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Presentation Presentation

on on

Indian Power Indian Power

SectorSector

Government of India June, 2006Government of India June, 2006

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Installed Capacity of Power (May , 2006) Generating Capacity Hydro 32,335 MW (26%) Thermal 82,507 MW (66%)

Coal 68,643 MWGas 12,663 MW

Nuclear 3,850 MW (3%) Renewables 6,158 MW (5%)

TOTAL 1,24,850 MW

Central Sector 32%

State Sector 57%

Private Sector 11%

(70,982 MW)

(40,448 MW)(13,420 MW)

In addition captive generation capacity of appx. 41,000 MW.

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Census Results 1990-91 2000-01 2004-05

PLF (%) 57.1 69.0 74.8

Energy Shortage (%) 7.9 7.8 7.3

Peaking Shortage (%) 16.7 12.3 11.7

Households Access to Electricity (%)

42.0 56.0 -

Rural Households Coverage (%)

31.0 43.8* -

Growth of Power Sector

To Electrify these Rural Households ( 78 million) in next five years, Rajiv Gandhi Gramin Vidyutikaran yojana has been launched.

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16 3584

131

238

408

592

1950 1960 1970 1980 1990 2001 2004 2005

Per Capita Consumption of Electricity in India (kWh/year)

In 1950 Electricity consumption per capita was 15 kwh In 1950 Electricity consumption per capita was 15 kwh In 2012 it is projected at 1000 kwh. In 2012 it is projected at 1000 kwh.

Brazil : 2070

China : 1200

Thailand : 2000

Malaysia : 3000

606

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2005 2012 2017 2022 2027

Per capita consumption (kWh)

606 1000 1300 1900 2800

Generation Capacity (GW)

118 216 333 512 790

Growth Projections (9%)

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Challenges and Policy ResponsesEliminating Shortages- Peaking 11.7%, Energy 7.3%.

•Stepping up Public Investments.

- Adding 1,00,000 MW capacity by 2012.

• Nurturing Private Sector- Present share 11%.

- Electricity Act –2003 and National Electricity Policy.Rural Electrification- 56% Rural households yet to electrified.

Completion of electrification in next five years.

Financial Viability- SEB losses though reducing , yet very high.

•Distribution Reforms : Reduction in Aggregate Technical and Commercial (AT&C)

losses; Improving quality of supply.

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Improving Investment Climate

At present 40,000 MW generation capacity is already under

execution. Investment of USD 43 Billion committed.

Public sector investments have been stepped up ; will need

to be supplemented through private investments.

100 % FDI in all segments of Power Sector has been

allowed.

Recently Power Trading also covered for 100% FDI.

Level playing field for both domestic and International

Investors.

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The Act creates a liberal and transparent framework for Power Development.

It facilitates investment by creating competitive environment and reforming distribution segment of power industry.

Entry Barriers removed/reduced

•Delicensed generation.•Freedom to captive generation including group captive. •Recognizing trading as an independent activity.•Open access in transmission already in place.

Electricity Act 2003

Open access to consumers above 1 MW within five years commencing from 27th Jan 2004 (date of enforcement of amendment to Electricity Act).

Multiple licenses in distribution.

Regulatory Commissions- to develop market to fix tariff.

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Implementation of the Electricity Act• Most of the Rules (required to be framed by Central Govt.)

notified.

• National Electricity Policy announced: Feb, 2005

• Electricity Appellate Tribunal : Operational July, 2005.

• Guidelines for determining tariff through competitive bidding

notified:Jan 2005

• Regional Power Committees for all the 5 regions established:

May 2005

• Electricity/Tariff policy notified : Jan 2006

• CERC has notified open access in transmission: Jan, 2004

• Guidelines for private investment in transmission: April 2006

• Several SERCs have initiated action on open access in

Distribution.

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By year 2012 :

Per capita availability 1000 units.

Installed capacity over 200,000 MW.

Spinning reserves 5% .

Minimum lifeline consumption of one unit per household

per day.

Inter-regional transmission capacity 37,000 MW.

Energy efficiency/ conservation savings about 15%.

Quality and reliable power supply.

National Electricity Policy

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Tariff Policy

Tariff of all Generation and Transmission Projects in Private Sector through Competitive route- Public sector to complete transition in five years.

Reduction of cross subsidy to (+)(-) 20% in next five years.

Emphasis on facilitating Open Access in Distribution; clear formulation on cross subsidy surcharge.

Transmission Tariff framework sensitive to distance and direction.

Strict Implementation of Performance Standards.

Agriculture Tariff to leverage sustainable use of Ground Water Resources.

Time bound introduction of MYT.

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Peak demand estimation :

• End of XI plan (2012) - 157 GW.

• End of XII plan (2017) - 213 GW.

For next 30 years , capacity will need to be doubled every 10

years.

Full Development of Hydro potential .

• All Hydro is Renewable irrespective of size.

• 50,000 MW Hydro Initiative launched.

• 73 projects with capacity of 33,000 MW taken up for

DPR preparation.

100,000 MW Thermal Initiative launched.

Meeting the Demand

Contd..

