Regaining Investor Confidence in
Power Sector
and
Addressing Stressed Assets
K Biswal, Director(Finance)
NTPC Ltd
Installed Capacity of India
Total Installed Capacity of India as on Jun’15- 275592 MW
36470, 13%
5780, 2%
167666, 61%
Coal
Gas & Deisal
42015, 15%
Hydro
Nuclear
Renewable
23661, 9%
Source-CEA
Present State of Affairs of the Indian Power Sector
• Stranded Assets of ~approx 70000 MW
• Commensurate growth (w.r.t generation) in transmission and distribution
sector did not happen.
• Very low per capita power consumption in India (1010 units in 2014-15).
• 100% metering not yet achieved.
• Lukeworm response of Investors in Indian Power Sector.
• Non Uniform Policy on Cross Subsidy, Subsidy by Govts, rewards for timely
paying consumer, penalty for non paying consumers etc.
• Huge accumulated distribution loss of Rs 3.8 Lakh Cr (2015).
• Distribution tariff is not cost reflective.
• Because of poor financial conditions, distribution companies are not able to
provide 24x7 power resulting into partial loading/ under utilization of
generating units.
Challenges in Power Sector
• Regulatory Challenges
• DISCOMs are the weakest link in providing 24X7 Power for All
• 40000 Cr loan given by Banks & FIs is outstanding
• Accumulated Loss of DISCOM~ Rs. 3.8 lakh crore (Mar 15) , Total Loss in
last 6 years – Rs. 3.66 lakh crore
• DISCOM debt interest rate – Average ~ 12%, as high as 14-15% for many
DISCOMs while States borrow at ~ 8%
• Average AT&C losses ~ 32%
• Regulators don’t allow pass through of interest on past losses in tariff
• 18500 Unelectrified villages
• 5 Cr unelectrified household
Investors Expectation
• Regulators to ensure:
 Return on Capital Employed
 Return of Capital Employed
 Reimbursement of prudent operating expenses.
 Reward to efficient performer
 Reduction in Regulatory Uncertainties
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Consumer Interest-What does it mean
• In my view:





Access to Electricity
Availability of Electricity
Assured Quality of Electricity
Attentive to Services
Affordable Price
Regulators to strike a balance between the interest of
consumers and investors.
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Effective use of Regulatory Tools
• Speaking orders/ time limit for Pronouncements
• Price / Volume controls (Over drawl/ UI limitations)
• Suo - Motu petitions for all players instead of specific entities.
• Benchmark for Standards of Performance applicable to all players
• Uniform Penalties and incentives for the Sector.
• Simplification of License conditions
• Need for longer control period
• Need for consultative committees with representation from all stake
holder including regulated entities on all major issues.
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MOP initiatives
• Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY) for unelectrified
villages- Outlay of 75893 Cr
• Integrated Power Development Scheme (IPDS) for urban areas -Outlay of
65424 Cr
• Distributed Decentralized Generation (DDG) for remote areas
• Reducing Cost of Power by bringing energy efficiency, Coal rationalization
• Proposed amendments in the Electricity Act
• UDAY (Ujwal DISCOM Assurance Yojana) for financial turnaround of Power
Distribution Companies
• Promotion of Renewable energy : 175 GW by 2022
• Solar:100 GW, Wind: 60 GW, Small Hydro :5 GW & Biomass & Other : 10 GW
• Creation of a power sector development fund to bailout stressed projects
that have been left in the lurch for various reasons.
Reducing Cost of thermal Power
• Increased supply of domestic coal
• Coal linkage rationalization
• Liberally allowing coal swaps from inefficient plants to efficient plants
and from plants situated away from mines to pithead plants to minimize
cost of coal transportation
• Coal price rationalization based on Gross Calorific Value (GCV)*
• Correction in Coal grade slippage through reassessment of each
mine*
*Correct tariff fixation and reduce coal theft
Reducing Cost of thermal Power
• Expeditious completion of railway lines
• JV’s with States • Coal India to supply 100% washed coal for G10
grade and above at plants > 500 km from mines by 1 st October 2018
• 100% crushed coal from Coal India by 1st Apr 2016
• Faster completion of delayed transmission lines
• Bring down AT&C losses to 10-15%.
• Improving Billing efficiency through metering & tracking of losses
• Transmission loss presently in the range of 4-5 %, reduce by at least
1%
• Reduction of project capital cost through reverse auction bidding to
foster competition
Reducing Cost of thermal Power
Illustration of Savings - NTPC
Area
Savings
(Rs. Cr.)
Per Unit
Savings (Rs.)
Substituting imported coal, MoU/E-Auction
coal by 100% ACQ coal
7300
0.30
Rationalization / swapping of coal sources
including freight charges
1270
0.05
Total Saving
8570
0.35
Proposed amendments in the Electricity Act
• Segregation of carriage from content
• Accelerate electricity generation from renewable energy sources
• Strengthening grid safety and security
• Rationalize tariff determination process
• Review of performance of Regulatory Commissions.
