Fulbright US-India Series: CP Poonacha | Managing Director of Commercial and Power Sectors, DLF Group

2022-08-17
C. P. Poonacha, is the Head of Commercal Operations at DLF Group and the Managing Director of DLF Power and Services Limited. The DLF Group is India's largest real estate company and in this conversation, Mr. Poonacha discusses DLF’s real estate expansion plans and how renewable energy will be integrated. Further, Mr. Poonacha shows what variables need to be considered, in order for customers to more willingly and easily adopt solar energy into their porftolios.
Hope you enjoy my conversation with Mr. Poonacha! ​

Topics covered in this podcast: ​
[1:50] Mr. Poonacha introduces himself and speaks about his background [3:34] Context around the DLF Group and how the business is structured [7:25] The co-generation power plants of Cyber City
[12:15] Does the DLF group plan to add more than its current 3 megawatts of solar power?
[15:32] What have been some of the key macro challenges for integrating solar into DLFs portfolio?
[17:45] Background on the annual banking of power policy and how it varies across states
[22:09] What can the government do to help solve these macro hurdles?
[23:31] What are DLF’s expansion and solar integration plans for the future?
[28:38] Advice to the younger generation from Mr. Poonacha, who has extensive experience!

Transcript


00:06 Karan Takhar
Hello everyone. This is Karan Takhar, and welcome to the Energy podcast. Over the past decade, India has done an impressive job of integrating renewable energy into its energy mix. For this Fullbright podcast series, I sought to investigate the enabling factors and potential of India's global leadership in renewable energy with the focus on solar this Fulbright series is broken down into Four Seasons. In this season, through conversations with leaders who have been instrumental in developing the Indian renewable energy sector, we will highlight how India has managed to integrate 35 gigawatts of solar in just a span of 10 years. We will also explore what these leaders believe. The key challenge is to be as this sector further develops. In this episode, I'll be speaking with CP Poonacha, who's the Managing director of DLF Power and Services Limited and also the commercial Managing director of the DLF Group. Mr. Poonacha talks about DLF real estate expansion plans and how renewable energy fits into these plans hope you enjoy my conversation with CP Poonacha. Oh, Mr. Poonacha. Thank you so much for taking the time to participate in this interview. I really appreciate it, and prior to diving into my specific questions, I'd like to ask you to briefly introduce yourself so that listeners can get an understanding of your involvement in the energy sector in India. Could you please provide a brief introduction?

02:04 CP Poonacha
My name is pronounced spelled as POONACHA. I am basically I am an engineer with and MBA in finance, and I sort of a techno-commercial person. I had been in the power sector and later power plus other and like the real estate construction sector for nearly four decades now, and initially, I was in a power equipment management company called Birth Heavy Electricals Limited long back here. Now it's one of the best on public sector companies in the power field, but in the last about 30 years, I have been with In the DLF. Of course, I look after the all power-related matter and am Managing Director of a company called DLF Power and Services Limited. I am also the commercial director for the whole group. I look after all contracting, purchasing all commercial issues for all business of the group our group we have, as I said, office this business, shopping malls, residential buildings, few hotels and all this kind of the thing, so this is generally this my profile.

03:21 Karan Takhar
Thank you for expanding on that and. Are you the Managing Director of the DLF Power Group and the commercial director of the DLF Group? What are some of your key roles and responsibilities, and can you also provide some more background on the DLF group for those who may be unfamiliar?

