Presentation on Investment Opportunities in Indian Power Sector By Rajeev Sharma Director (Projects) Power Finance Corporation Ltd., New Delhi (November 09, 2009) 1
POWER INFRASTRUCTURE IN INDIA TOTAL INSTALLED CAPACITY (end Sept. 09) 1,52,360 MW FUEL WISE THERMAL 64.4% (98,045 MW) Coal + Lignite 80,396 MW Gas 16,449 MW Diesel 1,200 MW NUCLEAR 2.7% (4,120 MW) RENEWABLES 8.7% (13,310 MW) HYDRO 24.2% (36,885 MW) 2
POWER INFRASTRUCTURE IN INDIA Contd TOTAL INSTALLED CAPACITY (end Sept. 09) 1,52,360 MW SECTOR WISE PRIVATE 17% (25,891 MW) CENTRAL 33% (49,842 MW) STATE 50% (76,627 MW) 3
POWER INFRASTRUCTURE IN INDIA Contd XI th PLAN CAPACITY ADDITION TARGET : TYPEWISE NUCLEAR 4% (3,380 MW) GAS/ LNG 9% (6,843 MW) HYDRO 20% (15,627 MW) LIGNITE 3% (2,280 MW) COAL 64% (50,570 MW) Total: 78,700 MW Beginning of Xth Plan End of Xth Plan Peak shortage 12.60% 13.80% Energy shortage 7.5% 9.60% 4
ANNUAL GENERATION (BUs) 723.556 517.439 395.889 245.438 4.073 16.937 47.434 104.627 1947 1961 1969 1980 1990 1997 2002 2009 Note : all figures as of month of March except for 1947, which is of December 5
TRANSMISSION & DISTRIBUTION NETWORK (ckm) 7,106,078 6,030,148 5,141,413 4,407,501 2,351,609 23,238 157,887 886,301 1947 1961 1969 1980 1990 1997 2002 2008 Note : all figures as of month of March except for 1947, which is of December 6
AN OVERVIEW OF LEGAL & POLICY FRAMEWORK THE HISTORICAL BACKGROUND 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 7
AN OVERVIEW OF(LEGAL & POLICY FRAMEWORK HISTORICAL BACKGROUND.Contd 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. 8 The Electricity Act, 2003 provided the required tool kit and recipe
AN OVERVIEW OF(LEGAL & POLICY FRAMEWORK HISTORICAL BACKGROUND.Contd 2003 Electricity Act, 2003 2001 Energy Conservation Act, 2001 1998 Electricity Regulatory Commissions Act, 1998 Amendments to Indian Electricity (Supply) Act, 1948 1948 Indian Electricity (Supply) Act, 1948 1910 Indian Electricity Act, 1910 9
ELECTRICITY ACT, 2003 - NOTIFIED ON 10 TH JUNE 03 Objective : Competition, Protection of Consumers interests & Power for all areas 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 14
ELECTRICITY ACT, 2003 - NOTIFIED ON 10 TH JUNE 03.Contd 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 11
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 & 12 Transmission.
