2. INDUSTRY ANALYSIS

2.1 WHAT IS POWER SECTOR?

Electricity generation is the main function of the Power Sector. Electricity generation is the process of generating electric power from other sources of primary energy. The fundamental principles of electricity generation were discovered during the 1820s and early 1830s by the British scientist Michael Faraday. His basic method is still used today: electricity is generated by the movement of a loop of wire, or disc of copper between the poles of a magnet. For electric utilities, it is the first process in the delivery of electricity to consumers. The other processes, electricity transmission, distribution, and electrical power storage and recovery using pumped-storage methods are normally carried out by the electric power industry. Electricity is most often generated at a power station by electromechanical generators, primarily driven by heat engines fueled by chemical combustion or nuclear fission but also by other means such as the kinetic energy of flowing water and wind. Other energy sources include solar photovoltaic and geothermal power.

2.2 INTRODUCTION TO POWER SECTOR IN INDIA

The Power sector in India had an installed capacity of 243.02 GW as of March 2014, the world's fourth largest. Captive power plants generate an additional 39.375 GW. Non Renewable Power Plants constitute 87.55% of the installed capacity, and Renewable Power Plants constitute the remaining 12.45% of total installed Capacity. India generated around 911 BU (911,652 MU i.e. 911 TWh) of electricity (excluding electricity generated from renewable and captive power plants) during the 2012–13 fiscal. The total annual generation of electricity from all types of sources was 1053.9 TeraWatt-hours (TWh) in 2012.

The per capita average annual domestic electricity consumption in India in 2009 was 96 kWh in rural areas and 288 kWh in urban areas for those with access to electricity, in contrast to the worldwide per capita annual average of 2600 kWh and 6200 kWh in the European Union. India's total domestic, agricultural and industrial per capita energy consumption estimate varies depending on the source. Two sources place it between 400 to 700 kWh in 2008–2009.As of January 2012, one report found the per capita total consumption in India to be 778 kWh.

India currently suffers from a major shortage of electricity generation capacity, even though it is the world's fourth largest energy consumer after United States, China and Russia.

29%

30%

41%

Private sectorCentral sectorState sector

Fig. 1 Power sector share in India

The power sector in India is mainly governed by the Ministry of Power. There are three major pillars of power sector these are Generation, Transmission, and Distribution.

Central Sector or Public Sector Undertakings (PSUs), constitute 29.78% (62826.63MW) of total installed capacity i.e, 210951.72 MW (as on 31/12/2012) in India. Major PSUs involved in the generation of electricity include NHPC Ltd., NTPC Ltd.,, and Nuclear Power Corporation of India (NPCIL).

Besides PSUs, several State-level corporations are there which accounts for about 41.10% of overall generation , such as Jharkhand State Electricity Board (JSEB), Maharashtra State Electricity Board (MSEB), Kerala State Electricity Board (KSEB), in Gujarat (MGVCL, PGVCL, DGVCL, UGVCL four distribution Companies and one controlling body GUVNL, and one generation company GSEC), are also involved in the generation and intra-state distribution of electricity.

Other than PSUs and state level corporations, Private sector enterprises also play a major role in generation, transmission and distribution, about 29.11%(61409.24MW) of total installed capacity is generated by private sector.

The PowerGrid Corporation of India is responsible for the inter-state transmission of electricity and the development of national grid.

The Ministry of Power is the apex body responsible for the development of electrical energy in India. This ministry started functioning independently from 2 July 1992; earlier, it was

known as the Ministry of Energy. The Union Minister of Power at present is Sushilkumar Shinde and Minister of State for Power is K.C Venugopal.

India is world’s 6th largest energy consumer, accounting for 3.4% of global energy consumption, with Maharashtra as the leading electricity generator among Indian states. Due to India’s economic rise, the demand for energy has grown at an average of 3.6% per annum over the past 30 years. At the end of December 2012, the installed power generation capacity of India stood at  210951.72MW, while the per capita energy consumption stood at 733.54 KWh(2008-09). The Indian government has set an ambitious target to add approximately 78,000 MW of installed generation capacity by 2012. The total demand for electricity in India is expected to cross 950,000 MW by 2030.