03:42 CP Poonacha
The DLF, we have two or three different kinds of properties, etc., or product range number one is the officer's complexes, that is. This we let out be fully electrified, air-conditioned maintained office spaces Buildings 2 various companies, Indian as well as international companies. Most our 1670% of the area is leased out, MNC, andMultinational Corporations, and these buildings are owned by DLF and maintained by DLF and these people, they, depending on the companies requiring how many floors are half the flow or whole building they lease it out for a long term and when they're officers from there we have these officers in various parts of the country we have a huge cyber city in DLF Gurgaon there itself It is about 1415 million square feet of office space leased out, and we have also officers in other parts of Gurgaon, Delhi, Hyderabad the Calcutta, Chennai, Chennai also we have a huge IIT park of about 7,000,000 square feet and we are now going to develop further so currently DLF has about 3540 million square feet of office space is leased out and we are also started now building further office buildings of about 25 to 30 million square feet the building constructions have started in various stages other this is all on the commercial office space then of course we also have shopping malls that of course mostly in the national Capital Region in Delhi Gurugaon which we will again we own the buildings we maintain the powered electricity and air conditioning and then let out various retails various chains and various restaurants and shops then of course we have we build these residential projects like you mentioned you are currently staying interest you would have seen in Gurugaon lots of such complexes mid-range and high-end we don't do the low income or median income group or projects residential projects anymore so coming to this for example in the residential segment as you know they're all sold out to the individual property owners so these buildings complexes are run initially for a year or so DLF helps them run the thing and then it is all run over by the residents welfare associations what we call as RWAS is the resident themselves form a committee and then they do the thing and mostly they get some connections from the local Government licenses or the grid grid power what we call they get the power but then now this, that is as regards the residential projects that also we have done in various parts of the country so that's the model but you see, coming to the cyber city here in Gurgaon and there's also a property called Silliker which is about 7-8 kilometers from the cybercity on the National Highway these two properties we when we started and wanted to get attract the IT companies mostly the tenants are all righty and it east related services before then, that time these power situation in Haryana was very very poor. The availability was only about, say, 60% of the time in a year, and when available to, the quality was four, the voltage was less or more, and the frequency servers. So this could damage the our tenant's equipment because there are many data now and even International data centers with the banks etc. they, operate from our cyber city, so they need, you know, 100% backup power and uninterrupted good quality power for that we have set up our own co-generation plants in the cyber city and its local co-generation meaning there has to be more than two types of energy generated to qualify the co-generation product, so we have gas supply gas is a gas-based primarily the gas based plants where we get gas from the gas authority of India Limited on the long-term contract then we have plants in our huge basements we have gas turbines and gas engines.
Generating primary power and the because we have a huge air conditioning requirement, the heat coming the hot gases coming out of the gas turbines or gas engines they are utilized in waste heat recovery once we call, it is short form for vapor absorption missions this is a type of new technology for air-conditioning here there is a complex chemical system inside the valves and the hot gas the heat is absorbed and chilled water is generated, this chilled water we circulate through a district cooling system in this adversity and we take it from 1 generating point up to 3-4 kilometers, 5 kilometers and then pump it up to various floors of various buildings so that is how it is a co-generation plant we do air conditioning, we do also supply electricity for this property and other or the commercial buildings in various parts the country, of course, we have tidied up now, all with the local city board so we get the mix of I don't know how this also power different density boats have some quantum of renewable power and most of it is still conventional power. Cold-based and gas-based power plants they get the power, so this is how we get the power for the all our office complex in the residential complexes.

10:16 Karan Takhar
OK, that makes a lot of sense, so in terms of the cyber hub has its own co-generation plant at DLF.

10:25 CP Poonacha
So let me clarify based Cyber Hub is only that hub of about 40 restaurants, but that Cyber City, we call that whole a huge glass-based building cinema, there are about 1820 buildings in that area they're all let out for officers IT companies IT enable services there that we earlier we call as Cyber City.

10:48 Karan Takhar
I know it, yeah, my mistake, and that makes that's very interesting, so I know you briefly mentioned that the DLF group has ambitions to develop another 40 million; I think you said square feet for similar to.

11:04 CP Poonacha
No 40 million but 30 million square feet about the dominance.

11:07 Karan Takhar
Of it, so for example, in this, as DF group is scaling and has also like renewable energy technologies are now becoming economical to a large degree so are there any plans? What are your own personal or your views in terms of?

11:26 CP Poonacha
I'll come to that, so now, coming to the renewable energy system we have.

11:27 Karan Takhar
Thank you.

