Power Sector Investors’ Meet

1. Power Sector Investors’ Meet Ministry of Power, GoI

2. Outline of the presentation • Socio Economic Trends and Power Sector • Electricity Demand Outlook • Drivers of Growth • Myths Prevailing in the Sector • Key Issues and GoIInterventions

3. Socio Economic Trends ` Rising trend of Electric Mobility 1 5 3 Rapid Urbanization to drive Energy Demand Better Utility- Consumer Engagement Adoption of Cleaner Energy Sources 2 4 Adoption of electricity for cooking • Increased Consumption will boost Manufacturing for appliances. • Higher demand for products & services e.g. Smart Meters. • Accelerated demand for RES technologies and services. • E-mobility to create additional demand • Rural sector consumers to increasingly adopt electricity as primary fuel for cooking. • Rising trend of EV adoption to boost demand for EV Subsystems. Estimated No of Smart/Prepaid meters required ~70 Million, immediately • New Business segments to help integrate VRE penetration in grid. India: Appliance energy consumption projection 482 TWh/yr • Major contribution towards base demand. 380 TWh/yr Source: CEA, 2017 • EV Ancillary Services such as battery swapping, recycling to receive major boost. • Energy efficiency adoption to create new segments. Estimated* annual Energy Supply (BU) by RES 383 BU 2021 2026 Estimated Capacity requirement for HH cooking @20% adoption ~50 GW. Estimated Investment in EE, 2015-2040 $ 832 Bn. Source: World Bank, 2008 124 BU Estimated No of EVs by 2030 ~261 Million • Strong demand to propel energy intensive industries e.g. steel and cement 2022 2017 Source: IEA 2015 Source: MoP • New PPP ventures with Utilities Source: MoP *At Avg. PLF of 25% Source: NITI Ayog 2017, (Transformative Scenario) “The largest contribution to demand growth (2017-2040)- almost 30% - comes from India, whose share of global energy use rises to 11% by 2040 “(World Energy Demand 2040: 3305Mtoe) -IEA World Energy Outlook, 2017

4. Power Sector is enabling Social and Economic Transformation…. Increasing Per Capita Consumption 818 kWh (FY ’11) to 1122 kWh (FY ’17) Source: CEA 2017 Connecting the last household Requirement of additional 28,000 MW / 80,000 MUs per annum Source: SAUBHAGYA portal Making Utilities Efficient and Viable 25% reduction in DISCOMs financial losses in last 1 year Source: UDAY Portal 24X7 Affordable and Reliable Power Growth in energy billed by ~9% in FY17 against ~6% in FY16 Source: CEA, UDAY Portal Increasing transparency & Customer Inclusion Portals/APPslaunched along with a National Power Portal

5. Positive Electricity Demand Outlook c Present Power Demand growth CAGR: 5% Significant demand Potential: Similar Socio-Economic Conditions but different Annual per capita Consumption Expected Power Demand growth CAGR (FY’17 –FY ‘22: 6% Source: CEA and 19th EPS Source: WB analysis and CEA Electrification and Last Mile Connectivity 24X7 Power for All Key Drivers of Demand Reliability of Supply Key Drivers of Demand Growth Hours of Supply Electrification of Transport

6. Drivers of Growth

7. Drivers of Growth 1 Increase in the Supply Base 4 Improvement in Governance & Transparency 24X7 Affordable and Reliable Power 2 Expansion of Transmission Network 5 Adoption of Emerging Trends & Technology Increased Investment Opportunities 3 Distribution Reforms &System Strengthening

8. Increase in Supply Base Increase in Supply Base Coal Sector Transformation: Shortage to Surplus to Superior Coal Mines (Special Provisions) Act, 2015: SHAKTI: Power Sector Linkage Policy Transparent Allocation of coal blocks to through E Auction Coal Linkage through transparent auctions COAL SECTOR TRANSFORMATION Linkage policy Non Regulated sector: Coal production by CPSEs: Transparent Allocation through E-Auction to steel and cement sectors. Sustained increase in production has led to fuel reliability and lesser imports 2016-17 659 MT Annual Domestic Coal Production Trend 2015-16 639 MT 2014-15 609 MT 2013-14 566 MT 2012-13 556 MT 2011-12 540 MT Source: CEA

9. Increase in Supply Base Increase in Supply Base Opportunities in Generation: Catering future Base Load Renewable Sources 19th EPS Predicts a sustained growth in Energy and Peak Demand RE Installed Capacity CAGR (FY’10- FY‘18) : 22% Envisaged CAGR (FY’18- FY‘22) :22% Enhancing RE Capacity Source: Draft, NEP 2016 Investment Line-up in next 5-10 Years Source: 19th EPS 266 GW Addition • Sustained Growth in Demand is inclusive of increasing Adoption of Energy Efficiency Measure • 19th EPS is rather conservative compared with other credible sources. USD 310-350 Bn. 293 Global Firms Source: IBEF

