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With delinking of coal, the Government will neither control coal price nor quota allotment to any consumers

Published

10 years ago

August 31, 2015

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Meemanshi Rangacharya, Group Head, Power Management Department in TECHPORT-Thane

Recently, Indian Cement Review had a tete-a-tete with Meemanshi Rangacharya, Group Head, Power Management Department in TECHPORT-Thane, a manufacturing support service division for LafargeHolcim-owned two major cement manufacturing companies: ACC Ltd and Ambuja Cement. Both ACC and Ambuja have vast captive power plant (CPP) networks, catering power requirements of their respective cement manufacturing units in India.

Rangacharya is looking after operational excellence of all CPPs of ACC & Ambuja Cements installed at their various CMU locations.

We tried to understand what Rangacharya feels about the growth of CPP in existing cement plants as well in all future cement project proposals of various cement manufacturing companies of India. Excerpts from the interview:

What are the prime considerations to be taken into account before setting up a captive power unit for a cement plant?
In India, the gap between power supply and demand is quite high. As a result, all power-intensive industries look for stable, reliable & cost-effective electrical energy security measures.

Unlike other European, American and British countries, the word ?CPP? is synonymous with cement industry in India. The power utility in cement plant amounts to around 30-35 per cent of the total required feed-stocks for cement manufacturing process and is considered one of the major power-intensive industries.

The key considerations for setting up CPP are:
i)Long-term cheaper fuel resources with flexibility to switch over other alternate similar nature fuel sources.
ii)Availability of water source in neighbouring areas, without affecting government-sponsored priority projects like agriculture & eco-balance, etc.
iii)To include a proper water harvesting scheme such that own installation becomes at least water neutral, over an initial period of 4-5 years.
iv)Maximum updated water conservation measures need to be adopted, as cement plants are located, where sufficient lime-stone reserves are there in nearby areas, which will normally be water scare area.
v)Own captive power generation system has to be competitive to grid-power discom tariff, quality, reliability, availability, including scope of availing open access facility (purchase or sale of power to third party) through grid connectivity.
vi)In all states, the grid discom is the primary source of electricity distribution, for any industry.
vii)Discoms? performances get affected, mostly for poor cash flow due to low billing collection rate, unreliable and high cost of operations of state/central government-owned power producing agencies and severe transmission & distribution losses across the distribution network.
viii) On consideration of above factors around our cement plant locations, opting for own CPPs is obviously considered as strength for the cement industry.
ix)Plants need to be designed and installed, keeping in mind for full compliance of environmental and all other statutory norms, applicable to location site.

If there is excess power generated and the same is sold to state grid, is it remunerative enough as in the past? If not, why?
Normally CPP in cement industry is not installed with surplus capacity, aiming for earning revenue through sale of surplus power i.e. generation, excess of their captive consumption. This is mainly to remain focussed on their core cement business. However, at times, for changes in the demand side, there may be scope of generating some surplus power and selling that surplus power-either to grid or to any third party consumer-may fetch additional revenues.

With a gradual growth of mega-size IPPs in India, the cost of saleable power from our size of CPPs seldom look to be competitive. To avail this facility, grid connectivity infrastructure with CPP paralleling facility should be available, even though full power demand of cement plant, can be met with CPP. This leads to high-fixed cost component, even though very little power drawal is there, from grid. Some states, also impose CPP paralleling charges, in addition to fixed connectivity charges. There are several cement plants in India, operating only on CPP.

After delinking of coal in 2016, what will be the effect on captive generation and the overall profitability of captive generation?
With delinking of coal, the Government will neither control coal price nor quota allotment to any consumers. To combat this situation, bulk industrial coal consumers are looking for winning coal blocks through government-sponsored e-auction process, which will guarantee long term coal availability for their core industry. Others will have to look for other alternative cheaper fuels-may be fossil or non-fossil from indigenous sources-suiting to their type of CPP units, including fuel rejects from other industries, like coal washery rejects, coal fines & dolachar from sponge iron industries, biomass, municipal solid waste, etc.

With coming up of so many captive coal mining by mega industrial houses, mushrooming of coal washeries are expected to segregate high & poor quality coals, thus making more availability of poor quality coal including washery rejects for power plants. On the other hand, this may be a threat for the existing CPPs, as mega-size IPPs will be forthcoming with competitive power tariff. Switching over to imported fossil fuels for CPPs, may be another viable option, provided the fuel quality is compatible to our CPPs.

Since coal delinking process of government is presently in a very nascent stage, it is too early to say how long the type & size of CPPs that are typically installed in cement plants-normally with multi units, each of 15-30 MW capacity-will be cost viable to remain operative.