11:32 CP Poonacha
Of course, all our commercial buildings these, office buildings, and shopping mall roofs, we have all installed solar rooftop solar systems, so these have been mostly set up on a build own operated by the solar power developers. There are companies, as you know, Azure Power, renewable power, Tata Solar, etc., so these companies have set up we have roughly about 3 megawatts of rooftop solar spread over various buildings In their lives.

12:08 Karan Takhar
OK, and yeah, I know DLF Group was the first real estate company to actually personally get solar on its rooftops, SO 3megawatts, so for example, in this new as development proceeds, do you see this growing in Its portfolio in the DLF groups portfolio, the three.

12:26 CP Poonacha
Yes, it's a yeah, this is the we any office, but we don't leave any of his roofs empty. There's some portion of the roof that also gets absorbed because we have a cooling tower for the air conditioning systems and pumps, etc. It occupies some space and all other rest of the space we any new building coming up, we put up these rooftop solar systems.

12:51 Karan Takhar
OK, very interesting.

12:53 CP Poonacha
That is the one thing #2 where we have no connections. This government Central Government, of course, is pushing or as encouraging. Setting up of the conventional non-conventional power systems like solar, wind, etc., and in this context, as we had In the final stages, but for the COVID now for the last 5-6 months, it is getting delayed derailed, but we are in final stages of discussion with the solar power generators in Chennai for example in the southern city of Chennai because as I mentioned to you there, we have about 7,000,000 square feet of IT park Yes, he said so we want to set up a ground-based at a distance wherever they get line because as you know, one method of solar power needs about we find a half acres of land, so they had to find the line block and also the transmission arrangements, etcetera, and then we want that power to be wheeled to our Caesar so that we get it one is we encourage the non condensing the power, and that will be cheaper compared to what the Governmental license distribution companies gives us the power.

14:20 Karan Takhar
That's very interesting. Yeah, I was most curious about that area, and yeah, for example, say, in a lot of the present DLF properties, maybe we can use Cyber City as an example just because of how big that area is, so I was curious.

14:37 CP Poonacha
River City also we'll be going into this arrangement slowly because, as I told you when we started cycles able to and 15 years back start, they need to attract the good for in IT companies we need to have 100% reliable power, so we had set up as I told you, our own co-generation power plant. Because of that, till now, because the power position was not good as the State Government, we had not taken any grid power connection, so now we have applied for it, so we expect the grid power to come in about nine months to one year after that we would also have planned to have similar solar power plants and ground and wheel power to the cyber city to have those non the green power for this happen.

15:30 Karan Takhar
Wow, that's amazing. That's amazing to hear, and what are your what are like some of the key challenges from your perspective in terms of.

15:39 CP Poonacha
It's a challenge, mainly is very changing, unreliable what we call the regulations of these state governments see anybody who invests in this they are loan tenure normally is about 12 years for these green plants oh plants so till 12 years if somebody has to make calculations and know his returns, know his capability to pay back the loans and service the loans, etc. the parameters or the terms and conditions should be fixed It can't be that the viability she cannot go wrong 2-3 years down the line once set up the plant, so some states had tried to make it for they have brought in Lord, for example, Haryana about one year back to one and 1/2 years back they said the State Regulatory Commission there will be no cross-subsidy surcharge there is what is called the cross-subsidy surcharge If you have a captive plant and you wield the power using their systems but normal conventional power, there is a huge amount per unit of power, about 1.5 rupees, ₹1.00 different states. They have very high surcharges. They have some other additional charges, etc., so when they say this will not be eligible for solar and wind power, they said one and 1/2 years back, and then after a while, a few months back, they said no it didn't believe it so if somebody is to send like set it off guard and investments made on saying that the unit costs for generation with this much and later if these many additional charges get levied, the whole viability does not exist for the part and #2 similarly in this there are many states you strike, Tamil Nadu we they used to allow for wind and solar power annual banking you do I hope you understand what's meant with banking.

17:46 Karan Takhar
Not it fully. If you could explain a little, that would be really nice.

