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Private & Confidential
TECHNO ELECTRIC AND ENGINEERING COMPANY LIMITED INVESTOR PRESENTATION
August 2011
2
Section 1: Introduction and Company Overview
Section 2: Financial Performance
Section 3: Industry Outlook
CONTENTS
INTRODUCTION AND COMPANY OVERVIEW
Section 1
4
Company and Business Overview
Incorporated in 1963, Techno Electric and Engineering Company Limited (Techno) is headquartered in Kolkata
Techno is involved in the following business segments:
EPC contracting focused on the Indian power sector –
– Turnkey projects ranging from complete power generating plants to system packages of plant tailored to complement larger systems supplied by others
– Electrical System across Generation, Transmission & Distribution up to 765 KV
– Tailored power solutions for Industries such as Aluminium, Petrochemicals etc
Renewable Power Generation – operates 110.45 MW of Wind Energy assets and plans to expand further. Plans to enter Bio Mass, Solar and Hydro based power generation
Transmission – won a 25 year (extendable by 10 years) Concession in consortium with Kalpataru Power for transmission link at Jhajjar, Haryana
Experienced team of over 150 engineers backed by 200 skilled professionals and 100 staff members
Recognized as one of the leading Indian corporate:
Forbes, 2008 (Best 200 Under Billion List in Asia)
Business Standard, 2009 (Top 1000 Companies of India)
Dalal Street , 2009 (Top 400 Large Cap Corporates in India)
Mint, September 2010 (Top 100 Performing Companies in India)
TECHNO – NOT JUST ANOTHER POWER SOLUTIONS COMPANY
Revenue Growth CAGR ‐ 29% over last 4 years
Key Milestones
*FY10 and FY11 includes Wind generation business
1963* Incorporated
2006* Private Equity Investment by CVCI
2009* Company Enters power generation business with acquisition of Wind assets
2010* Enters Transmission Management with award of a PPP contract in Jhajjar, Haryana
* Calendar Year
4,296 4,860 7,021 7,166
12% 11%
20% 23%
14% 17%
20% 18%
0%
5%
10%
15%
20%
25%
‐
2,000
4,000
6,000
8,000
FY08 FY09 FY10 FY11
Revenue EBITDA Margin PBT Margin
5
CORPORATE STRUCTURE
Techno Electric & Engineering Company Ltd
New Bio Mass SPVs* Jhajjar KT Transco Pvt Ltd* Simran Wind Project Private Ltd
EPC Contracting 45 MW Wind Energy Generation
6 Bio Mass Power Generation Plants in West Bengal (3), Orissa, MP and Rajasthan (1 each)
Design, Build, Finance, Operate and Transfer a 400 KV / 1500 MVA Transmission Network in Haryana
65.45 MW Wind Energy Generation
* Not yet operational
100% 100% 49%
6
LED BY EXPERIENCED MANAGEMENT TEAM
Name Details
Mr. P.P. Gupta (Managing Director)
Mr. P.P. Gupta took over Techno in 1980 and has led Techno to become one of the largest companies in the electro‐mechanical field in the power sector in India
Actively involved in various power sector developmental activities on behalf of industrial bodies and Ministry of Power, India and well known in the Indian power sector. Has excellent relationships with various stakeholders in the industry
Previous employers include Bharat Heavy Chemicals Limited (BHEL) and National Grindlays Bank (Merchant Banking Division)
Education – Hons. Graduate in Industrial Engineering with post‐graduation in Management from IIM, Ahmedabad
Mr. A.K. Mitra (ED – Electricals Division, Kolkata)
Associated with Techno since 1977 and has been heading the Electrical Division at Kolkata since 1980
He is leading the team to cover all the Electrical Power System
Previously employed with WBSEB (a state utility responsible for Power)
Mr. R.C. Agarwal (ED – Utility Division)
Joined Techno in 1978 and has independent charge of handling operations (including Business Development and Execution). Has expertise in all aspects of Contracting, Project and Construction Management
Member of Institution of Engineers , Indian Institute of Welding , Project Manager Associate and the CII
Education qualifications include a degree in Mechanical Engineering from BITS Ranchi
Mr. P.K. Lohia (President ‐ Finance)
Associated with Techno since 2004 and has overall responsibility for Finance, Accounts and Taxation
Previously employed with HNG as General Manager (Commercial)
Chartered Accountant by qualification with 20 years of experience in this field
Mr. R.K. Raina (ED – Electrical Division, New Delhi)
Associated with Techno for the past 10 years
Heading the organization's set up in North India. He has expertise in Procurement, Tendering & Project Execution.