India is the sixth largest in terms of power generation. About 65% of the electricity consumed in India is generated by thermal power plants, 22% by hydroelectric power plants, 3% by nuclear power plants and rest by 10% from other alternate sources like solar, wind, biomass etc. 53.7% of India’s commercial energy demand is met through the country’s vast coal reserves. The country has also invested heavily in recent years on renewable sources of energy such as wind energy. As of March 2011, India’s installed wind power generation capacity stood at about 12000 MW. Additionally, India has committed massive amount of funds for the construction of various nuclear reactors which would generate at least 30,000 MW. In July 2009, India unveiled a $19 billion plan to produce 20,000 MW of solar power by 2020 under National Solar Mission.

2.2.1 Electricity Generation

India’s energy electricity has been growing rapidly in the last two decades. This demand has been boosted by industrial growth as well as a rise in household consumption. On the other hand, supply of energy too has grown but has been outstripped by demand. India derives most of its electricity from fossil fuels; primarily from coal (India has 20,381 MW of capacity on coal which is 59% of total capacity). India also derives considerable amount of electricity from hydro power sources.

The top five states with highest installed electricity generation capacity are given below;

Maharashtra Gujarat Tamil Nadu Andhra Pradesh Uttar Pradesh

31,93426,126

20,112 17,175 14,079

Top 5 States in India with highest installed electricity generation capacity (in MW)

Top 5 States in India with highest installed electricity generation capacity (in MW)

Graph 2.1 :

The state of Maharashtra is at the top position in installed electricity generation capacity in India. By Sep 2013, Maharashtra has 31,934 MW of installed capacity. The state of Gujarat is on second position with 26,126 MW of installed electricity generation capacity followed by Tamil Nadu, Andhra Pradesh and Uttar Pradesh.

The detailed breakup of the total installed capacity is given below:

Capacity in MW (As on Sep 2013);

Type Maharashtra Gujarat Tamil Nadu Andhra Pradesh

Uttar Pradesh

Coal 19,939 15,738 8,476 8,573 10,523Gas 3,476 4,979 1,026 3,370 550

Diesel - 17 412 37 -Total

Thermal23,415 20,735 9,914 11,981 11,073

Nuclear 690 559 524 276 336Hydro 3,332 790 2,182 3,735 1,847RES 4,497 4,042 7,491 1,184 824

Grand Total 31,934 26,126 20,112 17,175 14,079

Table 2.1 :

Sector wise breakup is given below (Capacity in MW);

Sectors Maharashtra Gujarat Tamil Nadu Andhra Pradesh Uttar Pradesh

State 12,269 6,887 7,594 9,050 5,472

Private 13,038 15,590 8,687 4,968 3,649

Central 6,627 3,650 3,830 3,157 4,958

Total 31,934 26,126 20,112 17,175 14,079

Table 2.2 :

The state of Maharashtra, Gujarat and Tamil Nadu are highly industrialized. Therefore, their electricity demand is also higher than other states. If we compare total installed electricity generation capacity with the population of respective states, then following results are arrived at;

Gujarat Maharashtra Tamil Nadu Andhra Pradesh Uttar Pradesh

0.000430000000000001

0.00028 0.000280.0002

0.0000700000000000001

Per Capita Installed CapacityPer Capita Installed Capacity

Graph 2.2 :(Source for population data: Census 2011)

The state of Gujarat is at the top position in per capita installed electricity generation capacity followed by Maharashtra, Tamil Nadu, Andhra Pradesh and Uttar Pradesh.

All these five states contribute towards 48% of installed electricity generation capacity of the entire country.

Reference: Central Electricity Authority (Sep 2013)

2.2.2 Electricity Transmission

A power transmission cable operated by BEST in Mumbai , India.

Transmission of electricity is defined as bulk transfer of power over a long distance at high voltage, generally of 132kV and above. In India bulk transmission has increased from 3,708 ckm in 1950 to more than 166000ckm, out of which 75556ckm is transmitted by Power Grid Corporation of India (as on 30 Sep. 2010 ). The entire country has been divided into five regions for transmission systems, namely, Northern Region, North Eastern Region, Eastern Region, Southern Region and Western Region. The Interconnected transmission system within each region is also called the regional grid.