17:50 CP Poonacha
Yeah, banking days that these are wind or solar unlike the conventional coal-based plants cool page plants can generate it will as long as there is a load royal because 24/7 it can operate continuously because you're feeding coal or gas, whereas a solar can generate generally only forever 8 to 10 hours a day morning at 8:00 am to evening 6:00 pm and5:00 PM because when the sun is, you know bright but rest of the time it cannot generate similarly, wind is also cyclically depends on certain seasons of the year It generates well other seasons it generator will generate sometime night it is less day time it is more there are lots of natural conditions which controls the generation in that case so when you generate in the daytime whatever it's generation time of a wind or solar, you are allowed to pumping it into the government grid and store it keep it there In the sense keep it in the sense that can be used by others and you can withdraw and consume that much power anytime during the year this is called as banking, so this is arrangement which should be there in our opinion for a non-conventional power of solar and only called the wind power because those generation times cannot be controlled by individuals It's a nature, natural phenomena so this thing is now even Tamil Nadu they have withdrawn for all the new plants to be set up they say banking can be done only on a month, one-month basis that is hardly anything otherwise you've got to consume or real-time basis. Real-time basis means when you're generating at the time you got to consume, we have set up a captive power Francis, so whatever generated between 8:00 am to 5:00 pm in the evening you have got to consume during the time itself so this drastically reduces the ability to the ability for consumption of the fully generated units.

20:07 Karan Takhar
That makes sense. This is very interesting. Thank you so much for expanding on this really interesting I did; I actually did not know that these policies have been re-enacted in Tamil Nadu, for example. I was just going to ask you if this also the case in Haryana or.

20:24 CP Poonacha
No, Haryana is also now. Yes, I think they have changed. Initially, they came up with a very good ambitious plan but then, later on, See what is happening. Unfortunately, yeah is most of the erstwhile we used to call it as electricity boards of the state government or in its state then they made as in improvement and progress they've made it into areas, Government control corporations, one for distribution of power, one for generation and other for transmission of power, so all of them are due to historical reasons are in the red, most of them they're all making losses, so the government to protect their interests sort of, you know they're making that you should not consume in 2020. Annual banking and there will be cross-subsidy surcharges. All these surcharges are goals to be these government distribution and generation companies, distribution, and transmission companies so that you know their losses are reduced, so this becomes a sort of a vicious cycle so when the you say the power cause cap-ex has come down, but then at the same time these charges keeping so the charm or I would say the arbitrage between the Government-Supplied grid power and it says solar power is not much earlier that could have been ₹3or₹4.00 per unit, whereas with these charges if they kick in, then the costs will go up German Bill Steele

22:10 Karan Takhar
So what do you think is a solution for these potential challenges with energy storage? In your view, completely change every forest.

22:19 CP Poonacha
No, energy storage is also very costly. As of now, there are lithium-based battery systems which they say with lithium, the size of the batteries reduces drastically, unlike the conventional power with conventional batteries, but then at the moment, the prices by the cost of these lithium battery systems are prohibitive, very costly my opinion is the government when the Central Government has set up a guideline, they want to encourage this, but then they should also impress upon the state comments they should make clear cut policies which are fixed for a period of say, ten years, or 12 years otherwise the viability it cannot calculate consider the viability at all today there are some rules tomorrow it changes how will the investments make and how will the banks lend to the developers, and how if the developers pay back the loans, that's a show.

23:21 Karan Takhar
That makes a lot of sense, and yeah, I think a few people who have been interviewing have expressed similar concerns, so I really appreciate you clarifying on that and just in terms of the DLF plan like moving forward, so can you talk a little bit about just the groups plans moving forward I know you mentioned briefly on this, but if you could give a little more detail and also if you can incorporate a little bit on how If you think renewable energy, maybe if storage comes cheaper, whether the group will then start to become a lot more active In this.

