Understanding The Power Industry In India

Power Industry Overview

Industry Overview Business Segments Key sectoral data
• Definition: This sector encompasses companies Macroeconomic data Power Sources
Gene- Trans- Distri-
involved in the generation, transmission, End-User
ration mission bution 11% 2%
distribution, and consumption of electrical power. Total Capacity 411GW
• India is the 3rd largest producer & consumer of Thermal
Renew Peak Demand 205GW
(Coal/ Hydro /
electricity world wide behind China & USA. Sources able Nuclear
Diesel) Largest player NTPC 30% 57%
Leading Players
State Transmission & 72GW
Equipment Mfr. IPPs NTPC Capacity
Distribution Cos. Other
Power
Renewable players Power Trading Cos.
Power industry is governed by Thermal Renewables
Generating Cos.
Energy Cos. EPCs Electricity Act (2003) Hydro Nuclear

Key Drivers Industry Trends & Challenges Recent policy updates & news
Demand PPAs
Trends Challenges • Cumulative FDI inflow in the power sector stood at US$ 18.17 billion
Revenue between April 2000-December 2023.
Tariff/price Carbon Credits • From April 2020 to September 2023, the renewable energy sector in
• Renewable energy • Aging Infra. India attracted US$ 6.1 billion in FDI equity investment.
Fuel Costs Losses • India has received a cumulative amount of US$ 3.8 billion in foreign
Cost • Smart grids • Financial viability of direct investment (FDI) in the solar energy sector over the past three
fiscal years and the ongoing fiscal year until September 2023.
Transmission Compliance • Digitalization Power DISCOMs • India ranked fourth in the list of countries to make significant

Macro Intl prices Financing Options • Decentralized power • Energy theft

investments in renewable energy by allotting US$ 77.7 billion between
2015 and 2022.
•
Factors Weather / Climate Govt. Regulations generation • Input imports The Indian government has earmarked ₹1,43,332 crore worth of
incentives for 12 states to promote power sector reforms.

Value Chain Analysis

Power Generation Transmission & Distribution Energy Market & Customer

Fuel procuring Power plant Compliance Grid infra. Grid mgmt. Cust. service Market ops. Cust. analysis Other services
• Sourcing • Steam Gen. • Pollution • Substation • Load mgmt. • Metering • Trading • Tariff pricing • Energy
• Transport • Turbine ops. • control • Transmission • Voltage • Billing • Mkt price • Consumption • audits
• Quality • Control Sys. Waste Lines regulation • Complaint forecasting analysis Energy
• • •
• Maintenance management Transformer Grid stability resolution Settlement advisors

Source: IBEF
Note: IPP –Independent Power Producers , EPC –Engineering, Procurement & Construction Cos., PPA –Power Purchase Agreements, DISCOMS –Distribution Companies
Historical Overview
Recent Developments and Future Outlook
2021 - Present Renewable Energy Push and National Missions
In 2021, the launch of the Revamped Distribution Sector Scheme
2008 - 2020
aimed to improve DISCOMs, set targets for renewable energy, The National Solar Mission (NSM) was launched in 2010 under the National
focused on smart grids and digitalization, and introduced the Action Plan on Climate Change, aiming to deploy 20 GW of solar power by
Electricity (Amendment) Bill for sector reform. 2022 (later revised to 100 GW). Various policies and incentives like feed-in
tariffs and renewable purchase obligations were introduced to promote
renewable energy. India's renewable energy capacity, especially in solar
and wind energy, grew significantly, making the country a global leader in
Comprehensive Sector Reform - Electricity Act renewable energy.
2003
The Electricity Act, 2003 aimed to promote competition, protect
consumer interests, and provide a regulatory framework by de-
licensing power generation (except hydro projects), enabling open
access to the transmission network, and establishing the Appellate
Liberalization and Reforms Era
Tribunal for Electricity (APTEL) for dispute resolution. 1991 - 2003
The IPP policy in 1991 promoted private investment in power generation.
PGCIL was established in 1989 to manage interstate transmission and
CERC along with SERCs were formed under the Electricity Regulatory
Post-Independence and Five-Year Plans Commissions Act, 1998.
1947 - 1991
Establishment of Central Electricity Authority (CEA) in
1948 to oversee sector development and creation of Early Developments and Pre-Independence Era
state electricity boards (SEBs) under the Electricity
(Supply) Act, 1948 to manage power activities at the Late 1800s - 1947
state level. First electric light in India: Kolkata (Calcutta) 1879
First hydroelectric plant: Sidrapong near Darjeeling 1897
First large-scale hydroelectric station by Tata Power: Khopoli,
Maharashtra 1915
Understanding the Power Industry Ecosystem

Renewable Energy Companies

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Financing Companies
Pain Points In The Power Industry
Construction and Transmission of Reducing high- Metering and billing
operation of power electricity at high voltage electricity to
plants voltages (400 kV, 765 voltages suitable for
Conversion of energy kV, etc.) over long distribution (11 kV, Customer service and
sources to electricity distances 33 kV) maintenance