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Capacity Addition During X Plan (2002-2007)

Utility

Non-Conventional

Energy Sources

Sub Total Captive Grand Total

Already Commissioned

14342 4650 18992 2350 21342

Likely in 2006-07

19682* 1367 21049 2000 23049

Grand Total 34024* 6017 40041 4350 44391

*Out of this about 3300 MW are being attempted under the best efforts scenario and in case of their slippage they are expected to be commissioned by the end of Qtr- I, 2007-08.

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Capacity Addition Programme During XI Plan (2007-2012)

Fuel- Mix Central Sector

State Sector

Private Sector

Total

Thermal 21,000 11,000 12,000 44,000

Hydro 10,000 5,000 - 15,000

Nuclear 3,000 - - 3,000

Total 34,000 16,000 12,000 62,000

May be revised to 67,000 MW, depending on the

availability of Gas/ LNG in required quantities and right

prices.

In addition, 5000 MW through Non- Conventional Energy

Sources.

Captive capacity not included.

(MW)

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Investment Requirements During XI Plan (2007-2012)

USD 50 Billion for Generation.

Another USD 50 Billion for Transmission, Distribution

and Rural Electrification.

Total USD 100 Billion.

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New Benchmarks in Setting Power Units

• Coal Based

– The Average lead time for the 500 MW unit reduced from 49

months to 38 months.

– The Average lead time for the 210/250 MW units reduced form

32 months to 28 months.

– NTPC emerged as Globally competitive player as cost of

generation is among the lowest

• Gas Based

– Average lead time for gas based project has come down from

24 months to 20 months.

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Encouraging response of investors

Financial closure of 4400 MW projects– investment of

about USD 3.6 Billion.

Financial closures for 2200 MW is at advanced stage of

finalisation.

Additional about 10,000 MW appraised. Fuel supply

availability critical for financial closure.

Private Participation- Generation

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Ultra Mega Power Projects – A Major Investment Initiative

Section 63 of the Electricity Act, 2003, envisages procurement

of power by distribution licensees through competitive bidding.

Tariff so arrived is to be accepted by Regulatory Commission.

National Electricity Policy provides for “ Competition aimed at

consumer benefits” – Competition to determine the price as

apposed to cost plus exercise.

Electricity Tariff Policy stipulates competitive procurement of

future power requirements by Distribution Licensees.

Contd..

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Ultra Mega Power Projects contd..

Will facilitate setting up of large sized projects of 4000 MW each reaping

economies of scale and quick capacity addition leading to cheaper power.

Utilization of latest highly efficient super critical technology.

IPP experience highlights critical importance for Government intervention

to

• secure reliable fuel supply,

• obtain environmental clearances

• co-ordination with states & bulk power purchasers, for achieving

financial closure.

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The Shell Company Concept (SPV) Shell company to work independently to reach a stage where major tie-ups, statutory

clearances and linkages are in place.

PFC nominated as the nodal agency for setting up shell companies.

Each company headed by a Chief Executive.

Selection of developer through a Tariff based ICB.

Shell companies will be then transferred to the successful bidders for execution.

With a number of concerns addressed by Shell company, risk factors minimised.

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Role of Shell Company SPVs to take actions for :

• Preparation of project report.

• Land acquisition.

• Allocation of fuel linkages/coal blocks.

• Allocation of water by the state Govt.

• Appointment of consultants for Environment Impact Analysis (EIA)

& Project Report.

• Appointment of consultants for International Competitive Bidding

(ICB) document preparation & evaluation of bids.

Contd.

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Role of Shell Company contd..

Various approvals and statutory clearances.

Off-take/sale of power – section 63 of Electricity Act, 2003

provision.

Power Evacuation/ (Transmission) System.

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Role of Ministry of Power To be a facilitator.

Co-ordination with concerned Ministry/ Agencies for ensuring:

• Coal Block Allotment/ Coal Linkage

• Environment/ Forest clearances

• Required support from State Govt. Agencies

• Financial Institutions towards financial closure.

• To facilitate PPA and proper payment security mechanism - with State Govt./ State utilities

• Monitoring the progress of shell companies w.r.t. predetermined timelines.

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Present Status Seven Projects have been identified:

1. Sasan Power Limited (M.P.) - Coal pit head

2. Akaltara Power Limited (C.G.) - Coal pit head

3. Coastal Gujarat Power Limited (Mundra)

4. Coastal Karnataka Power Limited (Tadri)

5. Coastal Maharashtra Power Limited (Girye)

6. Coastal A.P. (Krishnapatnam)

7. Orissa- Coal pit head

Contd.

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Present Status contd..

EOI advertised for projects at Sasan, Mundra, Tadri and Girye.

Pre- Bid Conference held on 21.02.2006 at New Delhi and 17.4.2006 at

Mumbai.

RFQ invited for Sasan and Mundra Projects

Federation of Indian Chamber of Commerce and industry (FICCI) selected

Industry Partner.

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Payment Security Mechanism

As condition in PPA.

Letter of credit (LC) by distribution licensee.

Escrow Account claims of receivables of distribution utility.

Finally in the unlikely event of default direct supply to HT

consumers as per provision of the Electricity Act, 2003.