23:57 CP Poonacha
Space, as I told you, we are into these 3-4 segments. One is building of residential high-end residential complexes and then selling them, and some of them we very high-end apartment complexes in Gurgaon, like they're called Arrelious Magnolia or now Camellias is another one, the best, most luxurious property in India where it's in final stages all that we also take the onus of maintaining and running and giving it offer services to the customers and all other residential complexes we sell it to then we have as I told you office complexes which we have all around the country in major cities then we have shopping malls retail that is one of these areas which we own and operate then a few hotels there are so this is our the total gamut of the activities but in this coming to the power picture I've explained to you what we are currently doing and we will definitely all retail office spaces on the roof we would have a roof-mounted solar plant.
And plus, like in for Cyber City in where we have, you know, contiguous or in large office complexes, we are tying up with developers if the regulatory environment stabilizes, we might even, at our own cost, set up our own plant's ground-based power plants.

25:36 Karan Takhar
Very interesting.

25:36 CP Poonacha
That is something which we are well versed in solar this thing. For example, we know I know all the calculations and sensitivity analysis, what is the cap-ex, what should be the thing, etc., like in Chennai, as I told you in the final stages of tying up 430 MW of Ground-based the signals of opera in cybercity we may require about 100 MW capacity solar plants then we have a huge mall which is the biggest shopping mall in India called Mall of India at Noida a must have Noida here Adjoining Delhi there's a 2 million square feet of amount for that we have just tide up with a company called AM Solar, and they would set up a solar plant and provide, as we meet about three crores of units, but due to the regulations of, we can only consume as and when it is generated. We will be consuming about one and 1.5. That means about 15 million 20 million units of power per year from solar plants, and solar has been set up with an approved license from the Government of Uttar Pradesh.

27:05 Karan Takhar
Wow, that's that's amazing. So, are you optimistic that the regulatory environment will stabilize

27:12 CP Poonacha
No, it's not highly against It's a question of revenue for the government-controlled distribution companies, so they feel, but we are though it is at risk and taking certain investments people generate this solar power, etc., but they feel they are getting it cheaper or so you go to share your profits to tell it crudely, with the common listing distribution companies, so that is something which is a nagging point still there are certain such regulatory issues some issues are already challenged by various companies in the courts of law in India the matters have reached up to even the Supreme Court of India, so we need to see in the next few months or a year how things will turn.

28:07 Karan Takhar
Understood, understood, and now actually is my final question just because I really, I'm getting a little greedy here, but I'm just very curious. I always ask everyone this, and I know we're like a few minutes over time, but essentially so well, because you've had such a great career, and I just wanted to ask when you reflect back on your own career, and I'm someone who's just starting my career, so This is why I'm very curious, but even if you were to Imagine giving some advice to your own younger version of yourself just post-graduate and reflecting on all of your experiences, is there anything, particularly that any advice you would like to give to the younger generation, or to someone like me, just starting out.

28:54 CP Poonacha
So what I would say is one is you have to work hard you have to be to maintain your integrity be focused on the job, because unless you're focused, if your mind is on 100 different things then it's impossible to really come out with a solution, or this thing seem anytime people might think this working hard integrity or old fashion, but I don't think I have been observing I'm a good observer of life itself are people, but many times a hard working person may feel left out because somebody else you know buying certain manipulations or whatever may go ahead of them these are all you know, transitory things ultimately in your own clear path these old fashioned ideas of hard work integrity and you know the being very diligent, that does help and #2 is prioritizing your own In the sense in a given day there are normally something each individual you may like to do certain part of the work in your total the government of works over this side do and keep doing, but you've got to see what is priority and priority of also, what is your boss or your company wants it to be done first so certain other things you may get delayed, so there is a rule of 20 they say roll of 20 means out of 100 things you concentrate on 20 and do that first and do it well that takes your reputation higher.

30:37 Karan Takhar
Well, thank you so much, really.

30:39 CP Poonacha
Welcome, Miss you all the.


30:44 Karan Takhar
Best, thank you. I hope you enjoyed that episode, and do check out the show notes. For more information on my guest, see you next time.

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