OPPORTUNITY IN POWER SECTOR & GROWTH STRATEGY

BY SUNNY KUMAR M.B.A. (3RD SEM.)

PRESENTATION ON

INTRODUCTION

The power sector provides one of the most important ingredients for the development of a country. Availability of reliable and inexpensive power is critical for any nation’s sustained economic development.

Since independence, the Indian power sector has grown significantly in size and capacity with the installed capacity of power generation having increased by around 80 times, electricity generation by nearly 140 times and the total length of transmission lines by over 135 times.

The per capita annual consumption of electricity in India is one of the lowest in the world, at 704 KWH, and this is due to the low penetration of electricity at the household level. The Government of India has set a mission of achieving “Power for All” by 2012, where the demand for power is expected to be around 167 GW.

In order to contribute to the Government of India's goal of ‘Power for All’ by 2012, JSPL has planned further capacity expansion in the future and is working actively to increase domestic power production.

COMPANY STUDY:

Jindal Steel & Power Ltd.  JSPL is among a highest wealth creator in the country. JSPL is a

leading player in Steel, Power, Mining, Oil & Gas and Infrastructure. After consolidating its position as a leading player in the steel, power, mining and infrastructure sectors, JSPL has recently diversified into the oil & gas sector.

  With an annual turnover of US $2.1 billion (over Rs. 10,000

crore), Jindal Steel & Power Limited (JSPL) forms a part of the US $12 billion (over Rs. 60,000 crore) Jindal Group. The company operates across Asia, Africa, South America and Georgia.

 

Mission: Achieve business excellence through: The spirit of entrepreneurship and innovation Optimum utilization of resources Sustainable environment friendly procedures and practices The highest ethics and standards Hiring, developing and retaining the best people Maximizing returns to stakeholders Positive impact on the communities Core Values: Passion for People Business Excellence Integrity, Ownership & Sense of Belonging Sustainable Development JSPL has consistently tapped new opportunities by increasing production

capacity, diversifying investments, and leveraging its core capabilities to venture into new businesses. JSPL’s investment commitments in steel, power, oil & gas and mining have touched more than US $ 30 billion (Rs. 1,50,000 crore). The company, today, is the largest private sector investor in the state of Chhattisgarh with an investment commitment of over US$ 6.25 billion (Rs. 31,250 crore).

JPL has set up India’s first mega power project in the private sector at Raigarh, Chhattisgarh. The company has invested approximately. Rs. 4310 crore for setting up 1000 MW power plant which commenced commercial operation of the 1st unit in December 2007 and all four units (250 MW each) were commissioned within a span of nine months.

Besides this, JSPL is operating a 340 MW power plant on the premises of its steel plant in Raigarh.

Jharkhand : An 11 million tonne integrated steel plant and 2600 MW

captive power plant in phases, with an investment of US $ 6.00 billion (Rs. 30,000 crore).

Orissa: A 12.5 million tonne integrated steel plant and 2600 MW

captive power plant in phases, with an investment of US $ 8.00 billion (Rs. 40,000 crore). The first phase of 3 million tonne is expected to be commissioned by 2011.

In the Hydro sector, JPL has signed agreements for 6100 MW projects in Arunachal Pradesh in joint venture with Hydro Power Development Corporation of Arunachal Pradesh Limited(HPDCAPL)

Projects under implementation: Thermal Projects 2400 MW coal based power project in Tamnar, Raigarh, Chhattisgarh 1320 MW coal based power project in Dumka, Jharkhand 660 MW coal based power project in Godda, Jharkhand   Hydroelectric Projects 4000 MW hydroelectric power project in Etalin, Arunachal Pradesh 500 MW hydroelectric power project in Attunli, Arunachal Pradesh 1600 MW hydroelectric power project in Subansiri Middle, Arunachal Pradesh Projects under planning, signed an MoU or have been granted a

survey license. 2640 MW power project in Jharkhand 1320 MW power project in Angul, Odisha and

SWOT ANALYSIS OF JSPL:

External

Opportunity Threat

1 Expanding capacity to meet huge power demand

Gas & coal unavailability

2 Diversification in fuel business Competition with cost effective companies from other countries

3 Take over of poor performing assets Gas & coal unavailability

4 Diversification in renewable energy business

Strict environmental norms

5 Competitive bidding from 2011

Internal

Strength Weakness

1 Exposure of coal & steel plants Non exposure in renewable

2 Market experience Not vertical integrated

3 Small & agile company Not country wide network

4 Highly skilled & experienced manpower

5 strong balance sheet

COMPETITOR ANALYSIS

NTPC Ltd. NTPC is largest power utility of India with an installed capacity of

32194 MW as on 07.08.2010. NTPC plans to become 50000 by 2012 & 75000 plus company by 2017. The company is contributing around 28.6 % of the total electricity generated in the country with installed capacity of less than 20%. PLF of the company’s coal based power plants was 90.81% during 2009-10. Gross revenue is 49478 cr. & Net profit Rs. 86565 million. NTPC has done diversification in hydro power & coal mining etc. In addition to its thermal power generation business and also plans to enter nuclear power generation. Company also plans to go Global. With a dedicated manpower of around 25000, NTPC has achieved new heights. Company has been ranked among the “top 10 great place to work for” in the country in the business world survey.

SWOT ANALYSIS OF NTPCExternal

Opportunity Threat

1 Service business of O&M, Efficiency improvements etc

Competitive bidding from 2012

2 Expanding in different countries Competition with cost effective companies

3 Diversification in fuel business Gas & coal unavailability

4 Take over of poor performing assets Strict environmental norms

5 Diversification in renewable energy business

Internal

Strength Weakness

1 Exposure of gas, coal & hydro power plants Non exposure in nuclear & renewable

2 Largest market share Not vertical integrated

3 Excellent tract record of erection to O&M Operation attuned to cost plus of tariff

4 Highly skilled & experienced manpower Constraint of being a PSU

5 Maharatna status Inertia & process delay in decision

6 strong balance sheet

BUSINESS ENVIRONMENT:

Indian GDP growth rate is around 8%. So power sector needs to grow at the rate of 10%. Demand may exceed even this.

Power sector would have to add over 1,00,000 MW of additional capacity by the year 2012 to meet the demand arising out of a combination of factors such as population growth, improved standards of living and increased industrial activity.

CHANGING FUEL SCENARIO

Coal Production Coal will continue to be a main fuel in the power sector in India. Due to more capacity

addition & increased in Plant load factor of plants, a scarcity for coal is expected to increase significantly in the future.

Gas: Demand for gas in India for power generation could also significantly increase the future. Liquid fuels Diesel based power is more expensive and is used for smaller generators for self use. Hydro As per Government of India, the total hydroelectric potential in India is 1,50,000 MW, of

which, around 17 % has been developed and another 7-8% is under development. Small and medium sized hydroelectric power plants are especially suited for remote and inaccessible areas.

Nuclear Capital costs for nuclear units are very high but fuel cost is favorable. Wind Power India is the fifth largest wind power producing nation in the world after Germany, USA,

Spain and Denmark. Commercial projects have been established mainly in Tamil Nadu, Maharashtra, Gujarat, Andhra Pradesh and Karnataka.

Fuel Cells Fuel cells can provide an attractive alternative for exploiting the advantages of distributed

Generation in the future.

NATIONAL ELECTRICITY POLICY

The salient features of the Electricity Policy: Access to Electricity Available for all households in next five years. Availability of Power Demand to be fully met by 2012. Supply of Reliable and Quality Power of specified standards at

reasonable rates. Per capita availability of electricity to be increased to over 1000 units

by 2012. Minimum lifeline consumption of 1 unit/household/day as a merit good

by year 2012. Choice of fuel for thermal generation to be based on economics of

generation and supply of electricity. Development of National Grid. Tariff of Generation and Transmission Projects in Private Sector

determined through competitive bidding to be accepted by Regulatory Commission.

PRIVATE INVESTMENTS IN POWER SECTOR

The private investment could not come forward till recently due to poor financial performance of the SEB’s and the constraining regulatory environment. But now private player are coming in a big way through ultra mega power projects and renewable energy projects.The intention of UMPP project is to provide power to the consumers at the minimum cost. The cost of the project would be lower due to the economy of scale.

OVERVIEW OF THE INDIAN ECONOMY & DEMAND OF ELECTRICITY:

India currently ranks as the world’s eleventh greatest energy producer, accounting for about 2.4% of the world’s total annual energy production. But over 40% of households have no consistent supply of commercial energy even for lighting. So the demand/consumption of electricity is not a problem.

 

INDIAN ENERGY SECURITY:

With GDP growth rates, consumption of energy in India is catching up as well. But the country is finding it increasingly difficult to source all the oil, coal, natural gas and electricity it needs.