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 13
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. 14
RURAL ELECTRIFICATION POLICY 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 15
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. 16
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 17
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. 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 18
GOVT. SPONSORED PROGRAMS: RESTRUCTURED ACCELERATED POWER DEVELOPMENT & REFORMS PROGRAMME (R APDRP).contd # 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 19
( GOVT. SPONSORED PROGRAMS: RESTRUCTURED ACCELERATED POWER DEVELOPMENT & REFORMS PROGRAMME (R APDRP).contd 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. 20
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 21
ULTRA MEGA POWER PROJECTS Awarded Projects Under Process Sasan Power Ltd. Jharkhand Integrated Power Ltd Coastal Gujarat Power Ltd. Coastal Andhra Power Ltd. Orissa Integrated Power Ltd. Akaltara Power Ltd. Coastal Tamil Nadu Power Ltd. Coastal Maharashtra Mega Power Ltd. Coastal Karnataka Power Ltd Sakhi Gopal Integrated Power Co. Ltd, Orissa Ghogarpalli Integrated Power Co. Ltd, Orissa Tatiya Andhra Mega Power Limited, Andhra Pradesh 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) 22
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. 23
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 24
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. 25
RECENTLY ANNOUNCED JV S FOR MAIN PLANT EQUIPMENT MANUFACTURING S.No. Joint Venture Equity Mix Capacity Product Addition (in MW) 3000 TG 1 JSW- Toshiba JSW: 25%; Toshiba : 75% 2 NTPC- BHEL IL&FS 50%; NTPC 5000 TG, Boiler, 25% ; BHEL 25% BoP, EPC 3 NTPC- Bharat Forge : Forging, Bharat 51%; NTPC : 49% casting of Forge rotors etc 4 Reliance NA 10000 Infra- SEC 5 L&T- L&T : 51%; 1000 TG Mitsubishi Mitsubishi: 49% 6 Bharat Forge- Alstom Alstom : 51% - Bharat Forge- 49% 1000 Boiler 5000 TG for Coal, Gas & Nuclear 26
GENERATION CAPACITY ADDITION DURING XITH FYP Particulars State Centre Private Total (BUSD) Projects under Construction (including 13.72 26.78 14.97 55.48 Projects Commissioned and under best efforts ) Advance action for XII Plan 10.93 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 29.33 44.72 49.23 123.28 Renovation & Modernization (R & M) 3.31 0.00 0.00 3.31 Renovation & Modernization (R & M) 3.31 0.00 0.00 3.31 Transmission 13.54 15.63-29.17 Total Transmission 13.54 15.63-29.17 Sub-Transmission & Distribution 41.04 - - 41.04 RGGVY 10.63 - - 10.63 APDRP 10.75 - - 10.75 Others 2.08 - - 2.08 Total Distribution & Rural Electrification 64.50 - - 64.50 Human Resource Development (HRD) - 0.10-0.10 Research & Development - 0.25-0.25 Demand Side Management (DSM) - 0.14-0.14 Total Others - 0.49-0.49 Grand 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 10.93 15.85 14.88 41.66 Advance action for XII Plan 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 28
TRANSMISSION SYSTEM DEVELOPMENT DURING XITH PLAN Items Units Projected addition in Target at the end of XI XI Plan Plan i.e. March 2012 TRANSMISSION LINES 765 KV ckm 5,428 7,132 HVDC +/- 500 KV ckm 5,206 11,078 HVDC 200KV Monopole ckm - 162 400 KV ckm 49,278 125,000 230/220 KV ckm 35,371 150,000 Total Transmission Line ckm 95,283 293,372 SUBSTATIONS HVDC BTB MW - 3,000 HVDC Bipole+Monopole MW 6,000 11,200 Total- HVDC Terminal Capacity MW 6,000 14,200 765 KV MVA 51,000 53,000 400 KV MVA 52,058 145,000 230/220 KV MVA 73,503 230,000 Total- 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 30
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TOTAL INVESTMENT REQUIREMENT FOR XIth PLAN In BUSD 32
CAPACITY ADDITION DURING XII th AND XIIIth PLAN Items 12 th plan (2012 17) 13 th plan (2017 22) Coal Based (MW) Gas Based (MW) Lignite Based (MW) Hydro (MW) Nuclear (MW) Total (MW) 74000 64000 0 6000 2500 0 20000 24500 3400 8000 100000 100000 Source: CEA (Booklet on equipment on key input requirements for power sector 12 th plan and beyond 33
TOTAL INVESTMENT REQUIREMENT FOR XIIth PLAN Area Generation Fund Requirement (BUSD) 103.14 Transmission Distribution Total 50.00 83.40 236.54 Source: CEA (Booklet on equipment on key input requirements for power sector 12 th plan and beyond 1 USD = INR 48 34
THANK YOU 35