CII a on Infrastructure

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CII A.T. Kearney Study on 'Sustaining Growth: Future of Indian Power Sector'

Announcement / Economy October 31, 2009, 18:30 IST

About $ 250 Bn investments would be needed in the power sector over the next 8-9 years,according to a CII A.T. Kearney Study on 'Sustaining Growth: Future of Indian Power Sector.

The study highlights the emerging opportunities and challenges in the future power markets.

The Indian power market is evolving rapidly from a nascent/ opening market phase to adeveloping phase. The power demand in the base case is expected to grow at a steady 7.5%-8% CAGR till 2017. Further, the low power penetration levels indicate large latent/unmetdemand. The power markets will have to achieve consistent high growth rates to bring our percapita consumption to comparable levels of some of the other developing countries like Chinaand Brazil.

Sudhir Trehan, Chairman - CII India Energy Conclave & Energy Expo and Managing Director,

Crompton Greaves said, The emerging dynamics of the Indian power market would requireindustry players to realign their strategies and operating models to the changing sectoral trends.The focus would need to be both on project execution as well as efficient operations, in linewith the growth characteristics of the sector, Mr Trehan added.

A.T. Kearney Partner, Kaustav Mukherjee said, A new era of Power on Power competitionwill emerge by the year 2014 that will bring in at least 80-85 GW of new capacity - 80- 90% ofthem thermal units targeting high PLF of 80-95% - reducing the base load deficit to a low of 1-2%. Accordingly, we expect pricing pressures in the generation space and a 40-50% decline inaverage short term/merchant prices by 2014-15, Mr Mukherjee added.

The Report highlights new business opportunities will arise across the value chain. Gas, Hydroand Nuclear energy will renewed interests and growth in addition to coal, which will continue tobe the dominant generation fuel.

Renewables will strengthen its role in the sector: Wind energy will continue to grow at 15-20%pa with new opportunities in offshore capacities and large capacity turbines (> 3MW).Government incentives will open up opportunities for solar farms/distributed generation as wellas PV manufacturing.

However, constrained fuel supplies present a major threat to the sectors growth: As per currenttrajectory, India, in spite of substantial reserves, is expected to confront a supply deficit of ~25%

(250 MTPA) of domestic coal by 2014. Similarly, there will be a seven fold increase in uraniumrequirement for meeting nuclear power ambitions of India.

Distribution, financing and manpower are other concerns that require immediate attention: HighAT&C losses and slow rate of discom reforms will hurt the industry in the last mile. Financingmay also present a challenge to industry growth. About $ 250 Bn investments will need to beundertaken in the power sector in the next 8-9 years to fuel the planned growth. Similarly, over150,000 additional skilled and semi skilled personnel required over the next 5 - 7 years.


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In the emerging power scenario context, the study has highlighted some critical success factorsfor the industry

1. Strengthen project management & execution capabilities, to ensure on-time, at costexecution.

2.

Secure fuel supplies through well defined fuel sourcing plan especially coal (linkage,captive, imported) and its associated costs. Fuel logistics planning and implementation isalso critical and should be a focus for project leadership.

3. Realign market & customer strategy, by striking the right balance between long termPPAs and merchant trading. Reforms will also give rise to customer mix options (SEBs,traders, bulk buyers, etc), which will open up different possibilities. Alternate marketfacing models like power tolling, distributed generation, peaking power supplies shouldalso be evaluated.

4. Develop Capital and Operational excellence through selection of right technology andsuppliers/manufacturers for the units. The asset availability and utilisation should bemaximized through O&M best practices.

5.

Establish robust organizational enablers, across people processes and systems. Manyorganisations will have to manage concurrent projects and operations stages.Accordingly, a flexible organisation structure should to be designed and implemented.

Overall, the report is cautiously optimistic about the Indian Power Sector and its ability tosupport Indias growth aspirations. Effective implementation of next generation reforms,addressed constraints in fuel, financing and distribution and improved access & reach of Power /realisation of latent demand will ensure sustained growth of the sector and enable REAL Powerfor All!

Power is an essential requirement for all facets of our life and has been recognized as a basic

human need. It is the critical infrastructure on which the socio-economic development of thecountry depends. The growth of the economy and its global competitiveness hinges on theavailability of reliable and quality power at competitive rates. The demand of power in India isenormous and is growing steadily.For any economy to growth consumption of power is vital. The opening up of the energy sectorto private investors as part of the Indian economic reform gave an energy boost desperateneeds Indian power industry is now a highly opportunistic place of investments. Private equity(PE) players to invest around $1.64 billion worth of infrastructure funds, mainly in power sector.

PE investment in the power generation sector dropped by around 80% between April andSeptember 2009, to $157 million (around Rs 770 crore) from $902 million (Rs 4,419 crore) ayear earlier.But still it remains the high alert zone for getting good return over investments.According to Venture Intelligence, a research service focused on PE and mergers andacquisitions, investments in the power sector took jump were $122 million in 2006 to $495million in 2007.

So now a many question swill come in our mind asking

1. What are the growth prospects of power sector?


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2. Upcoming new power projects and its prospects.3. Invisible negative impact and fate of doing investment in power IPO.4. Long term outlook 2-4years.

Growth of Power Sector infrastructure in India since its Independence has been noteworthy

making India the third largest producer of electricity in Asia. n its quest for increasingavailability of electricity, India has adopted a blend of thermal, hydel and nuclear sources. Out ofthese, coal based thermal power plants and in some regions, hydro power plants have been themainstay of electricity generation. Oil, natural gas and nuclear power accounts for a smaller proportion. Of late, emphasis is also being laid on non-conventional energy sources i.e. solar,wind and tidal. Growth of the industry today is not standing on the traditional method of powergeneration. Newer forms have expanded the diversification and growth of the Industry. Theeconomics of the power sector is almost entirely driven by the domestic market and the attractivedemand-supply dynamic. If we look at the demand supply of the power industry of India we findthat

India needs incremental power capacity of one lakh Mw over the next five years. Peak powerdeficit in India goes to as high as 18.6%. The onus is on private players to add 40,000 Mw by2015.

UPCOMING NEW POWER PROJECTS IN INDIA.

We also find a strong list of upcoming Power projects in India. Some of them as follows:

y Neyveli Lignite Corporation Ltd is setting up the Barsingsar power project with Rs1,368.25 crore, which is under execution. It consists of two power units each of 125 mwcapacity. The project is expected to be complete by 2009.

y Another project by Neyveli Lignite which is setting up a 500-mw thermal power projectat Bikaner, which is in planning stage.

yRajasthan Rajya Vidyut Utpadan Nigam Ltd is setting up the Giral lignite power projectwith Rs 1,350 crore investment. The state governments project is partially complete andis coming up at Giral, Barmer. It consists of two lignite-based power units each of 125mw capacity.

y The Nigams Chhabra thermal power project with an investment of Rs 1,750 crore is alsounder execution. The project has two power units each of 250 mw capacity. It is expectedto be completed by 2008.


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y RRVUNLs Suratgarh power project stage-IV with an investment of Rs 750 crore isunder execution. The 250-mw coal/lignite-based thermal power project is expected to becompleted by 2008.

y Also under execution is the Kota power project stage-VII with Rs 800 crore investment.The project is of 195 mw capacity and is expected to be completed by 2008.

yMarudhar Power Ltds lignite-based power project with an investment of Rs 750 crore isunder execution at Bikaner. The project consists of two power units each of 135 mw.

y Raj West Power Ltd, a company belonging to Om Prakash Jindal Group, is setting up alignite-based power project at Barmer. It is under execution and is expected to becompleted by 2008. The project cost is estimated at Rs 4,804 crore.

So many projects will attract huge foreign inflow as well as domestic which will drive the sectorgrowth to new heights. More over the return from these investments will be time consuming asbreak even level will be achieved after certain time frame from start off. But the hidden treasureof growth lies once the projects crosses the break even and start generating future cash flow. Thislist stand for the demand that is being generated at present situation. In coming days many more

will add on which will make this power sector lucrative as gold mine.

INVISIBLE NEGATIVE IMPACT

In coming days we will find many more huge investments being drawn by this sector.

But at the same time too many players in to a particular segment leads to optimized growth aswell as far more increased decline. Their is a saying in English too many cook spoil the broth.Its same here. Too many projects and will increase price bargaining. Companies will becompelled to go for reduced margin sales, resulting less profitability. The companies will fightagainst each other to make the most competitive bidding. Despite of all these the power sector

will remain lucrative for private equity and venture capitalist in the long run.

Since demand for this sector is never ending process and will continue to grow in the comingdays. In recession times the demand might drop for a certain time but it will again shoot up likeany thing. In the past couple of the capital market witnessed some major power share IPO hittingand went off speechless. Investors frowned over the return they got from the IPO on the listingday. Investors were in this expectation that the share ipo will make their investment to double.But again here we made too much expectation from the initial phase. The place where we failedto identify the capability of these share ipos to give return is our short term out look. We neverlooked in to the process of the industry, when it will generate return over investment. This sectoris highly capital intensive and major generator of negative cash flow in the initial phase.Once theprojects gets started and power generation and supply begins from these projects the sector willbe nothing next to a gold mine.