7
BOARD OF DIRECTORS
Name Details
Mr. P.P. Gupta Mr. P.P. Gupta took over Techno in 1980 and has led Techno to become one of the largest companies in the electro‐mechanical field in the power sector in India
Actively involved in various power sector developmental activities on behalf of industrial bodies and Ministry of Power, India and well known in the Indian power sector. Has excellent relationships with various stakeholders in the industry
Previous employers include Bharat Heavy Chemicals Limited (BHEL) and National Grindlays Bank (Merchant Banking Division)
Education – Hons. Graduate in Industrial Engineering with post‐graduation in Management from IIM, Ahmedabad
Mr. S.N. Roy (Independent Director )
Has been associated with Techno since 2003
Previous employers include Indian Oil Corporation and BHEL, where he retired as Executive Director
Bachelor of Engineering (Electrical) from Indian Institute of Technology (IIT), Kharagpur
Mr. V.D. Mohile (Independent Director )
50 years of varied experience and is associated with Techno for the last 10 years
Previous appointments include General Manager, BHEL; CEO, Indal Power Company and Chairman OPTCL, Orissa
B.E. (Electrical & Mechanical), Post Graduate Diploma in Industrial Management
K. M. Poddar (Independent Director )
Renowned industrialist with 41 years of experience in the field of accounting and finance
Bachelor of Commerce
K. Vasudevan (Independent Director )
Positions held presently include Chairman, Green Business Centre for the Southern region, Member, National Committee on Power of CII, Independent Director, Alstom Projects India Ltd.
Past associations include President, Indian Electrical and Electronics Manufacturers Association and Joint Managing Director, Alstom India Limited
Bachelor of Engineering (Electrical) and a fellow-member of the Institute of Engineers and Institute of Standard Engineers
K. K. Rai (Independent Director )
Retired banking professional, with 40 years of banking experience.
Past employments include Executive Director, Allahabad Bank from 2001 to 2004. At present he holds directorships in many reputed companies
Bachelor of Arts and member of C.A.I.I.B
8
VISION TO GROW FROM ONLY A POWER EPC COMPANY TO A COMPREHENSIVE POWER PLAYER
Historically been a Power EPC Company
Provided solutions to nearly half of India’s installed thermal capacity and made it
possible to build 50% of National Grid for Inter‐regional Transmission
Growing vertically into a Power Generator (Renewable Energy) and Transmission Network
operator
Growing Focus towards Asset Ownership across the Value Chain and High Value EPC Contracting
PAST FUTURE
9
GROWTH STRATEGY – TWO FOLD APPROACH TO MAXIMISE VALUE
The Indian Power sector continues to provide significant opportunities for EPC companies
India continues to be a power deficit country and the Government has set ambitious targets for capacity addition
Almost half a century of experience in the Indian power EPC sector and well poised to capitalize on the growing market
Growing the Existing Power EPC Business
Long term strategy of entering asset heavy businesses requiring lower running costs:
Renewable Power Generation
– Depletion of finite resources to increase relevance for renewable energy in the long term
– Aspire to be one of the largest Independent Renewable Power Producers in India concentrating on both proven technologies (Wind power, Bio mass and Hydro) and emerging technologies (Solar)
Transmission Network and Management
– Growing priority to reduce transmission losses through up gradation and building new capacities
– Techno already a pioneer in this segment, bagging the first contract awarded in the private sector under a state PPP model with viability gap funding
Moving up the Value Chain: Entering new Businesses
Company proposes to build upon its experience and proven expertise in bidding for larger projects and consolidate its presence across a lower number of high value projects
Comprehensive pure play of the Growing Prospects of India’s Power Industry
10
6,488
9,736
0
3,000
6,000
9,000
12,000
Existing ‐ FY11 Projected ‐ FY13
Revenue (INR mn)
EPC Business
Transmission Network
GROWTH ENVISAGED – ACROSS BUSINESS SEGMENTS
Renewable Energy Generation
CAGR – 23% CAGR –
101%
Capacity further expected to grow to 1,258 MW by the end of the Twelfth 5 year plan (FY17)
Company expects to add one transmission line to its portfolio annually Portfolio of 5 projects by the end of the
Twelfth 5 year plan (FY17)
110.5
499
0
150
300
450
600
Existing ‐ FY11 Projected ‐ FY 13
Capacity (MW)
11
Overview
EPC has been the core business of the Company and accounted for 90% of FY11 revenues
