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Challenges in Building the 21st Century Energy infrastructure in a Low Carbon Economy

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CHALLENGES IN A PATH TO DISCUSES THE mANAGEMENT OF RISKS TO A SUSTAINABLE ENERGY INFRASTRUCTURE BY 2030.

CHALLENGES IN A PATH TO DISCUSES THE mANAGEMENT OF RISKS TO A SUSTAINABLE ENERGY INFRASTRUCTURE BY 2030.

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  • 1. Challenges in Building the 21st Century Energy Infrastructure Management of Risks and Constraints of Low Carbon Economy Presented By: Himadri BanerjiConfidentialThis document is solely for the use of its intended audience. No part of it may becirculated, quoted or reproduced without the prior approval of EcoUrja Private Ltd.
  • 2. India Infrastructure Country OutlookConfidentialThis document is solely for the use of its intended audience. No part of it may becirculated, quoted or reproduced without the prior approval of EcoUrja Private Ltd.
  • 3. Planned Infrastructure Investments: India
  • 4. Infrastructure Investment Projections
  • 5. Present Status: A Visible Gap Target vs. Actual Continuing mismatch between government infrastructure development targets and realized infrastructure development due to constraints in project approval, lending, delivery and operations. A continuation of some of the excesses of the pre‐crisis pre‐ years, e.g. high debt loads and minimum contingencies for project construction and completion risks is furtherConfidential aggravating matters.This document is solely for the use of its intended audience. No part of it may becirculated, quoted or reproduced without the prior approval of EcoUrja Private Ltd.
  • 6. The informal System of Jugaad “India’s informal system of jugaad allows counterparties to a project to recognize the systemic problems affecting most infrastructure projects and evolve workable solutions on a case‐by‐ case‐by‐case basis (whereas in other developed markets, such situations may be deemed as contractual failures, leading to the collapse of the projects).”ConfidentialThis document is solely for the use of its intended audience. No part of it may becirculated, quoted or reproduced without the prior approval of EcoUrja Private Ltd.
  • 7. Country Outlook India: Ignore to Redress Common Project Risks Financing structures and debt levels do not seem to adequately address Common project risks (a) Propensity for execution delays (b) Cost over run (c) Demand overestimation (d) Lack of a strong regime for contract observance and enforcement.ConfidentialThis document is solely for the use of its intended audience. No part of it may becirculated, quoted or reproduced without the prior approval of EcoUrja Private Ltd.
  • 8. Sector Scenario Power Sector ProjectsConfidentialThis document is solely for the use of its intended audience. No part of it may becirculated, quoted or reproduced without the prior approval of EcoUrja Private Ltd.
  • 9. Five Yr Plan: Power Production Target Vs achievements
  • 10. Region Wise: Power Generation and Peak Deficit Eastern Regions Status Western Regions Status
  • 11. Region Wise: Power Generation and Peak Deficit North- Eastern Regions Status Southen Regions Status
  • 12. Region-Region-wise Installed Generating Capacity: India
  • 13. Electricity Demand Projections: India
  • 14. Electricity Demand Vs Achievements: India
  • 15. Power Sector Projects (EPC) route for construction, companies are choosing to break down the entire activityinto packages System against the best practices in developed countries New Merchant power plants as unrelated diversification of the promoters Many projects continue to depend on Bharat Heavy Electrical Ltd (BHEL) for the supply ofthe critical boiler‐turbine‐generator (BTG) island, even though it has an overflowing order ‐ ‐book Confidential This document is solely for the use of its intended audience. No part of it may be circulated, quoted or reproduced without the prior approval of EcoUrja Private Ltd.
  • 16. What to Watch Financial health of state government‐owned ‐utility off‐take counterparties. ‐ Visible constraints on land availability,equipment vendor capacity, and sustainable fuelsupplies for projects under construction Capacity of domestic commercial bank sector tocontinue to finance mega power projects, givenlending exposure limits. Impact, if any, of the on‐going Climate Change ‐Summit 2009 discussions for restricting carbonemissions.
  • 17. The Challenges to Managing Growth of Infrastructure:What is needed?1. Innovative Approaches to Project Finance Needed Encourage public private partnerships (PPPs) to raise additionalfinancing. Encourage investment by pension funds and other large institutionalinvestors. Make greater use of user charges for funding infrastructure. Diversify and expand traditional revenue-raising sources. Explore the funding possibilities offered by land value capture.
  • 18. The Challenges to Managing Growth of Infrastructure: Improving the Regulatory and Institutional Framework Conditions Examine the legal and regulatory framework conditions with a view to encouraging the emergence of fresh sources of capital and new business models for infrastructure. infrastructure. Avoid Patronization and Corrupt Practices Place greater emphasis on the reliability of infrastructure functioning. functioning. Strengthen the framework for standards. standards. Explore new institutional arrangements that may provide more effective and efficient financing and or delivery of infrastructure. infrastructure.