Investors who are doing investment in this sector via capital market will have to wait for theirinvestments to grow since all the projects are on establishment process. The companies who areengaged in building these projects will not get positive cash flow from the first year. It will takesome time to break even and then generate future positive cash flow. The sector might face hardtimes in the initial phase as too many investors expect too much expectation. According to the


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industry process it will take time to establish power plants till then it will generate meager returnto investors which will lead to investor pull back from investments. This pull back is onlydriven by too much expectation in the initial phase and not on long term outlook.

Those investors or private equities and venture capitalist who desires to do investment should

look into the invisible future growth of the sector that will take birth from the huge upcomingnever ending demand of power in India. This sector is as good as a gold mine. Pricing issues andothers factors of so many power players will be their but as more demand will increase thisfactor will get more reduced.

LONG TERM OUTLOOK

The reason for this bullish growth emanates from two reasons. One is the continued capacityexpansion plan and investment outlay from the government. Two, growing demand in thedomestic market. Indias power deficit is about 14% during peak hours. Again, this varies fromstate to state. The more industrialized a state is, the more its demand for power. Maharashtra for

example, faces a deficit of more than 30 percent.Chronic power shortages and widening powersupply-demand gap is creating tremendous opportunity for privat investment encouraged bygovernment policies.

According to a McKinsey study Powering India: The Road to 2017, if India is to grow at 8%for the next ten years, its power requirement may rise from 120 GW to 315 to 335 GW by 2017,requiring an investment of $600 billion on adding the required capacity So we find a neverending demand and huge untapped potentiality for venture capitalist and private equities.

So while on one hand India is developing new and enhancing existing traditional power sources,at the same time it is also laying emphasis on non-conventional sources such as solar and wind

power. Moreover, post Budget 2009-10, the Power Minister has announced an addition of 16,000MW by independent power producers by the end of the Eleventh Five Year Plan and that thetarget of 78,750 MW would be met by 2012. In addition to this, the Government has announcedplans to set up a first-of-its-kind energy efficiency company under the purview of the Uniongovernment.

The below chart shows the demand and supply shortage of power supply.This never endingmismatch makes this sector more lucrative for expansion and growth.


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Having equity participation from four PSUs NTPC, Power Grid Corporation, Power Finance

Corporation and Rural Electrification Corporation the company will be called EnergyEfficiency Services Ltd (EESL). This company will engage in energy efficiency andconsultancy.

The profitability of the power generating companies is expected to improve in the comingquarters as the GoI is well on track to provide long-term fuel linkages to the po wer plants. CoalIndia Ltd. (CIL), which mines about 85% of the coal produced in the country, is expected to signa fuel supply agreement (FSA) with certain PSUs,with an assurance to supply coal for 90% PLF.In the current scenario of fuel shortages, the power generating companies should benefitextensively from this development. With reliable fuel linkages, the Peak Load Factor of thepower plants should improve and correspondingly result in better margins for the

power generating companies.

The excessive demand scenario for power in the country also implies significant growth potentialfor the power sector. India has historically been a power-starved country, with the peak powerdeficit standing at 16% in FY07-08. The GoI has charted out its mission of Power for All by2012, which calls for a YoY capacity addition of 18,00020,000 MW during the ongoing five-year plan. The mission also targets an increase in the per capita consumption of electricity from631 Kw/hr in 2006 to more than 1,000 Kw/hr by 2012.


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So the never ending demand increases the value of the power sector. Once the companies startoff their power supply distribution the companies will generate huge reserves which will givethem more space to expand and generate future growth. My advice to the investors is not to lookfor short term outlook of the sector. Look into the long term prospects and stay invested for longterm. Its Indias another untapped gold mine. Private equities and venture capitalist will findhuge return over their investment in the coming days

India has done pretty well when it comes to the improvement in the quality of life of its citizens.As today's chart of the day shows, the quality of life of Indian citizens has undergone a

healthy change since 1990. What is more, in comparison to its BRIC peers, India is way aheadof Brazil and Russia. And even though it has come second to China, the difference between the

two is hardly much to choose from.

* Life expectancy, adult literacy, education enrollment & GDP per person Data Source: The

Economist


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India once again missed her power generation targets. And the reasons? Fuel shortages at

thermal plants and low water levels in reservoirs of hydro plants. Now these issues are not

new. However, what worries us is that, with Indian power producers targeting aggressivecapacity addition over the next 10-15 years, these issues are only going to worsen. This is

something we see as the biggest concern for India sustaining a strong economic growth in

the future, as everyone around seems to believe.

India: Can she make the most of her opportunities?

A fast growing economy and an appetite for energy means India will be attractive to powercompanies and providers of environmental equipment for some time. Where do the opportunities

lie?

Ravi Krishnan, Krishnan & Associates Inc., India

India will remain a robust market for worldwide providers of power plant and environmentalequipment at least until 2030. Demand for electricity in the country is high and India hasaggressive targets for adding capacity. The countrys potential in the power sector is yet to befully realized and additions to its power generation capacity are expected to be substantialdespite shortfalls resulting from factors internal and external to the country.

Calcutta Electric Supply Corporations coal fired 4 x 60 MWthermal power plant in Titagarh, West Bengal Source:


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Prartik.panoramio

So what is driving Indias demand for power and what opportunities does it open up to powercompanies and providers of environmental services equipment?

Four major economic and social drivers characterize the energy policy of India: a rapidlygrowing economy, increasing household incomes, limited domestic reserves of fossil fuels andthe adverse impact on the environment of rapid development in urban and regional areas. Rapideconomic growth has created a growing need for dependable and reliable supplies of electricity,gas and petroleum products. Indias economy has expanded by above six per cent per year overthe last five years, one of the fastest rates in the world. Projections are for it be more than eightper cent per year until 2020. Supplies of electricity, gas and water must keep up with this. Indiaseconomy has more than tripled in real terms since economic reforms began in 1991.

Part of the reason for this growth is the commitment successive governments have showntowards continued economic liberalization, a stance which has instilled confidence in investors

and presented opportunities. The second driver of the countrys energy policy, is rising household incomes which has pushed up demand for affordable electricity.

Consumer demand has grown rapidly over the decades. India has a population of over a billionpeople and as a market for retail consumer goods it is already one of the largest, whose size isexpected to grow to $600 billion per year by 2012, putting it among the top five in the world.Geographically speaking India is one of the largest countries in the world. Its area covers morethan 3 million km2, or roughly a third of the United States.

India is a young nation. Some 70 per cent of its population is under the age of 36 and 20 per centunder 24. It produces over 15 million fresh university graduates each year, about 1.5 times as

many as China and about twice as many as the United States. It has also made considerableprogress on many socio-economic fronts. Since the 1950s, the fraction of the population belowthe poverty line has dropped from over 50 per cent to just over 25 per cent, and adult literacyrates have risen from the high 30 per cent range to the mid-60 per cent range. India will need atotal capacity addition of 150-250 GW over the next 12 years to address its goal to alleviatepoverty.

Fossil fuel reserves

Low domestic reserves of fossil fuels form the third main driver in Indias energy policy. Asabout 64 per cent of Indias total installed capacity is fossil-fuel fired it has to import vastamounts of natural gas, crude oil and petroleum products. Coal accounts for about 53 per cent ofthe nations generating capacity, while gas and oil account for 10 per cent and 1 per centrespectively.


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Indias domestic of coal resources are available in abundance. Most of these are in the states ofBihar, Jharkhand, Orissa, Madhya Pradesh, Chhattisgarh and West Bengal. Production of coal inIndia has traditionally been low compared with its reserves. One reason is because the past hasseen restrictions on the entry of private sector players in the mining of this fuel in the country.These restrictions have been removed, encouraging private participation in coal mining.

Indian coal is high in silica and alumina and is highly abrasive, with high slaggingcharacteristics. Its high ash content of 35-45 per cent and the weak coal transportation system inthe country mean that it is economical to locate power plants close to pit heads. Most of the pithead stations have their own dedicated coal transportation system and do not depend on Indiasrailways.

To address the need for a higher quality of coal many Indian power producers are now acquiringfields in the countries of east Asia, such as Indonesia, and erecting power plants in Indian coastaltowns to tap into a more economical fuel supply. This should fulfill some of the countrys needfor higher quality coal, but domestic supplies will still fuel the bulk of the countrys power

generation.

Natural gas is in short supply in India and supply to gas fired power stations has been inadequate,which has meant they have been operating at load factors of around 58-60 per cent. Gas is notexpected to bridge the power generation deficits in the short-term although India has identified afew domestic natural gas reserves and is in discussion with suppliers in Qatar, Iran and Australia.Table 2 aboven shows Indias fuel alternatives.

