Gives a glimpse of thermal power sectors Business Aspects with basic financial perspective

1. INDIAN
THERMAL
POWER
SECTOR:
BUSINESS
ASPECTS
Finance Perspective
By
Vishwateja Bodla
MBA Power Management
SoB, UPES

2. Introduction
Present Status
Bed Rock of Indian Power Sector
Installed Capacity: 2,22,662.59 MW of 3,45,494 MW 65%
Coal: 1,96, 957.50 MW Gas: 24,867.46 MW Diesel: 837.63 MW
Units Produced: 82.18 BU out of 116.324 BU
Generation of Renewable Sources: 14 BU
Share of NTPC: 40,335 MW + 7,551 MW
Rest is distributed among State and Private Generating Stations
*Data from CEA Executive Summary July 2018

3. Features:
Technology
Mostly Sub CriticalTechnology is Installed
Sub CriticalTechnology:
up to 374 Degree C and 221 Kg/cm2 Efficiency up to 36%
Super CriticalTechnology:
up to 538-565 Degree C and above 221 Kg/cm2 Efficiency up to 38%
Ultra Super CriticalTechnology:
up to 700 Degree C and 350 Kg/Cm2 Efficiency up to 39%
Current trend: Super CriticalTechnology

4. Features:
Investment Requirement:
4-6 Cr/MW Depending on location
Land Requirement:
Depends on Capacity and large scale capacities utilize less than 1 Acre for 1 MW
Ex: 4000 MW required 2500 Acres of land
Water Requirement:
7 m3/h/MW without ash water recirculation and 5 m3/h/MW with ash water recirculation

5. Features:
Man Power Requirement:
Generally 6-8 people are required in setting up one MW generation Capacity
Man-MW Ratio: Generally is a key indicator to assess the efficiency of work force in the power
sector
Currently it is about 0.7 to 0.8 and in some cases it is about 0.4
Commissioning Period*:
*Data from CERC 2014-19 Regulations
Green field plants Extension Plants
500/600 MW 44 months 42 months
660/800 MW 52 months 50 months

6. Operational Parameters
Plant Availability Factor:
Depicts the capacity up to whichGeneration can be done out of installed capacity
Ex: 1000 MW Availability: 900 MW (because of non availability of coal)
Plant Load Factor:
Depicts the capacity which is actually utilized in production of electricity
Ex: 1000 MW Availability: 900 MW Loaded up to: 650 MW because of load
CurrentTrends: Falling PLFs at 60%

7. Financial Parameters
Loan Repayment Period Allowed: 12Years
Capital Structure: 70:30
Leverage Possible: 80: 20
Depreciation: Up to 90% allowable
Return on Investment:Two Possible Methods RoE and RoCE
Method followed RoE
Rate of Return on Equity: PostTax 15.5 %
Difference between PostTax and PreTax?

8. Financial Parameters
Debt:
 Banks
 Financial Institutions
 Debt Markets
Banks:
– MCLR+ Premium:
Marginal of Funds based Lending Rate introduced from April 1, 2016 to improve transparency
– Base Rate:
Introduced from 1st July 2011
– BPLR:
Prior to Base rate

9. Financial Parameters
Financial Institutions: National and international
National:
Rural ElectrificationCorporation:
Power FinanceCorporation
International:
World Bank Group, ADB etc, used to financeThermal Projects but now it is a rare event as
investments are shifted to more Clean fuels.
Debt Markets:
Some Companies raise funds through bonds which usually help them in optimizing the cost of debt
as the interest rates of banks are higher than coupon rates of bonds.

10. Demand
and Supply
at current
Position
• According to National Electricity Plan,Volume I
Generation released in March 2018
– Requirement ofThermal: In Period 2017-22, 6445 MW as
already 47,885 MW is at various stages of construction
– In Period 2022-27, 46420 MW is required in order to cater
increased Demand and De Commissioned Capacity
– Decommissioning Capacity: 2017-22 22,716 MW
( 5927 MW due to age Rest due to inadequate space to
install FGD)
2022-27 25,572 MW

11. Raw
Material:
Coal
• Production of coal: 662.79 Million MetricTons
• Industries in India consumed 841.56 MT of raw coal
• India Electricity Generation 527.26 MT
• Average GCV of indian Coal is about 4500 Kcal/Kg
• Utilizes about 0.7 Kg/Unit of Energy produced.
• Plants go for Blending of Coal with imported as it has
higher calorific value
• Australia: 6500 Kcal/Kg, Indonesia, South Africa etc.

12. Project
Initiation
• Demand Assessment
• Section 62 and 63 of EA 2003
• Section 62: Cost BasedTariff Secured PPA as per
MoU between State GeneratingCompany & Discom
• Section 63: Competitive Bidding Bidding by DISCOMs
• Clearances: About 63 clearances required even though
it is de licensed
• Financial Closure & Investment Approval:
• Central Generators: CCEA Private
Generators: Board of Company
CCEA: Cabinet Committee on EconomicAffairs

13. Project
Initiation
• PPA: Power PurchaseAgreement
– LongTerm Contract Forward Contract generally for 25
Years
– Legal Agreement
– Provision for fixed cost recovery to the Generator
– Payment terms
– Termination Clauses
– Force Majeure measures

14. Project
Execution
• EPC Mode
– Design
– Engineering
– Procurement
– Construction
– Commissioning
• In House Mode

15. Revenue
Model
• Tariff to be determined by Appropriate Commissions
• Fixed, variable charges
• Fixed Charges:
– Interest on Debt,Working Capital, Depreciation, RoE and
O&M Expenses
• Variable Charges:
– Landed Fuel Cost
• Recovery based on Availability
• Variable Charges: Recovery based on Load

16. Investment
s in course
of time
• Additional Capitalization
• Renovation & Modernization
– Environmental Norms
– Energy Efficiency
– Upgradation of ExistingCapacity

17. Current
Concerns to
be taken
care of
• Improved Environmental
Norms: For Installation of
PollutionControl Systems
– Ministry of Environment
& Forest Affairs
– RequireAdditional
Capital Requirement
– RequiresAdditional
Land
• Energy Efficiency Norms
– PAT Scheme
– RequireAdditional
Capital
• CoalAvailability
• Flexible Ramping up and
Ramping Down
– RequireAdditional
Capital
• Water Availability
• LandAvailability
• TransmissionAvailability
• Surplus situation
demanding Short Run
Power Purchase
Agreements
• Cancellation of PPAs
because of low cost
Renewables

18. Thank You