Proven Track Record with focus on meeting and exceeding customer expectations
BHEL awarded Techno as the best vendor for the year 2010
Efficiently run business with low levels of working capital (contrary to industry norms)
Clientele includes major Indian and Global companies like Power Grid, GE, BHEL, Indian Oil, NTPC, Reliance, Vedanta, Hindalco, etc
Currently multiple EPC projects are under execution across India for clients including Bengal Energy, IOC, MSEDCL, Vedanta, NTPC, Hindalco, etc
Unexecuted order book of ` 14,000 million as at 31 March 2011
Growth in business to continue going forward owing to:
Growth in market with increasing government focus on power sector and expansion of private sector capacities
Expansion in product offering as Techno continues to expand its array of services
In house EPC (for transmission and renewable projects)
EPC CONTRACTING BUSINESS – TECHNO IS A PIONEER
Financial Performance
Revenue CAGR – 16%
4,860
6,318 6,488
11.2% 12.2%
15.2%
0.0%
5.0%
10.0%
15.0%
20.0%
‐
1,500
3,000
4,500
6,000
7,500
FY09A FY10A FY11A
Revenue EBITDA%
12
EPC CONTRACTING BUSINESS – TECHNO IS A PIONEER
Power Generation Power T & D Industrial
EHV Substations
Distribution Systems Management (APDRP)
Rural Electrification (Rajiv Gandhi Gramin Vidyutikaran Yojna)
Fire Fighting Systems
Fuel Oil Systems
Off site piping systems
AC/DC substation for Aluminum plants
Power distribution systems
Plant Electrical
Illumination systems
High intensity power system for Aluminum smelter pots
EPC Business Segments
Captive Power Plants up to 100 MW on a turnkey basis
Balance of Plant
Fuel oil System
Water intake/ Make Up Systems
Piping networks
Coal handling plant
HT/LT Switchgear
Cabling
Illumination Systems
Power Evacuation Systems
13
PROVEN TRACK RECORD
Project Type Description Air‐conditioning System 23 Projects for Power Industry
Balance of Plant 4 Projects for Power Industry
Balance of Plant 4 Projects for Power Industry
Captive Power Plants 5 Projects for Power Industry
Cabling Projects 28 Projects for Power Industry
Distribution and Rural Electrification
12 Projects for Power Industry
DM Water / Condensate Storage Facility
9 Projects for Power Industry
Fire Fighting System 30 Projects for Power and other Core Industry
Fuel Oil System 45 Projects for Power Stations and Process Industries
Industrial Installation Projects 11 Projects for Aluminum and Petrochemical Industry out of which 8 Projects of Bus Bar System
Naptha and Diesel System for Gas Turbine
10 Projects for Power Industry
Plant Electricals / Illumination 24 Projects for Power and Core Industries
Switchyard Projects 3 Projects of 765 KV / 36 Projects of 400 KV /24 Projects of 220 KV / 21 Projects of 132 KV rating
Water and Allied System 14 Projects for Power and Core Industry
Major Projects Undertaken
14
SOME MARQUEE PROJECTS ‐ Khandwa‐Seoni Transmission Line
Installation of 40% fixed series compensation package for 400 KV double circuit D/C Khandwa‐Seoni transmission line in association with Nokian Capacitors Ltd, Finland for Power Grid Corporation of India Ltd
The FSC platform to be managed was arguably the largest in Asia (each platform 23.6m x 9.5m), across 6 such platforms
Both line bays were already constructed by another agency and owing to the large size of the banks it was difficult to accommodate them within the available space
Techno innovatively restricted the weight of the platform and used special beams (parallel flange section) conforming to European specifications sourced specially for the project
Used 110 MT telescopic cranes to assist with the work
Layout and orientation were modified by incorporating middle gantry
PROJECT
CHALLENGES FACED
TECHNO DELIVERY
“It is great to have such an achievement with the scheduled 2 year time span. It is a matter of great pleasure for us that the power grid system is now able to provide additional power transfer capacity with the introduction of state of the art systems from India and Finland” – Client Endorsement
15
SOME MARQUEE PROJECTS ‐ Grid Stations at Bihar Sharif and Bari Pahari
Modernisation of Grid stations at Bihar Sharif and Bari Pahari for the Bihar State Electricity Board
Legacy sub stations with no drawings or schemes in existence
Need to identify and categorize key action areas in terms of outright replacement, overhauling and installation of new systems where required while minimizing downtime
Mapped the existing system and developed drawings
Conducted detailed survey with operational tests on individual components to assess quality of current system
Circuits were taken out of service sequentially to minimize downtime.