The final main driver of Indias energy policy concerns the environment, on which rapid urbanand regional development has had a negative impact. India aims to adopt cleaner fuels andcleaner technologies to compensate. It is projected coal-fired power generation in India is likely

to expand rapidly. If this growth is uncontrolled it will be of detriment to the environment. WhileIndias focus is on generating low-cost power, the government new coal plants will have adetrimentl impact on air quality.

In response, India has begun various initiatives at the national level which aim to bring in morestringent regulations for nitrogen oxides (NOx), PM10, sulphur dioxide (SO2) and, potentially,mercury emissions. For example, some of the plants burning high-sulphur coal now must eitherinclude an FGD scrubber, depending on the plant location, or make space provisions for a futureretrofit of SO2 removal technologies.

This is a major development for a country that has no official standard for major pollutants suchas NOx, SO2 and mercury but largely regulates on a case-by-case basis. In the case of CO

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emissions, no regulations exist.

India is not expected to accept a binding emissions reduction target as the initiative is consideredtoo expensive and could double the cost of electricity generation. However, various measures arebeing considered to deploy cleaner coal technologies.


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Indias infrastructure has not kept up with its economic growth, despite progress on variousfronts. Compared with western nations, the quality of the rail and road systems is poor and theyfail to offer the same connectivity. Similarly the countrys energy infrastructure is in continuousneed of expansion to support increasing demand from consumers and industry.

Although infrastructure investment is on the rise, the government recognizes future growth maybe constrained without further improvements to infrastructure, the inadequacy of which is a keyrisk to the continued growth of the Indian economy. Since independence in 1947, electricitygenerating capacity has grown from 1400 MW to about 150 GW today: the sixth highest in theworld behind the figures of the US, China, Japan, Russia, and Canada.

Over the same period, the population of India has grown from 250 million to over 1.1 billion.The rising population, Indias high economic growth rate and its inadequate supply anddistribution infrastructure have caused power supply shortages in terms of peak demand andoverall energy supply. Peaking shortage has averaged at about 13 per cent across India withsignificantly greater shortages in selected regions, such as the west of the country, where deficits

are as high as 26 per cent, (as shown in Table 1).

The large energy deficit gaps have resulted in low per-capita consumption, so India will needadditional generating capacity to serve its population and fuel economic growth. To this end thegovernment embarked on an ambitious plan to raise power generation capacity to bridge thegrowing power demand-capacity gap with low-cost power.


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The Planning Commission has established five-year plans that lay out specific targets for newgeneration capacity.

The tenth five-year plan, covering 2002-2007, had a target of 41.1 GW of additional capacity.The 11th, covering 2007-2012, is slated to add 78 GW of capacity. Some 83 GW of new capacityis the target for the 12th plan, covering 2012-2017.

This expansion includes 14 Ultra Mega Power Projects that are awarded based on tariff-basedcompetitive bidding. The projects are designed to be environmentally friendly. They will emitlow amounts of greenhouse gases, employ supercritical technology and use 100 per cent of fly

ash.

Shortages continue

Indias power sector has traditionally faced a range of challenges in expanding generationcapacity. The country has added 30 GW in the past seven years whereas China has added 303GW over the same period. India needs to add 78 GW in the current five-year plan, essentially

doubling the 78 GW added over the last 22 years.

Of the targets set across the last three five-year plans, only 50 per cent of the target capacity hasbeen achieved, failures largely attributed to a shortage of boiler, turbine and generatorequipment, long lead times, shortages of construction equipment, shortage of skilled manpower,fuel availability, a lack of project financing, rail and other infrastructure related issues, anddelays in obtaining environmental and governmental clearances.


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Figure1: Indias power generation by capacity

To accelerate capacity additions, the government has embarked on programmes to encourageforeign participation in the supply of power generation equipment supply. The result is thatWestern and Chinese manufacturers now actively provide equipment and services in India.

This has significantly eased the bottlenecks the industry previously faced. Various training and

manpower development programmes and expedited processes to obtain various permits andclearances have also been initiated to address external delays.


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Figure 2: Breakdown of generation assets ownership

Financing for power projects from world capital markets a historical constraint is less of animpediment for India today as many Indian Power Producers have started delivering results thatmatch their earlier projections.

Alstom to build 96 MW hydropower plant in India's Sikkim region

14 May 2010 - Alstom has snagged a contract worth EUR18m ($22.5m) from Dans Energy forthe 96 MW Jorethang Loop Electric Project in Sikkim, India.

The order entails end-to-end manufacturing of equipments at Alstom Projects India's Vadodarafacility in Gujarat state. The contract includes supply, installation, testing & commissioning ofelectro-mechanical equipments for the plant's two 48 MW units.


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The 96 MW Jorethang Loop hydropower project will be based at the city of Jorethang on thebank of the river Rangeet, a tributary of the river Teesta, the state's largest river.

Can tidal energy be a solution to Indias power woes?

It is common knowledge that India faces a severe electricity crunch. In fact, it would not be

wrong to say that power deficit has been one of the dampening factors in the Indian growth story.

According to reports, Indias power deficit is about 14 percent during peak hours. Again, this

varies from state to state. The more industrialized a state is, the more its demand for power.

Maharashtra for example, faces a deficit of more than 30 percent.

According to a McKinsey study Powering India: The Road to 2017, if India is to grow at 8

percent for the next ten years, its power requirement may rise from 120 GW to 315 to 335 GW

by 2017, requiring an investment of $600 billion on adding the required capacity.

So while on one hand India is developing new and enhancing existing traditional power sources,

at the same time it is also laying emphasis on non-conventional sources such as solar and wind

power. But looking beyond these traditional non-conventional sources, what about tapping the

tides in the ocean for power?

With the demand for energy skyrocketing, several countries are showing interest in this sector,

even though it is still in an experimental stage. This year, SeaGen, the worlds first commercial-

scale tidal turbine, developed by the British tidal energy company Marine Current Turbines,

started generating power on an investigational basis. One of the possible reasons for the interest

in tidal energy maybe the fact that compared to other renewable energy sources, tides can be

predicted many years in advance. With two-thirds of our boundaries flanking oceans, shouldnt

we be looking at tidal power more seriously?

The power of tides can be harnessed in two ways.

Barrage System

This involves building a barrage across a bay or river that has high and low tides. Turbines

installed in the barrage wall generate power as water flows in and out of the estuary basin, bay,or river. These systems are similar to hydro dams that produce power from a static head or

pressure head. The largest such installation has been working on the Rance river, France since

1966 with an installed (peak) power of 240 MW and an annual production of 600 GW. There are

two other small plants, one operating on the Bay of Fundy and the other across a tiny inlet in

Kislaya Guba, Russia.


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Where can tidal power be produced in India?

Potential sites for tidal power development have already been located at the

Gulf of Cambay and the Gulf of Kutch on the west coast where the

maximum tidal range is 11 m and 8 m, with average tidal range of 6.77 m

and 5.23 m respectively. The Ganges delta in the Sunderbans in West

Bengal also has good locations for small-scale tidal power development. The

maximum tidal range in the Sunderbans is approximately 5 m with an

average tidal range of 2.97 m. The identified economic tidal power potential

in India is of the order of 8000 to 9000 MW with about 7000 MW in the

Gulf of Cambay, about 1200 MW in the Gulf of Kutch and less than 100

MW in Sundarbans.

How does tidal power compare with other renewable energy sources?There are many advantages of tidal power. Unlike the wind and the sun, tides can be predicted

many years in advance. There are many disadvantages of tidal power plants too. They are very

expensive to build. The time that the tidal flow occurs may not be ideal as far as demand is

concerned. So, tidal generation should be coupled with some form of storage. Hydropower makes

an ideal storage choice. Water or energy could be stored in these dams for times when power

cannot be generated at the tidal stations. Tidal energy is extremely site specific and requires mean

tidal differences greater than 4 m and also favourable topographical conditions, such as estuaries or

certain types of bays, in order to bring down the cost of dams, etc.

What is the estimated cost of setting up and running such a project? Are there any ways to

reduce the costs?

The cost of a tidal power project is relatively high and depends on many factors, including

geophysical characteristics of the site and technology adopted. The optimum design for a barrage

system would be the one that produces the most power, but also has the smallest barrage possible.

The production cost for a barrage power plant for Half-Moon Cove, USA, was estimated at

approximately 9 cents/kWh. With government support and carbon credits, the generation cost may

be less than 5 cents per unit in 2010 as predicted by the engineering consultant for the project. The

Kutch Tidal Power Project in India, with an installed capacity of about 900 MW, is estimated to

cost about Rs 1,460 crore ,generating electricity at about 90 paise per unit.

The capital required to start the construction of a barrage has been the main stumbling block. It is

not an attractive proposition to an investor due to long payback periods. This problem could be

Dwipen Boruah

General Manager,

IT Power Indi


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solved by government funding or large organizations getting involved with tidal power.

Once the construction of the barrage is complete, there are very small maintenance and running

costs, and the turbines only need replacing once every 30 years or so.