Coal in India: In India, coal is the most abundant available fossil fuel and provides a

substantial part of energy needs. It is used for power generation, to supply energy to industry as well as for domestic needs. India is highly dependent on coal for meeting its commercial energy requirements. Presently about 54% of power generated in the country is from coal fired boilers. About 66% of the coal produced is consumed by Thermal Power Plants. This pattern is likely to continue. India now ranks as the third largest coal producer of the World next only to China and USA.

Most of the power plants built in the last decade in the world was fueled by natural gas due to its availability, low cost and low emissions. But in India, its availability is a problem and also fertilizer sector gets first priority.

AVAILABLE TECHNOLOGY FOR ELECTRICITY:

With consumable Fuels With Renewable or no Fuels A. Fossil Fuels A. Renewable Source1. Coal 1. Hydro power2. Natural Gas 2. Wind Energy3. Oils 3. Solar PowerB. Other Fuels 4. Geo-thermal Energy4. Nuclear Power 5. Tidal Power5. Fuel Cells 6. Energy from Biomass6. Hydrogen

ECONOMICS OF GENERATION:

Solar: The estimated capital cost of setting up a Solar Power Plant is in the range of Rs. 20 crore to 30 crores per MW. The cost of generation is around Rs.15 to Rs.18 per unit,depending upon technology efficiency etc.

Hydro: Hydro cost is lowest. It is well below Rs. 2.5 per Kwh even for new units.The estimated hydro potential in the country is 1,50,000 MW out of which only 26,910 MW amounting to 18% of the total potential has been harnessed.

Wind power : The flow of air masses is harvested by wind turbines that transform its kinetic energy into electrical energy. The available wind energy estimates range from 300 TW to 870 TW. Just 5% of the available wind energy can supply the current worldwide energy needs. Most of this wind energy is available over the open ocean.

Geothermal : Geothermal energy harnesses the heat energy present underneath the Earth. Two wells are drilled. One well injects water into the ground to provide water. The hot rocks heat the water to produce steam which comes from second well & is used to drive turbines & electric generators. Geothermal energy is used commercially in over 70 countries.

Biomass: fuel is burned in a boiler to produce high-pressure steam. This steam is introduced into a steam turbine. Steam flow causes the turbine to rotate and electricity is produced. Bio-fuels represent a sustainable partial replacement for fossil fuels

Wave and tidal power:Tidal forces created on earth by the relative motion of Moon (68%) and the Sun (32%). The energy fluxes of waves add up to 3 TW. 0.3 GW of electricity is now produced by tidal power.

Coal: Coal is the most abundant fossil fuel. According to the International Energy Agency the proven reserves of coal are around 909 billion tones, which could sustain at the current production rate for 155 years. Global warming gases and pollutants are the concerns.

Oil & Gas: Advanced technologies: It is estimated that there may be 57 ZJ of oil reserves on Earth.Over 68% of oil and 67% of gas reserves are concentrated in the Middle East and Russia.

RESEARCH PROBLEM:

The research was centered towards answering the questions

1. To assess what are the difficulties/constraints of power company growth?

2. The new environmental changes happening in the power sector and future trends?

3. Its impact on the growth of power company ? 4. Private company capability & resources to turn

opportunity into a success story 5. Employees capability and willing to assist in the

change process?

RESEARCH TOOL

Sample Since focus of this study was the perception about the company

growth strategy so focused group considered was literate persons. Random samples of 120 persons taken.

The responses were scanned for strategies and ten persons had to be contacted again to provide missing data in some of the questions.

Primary data Survey provided the primary data for quantitative research and

hypotheses testing. The literature survey provided secondary data for qualitative analysis.

Limitation One of the limitations of study was that large no. responses were

received from a particular place. This may introduce some bias in the results. Some respondents were not fully aware of the future implications and consequences of adopting the new business model. Thus there existed a knowledge gap to this extent in the interpretation of the research questionnaire.

 

PRIMARY RESEARCH DATA AND ANALYSIS

The objective of this study is to establish a growth strategy for company. An appropriate designed questionnaire was propagated to collect primary data from a cross section of different persons. The respondents were requested to give their free and frank view as their personal opinion was felt to be the best response our purpose. The survey needed intense efforts by personal visits to the respondents with considerable persuasion to obtain their valued opinion on each query.

  Profile of the respondents surveyed for the project   No. VALID 120   MISSING 0   During the survey, samples were drawn from executives and frequency distribution

of levels in various categories is shown below.    

Thank You