The transmission system planning in the country, in the past, had traditionally been linked to generation projects as part of the evacuation system. Ability of the power system to safely withstand a contingency without generation rescheduling or load-shedding was the main criteria for planning the transmission system. However, due to various reasons such as spatial development of load in the network, non-commissioning of load center generating units originally planned and deficit in reactive compensation, certain pockets in the power system could not safely operate even under normal conditions. This had necessitated backing down of generation and operating at a lower load generation balance in the past. Transmission planning has therefore moved away from the earlier generation evacuation system planning to integrate system planning.

While the predominant technology for electricity transmission and distribution has been Alternating Current (AC) technology, High Voltage Direct Current (HVDC) technology has also been used for interconnection of all regional grids across the country and for bulk transmission of power over long distances.

Certain provisions in the Electricity Act 2003 such as open access to the transmission and distribution network, recognition of power trading as a distinct activity, the liberal definition of a captive generating plant and provision for supply in rural areas are expected to introduce and encourage competition in the electricity sector. It is expected that all the above measures on the generation, transmission and distribution front would result in formation of a robust electricity grid in the country.

2.2.3 Electricity Distribution

The total installed generating capacity in the country is 210951.72MW, and the total number of consumers is over 146 million. Apart from an extensive transmission system network at 500kV HVDC, 400kV, 220kV, 132kV and 66kV which has developed to transmit the power from generating station to the grid substations, a vast network of sub transmission in distribution system has also come up for utilization of the power by the ultimate consumers.

However, due to lack of adequate investment on transmission and distribution (T&D) works, the T&D losses have been consistently on higher side, and reached to the level of 28.44% in the year 2008-09.The reduction of these losses was essential to bring economic viability to the State Utilities.

As the T&D loss was not able to capture all the losses in the net work, concept of Aggregate Technical and Commercial (AT&C) loss was introduced. AT&C loss captures technical as well as commercial losses in the network and is a true indicator of total losses in the system.

High technical losses in the system are primarily due to inadequate investments over the years for system improvement works, which has resulted in unplanned extensions of the distribution lines, overloading of the system elements like transformers and conductors, and lack of adequate reactive power support.

The commercial losses are mainly due to low metering efficiency, theft & pilferages. This may be eliminated by improving metering efficiency, proper energy accounting & auditing and improved billing & collection efficiency. Fixing of accountability of the personnel / feeder managers may help considerably in reduction of AT&C loss.

With the initiative of the Government of India and of the States, the Accelerated Power Development & Reform Programme (APDRP) was launched in 2001. APDRP meant to upgrade the distribution system, minimize transmission and distribution losses, improve metering and assign responsibility for the realization of user charges —has not been able to bring down losses to 15% by the end of 2007, as originally targeted in 2000-01.

The APDRP Programme is being restructured by the Government of India, so that the desired level of 15% AT&C loss could be achieved by the end of 11th plan.(estimated plan cost – Rs50000 crore)

The main objective of the Programme was to bring Aggregate Technical & Commercial (AT&C) losses below 15% in five years in urban and in high-density areas. The programme,

along with other initiatives of the Government of India and of the States, has led to reduction in the overall AT&C loss from 38.86% in 2001-02 to 28.44% in 2008-09.

Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY), which had a target of providing electricity to 125,000 villages and connecting 23 million below-poverty-line households across the country by 31 March, has also been faltering.

2.2.4 Supply and Demand of Power Sector in India

2.2.5 Challenges

High level of technical and commercial losses

New Project Management & Execution

Fuel sector reforms

Lack of skilled manpower

Clearances and Linkages

Land Acquisition

2.2.6 Future

India‘s power sector has a long way to go. India‘s fast-paced economic growth and its rapid rate of industrialization and urbanization have fuelled an increased demand for energy. It is estimated that if India continues to grow at the current rate, the Indian economy would emerge as the second largest in the world, next only to China, by the year 2050. It is therefore expected that, the demand for energy would also rise substantially in the future.