On the flip side, barrages suffer from high civil infrastructure costs, shortage of viable sites, and

several environmental issues.

Tidal stream systems

Tidal stream generators draw energy from currents in much the same way as wind turbines. A

higher density of water (832 times that of air) means that a generator can provide significant

power, even at low tidal flow velocities (compared with wind speed). This method is gaining

popularity because of the lower cost and lower ecological impact compared to barrages.

SeaGen, which claims to be four times larger than any of the tidal projects built so far, works on

this system. This 1.2 MW project uses two 600 KW turbines, and costs around 8.5 million. It is

estimated that it can power 1,000 homes.

Some tidal power plants

Location Capacity

Rance Tidal Power, La Rance, France 240 MW

Bay of Fundy, Nova Scotia, US 18 MW

Kislaya Guba on the Barents Sea Russia (2

projects)

1.2 MW & 12

MW

SeaGen, Strangford Lough, UK 1.2 MW

Tidal power technologies are very much in their infancy and there is no single direction as yet. A

large variety of designs and concepts are being experimented with; so, it is quite possible that a

third variant is what becomes ultimately successful.

Where does India fit in?

The identified economic tidal power potential in India is 8,000 to 9,000 MW, according to

Dipwen Boruah of IT Power India, an environmental and renewable energy consultancy. Even

though we boast of a long coastline of 7,517 km, tidal energy cannot be produced everywhere. It


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is extremely site specific, requires mean tidal differences greater than 4 m, and also favorable

topographical conditions, such as estuaries or certain types of bays in order to bring down costs

of dams, etc. Therefore, the government has identified three suitable sites in India the Gulf of

Cambay (7,000 MW), the Gulf of Kutch (1,200 MW), and the Sundarbans (


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Wind energy will continue to grow at 15-20% pa with new opportunities in offshore capacities

and large capacity turbines. Government incentives will open up opportunities for solar

farms/distributed generation as well as PV manufacturing.

However, constrained fuel supplies present a major threat to the sectors growth: As per current

trajectory, India, in spite of substantial reserves, is expected to confront a supply deficit of 25%

(250 MTPA) of domestic coal by 2014. Similarly, there will be a seven fold increase in uranium

requirement for meeting nuclear power ambitions of India.

Distribution, financing and manpower are other concerns that require immediate attention: High

AT&C losses and slow rate of discom reforms will hurt the industry in the last mile. Financing

may also present a challenge to industry growth. About $ 250 Bn investments will need to be

undertaken in the power sector in the next 8-9 years to fuel the planned growth. Similarly, over

150,000 additional skilled and semi skilled personnel required over the next 5 - 7 years.

In the emerging power scenario context, the study has highlighted some critical success factors

for the industry: Strengthen project management & execution capabilities, to ensure on-time, at

cost execution. Secure fuel supplies through well defined fuel sourcing plan especially coal

(linkage, captive, imported) and its associated costs. Fuel logistics planning and implementation

is also critical and should be a focus for project leadership.

Realign market & customer strategy, by striking the right balance between long term PPAs and

merchant trading. Reforms will also give rise to customer mix options (SEBs, traders, bulk

buyers, etc), which will open up different possibilities. Alternate market facing models like

power tolling, distributed generation, peaking power supplies should also be evaluated.

Develop Capital and Operational excellence through selection of right technology and

suppliers/manufacturers for the units. The asset availability and utilisation should be maximized

through O&M best practices.

Establish robust organizational enablers, across people - processes and systems. Many

organisations will have to manage concurrent projects and operations stages. -Accordingly, a

flexible organisation structure should to be designed and implemented.

Overall, the report is cautiously optimistic about the Indian power sector and its ability to

support Indias growth aspirations.

Ashmore, PTC India in $750 mln energy infra fund

Emerging markets fund firm Ashmore said on Thursday it has launched a fund jointly with

power trading firm PTC India that aims to raise $750 million to finance power projects across

all energy-related sectors in India.


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India's power sector, beset by a peak power deficit of 12 percent, has struggled to attract foreign

investment in recent years, but the tide seems to be changing.

In March, a group of investors including Morgan Stanley's infrastructure arm, Goldman Sachs,

and General Atlantic said it invested $425 million in Asian Genco Pte Ltd, which has stakes in

power generation assets in India.

The Ashmore PTC India Energy Infrastructure Fund will provide equity financing to energy

projects including those related to generation, transmission, distribution, fuel extraction and fuel

transport infrastructure, the British firm said in a statement.

The fund will target the private sector to lead the initial investments and exit through strategic

sales and public markets once assets mature. The portfolio will contain a mix of holding andasset companies.

The closed-ended fund will offer a target return of 20 percent, with 10 years maturity, and is

aimed at local and international investors, Ashmore said.

Source: Reuters

PE firms see bigger, simpler deals

About 77% of private equity players in the country expect an increase in investment momentum

in the coming 12 months, according to a survey by Deloitte Touche Tohmatsu India.

And the deals will be simpler. The report said 87% of respondents rated 'structured development

capital' (in essence, a return to the traditional way of structuring development capital deals, using

less leverage and a simplification of the structure) to be the key focus area for investment this

fiscal.

Following this are transactions in the venture capital, pre-IPO and buyout space, in that order of

priority.

"Some funds have committed a lot of private investments in public enterprise (PIPE) deals since

2007 and have suffered mark-to-market losses. We'll increasingly see a return to basics back

to structured development capital deals. However, PIPEs will continue to see activity given the

lack of sizable development capital deals," Avinash Gupta, head-financial advisory services for


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Deloitte Touche Tohmatsu India, said in the report.

The report outlined the education, construction and infrastructure sectors as showing promising

signs for PEs. Infrastructure-related sectors or those having domestic consumption themes will

also attract significant investments. "On the latter, the focus will be urban rather than rural given

that poor monsoon will impact consumption patterns in the rural areas," Gupta said.

Neelabh Dubey, vice-president-investment banking at One Life Corporate Advisory, said the

Indian infrastructure will be a favoured opportunity for the next five years. "This is primarily due

to planned infrastructure investment of about $450 billion in some key sectors such as roadways,

civil aviation, ports, railways, telecom and power," she said.

However, the re-bound of markets is likely to put a spanner in deal-making, as valuations appear

to be going for a toss. Adding to the challenge is government intervention. "Regulatory issues are

certainly an area of concern for us," said a top official from a global PE firm, requesting

anonymity.

Deals expected to conclude over the coming year will continue to be growth focused. Average

deal sizes are also expected to rise. "Banking, financial services & insurance (BFSI) will be

another focus area this year. And yes, the average deal size will see a significant increase from

last year," said Niren Shah, MD, Norwest Venture Partners.

The report said foreign fund managers will be the most active investor group, but the

introduction of a new tax code could reduce the number of foreign players entering the region.

Source: Today News

Fortis Health sells 6.58% to Singapore's GIC for Rs 380 crore

Fortis Healthcare, Asias biggest hospital chain, raised Rs 380 crore by selling shares to

Singapore state-run investment company GIC Special Investments as part of its plans to raise Rs

3,000 crore for expansion. The company has agreed to sell 6.58% of the company, or 22.35

million equity shares, at Rs 170 apiece, 1.5% higher than its closing price on Monday. Its shares

rose 1.27% to Rs 167.25.

The funds will be used to part finance recent acquisitions like the purchase of TPG Capitals

25% stake in Singapores Parkway Holdings for around $715 million and also for more in the

future, said a statement. The deal may close by June.


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The New Delhi-based Fortis plans to sell foreign currency convertible bonds (FCCBs) and other

securities in the months ahead as it funds the Singapore acquisition and last years purchase of 10

hospitals from Wockhardt. The company has been growing its revenues through acquisitions, but

the profits are yet to come by.

The topline growth is mainly from acquisitions and meaningful value from recent deals will be

captured in the next 1-2 years, said Vishal Gandhi, VP (life sciences & technology) at Yes

Bank. Healthcare is a long-term investment.

Malvinder and Shivinder Singh, the brothers who promoted the company, aim to transform it

into an international firm. The acquisition of Parkway Health is a part of the plan and Malvinder

is relocating to Singapore to pursue the global plans. Late last month, Trikona Trinity Capital

sold off its 2.5% three-year investment in Fortis at Rs 160 a share.

Source: Economic Times

CSIR to take equity stakes in companies

Council of Scientific and Industrial Research (CSIR), the industrial research and development

organisation under the central government, plans to take equity stakes in some companies to

whom it is lending technological innovations.

Samir K Brahmachari, director general, CSIR and secretary, department of scientific and

industrial research, Government of India, told DNA, We will take stakes in smaller companies.

We have received the governments approval for it and are already negotiating with the

companies. Many are in the pipeline in the life sciences and energy sectors, which have great

potential.

CSIR has been charging fees and royalties for its technology transfers for commercial use to

private companies but hasnt taken stake in any company.

Recently its agreement terms include putting up its logo in the projects which have used its

technologies.


