76412604 India s Power Sector DB Jan0910

8/10/2019 76412604 India s Power Sector DB Jan0910

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Power Sector

Opportunities and Issues


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Power Sector -Overview

Policy Initiatives

Measures Undertaken

IDBIs Exposure in Power Sector

Top Private Players Announcements

Investment Opportunities

Issues & Concerns

Suggestions

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Contents


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Thermal Power Plant (Coal, Lignite, Natural gas, Naphtha, Diesel)

Hydel Power Plant (Water)

Nuclear / Atomic Power Plant (Radio-active fuels)

Non-conventional Power Plant (Wind, Solar, Biomass, Tidal, Co-generation)

Emerging Technologies

Coal based (Circulating Fluidized Bed Combustion, Integrated Gasification

Combined Cycle)

Nuclear Power Based (Pebble Bed Modular Reactor)

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Power Sector OverviewTechnology


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Power Sector OverviewGlobal Scenario


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SEBs

CPSUs

IPPs &

Private

Licenses

Captive

SEBs/ STUs

PGCIL

Private Utilities

SEBs

Discoms

Pvt. Licensee

Energy sold =

Energy available

Energy lost

Transformation,

transmission &

Distribution

Losses including

unaccounted

energy

Agriculture

Domestic

CommercialIndustries Others

Captive

Power Trading Companies

Generation Transmission Distribution Consumption

Structure of the Indian Power Industry

open

Input

(KWh)


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Power Segment wise break-up

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Power Sector Overview- Present Indian Scenario


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Power Sector Overview

Contractual Structure of a Power Project


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Installed capacity increased from 1362 MW in 1947 to 1,50,323 MW at endof June 2009

Central Sector

48,971 MW33%

Private Sector24,988 MW

17%

State Sector

76,364 MW

50%

Hydro - 36,917 MW

Thermal - 96,044 MW

Nuclear - 4,120 MW

Renewable - 13,242 MW

Total 1,50,323 MW

Coal - 78,459 MW

Gas - 16,386 MW

Diesel - 1,200 MW

Sector-wise Installed Capacity

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Power Sector Overview- Installed Capacity


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Per Capita Consumption : 704.2 Kwh

Power Supply Position (2008-09)

Energy (in MU) Peak (in MW)

Demand 7,77,039 1,09,809

Availability 6,91,038 96,785

Shortage 86,001 13,024

% shortage 11.1% 11.9%

Average Plant Load Factor (PLF) : 77.19 % (Thermal, 2008-09)

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Power Sector OverviewDemand-Supply Gap


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Power Sector OverviewDemand Supply Position


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Target & Achievements

Five year plan Year Target Achievement

Eight plan 1992-1997 30,538 16,423 (54%)

Ninth plan 1997-2002 40,245 19,025 (47%)

Tenth plan 2002-2007 41,110 21,180 (51%)

Eleventh plan 2007-2012 78,700* -

Twelfth plan 2012-2017 82,200 -

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Power Sector OverviewCapacity Addition

* 12,716 MW added during last two years


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Unsatisfactory Financial health of SEBs Poor quality of Supply

Un-scheduled load shedding, low voltages, voltage and frequency fluctuations

High T&D losses

Metering, Billing & Collection

Energy audit Average tariff lower than cost of supply

Commercial Losses without subsidy of SEBsApprox. Rs.265 billion (for2008-09)

Slow progress in T&D reforms

Subsidies

Escrow Cover

Political involvement

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Power Sector Overview- Present Scenario


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Power Sector OverviewPolicy Initiatives

