Pan Global’s strategy is to build sustainable infrastructure, including regionally-targeted, low environmental impact small hydro projects, as well as other high ROI ventures in Asia’s third-largest economy, India. The company is well-positioned to succeed alongside the country’s mounting GDP, which grew at 5.7% during the June quarter. This is the strongest pace of GDP growth for India in two and a half years and is up 1.7% from the March quarter, driven largely by strong industrial activity.
While Izumi Devalier, an economist for HSBC in Hong Kong, chalked up most of the GDP jump to front-loading of government expenditure in a recent statement, economists at Citi argued India is on its way back to as much as 7% growth with 6% inflation and that it is just a matter of if, not when. Irrespective of who is right in such a debate, the policy initiatives set by Prime Minister Narendra Modi’s government regarding small hydro are clearly positive for PGLO, with Modi dedicating a 240MW hydro project in the northern Jammu & Kashmir state in July, followed up by two more dedications last month (44MW and 45MW respectively). This is considerable development activity considering the difficult terrain and location of the latest dedications being some 10.5k feet above sea level in the Ladakh border region, which sits between the Himalayas and the Kunlun mountain range further north. PM Modi even asserted at the latest hydro project dedication that his government would strive to make Jammu & Kashmir the “energy state of the country,” offering investors a clear signal as to the future of such hydro development in northern India.
A recent report on the Indian hydropower market by MarketReportsOnIndia.com, looking at the sector through 2025, predicts a very bullish trend moving forward and, given the recent World Bank announcement that they will only fund ecologically safe hydro projects in India, the market is wide open for precisely the sort of projects PGLO is looking to do. Projects like the 5.7MW small-hydro plant in Uttarakhand (Project Badyar) which was connected to the grid in July and which PGLO is acquiring through a staggered acquisition (currently 9.93% of outstanding equity held) of the privately-held Indian corporation that is commissioning the plant, Regency Yamuna Energy.
The Uttarakhand government is currently in the process of working on a its recently announced (September 4) power policy overhaul, which focuses heavily on small hydro project development in the 2MW to 25MW range. The stars seem to be aligning for environmentally safe and sound technologies in the small scale hydroelectric power sector in India and PGLO is at the forefront with efforts like Project Badyar, which is currently in testing, certification and other activities associated with commercial operation. Harnessing hydro power on a small scale allows for minimally invasive tapping of river currents and also helps enable cost-effective infrastructural development, even at high altitudes in India’s remote or poorer regions, where larger projects would be logistically ponderous for a variety of reasons.
World Bank estimates indicate that as many as 79 million households in India still have no access to electricity and small-hydro. With its ability to be deployed in remote regions where larger projects, or other types of projects simply aren’t anywhere near as feasible, small-hydro could bring millions into the ligh, as PGLO and other players develop the massive remaining amounts of hydro potential across the country. India currently imports somewhere around 28% of its net energy consumption as well, so this overall trend toward developing distributed hydro must be seen in the light of achieving energy independence as well. This is a subject that the Modi government has been driving hard at since even before the 2012 blackouts, which put as many as 600 million people’s lights out for days and helped put Modi into office.
The specter of grid overload in India, so profoundly represented by the 2012 blackouts, was just conjured up again this week on Tuesday (September 3), with rolling power outages bringing most of Mumbai (around 12.5 million people) to a standstill for the better part of the day, when the primary supplier, Tata Power’s plant in Trombay, had its 500MW unit 5 station trip, causing a domino effect. This latest incident throws a bright spotlight on how difficult it is to solve the problems facing India’s electrical grid and makes a strong case for a less-centralized, more localized/distributed solution, where consumers and businesses are not reliant on a handful of large, often distant providers. Small hydro is going to be a huge variable when it comes to solving the problem of India’s seemingly ravenous hunger for more electricity, driven not just by steady GDP growth, but by a growing population where the birthrate remains at around 2.6 births per woman.
India is still growing at a healthy clip and has clearly put hydroelectric on the front burner legislatively, creating is tremendous potential upside for a small company like PGLO, which is also developing sustainable agriculture projects to feed the growing population high quality organic produce while simultaneously addressing increasingly worrisome water shortage issues. PGLO is also pursuing geothermal and solar PV, as well as environmentally sustainable green buildings using LEED guidelines.
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