f 15 17, 2012 h r n d , i - usaid sari/energy integration...© lanco group, all rights reserved nets...

© LANCO Group, All Rights Reserved © LANCO Group, All Rights Reserved

Venue: New Delhi Date: 17th February 2012 POWER EPC INFRASTRUCTURE SOLAR RESOURCES

SOUTH ASIA REGIONAL CONFERENCE ON POLICIES AND REGULATIONS

TO INCREASE CROSS BORDER ENERGY TRADE

FEBRUARY 15 – 17, 2012

HYATT REGENCY, NEW DELHI, INDIA

© LANCO Group, All Rights Reserved

In this presentation

NETS Overview

Cross Border Opportunities

Sectoral Trends - India

Power Trading Market Trends

India Electricity Participants

http://www.saarc-sec.org/india/


NETS Overview

National Energy Trading And Services Limited - Overview

Power Market Trends



NETS Background

Category 1 Trader (highest category with no trading limits)

No. 1 Private Sector Trader in terms of market share

Consistently ranked amongst top 3 Power Trading Companies in India

Equity and Trading Partner of IEX

Trading Partner of PXIL

Pan India presence – trading experience in all 5 power regions

Trading operations covering all major utilities in Government and Private sector

Constantly delivered the best price in the market



NETS Strengths

• Short/Medium/Long Term

• Power Banking

• Day Ahead/Term Ahead

• RTC/Peak/Off-peak Power

• Promoters with strong track record

• Professionally qualified Management

• Diversified Board of Directors

• Independent Power Producers

• Captive Power Producers

• State Electricity Boards

• Private Distribution Licensees

• Leading player in Indian power trading market

• Market share of ~15% for FY10-11 (excl Banking)

• Co-promoter of IEX

Market Leading Performance

Strong Relationships

Diverse Product Portfolio

Strong Management

Team



SEB’s of

• Punjab, Uttar Pradesh , Madhya

Pradesh

• , Bihar, Andhra Pradesh, Karnataka,

West Bengal, Meghalaya

• Tamil Nadu

Pvt. Dist. Licensees

• BRPL / BYPL

• NDPL

• CESC

• R Infra

• TATA Power

CPPs

• BALCO

• Monnet

• KSK

• Shree Renuka Sugars

• Shree Cement

• NSL Sugars etc.

IPPs

• LKPPL

• Jindal Power

• Adani Power

• Indrajeet Infrastructure

• Abhijeet Group

• Jagdamba

NETS – Strong Relationship



NETS – Strong Relationship

Buyer

Seller

NR

WR

SR

ER

NER

Total Client Base: 140+ Buyers: 40+ Sellers: 100+



B I L A T E R A L

E X C H A N G E

DAM DAC Intraday Daily Weekly Monthly

PARTICIPANTS • Grid Connected entities • Electricity Traders

PARTICIPANTS • Grid Connected entities • Electricity Traders • Financial Brokers

Regulatory Framework • Electricity Act’03 • Open Access Regulation

Regulatory Framework • Electricity Act’03 • Open Access regulation • IEX By-Laws • IEX rules • IEX Business rules

Indian Power Trading Market



Indian Power Trading Market

NETS VOLUME in MUs TOTAL TRADING VOLUME in MUs

NETS, 2006-07,

734

NETS, 2007-08,

2600

NETS, 2008-09,

2841

NETS, 2009-10,

4269

NETS, 2010-11,

6043

y = 827.83x1.2293 R² = 0.9539

INDUSTRY, 2006-07,

15023

INDUSTRY, 2007-08,

20925

INDUSTRY, 2008-09,

24142

INDUSTRY, 2009-10,

41013

INDUSTRY, 2010-11,

43220

y = 13896x0.6802 R² = 0.9156 CAGR 69% CAGR 30%



• Strategizing to increase the volume and mix of Medium and long term trading contracts

• Entered into PPAs to source long term power of over 4,000 MW (Approx. 28 bn units) every year

• Entering into Tolling arrangements for long term supply

Long & Medium Term Arrangements

• Apart from the conventional products in Power Market we specialize in :

• Power Banking

• Term Ahead Market

Short Term Arrangement

NETS – Product Portfolio



NETS

Trading Arm for In house Merchant

capacities to provide

sustainability

Strong relationship

management with Customers

& Vendors

Optimization in Sale Price of Power to the

Group

Adding Value of top line &

bottom line to the Group

Business intelligence of Power Trading

Scope for new business to

integrate with existing business

NETS – Value Addition



NETS Overview

Cross Border Opportunities

Power Market Trends



Opportunities in Cross Border Trade

Information about

Population (in Millions) 1,220 29 159 0.73 26 187 21

Installed Capacity (MW) 187,550 1,000 5,255 1,600 689 19,505 3,000

Per Capita Cons. (in kWh) 779 10 180 260 91 385 395

Deficit (MW) 17,517 1,500 2,000 1,500 400 5,000 2,000

Cross Border Transmission capability (existing / proposed)