Your opinion on the cost of power through CPP.
Typically, the total cash cost of net power generation in solid fossil fuel fired conventional Steam-Rankine thermal cycle-based CPPs in cement plants-with each unit in the range of 15-30 MW capacity-comes to around Rs 3.50 to Rs 5.50 per unit, depending on the locations. Major cost differentiation factors location-wise are fuel cost, fuel logistic cost, and state electricity duty & taxes.

However, going for captive power, as primary sources is always evaluated with respect to cost, availability, reliability and quality power, is compared to any other available sources. For the next at least 10 years, captive power will be considered as the most economic & reliable primary power source for all major cement manufacturing companies in India.

Are there any technological changes happening in CPP scenario. If yes, what?
There has been a lot of technological advancement in all types of thermal power plants, which depends primarily on size of the plant and availability of suitable cheaper fuels from the neighbouring areas, finally to emerge as cost viable projects. There has been advancement in manufacturing FBC type boilers, suitable for low cost & low quality solid fossil fuels. Efficiency optimisation in typical small size STG-Sets (normally of 15-30 MW capacity range for cement plants) with re-designing thermal roto dynamics, modifications in thermal cycles, etc.

Cement plant locations are normally water scare areas, for there being lime stone mineral reserves – lots of advancements have taken place in evolving/adopting complete air cooling systems against typical conventional design of water cooled thermal power plants.

There has also been lots of progress for venturing to non-convention sources of energy sector, even for tapping by small producers/consumers like wind power, solar power, biomass plants, small hydro power plants; enhancing sustainability index of the company.

Please comment on the quality of power and on the environmental norms, required to be followed by CPPs.
As far as quality of power is concerned, technically it is very much maintainable to the desired level and that is the reason most of the power intensive industries in India like chemicals, petro chemicals, oil refineries, fertilizer, steel, etc. are having big network of captive power generation facilities.

Environmental norms-both for air & water pollution controls-are becoming stringent day-by-day and small size CPPs also need to invest a lot in air & water pollution control measures for statutory compliances. Most of the major CPPs, operating in India, have or planned to install on line CEMS (Continuous Emission & Effluent Monitoring System) with access to SPCB through SCADA system.

What are your views on recent trend of installing WHRS-based captive power generation facilities in cement industry.
Quite a considerable amount of waste heat is generated in cement manufacturing process from pre-heater & clinker cooler, with little recovery, out of the total waste heat, sometimes in raw feed section only, thus major portion of the heat goes away to atmosphere with the waste hot gases.

Moreover, at some plants, additional energy is consumed for water quenching on clinker conveying belt conveyors, to bring down the clinker temp to desired level for further processing to cement production. This is the reason most of bigger cement plants are installing WHRS-based power generation facilities. It helps reduce electrical energy cost and enhances over all thermal efficiency of the plant, own energy security and sustainability index, being green energy.

We would like to have your opinion on all proposed future cement projects [whether to come along with captive power generation facilities or not] that are in the pipeline. Any greenfield cement project, which is being blue-printed now, will come to commercial production, at least after around five years from now. We need to take decision to go for CPP, in the broader concept of fuel & power scenario in the country, in the next 8-10 years.

With the ongoing delinking of coal policy, low quality & low cost indigenous fossil fuels, which makes sense to go for CPPs, will be scarce for smaller generators/consumers, in the next 8-10 years and hence fuel security will always be haunting. Bigger industrial houses, including mega power producers, will be looking for own coal-blocks or the IPPs will look for business agreement with the coal block owners, to set up coal beneficiation plants, so that the coal rejects can be used for power generation, in mega scale.

Looking for some alternate fuel sources, either fossil or non-fossil, may not be a stable proposition as cost structure of imported fossil fuels always remain volatile and non-fossil fuels like biomass, agro wastes, etc. are seasonal commodity. Fuel security will be a big question mark. The best option is to have partly electrical energy security for cement industry of which power is not the core business, gradually to build up captive renewable energy generation facilities like wind power, solar power, small hydro power and biomass or waste to energy-based power plants – subject to convertible input potential data, in the neighbouring area, will suffice our optimised plant size requirement.

FUTURE SCENARIO

Key considerations for setting up CPP

Long-term fuel resources with flexibility to switch to alternate fuel
Availability of water
Scope of availing open-access facility (purchase or sale of power to third party) through grid connectivity
Full compliance of environmental and all other statutory norms, applicable to location site

Delinking of coal to CPP

Look for alternate non-fossil fuels like coal washery rejects, coal fines & dolachar from sponge iron industries, biomass, municipal solid waste, etc.