Apart from main electrical systems and circuit controls, all other sub station auxiliaries (like LT power supply, illumination systems, fire‐fighting systems etc) were newly installed or overhauled
Complete renovation of control room building, landscaping, roads, drains etc
PROJECT
CHALLENGES FACED
TECHNO DELIVERY
“It is a pleasant surprise to note that a renovated sub station can be as good or better than a newly constructed one. This project must set a benchmark in our sector for upcoming renovation packages in terms of qualitative and quantitative value addition done in a renovation contract” – Client Endorsement
16
SOME MARQUEE PROJECTS ‐ Others
Project Description 12 MW waste heat recovery based power plant at Haldia (Captive Power Plant) Techno provided full EPC services for the project:
Engineering Conceptual Design Preliminary & Detail Engineering Preparation of BOQ Procurement Floating of enquiries Receipt of offers Commercial evaluation & Placement of orders Follow up & inspection Dispatch of material to site Construction Civil construction of boiler fdns,. Power house,
cooling tower, DM plant bldg, pipe rack etc Erection of equipment, piping, electricals,
instrumentation, etc Testing & Commissioning Synchronization with grid
Project Description Turbo Generator package for 1x30 MW TT12 (23 MW with air cooling) at Mithipur Plant of Tata chemicals on EPC basis Techno provided engineering, procurement, execution of all civil, structural, mechanical, electrical and instrumentation, hook up with existing system and commissioning of the TG set. Some of the specific work include:
Conversion from brushless excitation system to static excitation system
Conversion of governing system from hydraulic to electro‐ hydraulic system
Techno was able to complete the project in 5 months (against scheduled time of 11 months), earning commendation from the client
17
CLIENTELE INCLUDE SOME OF THE LARGEST PLAYERS IN THE INDUSTRY
18
EXCELLENT REVENUE VISIBILITY
Unexecuted Order Book of ` 14,000 million as at 31 March 2011 including orders for:
Generation – ` 4,000 mn
Transmission – `7,950 mn
Distribution – ` 1,250 mn
Industrial – ` 800 mn
Order Book at 31 March 2011 – Top 10 Orders
Customer Project Value (` mn)
MP Power Transmission Company Ltd 2,320
Jhajjar KT Transco Private Ltd 1,500
Kalpataru Power Transmission Company Ltd. 1,370
Bengal Energy Ltd 1,000
Thyssenkrupp Ltd 910
Maharashtra State Electricity Distribution Ltd 890
Assam State Electricity Board 660
HINDALCO 520
NEEPCO 490
TBEA Sheyang 330
19
Planned Expansion
Plans to expand by more than 1000 MW by FY17
Recently announced purchase of 202 MW of Wind assets from Suzlon:
Turbines ranging from 1.5 to 2.1 MW each
102 MW has been commissioned on September 2011 (Phase 1) and remaining 12 MW (Phase 1) to be commissioned by October 2011 and the rest by March 2012 (Phase 2)
Phase 1 is located in Tamil Nadu
Further agreed to purchase additional 300 MW from Suzlon during FY13 – FY14 on mutually agreed terms
Entered the power generation sector by acquiring two wind energy companies in 2009
Current Operations
WIND POWER – A SUSTAINABLE SOURCE OF ENERGY
Pollution free and environment friendly source of energy
Zero fuel cost
Lower construction time compared to conventional power projects
Low operations and maintenance Cost
Super Wind Project Ltd (now Techno) Capacity – 45 WM
Location – Karnataka (12 MW) & TN (33 MW)
30 turbines at 3 wind farms
PLF – 24% to 29%
Contracted Tariff – ` 3.40 (Karnataka) and ` 3.39 (Tamil Nadu)
Simran Wind Project Pvt Ltd Capacity – 204.95 MW
Location – Karnataka (6 MW) & TN (146.45 MW)
103 turbines at 6 wind farms
PLF – 23% to 32%
Preferential Tariff – ` 2.90 to ` 3.39 (Tamil Nadu) and ` 3.40 (Karnataka) for 50.45 MW APPC Tariff – 2.37 for 2010 - 11(Tamil Nadu) for 102 MW
20
BIO MASS – AN EMERGING OPPORTUNITY
No new technological development required given its similarity to coal based thermal power projects
Operational Flexibility with the possibility of using variety of biomass materials in the same plant
Improving the quality of electricity supply in rural areas
As part of its Renewable Power Generation strategy, Techno plans to foray into Bio mass based power generation
Salient features:
Six Plants with capacity of 10 MW each
3 Plants in West Bengal, 1 each in Orissa, Madhya Pradesh and Rajasthan
Total estimated project capex ‐ ` 3,000 million
Currently in Land acquisition stage at all locations (completed for 3 sites and ongoing for remaining 3)
