2_session 1_finacing of ps_ sangeeta verma
TRANSCRIPT
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Key Inputs for XIIth Plan
Financing of Power Sector
Central Electricity AuthorityGovernment Of India
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Agenda Sector Profile
Magnitude of Investment
Funding Sources and Issues
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Power Sector Profile
ALL INDIA DEFICITS IN POWER
0
5
10
15
20
1998-99 2000-01 2002-03 2004-05 2006-07 2008-09
Percent
Energy Deficit Peak Deficit
Energy availability has increased by 32.7% in the past 5 years butdemand continues to outstrip supply
Nearly 600 million Indians do not have access to electricity
AT&C losses currently exceed 30% for the country as a whole.
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Need to Accelerate Power
Sector GrowthGrowth in GDP and Gross Power Generation
0.00
5.00
10.00
15.00
1999-
00
2000-
01
2001-
02
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08*
2008-
09*
Percent
Growth in Gross Generation Growth in GDP
For India to grow @9% p.a. its power sector must also grow at7.2% p.a (XIIth Plan projects electricity use elasticity wrt GDP at0.8)
But over the last 5 years, Gross Power generation has grown byonly 5.89% pa
NEP objective : Power for all by 2012
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Targeted Growth of Generation
XIth Plan target is 78,700MW
XIIth Plan target is 1,00,000 MW
Current investment focus is on Generation
Investment in Sub-transmission and Distribution is lagging
However, for smooth functioning of the sector Investment
should be in the ratio 2:1:2
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Magnitude of Investment(Rs crore)
Plan Generation Transmi
ssion
Distributi
on
R&M
etc
Total
XIth Plan 5,91,734 1,40,000 3,09,077 18,104 10,59,515
XIIth
Plan4,95,082 2,40,000 4,00,060 - 11,35,142
XIth Plan availability assessed at Rs 6,37,873 croreLeaving a gap of Rs 4,21,642 crore of which
Debt gap 269,067 Equity gap 152,575
Even bigger gap in XIIth Plan unless greater mobilization is
achieved
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0
200
400
600
800
1000
1200
1400
1600
2006-07 2007-08 2008-09
External Funding (USD mn)
FDI Ext. Comm. Borrowings
0
5000
10000
15000
20000
25000
30000
2006-07 2007-08 2008-09
Domestic Funding (Rs.Cr)Bank Credit
Pvt. Placement(debt)
Public & RightsIssues
Funds Available
to the power sector
in the past
Source : Economic Survey 2008-09.
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Issues in Brief
Bank Credit to Power sector
Subject to sectoral and group exposure limits
The growth of credit has slowed down from 68% in 2007-8
34% in 2008-09
Term Lending Institutions constrained by prudential norms
FDI -Shy because of insufficient return on equity
Raising resources through Public offers- captive to political stancesPoor health of distribution segment
Let us examine these issues in some detail
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Funding Issues
Banks & NBFCs Restrictive RBI guidelines for Sectoral and Group exposure PFC and REC also constrained by prudential exposure norms
for Groups and Companies
Leading to difficulties in UMPP lending
Worldwide liquidity crunch has created adverse conditions forbank loan completions
banks are delaying disbursal of sanctioned loans Government borrowing crowding out private sector
borrowers
Duty and Tax regime not conducive to innovative infrastructurelending
repetitive stamp duty discourages take-out financing
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Funding Issues
Banks & NBFCs contd
PFC and REC have to seek RBI approval to raise External
Commercial Borrowing
Cautious about lending to projects coming through the MOU
route.
Insistence on PPAs creates difficulties for IPPs and MPPs Banks and NBFCs comfortable only with PPAs with ultimate
offtakers- not traders
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Funding Issues
FDI Government Policy allows 100% FDI in all segments
Yet share of power sector in FDI to infrastructure sectorsincreased only marginally from 16% to 18% over 2006-9. By
contrast FDI to Telecommunications is more than 47% Paradox explained by:
low regulatory returns on equity
lack of politico-administrative support on containment of
commercial losses Lack of payment security
These issues relate equally to domestic private
investment
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Other Issues impacting Funding
Poor financial health of state sector utilities
State utilities not allowed return on equity
States are taking a long time to finalize Case I bids
Developers unable to achieve financial closure Power offered in one bid cannot be bid elsewhere
Delays in land, forest and environmental clearances lead to costescalation
Appropriate fiscal incentives not available to channelise savings Long term funds available with PFs, Pension and Insurance Funds
are not being tapped
RBI guidelines restrict use of ECB proceeds for rupee
expenditure
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Other Issues impacting Funding contd. Developers continue to be risk averse - seek non-recourse
financing
Capital is being raised for greenfield projects only
Refurbishment/technology upgrade of state assets is starvedfor funds
Risk appetite of traders curbed by cap on trading margins inbilateral markets
Long term price hedging instruments do not exist in thepower markets necessary as more merchant capacitiescome on stream
Disinvestment proceeds not being available for investment
in the sector
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Green Shoots Equity markets have witnessed surging demand for new
paper - NHPC, Adani Power oversubscribed
Successful QIP by established players
Lanco on July 31st $150 m
With the right policy initiatives, fiscal and regulatory as
well as distribution reforms it should become a very
exciting and sought after sector for investment
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Thank you