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Presentation Presentation on on

Investment Opportunities in Indian Investment Opportunities in Indian Power SectorPower Sector

By Rajeev Sharma

Director (Projects) Power Finance Corporation Ltd., New Delhi

(November 09, 2009)

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POWER INFRASTRUCTURE IN INDIA 

HYDRO 24.2% (36,885

MW)

NUCLEAR 2.7% (4,120 MW)

FUEL WISE

THERMAL64.4% (98,045 MW)

RENEWABLES 8.7% (13,310

MW)

Coal + Lignite –

80,396 MW 

Gas 

–

16,449 MW

Diesel 

–

1,200 MW

TOTAL INSTALLED CAPACITY (end Sept.’09) – 1,52,360 MW

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POWER INFRASTRUCTURE IN INDIA…Contd

STATE 50% (76,627 MW)

PRIVATE 17% (25,891

MW)CENTRAL

33% (49,842 MW)

SECTOR WISE

TOTAL INSTALLED CAPACITY (end Sept.’09) – 1,52,360 MW

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Total: 78,700 MWBeginning of Xth Plan End of Xth Plan

Peak shortage 12.60% 13.80%Energy shortage 7.5% 9.60%

Total: 78,700 MWBeginning of Xth Plan End of Xth Plan

Peak shortage 12.60% 13.80%Energy shortage 7.5% 9.60%

POWER INFRASTRUCTURE IN INDIA…Contd

XIXIthth

PLAN  CAPACITY ADDITION PLAN  CAPACITY ADDITION TARGET : TYPEWISE

COAL64% (50,570 MW)

LIGNITE3% (2,280 MW)

GAS/ LNG9% (6,843 MW)

NUCLEAR4% (3,380 MW)

HYDRO20% (15,627 MW)

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ANNUAL GENERATION (BUs)

4.073 16.937 47.434104.627

245.438

395.889

517.439

723.556

1947 1961 1969 1980 1990 1997 2002 2009

Note : all figures as of month of March except for 1947, which is of December

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23,238 157,887886,301

2,351,609

4,407,5015,141,413

6,030,148

7,106,078

1947 1961 1969 1980 1990 1997 2002 2008

TRANSMISSION & DISTRIBUTION NETWORK (ckm)

Note : all figures as of month of March except for 1947, which is of December

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At time of Independence with generating capacity of 1,362 MW, generation and distribution were carried primarily by private utilities in a few urban centres.

The Electricity (Supply) Act, 1948 enacted to facilitate faster power sector development. Consequently SEBs set up with new generation, transmission and distribution coming under purview of SEBs.

As financial constraints of State Governments precluded the SEBs from adding the desired capacity, the need was felt for Central Government supplementing the effort.

• Central Generating companies set up – NTPC/ NHPC/ NEEPCO/ NPCIL etc.

• POWERGRID created for operating & maintaining the inter state and inter regional transmission systems

AN OVERVIEW OF LEGAL & POLICY FRAMEWORK

THE HISTORICAL BACKGROUND

(

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Power Sector reforms initiated in 1991 with focus to encourage competition and seek private participation (focus was on generation)

• The losses incurred by the SEBs made it difficult to commercially sustain leading to large outstanding thus discouraging new developers.

The key focus shifted to Distribution reforms; the “Bottoms up” approach was facilitated by the legal framework laid through the Electricity Regulatory Commissions Act, 1998 for creating an independent and transparent regulatory regime.

The Electricity Act, 2003 provided the required tool kit and recipe

AN OVERVIEW OF(LEGAL & POLICY FRAMEWORKHISTORICAL BACKGROUND ….Contd

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1910

1948

1998

2001

2003

Indian Electricity Act, 1910

Indian Electricity (Supply) Act, 1948

Amendments to Indian Electricity (Supply) Act, 1948

Energy Conservation Act, 2001

Electricity Regulatory Commissions Act, 1998

Electricity Act, 2003

AN OVERVIEW OF(LEGAL & POLICY FRAMEWORKHISTORICAL BACKGROUND ….Contd

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ELECTRICITY ACT, 2003 - NOTIFIED ON 10TH JUNE ‘03

Creates liberal framework for development

Creates competitive environment

Facilitates private investment

Delicenses generation except for hydro : Captive free from controls

Rural Areas : Stand alone Generation and Distribution delicenced

Multiple licensing in Distribution

Stringent provisions for controlling theft of electricity

Focus on revenue recovery in cases of unauthorized use of electricity

• Objective : Competition, Protection of Consumers interests & Power for all areas