Indian Electricity Act 1910

Technical & Operating Standards

Licenses for supplying power in specific areas

The Electricity (Supply) act 1948-

Development of State sector

Creation of SEBs, CGUs & CEAs

Amendment to Electricity (Supply) Act 1991

Private sector participation in generation

Awarding the IPPs through Pass Through Cost Basis route

100% foreign Equity participation: full dividend repatriation . Two part tariff structure - 16 % return on equity at PLF of 68.5%,

incentives for PLF above 68.5% with FX pass through

Guaranteed Off-take by SEBs

Counter guarantee by Central Government for 8 fast track IPPs


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Competitive Bidding Process (tariff) for IPPs was adopted since 1995 The Electricity Laws (Amendment) Act, 1998

Transmission of Electricity

Granting of transmission license

Electricity Regulatory Commission Act, 1998

Establishment of CERCs & SERCs. Creation of CTUs & STUs

Mega Power Policy, 1999

100% Customs duty waiver

PTC to buy power from Mega Projects & supply to SEBs

The Accelerated Power Development and Reform Programme (APDRP), 2000 Financial assistance/ incentives for T&D upgrades & SEB

profitability

Availability based tariff (ABT) notified by CERC


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Montek Singh Committee - Securitisation of SEBs over dues by CPSUs

However, capacity creation through private sector participation did not happen asdesired mainly due to the following:

SEBs reforms tardy

SEBs financial health continued to be poor

Dishonoring legally binding agreements

Pulling out by number of foreign utility companies

MOAs with Govt. of India to undertake reforms

The Electricity Act, 2003 enacted

The Electricity Amendment Act, 2007 Access to Electricity to all areas

Sale from captive units - No license required

Removal of provision for elimination of cross subsidy


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Power Sector OverviewThe Electricity Act, 2003

Delicensing of generation including captive but excluding hydro and nuclear

Captive generation freely permitted

Non-discriminatory open access to network subject to surcharge: No surcharge for

captive use

Private transmission licensees allowed

Generation companies can undertake distribution activities and vice versa for

distribution licensees

Open accessconsumers permitted to purchase electricity from generators and other

distribution licensees 100% metering made mandatory

CERC and SERCs would be the licensing authorities for T & D and trading


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Power Sector OverviewThe Electricity Act, 2003

Power trading is recognized as a regulated activity

Preparation of National Electricity Policy and Tariff Policy

An appellate tribunal would be set up for appeals against decisions of CERC and

SERCs

Setting up SERC made mandatory for all states

T & D surcharges are permitted but subsidies would be required to be phased out

gradually

Stringent penalty for power theft


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Power Sector OverviewImpact of Electricity Act

Entry of more private players in generation

Captive power capacities by industrial players

Entry of few private players in transmission segment (JV with PGCIL)

16 states have unbundled the distribution (May 2009)

Orissa & Delhi privatized Bhiwandi, Nagpur , PirthipurFranchise route

Progress in reduction of T&D losses

Improvement in the system efficiency

Grid discipline in the system

Cross subsidization of consumers still continuing

Implementation of open access at retail level would take some more time (being

tested in Mumbai)


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Measures undertaken Ultra Mega Power Projects

Large sized projects, approx. 4000 MW

Estimated investmentRs.16,000 crore

Minimum Net WorthRs.200 crore

Maximum 3 projects can be awarded to a bidder

Developed on BOO basis

Use of Super Critical Technology

Dedicated captive coal blocks for pithead projects (4 projects)

Imported coal for coastal projects (5 projects)

Co-ordination from Ministry of Power

Power Finance Corporationidentified as the nodal agency


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Budget Impact

2009-10 Union Budget Impact on Power Sector

Take-out financing of 60% of bank loan by IIFCL ( up to Rs. 1 lac crore)

The budgetary allocations for the APDRP has been increased from Rs.800

crore to Rs.2080 croreThe allocation for RGGVY has been increased from Rs.5500 crore to

Rs.7000 crore

Customs duty on permanent magnet used in wind power generation reduced

from 7.5 per cent to 5 per cent


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Power Sector OverviewMerchant Power Plants (MPP)

MPPs generate electricity for sale at market driven rates in the open

wholesale market.