21
First of its kind Public Private Partnership (PPP) project in the country at the state level
First ever transmission project to get VGF support from central government
First project in Haryana for which VGF has been sanctioned under the PPP mode
In partnership with Kalpataru Power Transmission Ltd (KPTL) – a leading Power Transmission Company in India
Project to be carried out by an SPV (Jhajjar KT Transco Pvt Ltd) – a 51:49 Joint Venture between KPTL and Techno
Awarded Concession to design, build, finance, operate and transfer :
400 KV, 100 Km long transmission link
Connecting 2 sub‐stations at Rohtak & Sonepat (24 bays each)
To evacuate 1,320 MW (2*660) of power from the Jhajjar Power Plant (design capacity – 2,430 MW) built by China Light & Power, Hongkong
Concession period – 25 years (extendable by 10 years)
Project commercials:
Sustainable revenue ‐ Company to be paid a monthly unitary charge (`45 million per month) by Haryana Vidyut Prasaran Nigam (HVPN), besides enjoying incentives and rebates
Bid under viability gap funding where Haryana Government has given grant of ` 939 million
Techno to do EPC and Operations & Maintenance work for the sub‐station part of the project
Commissioning of the sub stations scheduled for December 2011
Jhajjar KT Transco Pvt Ltd
TRANSMISSION NETWORK MANAGEMENT
Pioneering Contract to set up and operate a Transmission link
Being a design‐build‐finance‐operate‐transfer contract, it offers wider revenue streams for Techno
FINANCIAL PERFORMANCE
Section 2
23
8.8 11.05
19.94 17.35
0
6
12
18
24
FY08 FY09 FY10 FY11
3,526 4,296
4,860
6,680 6,811
369 505 545 1,118 1,308
‐
2,000
4,000
6,000
8,000
FY07 FY08 FY09 FY10 FY11
Revenues EBITDA
Standalone Revenues & EBITDA#
Earning Per Share (` )
GROWING REVENUES AND EARNINGS (STANDALONE*)
Standalone Profits
Profitability Ratios
* Standalone financials for FY10 and FY11 include 45 MW of wind assets acquired during FY10
Revenue CAGR – 18%
` millions ` millions
# Revenue and EBITDA figures above do not include Other Income
415
613
844
1,368 1,260
280 491
631
1,138 1,009
‐
400
800
1,200
1,600
FY07 FY08 FY09 FY10 FY11
PBT PAT
12% 11%
17%
19% 14%
17% 20%
19%
11%
13%
17% 15%
0%
6%
12%
18%
24%
FY08 FY09 FY10 FY11
EBITDA Margin PBT Margin PAT Margin
24
SUMMARY INCOME STATEMENT
Improvement in EBITDA margins in FY 11 is on account of higher margins in the EPC business
Other income includes interest and dividend received from market investments made by the company due to surplus cash balance
High interest and Depreciation during FY10 and FY11 is due to capitalization of Wind assets which were partly financed by debt
Standalone Income Statement
` million FY 08 FY 09 FY10* FY11*
Revenues 4,295 4,860 6,680 6,811
Growth % 22% 13% 37% 2%
Operating expenses 3,791 4,315 5,561 5,503
EBITDA 504 545 1,118 1,309
EBITDA % 12% 11% 17% 19%
Other income 117 312 525 285
Depreciation 6 6 147 151
Interest 3 6 128 183
PBT 612 844 1,368 1,260
PBT % 14% 17% 20% 19%
Taxes 122 214 230 251.1
PAT 491 631 1,138 1,009
PAT% 11% 13% 17% 15%
* Standalone financials for FY10 and FY11 include 45 MW of wind assets acquired during the year
25
SUMMARY BALANCE SHEET
Company has historically been almost a debt free Company
Debt was taken during FY10 and FY11 to finance purchase of Wind assets
Investments includes investment in Wind power subsidiary (Simran Wind Project Pvt Ltd)
Low levels of operating working capital
Standalone Balance Sheet
`million 31‐Mar‐08 31‐Mar‐09 31‐Mar‐10* 31‐Mar‐11*
Sources of funds
Shareholders' funds 1,714 2,278 3,701 4,577
Loan funds 1 420 1,667 2,387
Deferred tax liability 6 6 7 76
Total 1,722 2,705 5,375 6,971
Application of funds
Net fixed assets 48 47 2,605 2,487
Investments 1,545 1,514 1,865 3,551
Current Assets 973 2,620 3,116 3,423
Current Liabilities 845 1,477 2,212 2,491
Net Current Assets 129 1,143 905 932
Total 1,722 2,705 5,375 6,971
* Standalone financials for FY10 & FY11 include 45 MW of wind assets acquired during the year
26
SUMMARY INCOME STATEMENT
Consolidated results include financials of Simran Wind Project Pvt Ltd in FY10 and FY11
High PBT levels due to other income from interest earned on deposits & investments
Consolidated Income Statement
` million FY 08 FY 09 FY10 FY11
Revenues 4,295 4,860 7,021 7,166
Growth % 22% 13% 44% 44%
Operating expenses 3,791 4,315 5,598 5,531
EBITDA 504 545 1,423 1,635
EBITDA % 12% 11% 20% 23%
Other income 117 312 503 285
Depreciation 6 6 303 308
Interest 3 6 210 238