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Obliges States to restructure Electricity Boards

Mandates creation of Regulatory Commissions

• Retail tariff to be determined by regulatory commissions

Open access in Transmission from outset

Open access in Distribution to be allowed by SERCs in phases

Gradual phasing out of cross subsidies

Trading distinct activity permitted with licensing

ELECTRICITY ACT, 2003 - NOTIFIED ON 10TH JUNE ‘03….Contd

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NATIONAL ELECTRICITY POLICY

NATIONAL ELECTRICITY POLICY (NEP) notified on 12th Feb.’05, with objectives :

Availability of Power – Demand to be met by year 2012 / Energy and Peak shortages to be overcome and adequate spinning reserves available.

- Fresh capacity of 78,000 MW targeted for addition during

XIth Plan.

Supply of Reliable and Quality Power

- ERCs have notified Standards of Performance

Financial Turnaround and Commercial viability of Electricity sector

- AT&C loss reduction strategy provided by ERCs.

- R-APDRP launched by the Government.

Protection of Consumers’ interests

- Consumers Grievance Redressal forums constituted.

Access to Electricity

- Government of India has launched two Schemes to

improve the distribution sector: RGGVY & APDRP

Effective utilization of all available resources for generation, transmission and distribution

- National Electricity Plan notified covering Generation &

Transmission.

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NATIONAL ELECTRICITY PLAN

National Electricity Plan notified on 3rd Aug.’07- Plan based on 17th EPS and GDP growth rates of Integrated Energy Policy- Serves as Road map towards optimum growth of the power sector Focus areas and the present status :

• Adoption of Super critical technology to improve efficiency and reduce coal consumption

• Introducing Ultra Super critical technology (Plant using Steam parameters above 275 kg/ cm2 and Steam temp. over 565oC)• Encouragement for imported Coal based plants • Harness the Lignite reserves • Use of non conventional energy resources • Strengthening of Transmission system-HVDC , AC

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TARIFF POLICY

Tariff Policy notified on 6th June ’06, with objectives :• Ensure availability of electricity to consumers at reasonable and competitive rates

- Competitive Bidding guidelines and Standard Bidding Documents for procurement of electricity and for developing Transmission projects through tariff based bidding issued.

- UMPPs have achieved competitive tariffs.• Ensure financial viability of the Sector and attract investments

- CERC notifying rates for Return on Equity and depreciation. - Satisfactory situation of payment to Generators and Transmission

Service Providers• Promote transparency, consistency and predictability in regulatory approaches across jurisdictions and minimize perceptions of regulatory risks.

- The Forum of Regulators is working to facilitate consistency in approach specially in the area of distribution.

- Multi Year Tariff (MYT) implemented by CERC in Generation and Transmission.

- All future requirements of power to be procured competitively by

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Notified on 23rd August, 2006

Objectives:• Provision of access to electricity to all households by 2009.• Quality and reliable power supply at reasonable rates.• Min. lifeline consumption of 1 unit per household per day by 2012.

Grid connectivity to be normal way of village electrification

“RGGVY” mandated for completion of rural electrification

Off grid solutions based on stand alone system may be taken up in areas where grid connectivity is not feasible or not cost effectiveFranchisees for management of rural distribution for revenue sustainability

States to constitute District Committees to review & coordinate rural Electrification, quality of power supply, consumer satisfaction and promote energy efficiency & conservation

States to notify rural areas Rural Electrification Plans

RURAL ELECTRIFICATION POLICY

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NEW HYDRO POLICY

Exemption to private sector from tariff based competitive bidding up to

Jan’ 2011 which was available only to public sector.

Merchant sale of up to 40% of the saleable energy.

An additional 1% free power over and above 12% for a Local Area

Development Fund - A regular stream of revenue for income generation,

infrastructure creation and welfare schemes in the affected areas.

Construction of houses at resettled sites. Each Project Affected Family

(PAF) to get 100 units/ month free for 10 years.

An industrial training institute (ITI) at each project site, set up six months

before the beginning of the project work. PAPs will be provided jobs in the

project after training.

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OPEN ACCESS

Open Access is one of key features of the Electricity Act 2003.

Open Access defined as the “Non-Discriminatory provision for the use of transmission lines or distribution system or associated facilities with such lines or system by any licensee or consumer or a person engaged in generation in accordance with the regulations specified by the Appropriate Commission.”