Include sale of power under short-term PPAs and on spot basis

Can generate higher returns (vis-a-vis selling power through long term PPA)

Can sell power to the power trading companies (like the Power Trading

Corporation), the SEBs and industrial and bulk customers

Sale Price & Volume of Electricity Traded by the Trading Licensees

(12 licensee holders) are given in next slide


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Power Sector OverviewTop Private Players Announcements

Total CRISIL estimates Balance of totalannouncements

Top private players Announcements Eleventh Planexpected in Twelfth

Plan

MW MW MW

Reliance Power 28195 900 27295

JSW Energy 15000 0 15000

IndiaBulls Power

Services (JV)11000 0 11000

Tata Power 10000 250 9750

Lanco 10000 970 9030

Adani 10000 0 10000

Jaypakash Power 5275 700 4575

Videocon 5000 0 5000

Jindal Power

(JSPL+JP)4670 1000 3670

Torrent Power 4500 1100 3400

CESC 4250 250 4000

Essar power 4000 0 4000

GVK Power 3660 600 3060

GMR Energy 3440 0 3440

Sterlite Energy 2400 0 2400

Visa Power 1200 0 1200

Top players 122590 5770 116820


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Power Sector OverviewFund Requirement

Total capacity (MW) Generation Transmission Distribution investments

2007-08 9,263 417 163 73 653

2008-09 7,745 349 143 61 553

2009-10 8,014 361 147 63 571

2010-11 12,663 570 215 100 885

2011-12 12,120 545 207 95 848Total 49,805 2,241 876 392 3,510

Year wise investments in power (Eleventh Plan)

Fuel Capital Cost(Rs.crore/MW)

Levelised Tariff (15 years)(Rs. Per Kwh)

Coal 4.005.00 2.70

Naphtha 2.504.00 6.74

Gas 2.504.00 2.18

Transmission Target 37,150 MW (Present 20,750 MW)

Cost


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Issues in Financing Power Projects

Large Capital Costs

Long gestation period

Sector vulnerable to regulatory and policy changes;

Projects are contract driven leading to a lot of legal complexities

SponsorsTechnology

Fuel & Transportation

Evacuation

Market

Off takers (Financial health of SEB)Payment Security

Approvals & clearances

Foreign Exchange risk


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Power Sector OverviewSuggestions Enforcement of implementation of the reform process by SERCs

High level of cross subsidy surcharge to be progressively reduced/eliminated

Effective implementation of the restructured APDRP in distribution sector in all States

Critical review and rationalization of duties & taxes

Single window clearance/ automatic clearances, needs to be introduced

Delay in securing clearances, commitments from state utilities for power purchase,resistance from environmentalists, demand for free power by states need to be

appropriately addressed for all power projects

There is an urgent need of a Regulator in Coal Sector. The Union coal ministry has

initiated work on setting up a regulatory body, which will be responsible for domestic

coal pricing

Opening up of coal sector to private sector participation to promote competition

Open access to the Gas network should be ensured to promote competition in gas sourcing

Role of Regulator in Oil & Gas sector needs to be expanded to include gas pricing.


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Power Sector OverviewSuggestions

Augmentation of capital base of the banks

Raising of tax-free infrastructure bonds by FI/Banks.

Effective take-out financing mechanism [In the recent budget, FM has announced

a scheme for take-out financing of 60% of bank loan by IIFCL].

Softer provisioning norms for infrastructure projects. RBI has recently permitted a 2-

year period (originally COD) for determining asset classification of infrastructure

projects

Reintroduction of benefit of sec 10(23G) of IT Act 1961 (tax exemption on net

interest income in respect of infrastructure projects).

Review of ECB guidelines including allowing banks/institutions to extend guarantees

for financing infrastructure projects to make available cheaper foreign funds.

Reduction and harmonization of state level taxes and duties


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Thank You

76412604 India s Power Sector DB Jan0910

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