On technological changes

FBC type boilers suitable for low cost & low quality solid fossil fuels
Re-designing thermal roto dynamics, modifications in thermal cycles
Complete air cooling systems against water cooled
Venturing to non-convention sources of energy sectors like wind power, solar power, biomass plants
Small hydro power plants

On environment norms

CPPs need to invest in air & water pollution control measures for statutory compliances
There has to be a plan to install online CEMS (Continuous Emission & Effluent Monitoring System) with access to SPCB through SCADA system

Regarding installation of WHRS-based power generation

Improves ambient temperature around plant
Energy consumed for quenching of clinker needs to be taped
The cost of generation through WHRS is rupees 10 to 12 crores per MW
Most of the China-es companies are involved in the jobs

Process

Price hikes, drop in input costs help cement industry to post positive margins: Care Ratings

Published

4 years ago

October 21, 2021

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Region-wise,the southern region comprises 35% of the total cement capacity, followed by thenorthern, eastern, western and central region comprising 20%, 18%, 14% and 13%of the capacity, respectively.

The cement industry is expected to post positive margins on decent price hikes over the months, falling raw material prices and marked drop in overall production costs, said an analysis of Care Ratings.

Wholesale and retail prices of cement have increased 11.9% and 12.4%, respectively, in the current financial year. As whole prices have remained elevated in most of the markets in the months of FY20, against the corresponding period of the previous year.

Similarly, electricity and fuel cost have declined 11.9% during 9M FY20 due to drop in crude oil prices. Logistics costs, the biggest cost for cement industry, has also dropped 7.7% (selling and distribution) as the Railways extended the benefit of exemption from busy season surcharge. Moreover, the cost of raw materials, too, declined 5.1% given the price of limestone had fallen 11.3% in the same aforementioned period, the analysis said.

According to Care Ratings, though the overall sales revenue has increased only 1.3%, against 16% growth in the year-ago period, the overall expenditure has declined 3.2% which has benefited the industry largely given the moderation in sales.

Even though FY20 has been subdued in terms of production and demand, the fall in cost of production has still supported the cement industry by clocking in positive margins, the rating agency said.

Cement demand is closely linked to the overall economic growth, particularly the housing and infrastructure sector. The cement sector will be seeing a sharp growth in volumes mainly due to increasing demand from affordable housing and other government infrastructure projects like roads, metros, airports, irrigation.

The government’s newly introduced National Infrastructure Pipeline (NIP), with its target of becoming a $5-trillion economy by 2025, is a detailed road map focused on economic revival through infrastructure development.

The NIP covers a gamut of sectors; rural and urban infrastructure and entails investments of Rs.102 lakh crore to be undertaken by the central government, state governments and the private sector. Of the total projects of the NIP, 42% are under implementation while 19% are under development, 31% are at the conceptual stage and 8% are yet to be classified.

The sectors that will be of focus will be roads, railways, power (renewable and conventional), irrigation and urban infrastructure. These sectors together account for 79% of the proposed investments in six years to 2025. Given the government’s thrust on infrastructure creation, it is likely to benefit the cement industry going forward.

Similarly, the Pradhan Mantri Awaas Yojana, aimed at providing affordable housing, will be a strong driver to lift cement demand. Prices have started correcting Q4 FY20 onwards due to revival in demand of the commodity, the agency said in its analysis.

Industry’s sales revenue has grown at a CAGR of 7.3% during FY15-19 but has grown only 1.3% in the current financial year. Tepid demand throughout the country in the first half of the year has led to the contraction of sales revenue. Fall in the total expenditure of cement firms had aided in improving the operating profit and net profit margins of the industry (OPM was 15.2 during 9M FY19 and NPM was 3.1 during 9M FY19). Interest coverage ratio, too, has improved on an overall basis (ICR was 3.3 during 9M FY19).

According to Cement Manufacturers Association, India accounts for over 8% of the overall global installed capacity. Region-wise, the southern region comprises 35% of the total cement capacity, followed by the northern, eastern, western and central region comprising 20%, 18%, 14% and 13% of the capacity, respectively.

Installed capacity of domestic cement makers has increased at a CAGR of 4.9% during FY16-20. Manufacturers have been able to maintain a capacity utilisation rate above 65% in the past quinquennium. In the current financial year due to the prolonged rains in many parts of the country, the capacity utilisation rate has fallen from 70% during FY19 to 66% currently (YTD).

Source:moneycontrol.com

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Wonder Cement shows journey of cement with new campaign

Published

4 years ago

October 21, 2021

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The campaign also marks Wonder Cement being the first ever cement brand to enter the world of IGTV…

ETBrandEquity

Cement manufacturing company Wonder Cement, has announced the launch of a digital campaign ‘Har Raah Mein Wonder Hai’. The campaign has been designed specifically to run on platforms such as Instagram, Facebook and YouTube.

