Experiences in Distribution Privatization

Experiences in Distribution Privatization

Ramesh Narayanan Chief Executive Officer BSES Yamuna Power Ltd.

The 13th Regulators & Policymakers Retreat

Aug’ 2012, Goa

Presentation Flow

Demand Supply Mismatch

Generation

Reforms

12th Five Year plan

Distribution Reforms

A Glimpse

Challenges

Finance

Technology

Manpower

Strategy

Innovation

For Distribution Turnaround

2 BSES Yamuna Power Ltd.

DEMAND SUPPLY MISMATCH


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Installed Capacity : 2,06,456 MW

Grid Demand : 1,25,000 MW

PROBLEM : Power Demand Constraints

BSES Yamuna Power Ltd.

HUGE Suppressed & Unaddressed Demand

Suppressed Demand in the form of

Huge piling of the New connection pendency (other than private utilities)

More than 30% of the 2 Crs pumpset run on DG Sets

Majority of the un-electrified railway corridors (other than main trunk lines)

Unavailability of efficient Public transport system : Metro, Monorail etc.

Demand Growth : 5 TIMES

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India Vs China [ Yr 1991 to Yr 2012]


Installed Capacity : 950,000 MW


YEAR 1991

YEAR 2012



Installed Capacity : 66,000 MW

Grid Demand : 57,000 MW

Demand DOUBLED

CHINA INDIA

Economic Development

* Data Source : www.wikipedia.org & other reports

http://www.wikipedia.org/

GENERATION REFORMS


GENERATION : accelerated growth

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Installed capacity as on Jul’12 : 2,06,456 MW

YEAR 1991-92: Liberalization Policy by Govt. of India

New Policy Framework to foster Accelerated Growth in Power.

Private / FDI participation for the Generation Sector


So

u r

ce :

CE

A

GENERATION Reforms : Enablers

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2012: Installed capacity: 2,06,456 MW

1991: Installed Capacity: 66,00 MW

ADMINISTRATIVE FRAMEWORK

Statutory clearances sized up & streamlined.

Investment Promotion Cell in MoP.

Time bound clearances

LEGAL FRAMEWORK

Standardization of Indian Arbitration & Conciliation

Act, 1996 in line with UNCITRAL, 1976

Ease in Foreign Direct Investments

FINANCE FRAMEWORK

Concept of SPV / JV / Project based Financing

Assured Return on Equity

Cost reflective Two Part Tariff

Incentives - tax holiday, duties & taxes waivers

OBJECTIVE : Impetus to the Power GENERATION


GENERATION : Global Ranking


India to Rank No 3 by 2017

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12TH FIVE YEAR PLAN [ 2012-2017 ]

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Generation

Sector 8th plan 9th Plan 10th Plan 11th Plan 12th Plan

Central 50% 24% 57% 34% 28%

State 42% 50% 30% 34% 15%

Private 8% 26% 13% 32% 57%

TOTAL 100% 100% 100% 100% 100%

Transmission 1,36,000 CKm of Transmission Lines

2,95,000 MVA of Transformation Capacity

Distribution Cater to additional demand for : 88,000 MW

2.1 times the generation capacity ; Cost: 2.3 Crs / MW

Over 4,50,000 Crs of Investment



~88,000 MW addition


Over Rs 11,00,000 Crs

DISTRIBUTION : A GLIMPSE


DISTRIBUTION Sector : Status

Distribution Reform Area Segregation

*Including Delhi

Major Private Player engaged as Distribution Licensee

Kolkata, Mumbai, Delhi, Ahmedabad, Surat, Greater Noida, Orissa (3/4th of the state)

Major Private Player engaged as Distribution Franchisee

Agra, Bhiwandi, Kanpur, Nagpur, Aurangabad, Gwalior, Sagar etc.