3. COMPANY PROFILE

3.1 ABOUT KALPATARU POWER GROUP

Kalpataru Group was established in 1969 by the group‘s promoter Mr. Mofatraj.P.Munot. Kalpataru Limited, the flagship real estate company of the Kalpataru group of companies, is one of the leading real estate development groups in India. The focus has been on the development of premium residential, commercial, retail, integrated townships, lifestyle gated communities and redevelopment projects primarily in the Mumbai Metropolitan Region (MMR) & Pune.

The Kalpataru Group has interests in real estate development, property and project management, engineering, procurement and construction (EPC) contracting for power transmission and infrastructure projects including road projects, warehousing and logistics. One of the key strengths is affiliation and relationship with the Kalpataru Group and the strong brand equity generated from the ―Kalpataru brand name.

Since 1969, Kalpataru has invested in the trust of its customers through the delivery of innovative designs, specific expertise and outstanding service quality.

Here is where you will find the most significant reasons why you should choose Kalpataru. Strong brand equity of the Kalpataru Group

Experienced and qualified management team with strong human resource practices

Emphasis on high quality, innovative and environment friendly projects

Focus on customer satisfaction and relationship

The Kalpataru group has made its presence felt across the world with its innovative spirit and diversified operations. Group companies have individually contributed significantly to our overall success.

Kalpataru Power Transmission Limited

JMC Projects (India) Limited

Shree Shubham Logistics Limited

Property Solutions India Private Limited

3.2 ABOUT KALPATARU POWER TRANSMISSION LIMITED (KPTL)

Kalpataru Power Transmission Limited (KPTL) was established in 1981, with the name HT Power structure, Kalpataru Power Transmission Limited adopted it’s current name in 1994. KPTL is a part of Kalpataru group. Kalpataru was started in 1969 by Mr. Mofatraj Munot with establishment of Kalpataru Properties Pvt. Ltd., today Kalpataru group has foray into Power transmission , Oil-gas pipeline, Tower business, Biomass, Power Distribution & Logistic business.

KPTL is a public limited Company based in Gandhinagar(Gujarat); engaged in the business of Designing, Testing, Fabricating / Galvanizing and Supplying towers, Construction and Commission of high voltage power transmission lines upto 1200 kv on a Turnkey/EPC basis in India and Overseas.

Turnkey is a contract under which a firm agrees to fully design, construct & equip a manufacturers/business/service facility and turn the project over to the client when it is ready for operation for remuneration. It is one of the special mode for International Business.

As an EPC contractor, company’s scope of work includes design, testing, fabrication, galvanizing of towers & construction activities from survey, foundations, erection to stringing & commissioning of lines besides procurement of items such as conductors , insulators, hardware accessories etc. Kalpataru is also participating substation contract on partnership basis. The Construction department has been conducting surveys, erection, foundation work and has set up over 6,500 km projects on Turnkey basis all over India.

The brief details of KALPATARU are as under :

Year of establishment : 1981Turnover , 2012-2013 : Rs.3335 CroresInstalled Capacity Plant-1 : 96000 MT Per annum Plant-2 : 30000 MT Per annum Plant – 3(Raipur) : 54000 MT Per annumLand Area Plant-1 : 56000 Mt. Squrs. Plant-2 : 26000 Mt. Squrs. Plant-3(Raipur) : 120000 Mt. SqursNumber of Employees Factory : 538 Field Staff : 700Total supplies (Approx.) March -13 : Over 11,50,000 MT +Total number of Design developed : More than 750Total number of Tower tested (approx) : 300Construction of Lines : More than 17500 + Kms

500 KV & up to 1200 KV : 2500 Kms 400 KV : 9000 Kms Below 400KV : 6500 Kms OPGW Stringing : 1300 KmsExport to countries : Philippines, Indonesia, Malaysia,

Thailand, Vietnam, Bangladesh, Nepal Syria, Abu Dhabi/UAE, Iraq, Qatar, Kuwait Ethiopia, Nigeria, Algeria, Zambia, Tanzania, Kenya, South Africa, Botswana USA, Canada, Peru, Mexico, Spain Australia & Turkey

Domestic customers – TL : PGCIL and various State Power Utilities like Gujarat, Rajasthan, Haryana , Chhattisgarh, Maharashtra, M.P., U.P, WB, Karnataka, Orissa, TN, AP, Adani Power, Essar etc.