#HarRaahMeinWonderHai is a one-minute video, designed and conceptualised by its digital media partner Triature Digital Marketing and Technologies Pvt Ltd. The entire journey of the cement brand from leaving the factory, going through various weather conditions and witnessing the beauty of nature and wonders through the way until it reaches the destination i.e., to the consumer is very intriguing and the brand has tried to showcase the same with the film.

Sanjay Joshi, executive director, Wonder Cement, said, "Cement as a product poses a unique marketing challenge. Most consumers will build their homes once and therefore buy cement once in a lifetime. It is critical for a cement company to connect with their consumers emotionally. As a part of our communication strategy, it is our endeavor to reach out to a large audience of this country through digital. Wonder Cement always a pioneer in digital, with the launch of our IGTV campaign #HarRahMeinWonderHai, is the first brand in the cement category to venture into this space. Through this campaign, we have captured the emotional journey of a cement bag through its own perspective and depicted what it takes to lay the foundation of one’s dreams and turn them into reality."

The story begins with a family performing the bhoomi poojan of their new plot. It is the place where they are investing their life-long earnings; and planning to build a dream house for the family and children. The family believes in the tradition of having a ‘perfect shuruaat’ (perfect beginning) for their future dream house. The video later highlights the process of construction and in sequence it is emphasising the value of ‘Perfect Shuruaat’ through the eyes of a cement bag.

Tarun Singh Chauhan, management advisor and brand consultant, Wonder Cement, said, "Our objective with this campaign was to show that the cement produced at the Wonder Cement plant speaks for itself, its quality, trust and most of all perfection. The only way this was possible was to take the perspective of a cement bag and showing its journey of perfection from beginning till the end."

According to the company, the campaign also marks Wonder Cement being the first ever cement brand to enter the world of IGTV. No other brand in this category has created content specific to the platform.

Process

In spite of company’s optimism, demand weakness in cement is seen in the 4% y-o-y drop in sales volume. (Reuters)

Published

4 years ago

October 21, 2021

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Cost cuts and better realizations save? the ?day ?for ?UltraTech Cement, Updated: 27 Jan 2020, Vatsala Kamat from Live Mint

Lower cost of energy and logistics helped Ebitda per tonne rise by about 29% in Q3
Premiumization of acquired brands, synergistic?operations hold promise for future profit growth Topics

UltraTech Cement
India’s largest cement producer UltraTech Cement Ltd turned out a bittersweet show in the December quarter. A sharp drop in fuel costs and higher realizations helped drive profit growth. But the inherent demand weakness was evident in the sales volumes drop during the quarter.

Better realizations during the December quarter, in spite of the 4% year-on-year volume decline, minimized the pain. Net stand-alone revenue fell by 2.6% to ?9,981.8 crore.

But as pointed out earlier, lower costs on most fronts helped profitability. The chart alongside shows the sharp drop in energy costs led by lower petcoke prices, lower fuel consumption and higher use of green power. Logistics costs, too, fell due to lower railway freight charges and synergies from the acquired assets. These savings helped offset the increase in raw material costs.

The upshot: Q3 Ebitda (earnings before interest, tax, depreciation and amortization) of about ?990 per tonne was 29% higher from a year ago. The jump in profit on a per tonne basis was more or less along expected lines, given the increase in realizations. "Besides, the reduction in net debt by about ?2,000 crore is a key positive," said Binod Modi, analyst at Reliance Securities Ltd.

Graphic by Santosh Sharma/Mint
What also impressed analysts is the nimble-footed integration of the recently merged cement assets of Nathdwara and Century, which was a concern on the Street.

Kunal Shah, analyst (institutional equities) at Yes Securities (India) Ltd, said: "The company has proved its ability of asset integration. Century’s cement assets were ramped up to 79% capacity utilization in December, even as they operated Nathdwara generating an Ebitda of ?1,500 per tonne."

Looks like the demand weakness mirrored in weak sales during the quarter was masked by the deft integration and synergies derived from these acquired assets. This drove UltraTech’s stock up by 2.6% to ?4,643 after the Q3 results were declared on Friday.

Brand transition from Century to UltraTech, which is 55% complete, is likely to touch 80% by September 2020. A report by Jefferies India Pvt. Ltd highlights that the Ebitda per tonne for premium brands is about ?5-10 higher per bag than the average (A cement bag weighs 50kg). Of course, with competition increasing in the arena, it remains to be seen how brand premiumization in the cement industry will pan out. UltraTech Cement scores well among peers here.

However, there are road bumps ahead for the cement sector and for UltraTech. Falling gross domestic product growth, fiscal slippages and lower budgetary allocation to infrastructure sector are making industry houses jittery on growth. Although UltraTech’s management is confident that cement demand is looking up, sustainability and pricing power remains a worry for the near term.