Private Sector Participation a meager 4%

BSES Yamuna Power Ltd. 12

Distribution Losses @ All India Level [FY09]

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The average AT&C losses (%) National Level for FY 09 : 28.44% (Source : PFC report)

National

Average


Distribution Challenges

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Finance Technology Man Power

Strategy Innovation


Finance

Rs. 2.3 Cr is needed to create 1MW Distribution infrastructure

For 1,08,000 MW ( 12th Plan Demand + Existing Gap of 10%), sector requires Rs. 5,20,000 Crores

Debt: Rs. 3,65,000 Crs. (70%) ; Equity: Rs. 1,55,000 Crs. (30%)


Finance

• Fixed RoE (14%)

• Margin pressure Regulated Business

• Poor balance sheet

• Unpredictable revenue Difficult to raise funds

• Increased private participation

• Allowing reasonable profits Requirement


Dedicated Common Distribution Infrastructure Fund to be floated by government

Funds to be made available at attractive rates to Discoms

Easy access to funds like JNURM, R-APDRP, RGGVY etc

Finance


• 220/66 KV

• 66/11 KV

• 11/0.4 KV

Existing

• 220/33 KV

• 33/0.4 KV

Proposed

• Land

• CAPEX

• Manpower

• O&M

Advantages

Technology


Requirement

• 5 person /MW for urban areas

• 10-15 persons per MW for rural areas

Requirement for 12th plan

• For 88,000 MW ( Taking 7 persons per MW)

• 6,16,000 persons needed

Skill Requirement

• 70% skilled

• 4,30,000 skilled persons

Man Power


Training & Development

Distribution Specific

Special courses at ITIs, NPTI, IITs and IIMs

Skill Set

Knowledge

Attitude

Values/Culture

People interaction

Man Power


Raising the per capita consumption of power

Open & flexible

Energy Markets

Reduction of AT&C losses & Cost of supply

Improving supply Quality & Reliability

Strategy


Advanced Research

Remote metering

People less customer care

Money less transaction

Automation (SCADA etc.)

Safety

O&M practices

Research and Development

Dedicated centers Separate Fund Arrangement

Innovation


AN APPROACH


Comparison : Gen-Trans-Dist

Parameter Generation Transmission Distribution

Cost reflective Tariffs with timely revisions

Tax Holidays ; Excise / Import Duties waivers

Project Financing Based on

PPAs Based on

BPAs Based on

Balance Sheets

Transparency of cost/expenditure in tariff petition

Reduce Disparity Across the Power Chain


Supporting Framework

ADMINISTRATIVE FRAMEWORK

All statutory support to the discoms for schemes like RAPDRP etc

State government assistance for facilitating discoms network infrastructure

REGULATORY FRAMEWORK

Realistic approach towards Discom

Time bound discom cost amortization

Cost reflective tariffs & support schemes

FINANCE FRAMEWORK

Concept of SPV / JV/ Project based Financing

Assured Return on Equity

Low cost debt instruments for overall sectoral growth

Incentives in terms of tax holiday, duties & taxes

OBJECTIVE : Provide much needed Impetus to the Power DISTRIBUTION

LEGAL FRAMEWORK

Endorsement of the Electricity Act -2003

Theft / misuse of electricity

Mitigation of regulatory challenges

Discom standards of performance


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Lender-Discom Partnership (LDP) Model

Indulge itself with HIGH OUTSTANDING DISCOMS

Discoms to FRANCHISE certain cities to SPV for loss reduction & reforms.

The EXISTING DEBT to be converted to EQUITY portion for that franchise

BPUs to bring in technical & business efficiencies for the franchisee

Approach towards Accelerated Distribution Reforms


Best Performing Utilities (BPU)

REC / PFC / other financial institutions SPV

Approach towards Accelerated Distribution Reforms

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WIRE Business (EPC)

Centralized Monitoring (Inline with generation addition)

Centralized empanelment for EPC contractor (for discom network creation)

New n/w created to be leased to the state discom by the Central agency.

State Discom to pay Fixed Cost / Lease rental to the centralized agency

WIRE – CONTENT MODEL

CONTENT Business (State Discom)

Power procurement / management

Operations & Maintenance of the WIRE business

Much needed impetus to the Network Creation


Thank You

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