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Important Milestones For Selection Process

Project E.O.I. Issue of RfQ

Issue of RfP

Submission of RfP

Selection of Successful

Bidder

1. Sasan- Pit head 31.01.06 31.03.06 15.06.06 15.11.06 31.12.06

2. Mundra -

Coastal

01.02.06 31.03.06 15.06.06 15.11.06 31.12.06

3. Krishnapatnam – Coastal 31.07.06 15.10.06 15.03.07 30.04.07

4. Orissa- Pit head 31.07.06 15.10.06 15.03.07 30.04.07

5. Girye - Coastal 15.11.06 15.01.07 15.06.07 31.07.07

Milestones in respect of Akaltara and Tadri would be finalised after availability of key inputs from State Govts.

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Investment Opportunities

Investment opportunities for about USD 3.0 Billion in each project.

Long term Bond market and take out financing for better tariff is being

proposed.

The sectoral capping and the group exposure capping for the purpose of

debt financing, expected to be revisited and properly enhanced exclusively for

these Ultra Mega Projects.

Contd.

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Intra – Regional expansion of transmission capacity is

linked to generation projects.

Inter- Regional connectivity has been planned with

hybrid systems, consisting of HVDC, Ultra- High Voltage

AC (765 kV) & Extra High Voltage AC (400 kV) lines.

Present Inter- Regional transfer capacity is 9,500 MW,

being enhanced to 17,000 MW by 2007.

37,000 MW by 2012.

Augmentation of National Grid

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The Act provides:

• Dedicated transmission line can be set up by generating company or captive plant owner without any license

• For granting license for inter – State or intra- State transmission, the Regulator shall consider recommendation of CTU/STU. However, such recommendation is not binding on the Regulator.

Policy frame work developed for facilitating Private Participation through Empowered Committee.

Advance Project formulation to speed up projects through this route.

Project developers to be selected on the basis of competitive bidding for tariff.

Guidelines for competitive tariff determination notified.

Private Participation in Transmission

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Payment of Bills by State Utilities to CPSUs

Since 2003-04, the realisation of dues by CPSUs improved to about 100% of current billing.

• 2001-02 76%

• 2002-03 95%

• 2003-04 Almost 100%

• 2004-05 Almost 100%

• 2005-06 Almost 100%

Full payment to all private companies.

Agreement on Securitisation of dues of CPSUs were finalised in 2002-03. States have

issued bonds.

No NPA to PFC.

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Commercial Losses of State Utilities as % of Turnover (Without Subsidy)

28.32

14.69

17.60

33.00

41.29

37.17

0

5

10

15

20

25

30

35

40

45

1998-99 1999-00 2000-01 2001-02 2002-03 2003-04

Years

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1.47

0.86

0.97

1.611.55

1.30

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

1998-99 1999-00 2000-01 2001-02 2002-03 2003-04

Years

Revenue Gap (Cents/ kWh)Difference between Average Cost of Supply (ACS) and

Average Revenue Realised (ARR)

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4.57

4.45

4.11

3.8

3.9

4.0

4.1

4.2

4.3

4.4

4.5

4.6

4.7

2001-02 2002-03 2003-04

Years

Tariff Rationalisation and Improved Collection Efficiency

Average Revenue Realised (ARR) (Cents/ kWh)

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Rural electricity infrastructure initiative

In five years……

Electrify all villages and habitations.

Provide access to electricity to all households.

Give Electricity Connection to Below Poverty Line (BPL) families free of charge.

And also to cater to the requirements of household needs, Agricultural infrastructure, Agro based industries, commerce & Social Services – Health, Education

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Features The scheme covers the entire country. Provides 905 grant and 10% loan from the

central Government. USD 3.6 Billion outlay for the entire scheme. USD 1.1 Billion provided the current Tenth

Five Year Plan. Emphasis on decentralized distributed

generation & Decentralised management by Franchisees, Co-

operatives, Panchayats etc.

Rural Electrification

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India emerging as one of the largest potential source of Certified

Emission Reductions (CER).

Designated National Authority fully functional.

The Host Country Approval (HCA) was accorded to 297

projects in Energy sector under CDM.

63 projects have been registered – creating 9 million plus CERs.

Focus areas in Energy sector :

• R&M of old plants.

• Conversion of LT to HT lines.

• Supercritical Thermal Power Projects.

• Hydro Projects.

Clean Development Mechanism (CDM) Projects

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ConcernsIssues Status

Effective Competition National Electricity Policy NEP 2005, Competitive bidding guidelines 2005

Electricity Tariff Policy ETP 2006

Pvt. Participation in transmission 2006

Ultra Mega Power Initiative 2005

Open access ETP 2006 – time limit 5 years

CERC guidelines 2005

SERCs 2005-06

Market determination generation price

Electricity Act 2003 Sec 63

ETP 2006 time limit 5 years

Policy for sharing infrastructure & fuel resources in a particular state

M/o Power as facilitator & coordinator

Ultra Mega Power initiative

States advised accordingly for similar capacities

Dispute resolution Appellate Tribunal 2005

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THANK YOU

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