Domestic customers – DMS : PGCIL and various State Power Utilities like Rajasthan, Maharashtra, U.P, WB, etc.

Countries, where Turnkey Contracts areexecuted / under execution

: Turkey, Zambia, Qatar, Algeria, Ethiopia, Tanzania, Philippines, Abu Dhabi, Kenya, Kuwait, South Africa and Ukraine

Domestic customers : BSNL , IMIL

KPTL has it’s own tower testing station and R&D center from 1998, near Gandhinagar. It has successfully tested more than 250 towers for various domestic and international clients. Tower testing center of KPTL ranked as one of the largest in India across globe.

3.3 MAJOR RECOGNITIONS FOR KALPATARU

KALPATARU has executed and is executing contracts for various International EPCcontractors including ABB SAE-Italy, ABB-Australia, Alstom-France, Cobra-Spain, ETAUAE, etc. Few of these clients have awarded repeat contracts to KALPATARU, whichacknowledges the satisfaction and confidence level of these clients with KALPATARU.KALPATARU is having ‘Two Star Trading House’ status duly recognized by the Ministry ofCommerce, Government of India.

KALPATARU has received following Awards for the excellence in exports. “Certificate of Export Excellence” on All India Basis from Engineering Export

Promotion Council, for the year 1995-96, 1996-97, 1997-98, 2000-01.2001-02 & 2002-03. Award for the Highest Exporters in the category of Exporters to New/Difficult

Markets for the Year 1999-2000 from Engineering Export Promotion Council. “Certificate of Merit” from the Government of India, Ministry of Commerce and

Industry for outstanding export performance during the year 1998-99. Award for the “Highest Growth in Exports for the year 1997-98” on All India Basis,

from Engineering Export Promotion Council. ‘D&B – ECGC Indian Exporters Excellence Award’ as the top Exporter in the

Engineering goods sector in June 2008.

3.4 FACILITIES AT KPTL

3.4.1 Design and Engineering Division

KALPATARU’s engineering department has to its credit design of more than 700 towers of voltage level of upto 800 KV. More than 250 towers have been successfully type tested. After commissioning of its own R&D centre in last quarter of 1998, KALPATARU has been carrying out in-house testing. The R&D centre is the most modern in its technology and has received wide spread appreciation from visiting utility engineers as well as internationally reputed EPC contractors.

3.4.2 Fabrication and Galvanizing

KALPATARU has two manufacturing plants at Gandhinagar with installed capacities of96000 MT and 30000 MT and third tower manufacturing unit at Raipur with capacity of 54000 MT per annum. The plants are equipped with most modern and sophisticated machinery including Computerized Numerical Controlled (CNC) machines for drilling, punching, cropping and stamping. CNC machines installed in the plant are purchased from FICEP, Italy and are used most effectively with least down time with available in-house industrial engineering know-how. For better quality and efficiency, KALPATARU’s plant in addition to CNC machines is equipped with automatic copying machines, Plate shearing machines and milling machines, which work to perfection.

The plants have in-house galvanizing facilities for carrying out Hot dip Galvanizing. These are specially designed to dip shorter pieces vertically for higher productions and also maintain the critical temperature band, which is essential to get good and uniform zinc coating. High

velocity burners and automatic temperature control equipments are installed to maintain the required steady temperature.

3.4.3 Construction

KALPATARU is having fully organized and well equipped construction unit employing number of technical persons including Engineers, Supervisors and skilled work force. The construction unit is capable of carrying out construction activities including foundation, tower erection and stringing in different terrains including hilly, rocky and water logged locations etc.

Construction unit is equipped with 19 Nos. of Tension Stringing Equipments capable of stringing of bundle conductors. Apart from Tension Stringing Equipment indicated above, all other necessary equipments are available with KALPATARU for carrying out construction. KALPATARU has already executed more than 15700 Kms. of transmission lines of various voltage levels throughout the country. Its Construction division has erected several 400 KV Double Circuit river crossing towers having heights upto 132 Meters. And weights of 150 MT, with span of 1560 Meter special pile foundation, which were casted for these towers.