PBT 612 844 1,414 1,380
PBT % 14% 17% 20% 19%
Taxes 122 214 231 252
PAT 491 631 1,183 1,128
PAT% 11% 13% 17% 16%
27
SUMMARY BALANCE SHEET
Consolidated results include financials of Simran Wind Project Pvt Ltd in FY10 and FY 11
Consolidated Balance Sheet
` million 31‐Mar‐08 31‐Mar‐09 31‐Mar‐10 31‐Mar‐11
Sources of funds
Shareholders' funds 1,714 2,278 4,626 5,622
Loan funds 1 420 2,467 2,896
Deferred tax liability 6 6 7 6
Total 1,722 2,705 7,100 8,524
Application of funds
Net fixed assets 48 47 5,530 9,715
Investments 1,545 1,514 500 386
Current Assets 973 2,620 3,289 3,197
Current Liabilities 845 1,477 2,219 4,773
Net Current Assets 129 1,143 1,070 (1,577)
Total 1,722 2,705 7,100 8,524
INDUSTRY OUTLOOK
Section 3
29
India is far below other countries in electricity consumption
542
2,171
2,332
6,317
13,652
India
Brazil
China
Russia
US
Demand to grow at 9% over next 20 years (GW)
215 331
510
785
1,207
‐
200
400
600
800
1,000
1,200
1,400
FY12E FY17E FY22E FY27E FY32E
INDIAN POWER SCENARIO: INDIA CONTINUES TO BE POWER DEFICIT
Peak Load Shortage due to Capacity Shortfall (%)
12.4 13 11.8 12.2
11.2 11.7 12.3 13.8
16.6
11.9 13.3
0
5
10
15
20
FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10
Industry Dynamics
The government plans to add 95 GW of generating capacity during the next 5 years to meet the growing demand Development of National grid with a capacity of 200,000 MW and inter‐regional transmission capacity of 37,000 MW estimated to be completed by 2012 Government initiatives Sector outlay ~ ` 9.3 trillion over next 5 years Increasing role of private players in generation, transmission and
distribution – Faster approvals and facilitation for projects under private
sector
Per capita consumption expected to increase to 1000 kWh pa over next 5 years
Growing domestic consumption and increased government thrust to fuel power sector growth
Source: CEA
KWh per capita per annum
%
Source: CEA Source: CEA
30
POWER CAPACITY TO WITNESS DOUBLE DIGIT GROWTH
` 9.3 trillion to be spent on Power sector over next 5 years as follows:
Generation – ` 5.8 trillion
Transmission and Distribution – ` 3.4 trillion
1,379 1,589
1,812
2,082
2,397
13.5
17.6 18.8
21.5 23.7
0
5
10
15
20
25
‐
500
1,000
1,500
2,000
2,500
3,000
FY11P FY12P FY13P FY14P FY15P
Yearly Investment (INR bn) Capacity Addition for the year (GW)
Capacity of 95 GW to be added over next 5 years
` 9.3 Trillion to be spent on capacity expansion
Capacity Expansion in the Power sector presents huge opportunity for Power EPC players
Source: CRISIL Report, 2010
India’s Power Capacity set to grow at CAGR of 10.8% over next 5 years
31
Pursuant to the Electricity Act of 2003 and the National Tariff Policy of 2006, SERC’s are encouraged to set preferential tariffs for power produced from renewable energy
Renewable Energy Companies are entitled to various tax incentives like:
Accelerated depreciation @ 80% on assets employed in renewable energy generation
Tax holiday for 10 years (within first 15 years of operations)
Excise duty relief on certain capital goods
“Must Run” Status – Per CERC Regulations, all renewable energy power plants (except certain biomass plants) treated as must run power plants and are not subject to merit order dispatch principles
Other incentives like RPOs, GBI, REC etc
3.3 9.3
15.5 23.3
53.0
FY03 FY07 FY10 FY12P FY22P
Strong Regulatory Thrust Towards Renewable Energy
Renewable energy principally comprises wind power, hydro power, solar power and biomass energy
Sector has experienced rapid growth in India, with the 15.5 GW of installed capacity (excluding large hydro) accounting for ~10% of India’s overall power capacity
Capacity expected to grow at a CAGR of 11% by the end of 13th 5 year plan
Good execution track record – 6.7 GW added in the 10th 5 year plan against a planned addition of 3.5 GW
RENEWABLE ENERGY (RE) IN GREATER FOCUS
Sector to Continue on Growth Path (GW) Renewable Energy in India
Source: MNRE, Planning commission, CRISIL
39
7.5 6.5
FY22P
MiniHydro
Biomass
Wind
India plans to raise the share of renewable energy in national power output to 10% by 2015
32
Renewable Portfolio Obligation (RPO) specified by the State Electricity Regulatory Commissions*
Many states have instituted penal mechanism for not meeting RPO requirements (Maharashtra SERC has already levied financial penalty on state utilities for not meeting RPO obligations)
NAPCC (National Action Plan on Climate Change) targets 15% share of renewable energy by 2020; Most SERCs are expected to increase RPO obligations to meet national target gradually