Open access in distribution to be introduced by SERCs in phases. In first phase, open access to consumers with load exceeding 1 MW, latest by January 2009 (Section 42)

Mechanism of cross-subsidy charge to compensate the distribution licensee.

Inter State Open Access in Transmission – Accomplished

PGCIL is the nodal agency for grant of open access in inter state transmission system

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Focus of the programme on AT&C loss reduction on sustainable basis through systematic measures :• Establishment of base line data• Fixing of accountability• Strengthening and up-gradation of sub transmission and distribution network• Adoption of Information Technology

GOVT.  SPONSORED PROGRAMES:‐

RESTRUCTURED  ACCELERATED  POWER DEVELOPMENT & REFORMS PROGRAMME 

(R‐APDRP) 

CONTINUATION OF APDRP (R-APDRP) SCHEME DURING THE XITH PLAN APPROVED ON 31.07.08 AS A CENTRAL SECTOR SCHEME.

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# Project implementation under the scheme primarily to be taken up in two parts :• Part-A includes the projects for establishment of baseline data and IT applications for energy accounting/auditing & IT based consumer service centers. • Part-B includes regular distribution strengthening projects including segregation of feeders.

IUSD=INR 48# Programme size of re-structured APDRP during XIth Plan :-

10.75.BUSD- Part-A (Baseline System projects) :- 2.083 BUSD- Part-B (Strengthening & Up-gradation projects):- 8.33BUSD- Part-C (Enabling activities) :– 0.245 BUSD- Part-D (Incentives to Utility staff):- 0.083 BUSD

GOVT. SPONSORED PROGRAMS:‐

RESTRUCTURED  ACCELERATED  POWER DEVELOPMENT & REFORMS PROGRAMME (R‐APDRP) 

….contd

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Initially 100% loan for Part A and up-to 25% (90% for special category States) loan for Part B from the Govt. of India.

The entire loan for Part-A to be converted into grant after establishment of Base-line data system.

Up-to 50% (90% for special category States) loan of Part-B to be converted into grant on achieving the 15% AT&C loss in the project area.

(…

GOVT. SPONSORED PROGRAMS:‐

RESTRUCTURED  ACCELERATED POWER  DEVELOPMENT & REFORMS PROGRAMME (R‐APDRP) ….contd

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RAJIV GANDHI GRAMEEN VIDYUTIKARAN YOJANA (RGGVY)

Launched in March, 2005

Initial sanction was for last two years of Xth Plan with capital subsidy of 1.041 BUSD (IUSD=INR 48)

Under the scheme 90% Capital Subsidy provided

REC the nodal agency for implementation of RGGVY

Continuation of Scheme in XIth Plan sanctioned in January ‘08 with a subsidy provision of 5.833 BUSD (I USD=INR 48) for Phase I of the Scheme

# PRESENT STATUS :

TARGET ACHIEVED

No. of villages to be Electrified 1,18,146 61,209

No. of free BPL connections (in Lakh)

245.08 59.19

Designated by the Govt of India as the Nodal Agency for the development of UMPPs

Each UMPP to have a generation capacity of 4000 MW

Incorporated wholly owned subsidiary companies to act as SPVs for the projects

Subsidiaries to carry out pre-feasibility studies & facilitate tie-up of inputs, linkages and clearances

SPVs to be transferred to bidders through ‘Tariff Based International Competitive Bidding Guidelines’ issued by Govt. of India.

Tariff-based ICB completed 7 projects transferred to successful bidder as below:

Mundra UMPP (Gujarat) to Tata Power in Apr. 2007: USD 0.047/unit (Rs. 2.26/ unit)

Sasan UMPP (MP) to Reliance Power Ltd in Aug. 2007: USD 0.0247/unit (Rs. 1.19/ unit)

Krishnapatnam UMPP (AP) to Reliance Power in Jan. 2008: USD 0.0485/unit (Rs. 2.33/ unit)

Tilaiya UMPP (Jharkhand) to Reliance Power in Aug. 2009 (Rs. 1.77/ unit)

Designated by the Govt of India as the Nodal Agency for the development of UMPPs

Each UMPP to have a generation capacity of 4000 MW

Incorporated wholly owned subsidiary companies to act as SPVs for the projects

Subsidiaries to carry out pre-feasibility studies & facilitate tie-up of inputs, linkages and clearances

SPVs to be transferred to bidders through ‘Tariff Based International Competitive Bidding Guidelines’ issued by Govt. of India.

