Essar Power's CEO KVB Reddy doubles the company's efforts to crush project delays

Non-completion of assets have long been plaguing Essar Power.

This has been consequently causing negative cash-flows, and Essar Power’s CEO is having none of these as he vows to stop project delays and catalyse profit turnaround.

Non-completion of assets have long been plaguing Essar Power.

This has been consequently causing negative cash-flows, and Essar Power's CEO is having none of these as he vows to stop project delays and catalyse profit turnaround.

Non-completion of assets have long been plaguing Essar Power.

This has been consequently causing negative cash-flows, and Essar Power's CEO is having none of these as he vows to stop project delays and catalyse profit turnaround.

Non-completion of assets have long been plaguing Essar Power.

This has been consequently causing negative cash-flows, and Essar Power's CEO is having none of these as he vows to stop project delays and catalyse profit turnaround.

India's power sector is currently battling transmission and distribution issues, aggregate technical and commerciallosses, power theft, and project delays piling up. Essar Power has had its fair share of delayed projects, and CEO KVB Reddy is fully determined to keep it at bay and consequently put a stop to negative cash-flows. Asian Power recently caught up with CEO Reddy, a power industry veteran with over 32 years of experience, as he discussed Essar Power's biggest challenges and his plans to overcome these.

How long have you been in the industry and how long have you been with Essar Power?

I have more than 32 years of experience in the power industry and have had the privilege of being involved in executing all the power projects of Essar. From nurturing projects from scratch to seeing them turnaround into PAT positive companies that are powering the nation's future, it has indeed been an eventful journey. And it is a journey that has been a constant source of motivation. Essar Power's resurgence fills me with an immense sense of satisfaction. Over the years, we have successfully identified opportunities and have persevered despite challenges.

Having joined Essar Power in 1995, I have been responsible for formulating and directing the overall strategy of the Power Business Group. I started my career with NTPC (National Thermal Power Corporation) in 1983 as Engineer Executive Trainee and rose within the ranks to become Manager. At that stage, I looked after NTPC's first 3 combined cycle gas-based power plants—right from concept to commissioning. Since then, there has been no looking back. Every new challenge
has brought with it countless opportunities to break new ground and utilise past learnings.

What were the previous positions you held and how did these help you in leading the company?

Prior to my current stint, I was Chief Operating Officer (COO), Power Business Group. In that capacity, I was responsible for leading both the operations and projects team towards building a sustainable platform to cater to Essar's expansion plans. I worked along with the operations and maintenance teams across all plants to direct the investments, resources and management of the Power Business group towards delivering higher value solutions to all our suppliers and customers – internal as well external. My experience of working in varied value chains of gas and coal based power plants has been instrumental in shaping a 360-degree perspective. It aided my decision making capabilities. I have tried to utilise all these learnings towards ensuring the future growth of our business.

What are your top three priorities for Essar Power?

The power Industry has entered a makeover phase, and we plan to take as much benefit as we can from the initiatives and policies which the Government of India is implementing for improving the sector's health. Our top priority for Essar Power remains the following:

Firstly, complete the balance units of subsidiaries' assets viz. 3 units of Paradeep power plant, 1 unit of Hazira power plant, Stage II of Mahan-Sipat transmission line, stabilise Unit II of Mahan power plant and complete Tori 1200 MW power plant. These assets once completed and operational, will generate positive cash flows, thereby improving the financial position of the company. Secondly, ensure off-take from our plants in any scenario of the industry cycle. For this, our strategy involves improving operational efficiencies so that we can produce power at the lowest cost.

Since the commodity cycle is currently favourable, we intend to take advantage by securing fuel for stranded gas based assets and other coal based assets. Lastly, align repayment to lenders to the life of the assets and ease the initial cash flow mismatch. RBI's 5/25 flexible scheme, and related initiatives are helping us achieve
this objective.

What are the biggest challenges Essar Power is currently facing? 

The biggest challenges that the company is currently facing are: a. Managing regulatory challenges: De-allocation of certain coal blocks and corresponding delays in completion of projects, resulted in negative cash-flow. While we had aligned the repayments of debt from the revenues of the assets, non-completion of assets is creating a mismatch and causing negative cash-flows; b. Obtaining fuel at economical price for both gas and coal assets and being able to sell power at viable
rates.

The motivation to ensure that these challenges are being met comes from the changes afoot in the industry itself. From the industry side, many benefits are imminent. Many of the initiatives are in their nascent stage but we hope that these will be realized in due course of time and would have long term benefit for the industry. We recently had a positive turn-around in the parent company of Salaya power plant i.e. Essar Power Gujarat Limited (EPGL). The company, for the
first time since inception of the plant, stood PAT positive in FY 15-16. This was possible majorly due to utilizing the perk of declining trend of international coal cost and exploring various origins of international coal. So, this was our first step towards making financials of our company healthier and we are even more motivated with this achievement.

What is Essar Power's biggest plan to date? What should the industry be excited about?

The biggest plan to date – Making the subsidiaries profitable by maximum utilization of resources that are ours and the ones provided by the government. We are on track of achieving this plan and have made one of our subsidiaries (EPGL) as profitable in the last fiscal. Currently, the industry is showing signs of growth and improvement. New initiatives of power ministry are catalysing a turnaround. Industry should be excited about the reforms that the government is planning to bring in all the sub sectors, right from fuel to delivering the end-product to the consumer. Also, the renewed enthusiasm around renewable energy is making an impact in the industry; We hope that the industry strikes the right balance among all the sources of power generation and optimises value for the producers.