Power Generation Power Transmission Power Distribution End Consumer

Industrial

Commercial

Residential

Fuel Supply Infrastructure

Financial Health of Access and Reliability
Uncertainty Deficiency
DISCOMs Metering and Billing
High Capital Costs for Right of Way Issues
High AT&C Losses Inaccuracies
Renewable Energy Grid Stability with
Tariff Issues and Customer Service and
Environmental Renewable
Political Pressure Grievance Redressal
Regulations Integration
Understanding The Role of REC in Power Industry
Company Overview

Company Overview Role in Industry Key Financial Data

REC Limited, a 'Maharatna' company under India's Ministry of REC Limited as an NBFC facilitates the financing of projects in
Power, provides financial assistance to the power sector, different sectors.
Others Net Worth ₹ 68,783
including generation, transmission, distribution, and non-power Power Generation 11% 8.74%
infrastructure projects. It plays a crucial role in government Net Profit ₹ 14,019 CAGR

initiatives such as electrification, rural development, and

Power Transmission Power Distribution Power Generation
sustainable energy programs.. 10% 44% Loan Book ₹ 5,09,371
Key Competitors Power Distribution Total Sales ₹ 47,505

Renewable & Infra all values are in crores

Power Transmission as on 31/03/2024
29%

Key Drivers Company Trends & Challenges Recent policy updates & news
Interest Income Dividends
Revenue Trends Challenges RECPDCL Hands Over Khavda IV-E2 Power Transmission Ltd to
Fees and Commission Other Income Uncertainty around Power Grid and NERES XVI Power Transmission Ltd to Techno
REC's Q1 FY24 net profit
renewable energy targets, Electric
rose by 21% to ₹2,961
Operating Expenses Interest Expenses subsidies, and grid REC wins Sustainability Champion - Editors Choice Award at
Cost crore.
integration policies. the Outlook Planet Sustainability Summit and Awards 2024
Provisions &Write-off Taxation The renewable energy
Balancing the need for Shri Harsh Baweja takes charge as Director (Finance), REC
sector loan book grew to
low-cost funds with Limited
Energy Demand Interest Rates ₹298.33 billion in FY 2022-
Macro prudent risk management. REC gets RBI nod to set up subsidiary in GIFT City, Gujarat
23, representing 60% of
Factors Government Policies Infra Investment REC declares financial results for Q4 and 12M FY24
the total loan book.
Peer Comparison: Quantitative and Qualitative
Particulars
In 2019-20, REC adapted its Complies with regulations, upholding Governs trading by insiders and Initially regulated by NHB, it's now
Regulatory financial reporting, affecting income a Code of Conduct for insider trading mandates transparent disclosure of under RBI's purview following the
QUALITATIVE

and asset norms. It tracks regulatory and information disclosure. It offers confidential information, IREDA Finance Act 2019, adhering to the
Compliance metrics for Indian power utilities, strategic consultancy services and provides a Secretarial Compliance revised HFC guidelines issued in
with data up to 2022-23. enforces fair disclosure practices. Report as per Regulation 24A of SEBI 2020.

REC Limited is a Navratna firm under

A powerhouse in financing large- A leader in driving India's clean The trusted name in affordable
Market Position and India's Ministry of Power, crucial in
funding power projects and leading
scale power projects, valued for its energy transition, with a brand housing and urban development,
Brand Reputation in renewable energy, with over 20%
financial strength and stability in the
infrastructure sector.
synonymous with innovation and
sustainability.
recognized for its expertise and
focus on social well-being.
foreign equity investment.

Over the last five years, REC Ltd has Over the last five years, PFC has Over the last five years, HUDCO has
Financial achieved a return of 33.66%, with an achieved a return of 35.02%, with an
IREDA is a relatively newer firm and
has had an EBIDTA of ₹4,880.33
achieved a return of 46.82%, with an
Performance EBITDA totaling ₹47,931.67 crores
in FY 23-24.
EBITDA totaling ₹91,603.72 crores
in FY 23-24
crores in the FY 23-24.
EBIDT totaling ₹7,814.07 crores in
FY 23-24.
QUANTITATIVE

REC's loan book is valued at ₹5.09 Power Finance Corporation's loan IREDA's loan portfolio stands at HUDCO's loan portfolio reached
lakh crore, marking a 17% growth. portfolio is valued at INR 4.2 trillion, ₹59,698 crores, a 27% growth year- ₹92,654 crores, a 15% growth. The
Loan Portfolio Net credit-impaired assets are at
0.86%, with a provision coverage
marking a year-over-year growth of
13%. The net credit-impaired assets
over-year. The Net Credit-impaired
Assets are at 0.99%, with a provision
company's net credit-impaired
assets are at 0.36%, with a strong
ratio of 68.45%. are currently at 1.87%. coverage ratio of 58.80%. provision coverage ratio of 86.87%.

HUDCO has a Liquidity Coverage

REC has a Liquidity Coverage Ratio of PFC has a Liquidity Coverage Ratio of IREDA has a Liquidity Coverage Ratio
Liquidity Metrics 88% and a current ratio of 1.22 70% and a current ratio of 1.22 of 202% and a current ratio of 0.71
Ratio of 70% and a current ratio of
0.84