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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PowerTransformer

400/220KV ACTransmission Lines

PowerGeneration

Boiler+

Turbine+

Generator

R

Y

B

Fuel

Input

HT Consumers

Gridcontrol(Load

DispatchCentre)

ReactivePower

Control

Substation

132/110/66KV

High voltageswitchgear

Distribution Lines33/11/0.44KV

Distribution

TransformersLarge/Medium

Industries

Service lines

Houses

SSI

SSI

LT Consumers

Power Sector Overview Indian Power System


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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 GasificationCombined Cycle)

Nuclear Power Based (Pebble Bed Modular Reactor)

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Power Sector Overview Technology


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5

Power Sector Overview Global Scenario


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SEBs

CPSUs

IPPs &Private

Licenses

Captive

SEBs/ STUs

PGCIL

Private Utilities

SEBsDiscoms

Pvt. Licensee

Energy sold =Energy available

Energy lost

Transformation,transmission &

DistributionLosses including

unaccountedenergy

AgricultureDomestic

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 Sector76,364 MW

50%

Hydro - 36,917 MWThermal - 96,044 MW

Nuclear - 4,120 MWRenewable - 13,242 MW

Total 1,50,323 MW

Coal - 78,459 MWGas - 16,386 MWDiesel - 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 Overview Demand-Supply Gap


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Power Sector Overview Demand 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 Overview Capacity 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 SEBs Approx. Rs.265 billion (for

2008-09)

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 Overview Policy 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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Power Sector Overview Policy Initiatives 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 & SEBprofitability

Availability based tariff (ABT) notified by CERC


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Power Sector Overview Policy Initiatives

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 Overview The 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 forcaptive use

Private transmission licensees allowed

Generation companies can undertake distribution activities and vice versa fordistribution licensees

Open access consumers 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 Overview The 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 Overview Impact 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 , Pirthipur Franchise 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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Power Sector Overview Measures undertaken

Ultra Mega Power Projects

Large sized projects, approx. 4000 MW

Estimated investment Rs.16,000 crore

Minimum Net Worth Rs.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 Corporation identified as the nodal agency


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Power Sector Overview 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 crore The 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 Overview Merchant 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 Overview Top Private Players Announcements

Total CRISIL estimates Balance of totalannouncements

Top private players Announcements Eleventh Plan expected in TwelfthPlan

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 Overview Fund Requirement

Total capacity (MW) Generation Transmission Distribution investments2007-08 9,263 417 163 73 6532008-09 7,745 349 143 61 5532009-10 8,014 361 147 63 5712010-11 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 4.00 5.00 2.70

Naphtha 2.50 4.00 6.74

Gas 2.50 4.00 2.18

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

Cost


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Power Sector Overview 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

Sponsors Technology Fuel & Transportation Evacuation Market

Off takers (Financial health of SEB) Payment Security Approvals & clearances Foreign Exchange risk


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Power Sector Overview Suggestions 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 beappropriately addressed for all power projects

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

india's power sector db jan0910

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