Tariff-based ICB completed 7 projects transferred to successful bidder as below:

Mundra UMPP (Gujarat) to Tata Power in Apr. 2007: USD 0.047/unit (Rs. 2.26/ unit)

Sasan UMPP (MP) to Reliance Power Ltd in Aug. 2007: USD 0.0247/unit (Rs. 1.19/ unit)

Krishnapatnam UMPP (AP) to Reliance Power in Jan. 2008: USD 0.0485/unit (Rs. 2.33/ unit)

Tilaiya UMPP (Jharkhand) to Reliance Power in Aug. 2009 (Rs. 1.77/ unit)

ULTRA MEGA POWER PROJECTS 

Coastal 

Tamil Nadu 

Power Ltd.

SasanPower Ltd.

Coastal 

Maharashtra 

Mega Power 

Ltd.

CoastalKarnatakaPower Ltd

JharkhandIntegratedPower Ltd

Awarded ProjectsAwarded Projects Under ProcessUnder Process

Akaltara

Power Ltd.

Orissa 

Integrated 

Power Ltd.

Coastal 

Gujarat 

Power Ltd.

Coastal 

Andhra 

Power Ltd

.

Sakhi

GopalIntegrated

Power Co. Ltd, Orissa

GhogarpalliIntegrated

Power Co. Ltd, Orissa

Tatiya

Andhra Mega 

Power Limited, Andhra 

Pradesh

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ULTRA MEGA POWER PROJECTS  UNDER PROGRESS

Coastal Tamil Nadu Power Ltd., Cheyyur UMPP, Tamil Nadu: RfQ to be issued after finalisation of port site.

Orissa Integrated Power Ltd., Sundergarh UMPP, Orissa: Gram Sabha for 8 villages held in Sept’ 09. Outstanding issues to be resolved by Chief Secretary, GoO. RfQ to be issued after issuance of section 4 notification.

Akaltara Power Ltd., Chhattisgarh UMPP: Application filed for section 4 notification for 5 villages. Work for Section-4 application for five remaining villages in progress. RfQ to be issued after issuance of section 4 notification

Andhra Pradesh 2nd UMPP: Site near Kothapeta finalised. Alternate locations of Ash Dyke and Colony Area sent by CEA to APGENCO. Consent of State Govt awaited.

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ULTRA MEGA POWER PROJECTS  UNDER PROGRESS….CONTD

Coastal Maharashtra Mega Power Ltd., Maharashtra UMPP : Site yet to be finalised.

Sakhigopal Integrated Power Ltd., Orissa Additional UMPP 1: Site yet to be finalised.

Ghogarpalli Integrated Power Ltd., Orissa Additional UMPP 2: Site yet to be finalised.

Coastal Karnataka Power Ltd., Karnataka UMPP: Sites to be proposed by States

Gujarat 2nd UMPP: Site yet to be finalised

Tamil Nadu 2nd UMPP: Sites to be proposed by States

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POTENTIAL FOR  AUGMENTATION OF POWER PLANT   EQUIPMENT MANUFACTURING BASE

• Currently, BHEL is the only manufacturer in India for the main plant equipments (Boiler, Turbine and Generator)with current capacity is about 10000 MW, and another 5000 MW expansion is under execution

• The rest of the supply for main plant equipments from the imports thru OEMs-Alstom, Siemens, GE. Chinese companies

• Many Indian private players are setting up joint ventures with OEMs to manufacture the power plant equipments in India.

• According to IMaCS’ estimates, during 12th Five Year plan, about 28000 MW to 31000 MW of capacity addition would be required per year assuming that India will maintain a GDP growth rate of 9% in the period

• With reference to the Mckinsey Report “Powering India: The Road to 2017”, India will require a generation capacity of 415 to 440 GW by FY 17, which in turn means an annual capacity addition of about 40,000 MW,

• According to the computations mentioned above, India will reach to an annual capacity of 39000 MW (15000 MW by BHEL and 24000 MW by JVs) by the end of FY 17, which is in line with foregoing projections.

