the industry, has decided to wind up most of its operations here, while retaining a stake it owns in Orissa Power Generation Corp. Ltd(OPGC). A decision to this effect was taken by the board of AES and communicated to its employees in India. AES India is an arm of AES Corp., which has operations in over two dozen countries. AES has around 40 employees in India and a majority of them will be let go, a person familiar with the development said.


"The company has decided to not pursue any new projects except remaining in OPGC and exit everything else. There has been a change in the CEO (chief executive officer) and a global strategy change," said the person, who didn't want to be identified.
President and CEO Paul Hanrahan stepped down from his position on 30 September and was replaced by Andrés Gluski at the helm of the Arlington, Virginia-based company.

"We continue to evaluate opportunities in India in line with our strategy of focusing on select core and growth markets," Lucas Bushman, a US-based AES spokesperson, said by email. "It is not accurate to say AES is exiting India."

"We will continue to meet our funding commitments and are dedicated to completing our projects in development," he said, but did not address specific queries on AES operations in India.

AES and China Light and Power Ltd (CLP) have been the only significant overseas power companies with a presence in India through their subsidiaries-CLP Power India Pvt. Ltd and AES India, respectively.

An AES executive, who requested anonymity, confirmed the decision to wind up most of the company's operations.

"The decision was taken some time back," the executive said. "The employees have been asked to leave. The process of asking the employees to go started on Monday."

AES entered India in 1993 in power generation and distribution, and currently operates and owns a 49% stake in OPGC's 420 megawatts (MW) Ib Valley plant, which it bought for $143 million.

It also has a management control of the project, which has a two-stage, 2,640MW expansion planned. The utility also has a wind power and solar power portfolio, and is developing a 1,200MW project in Chhattisgarh. AES also had plans to bid for the United Progressive Alliance's showpiece ultra mega power project programme, targeted at building large power generation capacity at a single location with each project having a capacity of 4,000MW.

"The decision is largely driven by their global strategy," a Delhi-based power sector analyst aware of AES' move said on condition of anonymity. "They have also been facing problems with their Indian projects."

AES' decision to exit most of its operations in the country comes at a time when the Indian power sector is battling a crisis due to scarcity of funds, environmental issues, fuel shortages, resistance from local communities to give up their land and the worsening financial health of state electricity boards. Analysts say the decision to exit will only worsen sentiment.

"The power sector is going through a huge crisis, from being talked of as the best opportunity akin to telecom," said Arvind Mahajan, head of energy and natural resources, and global infrastructure practice at audit and consulting firm KPMG. "The crisis of policy, fuel supply, financial health of the distribution companies and land acquisition has led to pessimism at a time when there is a huge opportunity. This is forcing companies to look at opportunities overseas."

Phone calls to Venu Nambiar, vice-president (business development) at AES Corp., and who also heads AES India, remained unanswered. A message left on his cellphone and queries emailed on Friday also remained unanswered.

AES Corp. earned revenue of $17 billion in 2010 and it owns and manages $41 billion in total assets. According to information available on the company's website, the New York Stock Exchange-listed AES has a global presence "with over 40,000MW in operation across 28 countries on 5 continents".

"AES considers India as one of its top growth markets globally and targets to create a 5,000MW India generation portfolio over the next five years," said the website.

The Indian power sector will need an additional $400 billion investment in the 12th Plan starting April 2012. The government is worried about the funding scarcity facing the sector, which threatens to worsen an energy deficit that is seen as a key bottleneck in efforts to sustain and boost economic growth.

Source- Livemint

 

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