• Provide for recovery of revenue by Licensees without any revenue gap
• Mandate to Regulators for suo moto proceedings in determination of tariff
(in case the utility companies do not file their petitions in time)
• Expansion of existing power plants owned by states permitted for optimum
utilization of existing infrastructure.
• Expansion of private developers up to 100% from existing capacity; policy
for private sector to be decided in 6 months
Proposed amendments in the Electricity Act
• Setting up Coal washery rejects based projects on Cost plus basis by the
PSUs
• Renewable Energy Generation Obligation (RGO) on all future coal and
lignite based thermal station to be set up
• Renewable energy estimated to be 15% of total energy consumption by
2022 (up from 6% now)
• Compulsorily procurement of power from “Waste to Energy”
• Procured waste water to be used in thermal plants in the vicinity of towns
& cities.
• Regulatory Commission to devise a trajectory to ensure 24 hours supply
of adequate and uninterrupted power to all categories of consumers
UDAY- Snapshot
• States shall take over 75% of DISCOM debt as on 30 September 2015
Debt taken over
2015-16
2016-17
50%
25%
• Principal debt taken over will not be included in fiscal deficit of States. However,
interest has to be serviced within FRBM limits
• States will issue non-SLR bonds (SDL) with maturity period of 10-15 years with a
moratorium on principal up to 5 years 38 Past 2015-16 2016-17 Debt taken over
50% 25%
• States accepting the scheme and performing as per operational milestones will
be given additional / priority funding through DDUGJY, IPDS, Power System
Development Fund (PSDF) or other such schemes of MoP and MNRE
• Such States shall also be supported with additional coal at notified prices and, in
case of availability through higher capacity utilization, low cost power from NTPC
and other Central Public Sector Undertakings (CPSUs)
UDAY- Benefits
• Achievement of 24X7 Power for all improving quality of life and efficiency
• Power to 5 crore households without electricity
• Speedy achievement of electrification of remaining 18,500 villages
• Energy security through coal and renewables
• Reduce Current Account Deficit (CAD) from higher diesel import (current
annual imports of around Rs. 50,000 crore)
• Meet ambitious renewable energy commitments as a responsible global
citizen
• Avoid banking contagion (Rs, 40,000 crore of repayments due to banks in
2015-16) which will create significant NPAs
• Increased procurement of power by DISCOMs revives existing power projects
suffering from low PLFs
• Reduce investment uncertainty across the sector
NTPC –Merger & Acquisition Experience
• NTPC has issues 02 No's EOI for acquisition of Power Project
• Total Projects received against both EOI : 67420 MW (45 Projects)
Reason for stressed asset
No of Project
Totaling Capacity(MW)
Due to PPA availability
8
9210
Due to Fuel availability
21
26030
Due to Finance
8
12800
Due to Land availability
2
2520
Total stressed Projects
39
50560
• 02 projects were identified after detailed due diligence of the projects received
against round-1 of EOI for acquisition. The M&A process through EOI route could
not be pursued further because of
High valuation of projects
In a meeting of Chief Ministers held on 9th Sep’14, NTPC was guided to
consider the stressed assets of state utility for acquisition
Progress on State Assets viz Patratu TPS and Raghunathpur TPS
Availability of funds for further acquisition of assets from private sector
NTPC approach to New Investment
 Maharatna Company
 Board is empowered to approve investment in line of core business
 Investment approval is accorded only when five basic elements are
fulfilled.





PPA
Water Allocation
Coal Linkage
Land
Environment Clearance
 Hence most of the risks are mitigated at the time of Investment approval
itself.
NTPC Approach for stressed assets
• The strategy of considering stressed assets of state utilities which are
located nearby coal mines to enable allocation of coal mine to NTPC
is being pursued for time being for further acquisition of power assets.
• Investing in Private power plant for O&M of power plant through minor
stake of equity if asset is taken by FIs could be explored.
Opportunities in Power Sector for Investor
 As per Integrated Energy Policy a Capacity of ~ 500 GW has to be
added in upcoming 13th ,14th & 15th Plan (2017-2032) @ 8% GDP
Growth.
 More Than 120 GW has been added in last 8 and half year in which 50%
belongs to Private sector.
 Out of 129 units/56950 MW commissioned in 12th plan , 31 units/21405
MW are based on super critical technology.
 As of now total 84770 MW (165 Units) of thermal units are under
construction out of which 77 Units totaling to 53545 MW of supercritical
technology is under construction for the benefit of 12/13th Plan
 Total investment potential by 2022- 250 USD Bn out of which 120 USD
Bn by renewables,125 USD Bn by Generation,Transmission &
Distribution
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