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Brahmachari said, The technology that we transfer to Indian companies is easily being taken

away by international mergers and acquisitions. We have decided to take equity stake so that we

have a say in it.

At present it is raising its operational capital of $4-5 million to hire the senior management for

the venture.

For the time being the venture, which will take up the transactions, is named CSIR-Tech.

We will take less than 50% stake and for this SBI Capital Markets is raising the corpus for the

war chest, he said.

CSIR is also developing a 93-100 seater national civil aircraft for regional transport which will

be undertaken through a joint venture.

A committee will come up with the design and other details in a years time. The first prototype

will be built in 4-5 years at a cost of Rs 4,000-5,000 crore.

Source: DNA India

ICICI Venture plans $500 mn infra fund

ICICI Venture, the private equity arm of lender ICICI Bank , plans to launch a $500 million fund

by July to invest in infrastructure projects, its chief executive said.

"In the private equity context I would put education (and) hospital as part of infrastructure, but

there is also a big opportunity on serious infrastructure like roads, ports, power," Vishakha

Mulye told Reuters in an interview.

India has made building of roads, bridges, airports and power plants a priority and expects

private firms to fund half of a projected $1 trillion in infrastructure between 2012 and 2017.

India's diversified conglomerate Tata Group and private equity firm Actis aim to bid for $2

billion of road projects in India over the next five years as the country makes a major push to

build highways.


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"We have started putting together the team in place and we will probably approach the market

very soon," she said, adding ICICI Venture would look at launching the fund at end-June or early

July. ICICI Venture plans to tap domestic as well as international investors for the infrastructure

fund, which will have an overallotment option of another $500 million, said Mulye, who joined

the ICICI group in 1993.

ICICI Venture, one of India's largest private equity firms with about $2 billion in assets, also

plans to launch a $100- million fund in India with an option to raise another $100 million for

investing in real estate companies, she said. The fund will be launched in the next couple of

months, and will invest in residential projects, Mulye said.

"Residential (sector) is something we are extremely bullish about and in the top-tier cities, we

think that markets will only improve from here." Private equity investment in India fell more

than 60 percent to $4.4 billion in 2009 from $11.9 billion in 2008, according to VCC Edge,

which provides data on mergers and acquisitions, and private equity and venture capital deals.

Analysts expect the tide to change this year on improving economic and corporate growth

prospects. Private equity investments in India would be in the range of $9-$10 billion in this

calendar year, according to a recent report by consultancy firm KPMG and lobby group

Confederation of Indian Industry.

Source: Economic Times

Godrej Consumer looks to raise USD 125 m via PE

Godrej Consumer Products is in talks with a clutch of private equity investors to raise USD 125

million, two sources with direct knowledge of the matter said on Tuesday.

The company is in talks with US giants Carlyle Group and Blackstone, as well as India's

ChrysCapital and Standard Chartered Private Equity, the sources said.

Godrej has hired JM Financial Ltd to arrange the deal, sources said.


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Source: Money Control

Pvt equities to invest $10 bn in India this year

Private equity (PE) funds will remain a preferred choice for capital growth and Indian industries

will receive about $ 10 billion investments from the PE deals by the end of this year, says a latest

report jointly released by global auditing firm KPMG and the Confederation of India Industries

(CII).

"India has a very vibrant private equity industry with over $ 32.5 billion invested across more

than 1,500 PE deals from January, 2006, till date. As per the industry estimates, PE investments

would be in the range of $ 9-10 billion in the year ending December 31, 2010," says the report.

It adds PE funding is expected to provide capital to fund much-needed infrastructure projects to

support gross domestic product (GDP) growth of seven to eight per cent in India. According to

the report, the country needs about $ 1.3 trillion investment over the next three years to sustain a

GDP growth of seven to nine per cent out of which $ 60-100 billion will be PE investments.

"It is estimated that currently there are over 137 domestic and 135 foreign PE fund managers

operating in India. Over the last three years, PE investments were the equivalent of 33 per cent to

72 per cent of the total equity raised from primary markets," the report adds.

Gopal Srinivasan, chairman, CII national committee on PE, and chairman and managing director

(CMD), TVS Capital Funds Ltd, said, "The PE industry provided over $ 50 billion of much-

needed venture, growth and other forms of capital for the growth of Indian companies." " Over

1,500 companies have collaborated with PE firms in India so far and have excelled in several key

sectors like IT/ ITES, telecommunication, retail, infrastructure and manufacturing.

However, it is estimated that investments from PE and VC (venture capitals) need to be

increased three-fold, from a trailing level of $ 10 billion annually to $ 30 billion," Srinivasan

added.

PEs have been a source of funding during times of crisis especially for the micro, small and

medium enterprises ( MSME) sector. As per the report a significant 70 per cent of PE

investments in 2008 have been in MSME companies with turnover less than Rs 500 crore.


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The report was based on a survey of 17 companies that had received PE funding. Both the PE

firms and the company management were interviewed to get their inputs on the value addition

provided by the PE firms, besides merely providing capital.

The report finds that the three most important transformational impacts of PE are on business

model changes, corporate governance and professional talent management.

Closely following these is the impact on product development and helping find acquisitions or

strategic partners.

Less frequent are financial recapitalisations, spin- offs, new technologies and improving

efficiency.

India's Growth Booster:

India has a vibrant PE industry with over $ 32.5 billion invested in 1,500 PE deals from Jan,

2006, till date

The country needs about $ 1.3 tn investment in 3 years to sustain a GDP growth of 7-9% out of

which $ 60-100 bn will be PE investments

Currently there are over 137 domestic and 135 foreign PE fund managers operating in India

Over 1,500 companies have collaborated with PE firms in India so far

About 70% of PE investments in 2008 has been in MSME sector with turnover less than Rs 500

crore.

Source: India Today

Tayal not open to sell stake in Bank of Rajasthan

Crisis-ridden private-sector lender Bank of Rajasthan's promoter P K Tayal today ruled out any

possibility of selling his stake in the bank amidst speculations that ICICI Bank and Axis Bank

have evinced interest for a buy out.

"There are people who are coming (to buy the stake). They are not welcome ... the answer is no,"


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Tayal told PTI when asked if he was open to sell his shareholding in the bank.

At present, Tayals have a stated holding of around 28 per cent in Bank of Rajasthan while

according to market regulator Securities and Exchange Board of India, promoters' actual holding

in the entity is around 55 per cent.

Recently, media reports said that ICICI Bank and Axis Bank held preliminary discussions with

Tayals for a possible buy out of the latter' stake in the bank.

Source: PTI News

KKR Invests in Indian Cement Venture

Dalmia Cement (Bharat) Ltd. (DCBL), and Kohlberg Kravis Roberts & Co. L.P. (together with

its affiliates, KKR) today announced the signing of a definitive agreement under which KKR

has agreed to invest up to Rs 750crores in DCBLs wholly owned unlisted subsidiary

(Company) which will house post restructuring DCBLs 9MTPA cement manufacturing

capacity, DCBLs stake in OCL India Limited (5.3MTPA capacity) along with the upcoming

green field projects of 10MTPA across the country. The use of proceeds will be for both organic

/ inorganic growth and de-leveraging.

When we realigned our businesses in March, 2010, one of our goals was to create separate pure

play entities that could thrive on their own and have flexibility to raise capital. This transaction

with KKR is not just about capital but the foundation of a long term relationship. It will enable

us to enhance our capacity and market share through organic as well as inorganic routes, while

benefiting from KKRs global network and proven value creation capabilities, said Mr. Puneet

Dalmia, MD of Dalmia Cement (Bharat) Limited.

We are excited to be working with a dynamic and entrepreneurial family with a successfulexecution track record in India. While the cement industry by nature is cyclical, this is a long-

term investment in a great family business, its management team and in Indias economy. This is

a way to invest behind and contribute to the continued development of Indias residential,

commercial, and public sector infrastructure, said Mr. Sanjay Nayar, a Member of KKR and

CEO of KKR India.


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The transaction is subject to customary regulatory approvals.

About KKR

Founded in 1976 and led by Henry Kravis and George Roberts, KKR is a leading global

alternative asset manager with $52.2 billion in assets under management as of December 31,

2009. With over 600 people and 14 offices around the world, KKR manages assets through a

variety of investment funds and accounts covering multiple asset classes. KKR seeks to create

value by bringing operational expertise to its portfolio companies and through active oversight

and monitoring of its investments. KKR complements its investment expertise and strengthens

interactions with investors through its client relationships and capital markets platforms. KKR is

publicly traded through KKR & Co. (Guernsey) L.P. (Euronext Amsterdam: KKR). For

additional information, please visit KKRs website at www.kkr.com.

KKR has invested more than over $1.1 billion in India since 2006, which includes investments in

Aricent, a global innovation, technology and services company; Bharti Infratel, a telecom

infrastructure provider and Coffee Day Resorts, operator of the Caf Coffee Day chain of cafes

in India.