REC mechanism will encourage inter‐state transmission of renewable power, enabling states to meet their RPO by trading RECs on power exchange
States are offering increasing preferential tariffs for power generated from renewable energy sources
INCENTIVES FOR RENEWABLE ENERGY
State FY11 FY12 FY13 FY14 FY15 FY16
1 Gujarat 5% 6% 7%
2 Maharashtra 6% 7% 8% 9% 9% 9%
3 Uttaranchal 4% 5% 6%
4 Manipur 2% 3% 5%
5 Mizoram 5% 6% 7%
6 Jammu & Kashmir 1% 3% 5%
7 Uttar Pradesh 4% 5% 6%
8 Tripura 1% 1% 2%
9 Jharkhand 2% 3% 4%
10 Himachal Pradesh 10.10% 11.10 12.10%
11 Orissa 4.5% 5% 5.5% 6% 6.5% 7%
12 Assam Draft 1.4% 2.8% 4.25 5.6% 7%
13 Tamil Nadu 14%
14 Delhi 1%
15 Andhra Pradesh 5%
16 Karnataka 11%
17 West Bengal 10%
18 Rajasthan 9.5% 9.5%
19 Madhya Pradesh 10%
20 Punjab 4%
21 Haryana 10% *Source: MNRE
33
Renewable Energy Certificates (REC)
REC is a mechanism to enforce RPO across the country
The trading REC’s, one of the key growth drivers for the renewable energy industry successfully started in India
Indian Energy Exchange (IEX) based in New Delhi started the REC trading on 23rd February 2011
Power Exchange India Limited (PXIL) in Mumbai also started the trading on 30th March 2011
This mechanism is governed by CERC and the key stakeholders in REC framework are:
NLDC [Central Agency] : Responsible for registration, issuance of RECs, maintaining accounts, settlements, repository, monitoring and such other functions incidental to the implementation of REC mechanism
Accreditation Body (AB) : Checks RE generators against their eligibility criteria and the norms specified by MNRE, An approving Authority [State Nodal Agency (SNA)]
Monitoring Body : Verifies electricity generation from RE sources and notifies the Central Agency [Load Dispatch Centres (LDCs)]
Compliance Auditors: Monitors effective compliance by RE producers (To be selected by CERC)
INCENTIVES FOR RENEWABLE ENERGY
Option 1: Preferential Tariffs
Option 2: RECs
Renewable Energy Generator
• Sale of power at weighted average power purchase cost** of distribution company
• Sale of electricity at market price in open market
Sale of RECs at market determined prices at Power Exchange (With Floor & Forbearance Prices* for non‐solar of `1.5 & `3.9 and of `12.0 & `17.0 for solar )
States with low renewable energy generation will be able to purchase RECs to offset their respective Renewable Purchase Obligations
•Per KWh ** Weighted average pooled price at which distribution company has purchased electricity (including cost of self generation, long term and short term purchase) in the previous year, but excluding cost of RE power purchase
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Generation Based Incentive (GBI)
A GBI pilot scheme was introduced in July 2008 to provide benefit to wind power producers
Current GBI scheme was introduced in December 2009 as an optional benefit available for Wind power producers in lieu of Accelerated Depreciation Benefit
GBI is a Generation based benefit available to Wind Power producers over and above the base tariff
Benefit of ` 0.5 / kWh of power produced
Incentive available for a maximum period of 10 years from date of commercial operation (subject to maximum of ` 6.20 mn per MW)
Incentive is limited to wind farms with a maximum aggregate installed capacity of 4,000 MW
Only available for power producers whose capacities are commissioned for sale to the grid (i.e. ‐ not available for captive power projects and merchant plants)
IREDA appointed as the nodal agency for monitoring GBI implementation, project registration and disbursement of GBI
Entire funding for GBI to be met by Central Government
INCENTIVES FOR RENEWABLE ENERGY
Clean Development Mechanism (CDM)
Under the Kyoto Protocol, the CDM allows for projects in developing countries that result in reduction of GHG emissions to earn Certified Emission Reduction credits (CERs)
CERs are tradable carbon credits that can be purchased by developed countries to meet their emission reduction targets
To qualify to receive CERs, a project must satisfy the following criteria:
Approval from Designated National Authorities of host country
Public registration and issuance process with the UNFCCC
The additional funds thus generated to go towards improving the financial viability of clean energy projects
Indian scenario:
Indian projects comprised about 24% of all projects registered globally till 2009.