3.4.4 Tower Testing Station

KALPATARU has tested more than 300 towers for various international and domestic clients of different voltage levels. In order to optimize the designs and to save the project time in view of dependency on outside units for tower testing, KALPATARU set up its own R&D centre with testing station in 1998, which is the most modern and largest testing station, capable of testing square as well rectangular base towers, having the following main features:

Testing Capacity : Single circuit tower up to 1200 KV Double circuit tower up to 800 KV

Tower base width : 27.0 mts X 27.0 mts maximum Base configuration : Square or Rectangle Maximum height of test tower : 85 mts Maximum cross arm spread : 40 mts Maximum uplift per Leg : 500 MTs Maximum compression per Leg : 625 MTs Safe over Turning Moment : 27,000 MTs – mts

3.4.5 Quality System

KALPATARU is totally quality-oriented organisation, where the inspections are carried out for raw material at every stage of process, including as well as for finished material.For its quality system, KALPATARU has been awarded ISO 9001 in December 1994.KALPATARU is totally quality-oriented organization, where the inspections are carried outfor raw material at every stage of process, including as well as for finished material. For its quality system, KALPATARU has been awarded ISO 9001 in December 1994.

Sr. No. Certificate No. Valid up to1. ISO 9001 : 2008 December 2015

[Unit – I, TL Division]

2. ISO 9001 : 2008ISO 14001 : 2004

February 2015[Unit – II, TL Division]

3. ISO 9001 : 2008ISO 14001 : 2004

February 2015[Raipur Plant, TL Division]

4. ISO 9001 : 2008 May 2014DMS Division

Table 3.1 : Quality certification Records of KPTL

KALPATARU is the first transmission line Tower Company in India to get this coveted andPrestigious certificate.

KALPATARU is having in-house Quality Control Department, which is managed by thequalified engineers, who are well organized to carry out the inspections at procurement stage as well as intermediate stages. The material testing laboratory is fully equipped with the testing facilities to check the coating of galvanizing in terms of uniformity and thickness, and mechanical properties of steel confirming to the International Standards as well as customers’ requirements.

3.4.6 Financial Strength

KALPATARU POWER TRANSMISSION LIMITED is a Public Limited Company. The shares are listed on major stock exchanges of the country. During the year 1994, when the shares were made public, it was 8 times over subscribed . KALPATARU is backed by the consortium of Bankers, who have extended various credit facilities including fund based as well as non-fund based to meet all kinds of project needs, on regular basis. Limits funded by the bankers include Bank Guarantees, Letter of Credit, Bill Discounting & Over drafting to match with the needs of KALPATARU to meet its operations.

KALPATARU enjoys “Standard Asset” status with bankers due to their performance.Therefore, in case of any extra ordinary requirement of project, bankers give special

consideration and the limits are sanctioned to meet the project cash flow. Our consortium bankers are “Union Bank of India”, “Oriental Bank of Commerce”, “Indian Bank”, “Export-Import Bank of India”, “State Bank of India” & “HDFC Bank Ltd.”.

Annual Turnover & Net worth figures for the last 5 years are as under:

Year Turnover Net Worth2008-09 1914 Cr. 833 Cr.2009-10 2643 Cr. 976 Cr.2010-11 2874 Cr. 1571 Cr.2011-12 3033 Cr. 1716 Cr.2012-13 3335 Cr. 1817 Cr.

Table 3.2 : Annual Turnover & Net worth of KPTL for the past 5 years

3.3.7 Diversification

In addition to strong presence in the field of turnkey execution of transmission line contracts in Indian and Overseas, Kalpataru diversified in Power generation (Wind & Biomass), distribution (APDRP projects), Real Estate, Telecom, Railway, Substation as well as Oil & Gas pipeline business. Further, majority financial stake is also acquired in JMC Projects Ltd, a leading civil contracting company based in Ahmedabad.

3.4 ORGANIZATION STRUCTURE OF KPTL

Fig. 3.1 : Organization structure at KPTL