  • 19. The Challenges to Managing Growth of Infrastructure: Strengthening Governance and Strategic Planning Support the development of long-term, coordinated approaches to infrastructure development. Reduce the vulnerability of long-term infrastructure planning to short- term thinking. Ensure the involvement of a broader range of stakeholders in the infrastructure process. Step up efforts to reduce the length and complexity of the planning- to-implementation process. Strengthen international co-operation for trans-border infrastructure.
  • 20. The Challenges to Managing Growth of Infrastructure:Building Capacity in Executing Project and Managing Financial andProject Risks Financing constraints Land acquisition problems Delays in the supply of equipment Environmental and governmental clearances Problems of technology selection
  • 21. The Challenges to Managing Growth of Infrastructure: Building Capacity in Executing Project and Managing Financial and Project Risks Three factors in particular have contributed to the perception of this dearth of execution capacity being a key Risk - Growth in new project construction activity - increasing scale and complexity of projects - A small base of large, qualified developers available to accomplish this task.
  • 22. The Challenges to Managing Growth of Infrastructure: Managing Risks in Execution of Infrastructure ProjectsRisk management is an essential and integral part of projectmanagement in major construction projects Risks which have the major impact on any infrastructure projects. Financial risk Project Risk
  • 23. The Challenges to Managing Growth of Infrastructure: Managing Financial RiskThree main considerations with respect to financial risk. Impact of higher debt loads and interest rates Risk of Cash flows The mix of equity in the capital structure
  • 24. The Challenges to Managing Growth of Infrastructure:Managing Project Risk: Probabilistic Risk Assessment (PRA) Evaluation of the value of project risk Probability of Completing activities project in Time and Cost Criticality of Activities Monte Carlo Simulation Techniques
  • 25. The Challenges to Managing Growth of Infrastructure:Infrastructure Growth Constraints and Low Carbon Economy India contributes about 4 per cent of the total global CO2 emissions and thecountry has conveyed that per capita emission levels would never exceed theaverage levels of developed countries. Indias per capita carbon dioxide emissions will increase by nearly three- three-fold to 3.5 tones by 2030 Target Carbon emission intensity to decline by 20-25 per cent by 20- 2020
  • 26. The Challenges to Managing Growth of Infrastructure Infrastructure Growth Constraints and Low Carbon Economy• Emerging markets will have the largest growth in CO2 emissions up to 2025
  • 27. Infrastructure Development in Low carbon Economy Infrastructure Development has traditionally been carbon intensive.• The energy sector is responsible for 58% of the country’s total green house gas (GHG) gross emissions of 1.9 billion tons of CO2eq• electricity: 38%• transport: 8%• petroleum refining: 5%• Urban and rural residential: 7%
  • 28. The low carbon pathway :India ever green Changing the institutional framework financing and creating appropriate incentives for adoption of cleaner and green technologies and practice Target reduction in energy intensity through :• Improvements in agricultural and non agricultural practice and rural areas• Development of local power generation capacities based on renewable recourses to service unserved areas and reduction pressure on grid• Improvements in practices in urban manufacturing ,construction and service
  • 29. As an example, there are a range of policies and policy instruments at the state level that have been passed in recent years with the mandate to promote renewable energy projects and initiatives. Solar Policy 2011 is the latest example. However, when it comes to the legal framework it is the Electricity Act, 2003 and more specifically, the New Tariff Policy (2006) under the Act—which states that a minimum percentage of energy, as Act— specified by the Regulatory Commission, is to be purchased from renewable energy sources—that alone contains a legally sources— binding obligation requiring the creation, transmission, and deployment of renewable energy to address the country’s energy and environmental insecurity.ConfidentialThis document is solely for the use of its intended audience. No part of it may becirculated, quoted or reproduced without the prior approval of EcoUrja Private Ltd.
  • 30. Current transportation System: India
  • 31. Investment Challenges in Logistic Growth:India
  • 32. NILP: From Strategy to Implementation
  • 33. Model Mix for Balanced Strategy: Logistic India
  • 34. THANK YOUConfidentialThis document is solely for the use of its intended audience. No part of it may becirculated, quoted or reproduced without the prior approval of EcoUrja Private Ltd.

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