As of September 2010, India had 532 registered projects (426 of which were in the energy sector)
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Source: Global Wind Energy Council (Moderate Scenario)
Historical CAGR – 28%
Projected CAGR – 22%
Indian Wind Energy ‐ Historical Growth to Continue
Only 25% of potential currently utilized
48,561
12,966*
‐
25,000
50,000
75,000
Power Potential Installed Capacity
WIND ENERGY – LONG TERM GROWTH MARKET
Industry potential could be much higher than the 48 GW estimate due to offshore wind resources – Global Wind Energy Council
Wind is expected to account for 12 – 14% of India’s power generation by 2030
* As at 31.12.2010
1,077 1,167 1,407 1,702 2,125 3,000 4,430
6,270 7,845
9,645 10,827 12,966
15,966
19,966
24,466
29,466
34,966
-
8,000
16,000
24,000
32,000
40,000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011P 2012P 2013P 2014P 2015P
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Power Generation through Biomass
Biomass is a resource for deriving renewable energy using agricultural wastes like straw, husk and bagasse and other forms of waste like animal dung, municipal waste and sewage
Biomass is collected from farmers and transported to the power plant, where the material is processed and readied for burning
Fuel is burnt in a high pressure boiler to generate steam and operate a turbine to produce power
Some of the common technologies used in biomass power generation include direct combustion, biomass gasification, co‐generation and biogas production
BIO MASS BASED POWER – EMERGING MARKET WITH HUGE POTENTIAL
Biomass in India: The Story is Just Beginning
Total installed capacity of biomass plants in India as at October 2009 was 2,125 MW
Estimated potential of 25,000 MW means just 8.5% of the biomass potential has currently been realized
Number of policy initiatives have been introduced since 1993 for supporting the commercial exploitation of India’s biomass power potential
Climate change legislation is further expected to incentivize low carbon options such as bio power
Biomass Potential of 25,000 MW Largely Untapped
1,241 817 67
5,000
16,881
2,700
24%
5% 3%
0%
5%
10%
15%
20%
25%
30%
0
3,000
6,000
9,000
12,000
15,000
18,000
Cogeneration‐bagasse Agro‐residue Waste to energy
Actual Potential % Achievement (RHS)
Source: MNRE
Biomass Power Generation Technologies
Technologies
Co Generation
Combustion Gasification Biogas
Biomass used as fuel by partial combustion and conversion to fuel gas
Utilizing a byproduct to generate electricity (such as bagasse based power generation in sugar sector)
Anaerobic bacterial fermentation of biomass in a closed space
Direct burning of biomass to produce energy
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IMPORTANT NOTICE
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completeness or correctness of such information or opinions contained herein. The information contained in this presentation
is only current as of its date. Certain statements made in this presentation may not be based on historical information or facts
and may be “forward looking statements”, including those relating to the Company’s general business plans and strategy, its
future financial condition and growth prospects, and future developments in its industry and its competitive and regulatory
environment. Actual results may differ materially from these forward‐looking statements due to a number of factors, including
future changes or developments in the Company’s business, its competitive environment and political, economic, legal and
social conditions in India. This communication is for general information purpose only, without regard to specific objectives,
financial situations and needs of any particular person. This presentation does not constitute an offer or invitation to purchase
or subscribe for any shares in the Company and neither any part of it shall form the basis of or be relied upon in connection
with any contract or commitment whatsoever. The Company may alter, modify or otherwise change in any manner the content
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