4000 – 6000 MW

500 – 1000 MW

1200 – 1400 MW

1000 –

1500 MW

500 – 1000 MW

500 – 1000 MW

Predominant Fuel Thermal /

Hydro Thermal / Hydro

Gas Hydro Hydro Thermal /

Hydro Thermal / Hydro


http://www.saarc-sec.org/bangladesh/

http://www.saarc-sec.org/bhutan/

http://www.saarc-sec.org/nepal/

http://www.saarc-sec.org/pakistan/

http://www.saarc-sec.org/sri-lanka/


http://www.saarc-sec.org/afghanistan/


Issues in Cross Border Trade

Issue Probable Solution

Trading Platform Bilateral Contract / Exchanges

Medium Any Trader

Payment Mechanism Letter of Credit Guaranteed by the Sovereign

Regulatory Mechanism Common Forum of all the SAARC Regulators

Delivery Point International Boundary (Interconnection of the

Selling Country)

Taxes / Duties To be exempted

Controlling Agency for the Trade Respective Nodal Agency (CTU for India)

Pan Caking of Losses To be rationalised (PoC to be used)

Energy Accounting Nodal agency could be (CTU of India)

Usage of Corridor by Open Access Consumers

To be allowed to use the Corridor



NETS Overview

Indian Electricity Market Structure

Power Market Trends



Policy State Government Ministry of Power

Plan State Government CEA

Regulations CERC

Generation CGS, Mega Power Plants, Ultra Mega Power Plants

Transmission

Systems Oprn State LDC POSOCO, Regional LDCs (N,E,S,W, NER)

Distribution SEBs, DISCOMs

Trading Trading Licensees Trading Licensees, Power Exchange (s)

Appeal Appellate Tribunal

CAC

CENTRE STATE

SERC SAC

Gencos IPPs

CTU PTU STU PTU

Billing Settlement Regional P Cs S P Cs

Industry Structure



Generators

Single Buyer

Multi Buyer model (MBM) – Intermediate Phase

Traders

Distribution Utilities


PPAs

BST

Direct Contracts

Generators


Single buyer

Single Buyer model (SBM)

PPAs

BST

Competition

Evolving Market Structure



Consumer

G

G

G

G

G

G

G

D C

D

D

D

D

R

C

C

C

C

C

T

W

A

A

T

T

T

Transmission

Model 1

Model 2

Model 3

Model 4

Purchasing Agent,

Wholesaler or

Aggregator Generator

Discom /

Retailer

Competition and Choice



Indian Market Participants

The generation companies can obtain a trading license and carry on the trading activities.

The large industrial consumers will be able to participate in the market only after appropriate regulator provides them the open access right

Emergence of independent transmission companies will facilitate non-discriminatory open access

With regional Load Dispatch Centers (LDCs) having jurisdiction to manage the grid discipline, local markets will emerge

Central Generators

State Generators

Independent power

producers

Captive generators

Non-conventional

energy sources

Supply side

Distribution Cos

SEBs

Large Industrial

consumers

Small Industrial

consumers

Demand side Intermediaries

Wire Owners

CTU

STU

Transmission

Licensees

System Operators

NLDC

RLDC

SLDC

Traders

Trading Cos

Generating

Cos

Distribution

Cos

CERC

SERC

Regulators



NETS Overview

Sectoral Trends - India

Power Market Trends



Generation : Capacity / Generation Growth Vs GDP

Since 2002-03, generation capacity increasing steadily, in line with GDP growth and driven by positive changes brought in by EA 2003

Overall, YoY electricity generation growth has been lower than that of GDP growth – ranging from 0.4x to 0.7x of GDP growth rate

Source: CEA, Planning Commission Source: CEA, Planning Commission



Generation : Pvt. Sector Share and FDI in Power

Private sector participation in capacity addition

picked up sharply in last 3yrs (most of these projects

were started in 2003-04, after the EA Act)

FDI in power sector has also increased tremendously

in last 3-4yrs to around 4-6% of total FDI in India;

this compares to 1.2-1.8% levels seen earlier

* As per MoP estimates

Source: CEA Source: DIPP



Generation : Capacity Addition & PLF

Overall capacity addition below targets - due mainly

to Central & State sectors; XI Plan capacity addition

(in 2011-12) to be impacted by lack of fuel

* As per MoP estimates

Average thermal PLF has come down in last 3 yrs

after reaching the peak level of 78.6% in 2007-08,

signaling inadequate fuel supply

Source: CEA Source: CEA



Distribution : Demand/Supply Trend (Base Load)

Deficit (base load) as % of demand stood at 9% in

2010-11, almost equal to the level in 2002-03

In BUs terms, deficit rose @ CAGR of 5.4% to 74BUs

in 2010-11 from 48BUs in 2002-03

On YoY basis, supply growth lagged demand

growth for 5 consecutive yrs, though it finally

overtook it in last 2 yrs

Source: CEA Source: CEA



Distribution : Per Capita Consumption & ATC Losses

Per capital electricity consumption grew at 4.4% p.a.