About Dalmia Cement (Bharat) Ltd.

DCBL has business interests in two major segments, Cement and Sugar. It has cement plants in

southern states of Tamil Nadu (Dalmiapuram & Ariyalur) and Andhra Pradesh (Kadapa), with a

capacity of 9MTPA. A leader in cement manufacturing since 1939, DCBL is a multi spectrum

cement player with double digit market share and a pioneer in super specialty cements used for

Oil wells, Railway sleepers and Air strips. The company also produces around 160 MW of

Power through thermal and renewable energy with an aim to increase the power generation from

non-conventional methods.

Over the past 7 decades, the company has earned the trust of the employees, distribution chain as

well as all its stakeholders. DCBLs vision has been acknowledged by the existing Private Equity

investor, Actis who has been on the Board and adding valuable insights for the organisational

growth. The company is looked upon and respected for being a value-based organization. DCBL

has been recognized and awarded Hewitts Best employer for the year 2009. It has been ranked


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among the Top Ten in the Manufacturing industry. DCBL is Head Quartered in New Delhi. It

has employee strength of more than 3,500 people.

Source: PE Hub

VGN Developers to raise Rs 700 cr from PE funds

Chennai-based VGN Developers Pvt Ltd is planning to raise Rs 600-700 crore private equity

(PE) fund to support its proposed investment of around Rs 3,000 crore in various residential

projects.

The company has developed two million sft of residential projects in the last four years. Over the

next 3-4 years, it is planning to develop another 7-8 million sft, said Pratish Devadoss, managing

director, VGN Developers.

The total investment, including land, would be around Rs 3,000 crore, said Devadoss.

The company is planning to fund the project through internal accruals, debt and equity. We just

signed an agreement with a PE player, who will invest around Rs 80 crore. Going forward, we

are planning to raise another Rs 600-700 crore, he said without disclosing the name of the PE

player.

Around 80 per cent of the upcoming projects would be in Chennai, Coimbatore and other placesin TN.

The company on Wednesday launched Platina, its residential project proposed at Ambattur

here. The project, spread across 17 acres, will have 670 housing units and is estimated to cost

around Rs 120 crore.

Source: Business Standard

Power Sector in India - Past,Present,Future - Document Transcript

1. iQuest Solution +91 (124) 4253488 +91 (124) 4294239 www.iquestsolution.com2. Contents CURRENT STATUS POWER INFRASTRUCTURE IN INDIA . 3

GROWTH EXPECTED ........................................................................................................ 3 Generation................................................................................................ ...................................... 3


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Transmission & Distribution ............................................................................................................ 4 INVESTMENT EXPECTED................................................................ 4 ................................ PRESENT POWERGENERA GENERATION MIX .......................................... 5 ................................ WindPower ................................................................................................ 6

.................................... Hydro Power................................................................................................ 7 ...................................Nuclear Power................................................................................................ 7................................. KEY CONCERNS ................................................................................................................... 7 Dependence on Thermal Sources Especially Coal............................................ 8 ................................ Land Acquisition andClearance................................................................ ....................................... 8 PoorCoordination between T &D and Generation Projects ............................ 8 FUTUREPROSPECT ................................................................ ........................................... 8SOURCES USED ................................................................................................................... 9 iQuest Solution, 2010. All Rights Reserved -

Privileged and Confidential 23. Current Status Power Infrastructure in India India has an installed power generationcapacity of 156 GW as on Dec 2009 - fifth largest in the world. The country generated atotal of 723.8 billion KWh in FY 2008 09 to meet the demand of 777 billion KWh. Thecountry is clearly a power deficit economy. The graph below compares the supply anddemand of power in India for past five years: Figure 1: Supply and Demand of Power inIndia during 2004 09 690.6 737.1 777 800 591.4 631.6 664.7 691 624.5 578.8 548.1Billion KWh 600 400 200 0 2004-05 2004 2005-06 2006-07 2007-08 2008-09 PowerDemand Power Supply Source: Ministry of Power, India The power deficit in the countryhas been to the tune of 11 percent during 2008-09. It is noteworthy 11.9 here that thepower demand mentioned accounts only for the demand fr from the electrified areas ofthe country. The country has about 80,000 villages that are yet to be electrified. Further,the mentioned deficit 0,000 . does not take into account the latent demand (the electricitydemand that could not be realized due to load shedding). .Central ElectricityAuthority has projected energy shortage of 9.3% and peak power shortages of Central12.6% in 2009-10 Bharatsinh Solanki, Union Minister of State for Power, Jul 2009Power Growth Expected Generation With the current electricity supply of 691 billionKWh, the per capita electricity consumption for India stands at about 601 KWh. This isdismal as compared to world average of 2,300 KWh. The Ministry of Power aims toachieve per capital electricity consumption of 1,000 KWh by 2012. This would requireconsumption about 1,150 billion KWh electricity generation per annum or about 2 0 GWinstalled generation capacity. 230 Further, the Ministry of Power plans to increase theinstalled capacity to 330 GW by 2017. iQuest Solution, 2010. All Rights Reserved -Privileged and Confidential 3

4. Under the current 11th five year plan (FY 07 07-12), the Ministry of Power Indiaenvisioned an addition in th generation capacity by 80 Current Status on 11 Plan GW. Ofthis, a total of 12.7 GW capacity had been Planned Capacity Complete by To beCompleted commissioned by Mar 2009. Addition (GW) 2009 (GW) by 2012 (GW) Rest67.3 GW generation capacity is expected to be 80 12.7 67.3 added by Mar 2012.Considering the performance during first two years of the plan, it is likely that the


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government would not be able to meet the target by 2012. The graph below shows thebreak-up of ownership of the generation capacity as planned to be added up during thecurrent five year plan: Figure 2: Break-up of Generation Capacity to be Added during FY2007 12 up Of the total 80 GW 26% capacity addition 42% planned, majority 42percent would be centre owned. 32% Centre Owned State Owned Private Source:

Ministry of Power, India Transmission & Distribution Along with ambitious growthplans for power generation, the Ministry of Power plans to make similar investments intransmission and distribution sectors. The Ministry of Power plans to set up an integratedNational Power Grid during the current five year plan with about 37,700 MW of interregional power inter-regional transfer capacity. Currently, the inter inter-regional powertransfer capacity is 20,750 MW. Also, Power Grid Gri Corporation of India Limited, thenodal transmission organization of the country, has developed an orporation developadditional transmission line of 38,000 cKm during the current five year plan by Mar2009. Further, projects for additional 6,850 cKm transmission line are under evaluationfor investment approval. These projects under are also expected to be completed duringthe current five year plan. Investment Expected With the current focus of the Government

of India on development of power infrastructure, it is estimated that a total of about USD167 billion ( (INR 7,500 billion) would be invested on this sector during next five years.Of this, about USD 107 billion ( (INR 4,800 billion) would be invested on powergeneration and rest on transmission and distribution. The graph below presents break upof this investment on power break-up generation and transmission & distribution:iQuest Solution, 2010. All Rights Reserved - Privileged and Confidential 4

5. Figure 3: Investment Expected on Power Sector by 2014 107 60 USD billion GenerationT&D Source: Ministry of Power, India Private sector is expected to make significantcontribution in planned development of power infrastructure in the country. It isestimated that an investment of about USD 53 billion (INR 2,400 billion) INR billionwould come from private investors rom Role of Private Players by 2014. Further, of thetotal Expected Private Investment Private-owned Installed planned installed capacity of330 by 2014 Capacity by 2017 GW by 2017, about 30 percent is expected to be USD 53billion 100 GW owned by private investors. In this pursuit, the Ministry of Power hasenvisaged 13 coal-fired Ultra coal Mega Power Plants (UMPPs) to be awarded to privateplayers on the basis of competitive bidding. These projects would have a capacity he of 4GW each. So far, one such project has been awarded to Tata Power, while three toReliance power both private players. th In the 11 five year plan (FY 07-12), theMinistry of Power allotted about USD 12.2 billion (INR 550 billion) 12), ( to Power GridCorporation of India Investment on T&D by PGCIL (approx USD billion) approxLimited (PGCIL) for development of power infrastructure in the Allotment for Investedby Target for To be Invested country. Of this, about USD 3.3 th 11 Plan Mar 2009 2009-10 during 2010-12 billion (INR 150 billion) has already been invested by Mar 12.2 3.32.6 6.3 2009. PGCIL plans to invest additional about USD 2.6 billion (INR 115 billion)during the year ) 2009-10. Remaining allocation of USD 6.3 billion (INR 285 billion)would be invested during FY 2010 12. Further, the Ministry of Power plans to investUSD 53.3 billion (INR 2,400 billion on transmission during 2012 17. INR billion)Present Power Generation Mix esent In spite of noticeable growth in wind, solar, andnuclear fired generation plants, coal remains the preferred choice as fuel for powergeneration in India. The power generation mix of the country is heavily dependent on


