FUTURE OF HYDRO - PRIVATE SECTOR PERFORMANCE

RAHUL VARSHNEY

2

Hydro Power- Private Sector Performance

Hydro Power contributes to16.36% of total electricity generation in India.

Around 90000 MW capacity is still untapped and is yet to be developed

Private sector participation is growing in Hydro Power segment.

Hydro is a major source of peaking power, ancillary services and black start.

Most flexible and sustainable source of generation

Cost of generation of BBMB plants after 40 years of operation is only 20 paisa/kwh

ALL India State Private Central0

50001000015000200002500030000350004000045000

0%

20%

40%

60%

80%

100%

120%40661

27482

2694

10485

100%

68%

7%26%

Hydro Capacity under operation

ALL India State Private Central0

2000400060008000

10000120001400016000

0%

20%

40%

60%

80%

100%

120%14410

22424837

7331

100%

16%

34%

51%

Hydro Capacity under Construction

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No development from Private sector

Around 41000 MW Hydro Projects have been allotted to various Private developers

Not much development is taking place in Arunachal Pradesh, remote locations of Himachal and Uttarakhand

3600 11001800

1100

33000

Private Sector Allotted Hydro Projects, yet to be taken for construction

Himachal Pradesh Uttarakhand SikkimMeghalaya Arunachal Pradesh

Jaypee Tata Power Bhilwara & Statkraft

0

500

1,000

1,500

2,000 1,700

447 278

Top 3 players make up ~90% of the installed private capacity

4

Challenges for the private sector CHALLENGES- Bad Infrastructure / Road conditions - Delay in Award of Clearances (environment &

forest) , Land Acquisition- Delay in Financing / getting Financial Closure or

additional funding due to cost & time overrun.- High free power component and cost plus tariff- Financial upheaval and changes in company

strategy. No M&A policy or clarity

REWARD- Cost plus tariff giving 15.5% ROE subject to an

available buyer- Benefits to the Electrical system -spinning

reserve & frequency response, voltage support, black start capability

5

Bad Infrastructure CHALLENGES- Bad Infrastructure / Road conditions affecting

schedule of Project

WAY FORWARD- Access to the projects should be part of state

government initiative. - Common Infrastructure – funding, development

and utilisation- Defining the share of Government and Project

Developers in infrastructure costs

6

Approval and Clearances

CHALLENGES- Approval and clearance

WAY FORWARD- Defining of standard clearances with

required papers and procedures- Land acquisition under the New Act- Evolution of Single window; avoid

multiplicity of examination - Fixing timelines for statutory and non-

statutory clearances- Dispute Resolution

- More than 30% of the projects get stuck due to Environment clearances

- Land diversion / Forest Clearance takes at least 2-3 years and is considered into critical path of Project Activity.

- Environment clearance of Uttarakhand HEPs stalled by Supreme court from Aug’13 onwards.

7

Change in ownership

CHALLENGE- Change of ownership and control- Change of ownership in the Implementation

Agreements of most of the Hydro states are restrictive or ambiguous.

- Loss of expenditure and intellectual property.

WAY FORWARD- Remove restrictions on change of ownership - If required pre-define the technical and Financial

credentials of incumbent.

8

Enabling Environment

The Risk Reward should be reviewed. Much higher Risk

State should take Project Management role and be enabler to clear bottlenecks

Evolving of single window clearance; avoid multiplicity of examinations of similar issues at different levels

Viability of free power requirement

Clear M&A policy enabling certain developers to exit and unlocking value.

THANKS