to 734 units by 2008-09; however, GoI’s target of

1000 units by 2012 looks difficult to achieve

CAGR: 4.4%

The decline in ATC losses over the years has been sluggish and

insufficient

Source: CEA Source: CEA, PFC report on Utilities 2010



Distribution : Cost of Supply vs Revenue Realization

Since 2003-04, increase in revenue realization for DISCOMs has

mostly fallen short of the increase in cost of supply…

… as a result, gap b/w Avg Revenue Realized (ARR) and Avg Cost

of Supply (ACS) widened to 78ps./unit in 2008-09 from

43ps./unit in 2002-03

Revenue Chg > Cost Chg

Revenue Chg < Cost Chg

Source: PFC report on Utilities 2010 Source: PFC report on Utilities 2010



Distribution : SEBs Losses & Subsidy Trend

Aggregate losses of SEBs jumped to Rs.526bn by 2008-09; as per

Planning Commission’s estimates these losses could be ~Rs.700bn in

2010-11 and ~Rs.1,500bn by 2014-15

Huge losses of SEBs have resulted in significant subsidy burden

on the State Govts.; this would further increase if SEBs losses

continue to mount

Source: PFC report on Utilities 2010, Planning Commission Source: PFC report on Utilities 2010



WPI Trend for Commodity Prices (Indexed to 2001-02)

Price increases in Electricity have been lower than that of other commodities (cost-items). By 2009-10, Electricity prices were just 21% higher than 2001-02 levels, compared to 58% rise in Coal prices and 83% rise in Mineral Oil prices. Prices increases for Basic Metals & Alloys and Machinery & Tools have also been much higher than that for Electricity.

Source: RBI



YoY Changes in Commodity Prices

Amongst all commodities, YoY % price increases have been most muted for Electricity. While electricity saw max YoY price increase of 4.9%, price rises for Coal and Mineral Oil have been as high as 17.1%. Prices increases for Basic Metals & Alloys have been the strongest amongst all commodities, while Machinery & Tools have seen price increases of up to 7.1%.

Source: RBI



Cost / Revenue gap for DISCOMs

Due to non cost-reflective tariffs, the gap (shortfall) between Avg Revenue Realized vs Avg Cost of Supply for DISCOMs has widened over the years. From 43ps./kWh in 2002-03, the gap has widened to 78ps./kWh by 2008-09.

Source: PFC



NETS Overview

Power Trading Market Trends

Power Market Trends



Source: CERC

YoY – Total Gen Vs Total Volume



Existing Merchant Capacity Excluding captives, except BALCO and SCL, and any gen source not listed in CEA



Upcoming Merchant Capacities – Top 20 (By exp COD) - Only under construction projects



Upcoming Merchant Capacities – 15272 MW (Year on Year) - Only under construction projects



Market Analysis - Exchange – N E W Grid (Delivered Prices)



Market Analysis - Exchange – S R Grid (Delivered Prices)



Daily Delivered Price trend on IEX - (NEW Grid)

Price band declining, with reducing gap between Maximum & Minimum prices

General Elections

Low Rainfall / State Elections

High Temperatures

Floods in Orissa and Coal Shortage



Daily Delivered Price Trend on IEX - (SR Grid)

Relatively lesser decline in Price band in SR, with a consistent gap between Maximum & Minimum prices

General Elections

Low Rainfall / State

Elections

High Temperatures

Elections in Tamil Nadu

Singareni Colliery Strike and Telangana Agitation

Corridor Congestion and AP MTOA Cancellation



Power Trading – Trends of Traders (Volume YoY) Short Term Trading

Source: CERC

TRADERS 05-06 06-07 07-08 08-09 09-10 10-11 Share 11-12* Share

PTC 8357 6575 9553 6521 17623 15175 35% 8865 35%

NVVN 1642 2663 3324 4831 5538 7378 17% 4708 19%

NETS 11 744 2600 2841 4269 6043 14% 2897 11%

REL 483 878 776 1856 3300 4962 11% 2085 8%

TATA 673 1206 1682 2523 4073 3566 8% 2845 11%

OTHERS 41 143 229 303 1184 2670 6% 939 4%

JSWPTCL 968 1479 2001 3400 1902 4% 1043 4%

GMRETL 632 643 959 2% 638 3%

ADANI 2980 1845 1322 2634 982 566 1% 1240 5%

TOTAL MU 14187 15023 20965 24142 41013 43220 100% 25261

Gen. in BU 618 663 705 724 772 811

Trading % 2.30% 2.27% 2.98% 3.34% 5.32% 5.33%

* CERC Data upto Nov’12


Contact : [email protected], [email protected]


mailto:[email protected]

mailto:[email protected]

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