10. Increase in Supply Base Increase in Supply Base Opportunities in Generation: Catering beyond Base Load Expected India Duck Curve with 20,000 MW Solar Generation Envisaged RE Capacity Entails higher Grid Penetration of Variable Sources Source: Draft, NEP 2016 Source: NLDC Smart Grid Technologies Ancillary Services • Peak Load Management • Human Error Avoidance • Frequency Management • Voltage Management RE Grid Integration: Opportunities Capacity Market Storage Devices • Demand Supply Balance • Excess RE Generation

11. Expansion of Transmission Network Expansion of Transmission Network Transmission: Growing in cohorts with Generation Target vs Actual Transmission Capacity Addition (‘000 ckm) Target vs Actual Transformation Capacity Addition (‘000 MVA) Source: CEA Source: CEA 3.2 Lakh Crore Investment Opportunity in Transmission Sector FY ‘18-’22 Source: CRISIL Source: KPMG analysis Intra state TBCB to fuel the next wave of Investments in Transmission

12. Distribution Reforms and System Strengthening Electrification and Last Mile Connectivity: Outlay INR 42,561 Crores (DDUGJY) • Segregation of Agriculture feeder • Outlay: 15,190 Crore • Universal Metering • Outlay: 3,859Crore • Access to Rural Households • Outlay: 10,246 Crore • System Strengthening Outlay: 9,997 Crore Non Paying Consumers Weak T&D Infra Household Electrification Status Village Electrification Status DDUGJY Un -Connected Households Remaining 4,07,92,171 Remaining 1,370 Electrified Till Now 2,79,18,695 Electrified Till Now 15,981 Un electrified Initially 18,452 Un electrified Initially 4,37,46,279 • Intensive electrification to connect Villages • Outlay: 1,333 Crore DDUGJY

13. Distribution Reforms and System Strengthening Electrification and Last Mile Connectivity Last mile connectivity to all un-electrified households in rural areas and poor households in urban areas • Outlay : Rs. 16,320 Crore • About 4 crore households to be electrified by March 2019 SAUBHAGYA Source: MoP Demand Potential to be realized through Electrification of Households ~4 Crore HHs to be Electrified ~28 GW Annual Demand to be realized by connecting all Households Demand Implication Source: MoP Households in Crores

14. Distribution Reforms and System Strengthening DISCOM Transformation and Strengthening IPDS UDAY • 24X7 Reliable & Affordable Supply • Commercially Viable Discoms • An integrated scheme for urban areas with outlay Rs 27,052 Crores, targeting • IT Enablement (Quality and Reliability) • System Strengthening • Eliminate stress of Banking Sector from DISCOM exposure Achievements under IPDS Key improvement under UDAY • IT enablement completed in 1367 towns; fresh sanctions for 1932 towns amounting to Rs 985 Crores. • Old System strengthening projects completed in 970 towns; fresh sanctions for 3616 towns. • Expected to boost industry performance, as IPDS directs interventions in urban areas where most industrial hubs/ centres are located Source: UDAY Portal UDAY Performance IPDS Source: MoP

15. Adoption of Emerging Trends and Technologies Emerging trends: Indicative Opportunity Sizing Ancillary Services Storage Smart Meters Electric Vehicles Decentralized Distributed Generation • High significance with increased VRE • Total quantum of spinning reserves (primary, secondary and tertiary) is more than 13,500 MW# • Currently, tertiary frequency control • Going forward, market based ancillary service framework • Estimates on EV battery domestic manufacturing under different stages as per report by Niti Ayog • -Battery pack1: Potential: 120 GWh • - End to end manufacturing2: Potential: 2410 GWh • Installation of 35 million by end of 2019 (envisaged under UDAY) • EESLprocuring 50 lakh smart meters for 2 States through competitive bidding • Increase base-load demand, higher PLF • Effective channel for renewable peak power • EV Estimates** as per report by Niti Ayog for 2030 • Business As Usual scenario: 26 million • Transformative scenario: 261 million • High prospects if initiated at the DISCOM level • In Solar Rooftop, 40 GW capacity addition target by 2022 • INR 23,450 Cr* central financial assistant for solar roof top installations proposed by MNRE • States aggregating capacities and inviting bids * Proposed Sristi Scheme, MNRE; **GDP Growth rate @ 7.4% CAGR; 1Cell import 2Cathodes import, # CERC Estimates for 2015

16. Likely Investment Potential in Major Segments Investment Potential b/w 2015-2040 as per India Energy Outlook, 2015 Source: India Energy Outlook, 2015 • On the Distribution side, new trends and emerging areas like Rooftop Solar, EVs, Smart meter, Storage, Ancillary Services etc. to open additional avenues of investment DISCOM turnaround through UDAY to improve the overall performance of power sector, thereby making it more investment friendly

17. Myths prevailing in the Sector

18. Myths prevailing in the Sector UDAY is not Performing • Reality: • UDAY is a 3 year long programme where performance of the States is contingent to the time spent under UDAY, as different states have joined UDAY at different points in time • Early results under UDAY are encouraging, with some distinct benefits on operations. Going forward, improvement in metering to enhance the performance • Performance slack in some states may be attributed to interlinked factors like lead time of interventions, data-lag and seasonality of operations etc. UDAY Performance UDAY is not creating demand • Reality: • UDAY is a supply side intervention which aims to release the latent demand, that exists in the system due to short supply of power to the consumers. • Under UDAY, total energy billed by DISCOMs increased by 9% in FY17* over FY16, indicating a considerable growth in consumption, which in the past years had grown around 5-6%. Growth in Energy Sales