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conventional thermal sources especially coal that accounts for over 53 percent of theiQuest Solution, 2010. All Rights Reserved - Privileged and Confidential 5

6. total generation. Thermal sources (including coal, gas, and oil) account for 64 percent ofthe total generation capacity of the country. The graph below shows the power generationmix of the country as on Dec 2009: Figure 4: Power Generation Mix of India as on Dec

2009 Thermal sources (Coal, Gas, and Oil) account for 52% about 65 percent of 11%generation mix. 1% 24% 10% 2% Coal Gas Oil Hydro Nuclear RES Renewable EnergySources(RES) include S Small Hydro Project, Biomass, Urban & Industrial WaterProject, and Wind Energy rban Source: Ministry of Power, India Wind Power India hadan installed capacity of wind based power generation of 10.2 GW by Mar 2009.However, the annual addition of wind based capacity has been decreasing since FY 200607. The graph below shows 2006-07. show the annual addition of wind based capacityduring last f five years: Figure 5: Addition of Wind Based Generation Capacity during2004 2004-09 1,742 1,663 1,716 1,485 1,112 MW 2004 2004-05 2005-06 2006-07 2007-08 2008-09 Source: Wind Power India The decreasing trend in wind power addition inthe country casts some serious doubts on the prospects of wind energy being a power

source of the future for India. However, the industry players still have pegged highhopes on the prospects of wind energy in the country. Wind turbines and other equipmentsuppliers (such as Siemens) have been seen strengthening their wind product portfolios inthe country. iQuest Solution, 2010. All Rights Reserved - Privileged and Confidential 6

7. Hydro Power Hydro energy is the second most utilized resource (after thermal sources)for power generation in the country. As on Mar 2009, total installed hydro powercapacity in the country was 36.9 GW. Also, a installed significant hydro power capacitywas being added in the country each year until 2007 08. However, 2007-08. during 2008-09, there was a decrease in hydro capacity addition apparently an impact of globaleconomic crisis. The graph below presents yearly addition of hydro power capacity in thecountry during conomic last five years. Figure 6: Addition of Hydro Power GenerationCapacity during 2004 2004-09 2,364 2,456 1,736 1,000 1,041 MW 2004-05 2005-062006-07 2007-08 2008-09 Source: Central Electricity Authority, Business StandardAuthority In spite of a lean year in 2008-09, hydro power would still be considered as analternate to thermal 09, e sources for power generation in the country. Nuclear Power Theaddition of nuclear power capacity in India has been sporadic so far. The country as onMar 2009, had nuclear power capacity of about 4 GW. However, with the recent successmade by the Government of India in securing the Nuclear Suppliers' Group agreementand Civil nuclear cooperation agreements with some countries including the USA,significant action is expected in nuclear power space in the g coming years. NuclearPower Corporation of India Limited (NPCIL) has firmly proposed nuclear power projectsof capacity 25 GW by 2017. This suggests that nuclear power would play a significantrole in the countrys significant goal to attain self-sufficiency in power. sufficiency KeyConcerns Even after continuous reforms in the power sector, it still suffers from variousproblems that effectively , hinder the desired growth of the sector. The effect of theseproblems can be seen on the planned vis-- vis vis achievement statistics for last five FiveFive-Year Plans as shown in the graph below: iQuest Solution, 2010. All RightsReserved - Privileged and Confidential 7

8. Figure 7: Planned Vis--vis Achievement for Plan VI to Plan X vis 45,000 40,000 35,00030,000 25,000 20,000 15,000 10,000 5,000 0 Plan VI Plan VII Plan VIII Plan IX Plan X


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Target Achievement Source: Planning Commission of India Some of the key issues thatpower sector in India is facing are: Dependence on Thermal Sources Especially Coal Thepresent generation mix in India is heavily dependent on coal. The trend would lead to asupply constraint of coal in the country. The signs of the same have started emerging,lately. To deal with the . situation, new private players in power sector such as Reliance

Power, Tata Power have started exploring international sources of coal supply. Thesesources include countries in South Asia, Further, to ensure a seamless supply of coal tothe power plants the country needs strong railway as well er, as port infrastructure. Theexisting state of infrastructure in India (especially port) does not seem adequate to meetthese requirements. Land Acquisition and Clearance The growth in power sector is alsomarred due to problems pertaining to land acquisition in the country. Although, there arerules in place for asking the land owner to sell or handover the land for public interest,land-owner still the procedures involved are lengthy. The process, in many cases, hascaused lengthy project delays. Poor Coordination between T &D and Generation ProjectsA continuous lack of synchronization in T&D projects and generation projects hasresulted into constraints in power evacuation. Factors responsible for this are both

technical and commercial. Some of the key reasons responsible for include: Inadequateinvestment on development of transmission and distribution infrastructure n Improperproject management and execution Future Prospect The Indian power sector would see aninvestment of about USD 250 billion (approximately INR 12,500 approximately billion)by 2017. This investment would be made to meet the following objectives: To increasethe generation capacity from current level of 156 GW to 330 GW by the mentionedperiod iQuest Solution, 2010. All Rights Reserved - Privileged and Confidential 8

9. To strengthen and expand all the five transmission systems of the country To pursuerural electrification in the country During the period of next eight years, the percentageshare of nuclear energy and wind energy in the power generation mix of the countrywould increase considerably. The growth in percentage share of hydro energy would alsobe observed to some smaller extent. However, thermal energy would continue todominate the power generation mix of the country. Sources Used Ministry of Power,Government of India Central Electricity Authority Planning Commission of IndiaCommittee of Infrastructure Wind Power India Power Grid Corporation of India LimitedBusiness Standard LiveMint The Economic Times Energy Information AdministrationiQuest Solution, 2010. All Rights Reserved - Privileged and Confidential 9

States of India by installed power capacity

This is a list of States and Union Territories of India by installed capacity of power utilities with generation mode break-up as of 31-05-09 published by the Ministry of Powerwith figuresin millions of watts (megawatts).

Rank State/Union Territory Total Installed Total Nuclear Hydro RES**


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Capacity Thermo

India 149,391.91 95151.74 4120.00 36877.7613242.41

1 Maharashtra 20,415.38 14071.28 852.06 3332.83 2159.21

2 Tamil Nadu 14,088.75 6957.77 657.39 2093.95 4379.64

3 Gujarat 12,383.08 8104.08 37.41 3572.93 668.66

4 Andhra Pradesh 12,492.89 9498.39 825.00 772.00 1397.50

5 Karnataka 9,246.66 7034.47 203.72 1605.49 402.98

6 Uttar Pradesh 9,646.73 4057.09 190.90 3518.20 1880.54

7 Madhya Pradesh 6,780.01 3435.93 151.04 3031.57 161.47

8 West Bengal 8,113.27 4534.01 92.88 3223.67 262.71

9 Punjab 6,426.15 3774.03 469.00 1456.82 726.30

10 Rajasthan 7,731.69 6470.14 0.00 1162.00 99.55

11 Haryana 4,530.29 3054.03 76.16 1331.40 68.70

12 DVC 3386.00 3190.00 0.00 196.00 0.00

13 Delhi Territory 3,677.34 3045.20 47.08 585.06 0.00

15 Kerala 3514.05 1545.82 80.09 1769.10 119.04

12 Orissa 4072.46 1865.23 0.00 2174.93 32.30

19 Jharkhand 2,152.57 1972.52 0.00 176.00 4.05

21 Himachal Pradesh 1,896.47 156.43 14.08 1540.84 185.12

14 Chhattisgarh 3,607.05 3312.90 0.00 120.00 174.15

20 Bihar 1,969.99 1846.59 0.00 73.00 50.40

17 Uttarakhand 2,383.03 301.05 16.28 1955.73 109.97


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18 Jammu and Kashmir 2,158.95 509.62 68.00 1469.50 111.83

22 Assam 980.30 522.19 0.00 431.00 27.11

23 Goa 357.23 327.18 0.00 0.00 30.05

24 Meghalaya 288.08 28.05 0.00 229.00 31.03

25 Pondicherry Territory 256.62 239.51 17.09 0.00 0.02

26 Tripura 243.36 165.35 0.00 62.00 16.01

28 Arunachal Pradesh 180.14 36.88 0.00 98.00 45.26

29 Manipur 157.86 71.41 0.00 81.00 5.45

30 Mizoram 119.33 67.86 0.00 34.00 17.47

27 Sikkim 193.09 76.98 0.00 75.00 41.11

31 Nagaland 102.67 21.00 0.00 53.00 28.67

32 NLC 100.17 100.17 0.00 0.00 0.00

33 Chandigarh Territory 93.46 41.58 4.84 47.04 0.00

36 Andaman and NicobarIslands Territory

65.40 60.05 0.00 0.00 5.35

34Dadra and Nagar Haveli

Territory80.78 78.80 1.98 0.00 0.00

35 Daman and Diu Territory 71.10 69.12 1.98 0.00 0.00

37 Lakshadweep Territory 10.73 9.97 0.00 0.00 0.76

Renewable Energy Sources (RES) includes SHP, BG, BP, U&I, and Wind Energy.