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RECENTLY ANNOUNCED JV’S FOR MAIN PLANT EQUIPMENT  MANUFACTURING

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S.No. Joint Venture

Equity Mix Capacity Addition (in

MW)

Product

1 JSW- Toshiba

JSW: 25%; Toshiba : 75%

3000 TG

2 NTPC- BHEL IL&FS 50%; NTPC 25% ; BHEL 25%

5000 TG, Boiler, BoP, EPC

3 NTPC- Bharat Forge

Bharat Forge : 51%; NTPC : 49%

Forging, casting of rotors etc

4 Reliance Infra- SEC

NA 10000

5 L&T- Mitsubishi

L&T : 51%; Mitsubishi: 49%

1000 TG

1000 Boiler6 Bharat

Forge- Alstom

Alstom : 51% - Bharat Forge- 49%

5000 TG for Coal, Gas & Nuclear

Total 24000

GENERATION CAPACITY ADDITION DURING XITH FYP

Particulars State Centre Private Total (BUSD)Projects under Construction (including Projects Commissioned and under best efforts )

13.72 26.78 14.97 55.48

Advance action for XII Plan 10.93 15.85 14.88 41.66Total Generation 24.64 42.64 29.85 97.13Decentralized Distribution Generation - 2.08 - 2.08New & Renewable Energy Sources 4.69 - 9.38 14.06Captive Power Plants - - 10.00 10.00Integrated Generation 29.33 44.72 49.23 123.28Renovation & Modernization (R & M) 3.31 0.00 0.00 3.31Renovation & Modernization (R & M) 3.31 0.00 0.00 3.31Transmission 13.54 15.63 - 29.17Total Transmission 13.54 15.63 - 29.17Sub-Transmission & Distribution 41.04 - - 41.04RGGVY 10.63 - - 10.63APDRP 10.75 - - 10.75Others 2.08 - - 2.08Total Distribution & Rural Electrification 64.50 - - 64.50

Human Resource Development (HRD) - 0.10 - 0.10Research & Development - 0.25 - 0.25Demand Side Management (DSM) - 0.14 - 0.14Total Others - 0.49 - 0.49Grand Total 110.68 60.83 49.23 220.73 27

INVESTMENT REQUIRED IN GENERATION SECTOR IN XI TH FYP

Particulars State(BUSD)

IUSD‐INR 48

Centre(BUSD)

Private(BUSD)

Total(BUSD)

Projects under Construction (including Projects Commissioned

and under best efforts )

13.72 26.78 14.97 55.48

Advance action for XII Plan10.93 15.85 14.88 41.66

Total Generation 24.64 42.64 29.85 97.13

Decentralized Distribution Generation - 2.08 - 2.08

New & Renewable Energy Sources 4.69 - 9.38 14.06

Captive Power Plants - - 10.00 10.00

Integrated Generation 140.79 214.66 236.29 123.28

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TRANSMISSION SYSTEM DEVELOPMENT DURING XITH PLAN

Items UnitsProjected addition in

XI Plan

Target at the end of XI Plan i.e.

March 2012TRANSMISSION LINES

765 KV ckm 5,428 7,132HVDC +/- 500 KV ckm 5,206 11,078

HVDC 200KV Monopole ckm - 162400 KV ckm 49,278 125,000

230/220 KV ckm 35,371 150,000Total Transmission Line ckm 95,283 293,372

SUBSTATIONSHVDC BTB MW - 3,000

HVDC Bipole+Monopole MW 6,000 11,200Total- HVDC Terminal Capacity MW 6,000 14,200

765 KV MVA 51,000 53,000400 KV MVA 52,058 145,000

230/220 KV MVA 73,503 230,000Total- AC Substation Capacity MVA 176,561 428,000

Source: National Electricity Plan – Transmission – Apr.'2007 – CEA.29

INVESTMENT REQUIRED IN XITH PLAN FOR TRANSMISSION DEVELOPMENT PROGRAM

IN BUSD

Central Sector 15.63

State Sector 13.54

Total 29.17

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TOTAL INVESTMENT REQUIREMENT FOR XIth

PLAN

In BUSD

CAPACITY ADDITION DURING XII th

AND XIIIth

PLAN

Items 12 th

plan   (2012‐17) 13 th

plan  (2017‐22)

Coal Based (MW) 74000 64000Gas Based (MW) 0 6000

Lignite Based (MW) 2500 0Hydro (MW) 20000 24500

Nuclear (MW) 3400 8000Total (MW) 100000 100000

Source: CEA (Booklet on equipment on key input requirements for power sector 12 th plan and beyond

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TOTAL INVESTMENT REQUIREMENT FOR XIIth

PLAN

Area Fund Requirement (BUSD)

Generation 103.14

Transmission 50.00Distribution 83.40

Total 236.54Source: CEA (Booklet on equipment on key input requirements for power sector 12 th plan and

beyond1 USD = INR 48

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THANK YOU