19. Myths prevailing in the Sector Increase in rural connection under SAUBHAGYA, will result in increase in losses and low cost recovery • Reality: • SAUBHAGYA scheme would ensure energy access to all households; expected increase in demand of 28 GW. • Increase in Demand would lead to lower fixed costs due to higher PLFs. • 100% metering is integral to SAUBHAGYA ensuring theft control and revenue recovery Losses are being camouflaged in Agriculture Year wise total Input Energy, total Sales, Agriculture Sales in MUs and year wise Percentage Agriculture Sales 26.6% 26.6% 26.0% Source: CEA Above details are for 14 states contributing 95% of the Agriculture sales. Pecentage of Agricultural sales have remained largely in the same range from FY14 to FY16. Therefore, there is no tell-tale sign of losses being loaded on the Agricultural category.

20. Key Issues and Ongoing GoI Interventions

21. Key Issues and Ongoing GoI Interventions Stressed Projects (coal based) in Power Sector Current Status Major reasons for stress Action taken for resolution of Stress • Commissioned capacity: 24,405 MW • Under construction capacity: 15,725 MW • Total stressed capacity: 40,130 MW • Comprises 34* projects • Non-availability of fuel • No PPA tie-ups • Delayed payments by Discoms • Inability- infuse equity, service debt • Aggressive tariffs by bidders in PPAs • Regulatory/ contractual disputes • Legal Issues- auctioned coal mines • Other financial issues like non-compliance of Joint Lender Forum (JLF) decisions, RBI restrictions on funding of cost overrun, etc. • Shakti Scheme: To provide assured supply of coal through allocation and auctioning • Pilot scheme- to procure 2500 MW • Amendment in Mega Power Policy: • Competitive bidding for future PPAs, • Remove liquidity crunch with developers • -Ensuring project competitiveness • Steps by Lenders • - Joint lender forum, Flexible restructuring (5/25); invocation of SDR; Scheme for Sustainable Structuring of Stressed Assets (S4A) • - NCLTthrough IBC Act, 2016, SARFAESI, DRT. * As per list provided by Dept of Financial Services

22. Key Issues and Ongoing GoI Interventions Revival of Hydro Why hydro needs revival NEW HYDRO POLICY 2017 • Revival of stalled projects, improving investor confidence • Tariff affordability and push for PPAsthrough Hydropower Purchase Obligation • Hydropower qualities critical for future- Flexibility, Fastest ramping, Voltage regulation, Reactive power absorption, Black start. • Meeting peaking power and grid integration requirement for 175 GW RE. • Providing level playing field with Renewables • Bringing discipline- Project Construction/ Mgmt. • Water Storage- Flood moderation/Strategic Needs • The following have been proposed: • Declaring all hydropower (irrespective of size) as Renewable Energy. • Providing hydropower purchase obligations apart from solar RPO. • Financial support in the form of interest subvention/ equivalent support. • Financial support for storage/ flood moderation hydropower projects.

23. Annexures

24. UDAY

25. UDAY Performance UDAY has a clear impact towards improvement in operational efficiency and decline in overall losses Increase: 9.3% *Data as per PFC report Back to Myths UDAY snapshot Note: In all slides base year data of AT&C and GAP is as per PFC report (calculated as per revised methodology). Rest Data as per UDAY portal

26. UDAY Performance Operational Achievements in Key UDAY parameters till H1,FY18 *Note: States have filled data till Q1 FY18 Back to Myths UDAY snapshot

27. UDAY Performance Energy Billed by DISCOMs (MUs) in UDAY States increased at a relatively higher rate 9% in FY17 against 6% in FY16 Quarterly Performance Annual Performance MUs MUs 9% 10% MUs 6% MUs MUs Back to Myths UDAY snapshot Source: PFC Report FY 2015-16

28. UDAY Performance A total of 19 States have increased their tariff either in FY 16 or FY17. Tariff hikes have resulted in an additional revenue of Rs. 10,009 Cr. in FY 16 and Rs. 20,427 Cr. in FY17 State wise Tariff Hike FY 2016-17 FY 2015-16 UDAY: Pre and Post FY 2015-16 FY 2017-18 Back to Myths UDAY snapshot

29. IPDS

30. Integrated Power Development Scheme • Rs27,052 Cr sanctioned under IPDS - Rs 26,236 Cr System strengthening + Rs985 Cr IT + Rs 69 Cr Smart meters for Old Kashi Pilot • System Strengthening projects for 3616 towns – Rs. 26,236 Cr sanctioned including Rs. 16,314 Cr as GOI Grant, Rs. 4817 Cr released • Quantum of work envisaged for System Strengthening in Urban sector :- Back

31. DDUGJY

32. DeenDayalUpadhyayGraminJyotiYojana (DDUGJY)