Abbreviation:---- SHP=Small Hydro Project, BG=Biomass Gasifier, BP=Biomass Power,U&I=Urban & Industrial Waste Power, RES=Renewable Energy Sources.

From the table, we can see that Maharashtra is clearly the top in both total capacity and in


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thermal alone, whereas Tamil Nadu is clear top in Renewable Energy Sources, and AndhraPradesh is top in Hydro Power closely followed by Karnataka, Maharashtra and MadhyaPradesh.

Wind power in India

The development ofwind power in India began in the 1990s, and has significantly increased inthe last few years. Although a relative newcomer to the wind industry compared with Denmarkor the US, India has the fifth largest installed wind power capacity in the world.

As of 31, October 2009 the installed capacity of wind power in India was 10,925 MW, mainlyspread across Tamil Nadu (4301.63 MW), Maharashtra (1942.25 MW), Gujarat (1565.61 MW),Karnataka (1340.23 MW), Rajasthan (738.5 MW), Madhya Pradesh (212.8 MW), AndhraPradesh (122.45 MW), Kerala (26.5 MW), West Bengal (1.1 MW) and other states (3.20 MW) .It is estimated that 6,000 MW of additional wind power capacity will be installed in India by2012. Wind power accounts for 6% of India's total installed power capacity, and it generates

1.6% of the country's power.

Overview

India is the world's fifth largest wind power producer, with an annual power production of 8,896

MW. Shown here is a wind farm in Kayathar, Tamil Nadu.

The worldwide installed capacity of wind power reached 157,899 MW by the end of 2009. USA(35,159 MW), Germany (25,777 MW), Spain (19,149 MW) and China (25,104 MW) are aheadof India in fifth position.The short gestation periods for installing wind turbines, and theincreasing reliability and performance of wind energy machines has made wind power a favoredchoice for capacity addition in India.

Suzlon, as Indian-owned company, emergd on the global scene in the past decade, and by 2006had captured almost 7.7 percent of market share in global wind turbine sales. Suzlon is currently


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the leading manufacturer of wind turbines for the Indian market, holding some 52 percent ofmarket share in India. Suzlons success has made India the developing country leader inadvanced wind turbine technology.

State-level wind power

There is the growing wind energy installations in the number of the states across the India.

Tamil Nadu (4301.63 MW)

India is keen to decrease its reliance on fossil fuels to meet its energy demand. Shown here is a

wind farm in Muppandal, Tamil Nadu.

Tamil Nadu is the state with the most wind generating capacity: 4301.63 MW at the end of theMarch of the 2009.[2] Not far from Aralvaimozhi, the Muppandal wind farm which the largest inAsia is located near the once impoverished village of Muppandal, supplying the villagers withelectricity for work.The village had been selected as the showcase for India's $2 billion cleanenergy program which provides foreign companies with tax breaks for establishing fields of

wind turbines in the area. In february 2009, Shriram EPC bagged INR 700 million contract forsetting up of 60 units of 250 KW (totaling 15 MW) wind turbines in Tirunelveli district by CapeEnergy. Enercon is also playing a major role in development of wind energy in India. In TamilNadu, Coimbatore and Tiruppur Districts having more wind Mills from 2002 onwards,specially,Chittipalayam, Kethanoor, Gudimangalam, Poolavadi,Murungappatti (MGVPlace),Sunkaramudaku,KongalNagaram,Gomangalam, Anthiur are the high wind powerproduction places in the both districts.

Maharashtra (1942.25 MW)

Maharashtra is second only to Tamil Nadu in terms of generating capacity. Suzlon has been

heavily involved. Suzlon operates what was once Asia's largest wind farm, the VankusawadeWind Park (201 MW), near the Koyna reservoir in Satara district of Maharashtra.

Gujarat (1565.61 MW)

Samana in Rajkot district is set to host energy companies like China Light Power (CLP) and TataPower have pledged to invest up to Rs.8.15 billion ($189.5 million) in different projects in thearea. CLP, through its India subsidiary CLP India, is investing close to Rs.5 billion for installing


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126 wind turbines in Samana that will generate 100.8 MW power. Tata Power has installed windturbines in the same area for generating 50 MW power at a cost of Rs.3.15 billion. Both projectsare expected to become operational by early next year, according to government sources. TheGujarat government, which is banking heavily on wind power, has identified Samana as an ideallocation for installation of 450 turbines that can generate a total of 360 MW. To encourage

investment in wind energy development in the state, the government has introduced a raft ofincentives including a higher wind energy tariff. Samana has a high tension transmission gridand electricity generated by wind turbines can be fed into it. For this purpose, a substation atSadodar has been installed. Both projects are being executed by Enercon Ltd, a joint venturebetween Enercon of Germany and Mumbai-based Mehra group.

ONGC Ltd has commissioned its first wind power project. The 51 MW project is located atMotisindholi in Kutch district of Gujarat. ONGC had placed the EPC order on Suzlon Energy inJanuary 2008, for setting up the wind farm comprising 34 turbines of 1.5-mw each. Work on theproject had begun in February 2008, and it is learnt that the first three turbines had begunproduction within 43 days of starting construction work. Power from this Rs 308 crore captive

wind farm will be wheeled to the Gujarat state grid for onward use by ONGC at its Ankleshwar,Ahmedabad, Mehsana and Vadodara centres. ONGC has targeted to develop a captive windpower capacity of around 200 MW in the next two years.

Karnataka (1340.23 MW)

There are many small wind farms in Karnataka, making it one of the states in India which has ahigh number of wind mill farms. Chitradurga, Gadag are some of the districts where there are alarge number of Windmills. Chitradurga alone has over 200 wind turbines.

The 13.2 MW Arasinagundi (ARA) and 16.5 MW Anaburu (ANA) wind farms are ACCIONAS

first in India. Located in the Devangere district (Karnataka State), they have a total installedcapacity of 29.7 MW and comprise a total 18 Vestas 1.65MW wind turbines supplied by VestasWind Technology India Pvt. Ltd.

The ARA wind farm was commissioned in June 2008 and the ANA wind farm, in September2008. Each facility has signed a 20-year Power Purchase Agreement (PPA) with BangaloreElectricity Supply Company (BESCOM) for off-take of 100% of the output. ARA and ANA areAccionas first wind farms eligible for CER credits under the Clean Development Mechanism(CDM).

ACCIONA is in talks with the World Bank for The Spanish Carbon Fund which is assessing

participation in the project as buyer for CERs likely to arise between 2010 and 2012. Anenvironmental and social assessment has been conducted as part of the procedure and relateddocuments have been provided. These are included below, consistent with the requirement of theWorld Bank's disclosure policy.


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Rajasthan (738.5 MW)

Gurgaon-headquartered Gujarat Fluorochemicals Ltd is in an advanced stage of commissioning alarge wind farm in Jodhpur district of Rajasthan. A senior official told Projectmonitor that out ofthe total 31.5 mw capacity, 12 mw had been completed so far. The remaining capacity would

come on line shortly, he added. For the INOX Group company, this would be the largest windfarm. In 2006-07, GFL commissioned a 23.1-mw wind power project at Gudhe village nearPanchgani in Satara district of Maharashtra. Both the wind farms will be grid-connected and willearn carbon credits for the company, the official noted. In an independent development, cementmajor ACC Ltd has proposed to set up a new wind power project in Rajasthan with a capacity ofaround 11 mw. Expected to cost around Rs 60 crore, the wind farm will meet the powerrequirements of the company's Lakheri cement unit where capacity was raised from 0.9 milliontpa to 1.5 million tpa through a modernisation plan. For ACC, this would be the second windpower project after the 9-mw farm at Udayathoor in Tirunelvelli district of Tamil Nadu.Rajasthan is emerging as an important destination for new wind farms, although it is currentlynot amongst the top five states in terms of installed capacity. As of 2007 end, this northern state

had a total of 496 mw, accounting for a 6.3 per cent share in India's total capacity.

Madhya Pradesh (212.8 MW)

Present Rs.3.97p/kwh coming down to Rs 3.30 from the 5th year to 20th year

In consideration of unique concept, Govt. of Madhya Pradesh has sanctioned another 15 MWproject to MPWL at Nagda Hills near Dewas. All the 25 WEGs have been commissioned on31.03.2008 and under successful operation..

Kerala (26.5 MW)

The first wind farm of the state was set up at Kanjikode in Palakkad district. It has a generatingcapacity of 23.00 MW. A new wind farm project was launched with private participation atRamakkalmedu in Idukki district. The project, which was inaugurated by chief minister V. S.Achuthanandan in April 2008, aims at generating 10.5 MW of electricity.

The Agency for Non-Conventional Energy and Rural Technology (ANERT), an autonomousbody under the Department of Power, Government of Kerala, is setting up wind farms on privateland in various parts of the state to generate a total of 600 m

Documents

CII a on Infrastructure