Hydro power in Nepal Bishal Thapa Nepal Power Summit 2013

Transcription

1 Hydro power in Nepal Bishal Thapa

2 PRE REQUISITES: OPENING MARKETS, POWER TRADING 2

3 Outline Reflections on Indian Power Markets Nepal Diagnosis of the paralysis Managed Competition A model for Nepal s hydro power sector 3

4 REFLECTIONS ON INDIAN POWER MARKETS 4

5 At the ten year mark, Indian Electricity Act 2003 reveals a mixed record Electricity Act - Unbundling - Open access - Trading - Regulator Merchant capacity National tariff policy Power exchange approved Trading margin cap PE deals Gas pricing regime Captive coal liberalization Two Power exchanges established Mandatory competitive bids for power purchases Trading margin cap revised INR 3.5 lakh crore at risk of default Highest ever Coalgate capacity additions 30,000 MW stranded capacity 5

6 Short-term Electricity Transactions (Billion Units) Source: Central Electricity Regulatory Commission, Report on Short Term Power Market in India, Short-term electricity markets have grown % of total generation 10% of total generation 11% of total generation Traders Power Exchange Unscheduled Interchange Distribution Utilities 6

7 Structural & Regulatory Reform Energy markets are moving at different speeds LOW LOW De-regulation Coal Dist. HIGH Trans. Gas Gen. HIGH RE Dist. Distribution, Trans.- Transmission, Gen. Generation, RE. Renewable Energy 7

8 Deregulation is only as strong as the weakest links Fuels Generation & Trading Transmission Distribution Arbitrage between fuels and power trading markets was the biggest drivers of growth in the Indian power sector over the last 5 years 8

9 Source: Central Electricity Regulatory Commission, Report on Short Term Power Market in India, A mature trading environment has yet to emerge Power trading is also marked by considerable market power top 5 traders control 75% of the short term bilateral transactions 9

10 Deregulated energy markets need a supporting environment Power trading will remain limited to brokerage without supplementary financial instruments Capital maturity with non-physical deliverable contracts Structural certainty not possible without utility obligation to serve Transmission must be genuinely neutral 10

11 NEPAL DIAGNOSIS OF THE PARALYSIS 11

12 Political & regulatory uncertainty isn t the biggest constraint High degree of political, regulatory and structural uncertainty will remain Functional corruption will remain Businesses have adapted to this environment No point in having complex, competitive power market mechanism in the absence of a supporting environment Capital market maturity, critical mass of players, contract sanctity, legal protection 12

13 Need mechanisms that get things done in the environment we have What is the risk appetite How does it vary across the players What are the specific areas where economic rent is sought Can those be tackled with competition Where is competition feasible 13

14 Identification Hydro business has different stages Hydro business is not merely about profits from selling electricity from hydro-power plants Development Evolution of a Hydro Power Plant Construction Operation 3 5 years 4 6 years years 14

15 Identification Developers must be allowed to cash out at different stages Development Construction Operation 3 5 years 4 6 years years These stages have different risks, different financing needs, different expertise, different business models 15

16 MANAGED COMPETITION A MODEL FOR NEPAL HYDRO POWER SECTOR 16

17 Separate out who plays in what market segment Layered Ocean Model of Hydro Development for Nepal Big guys should play in big ponds, little guys should play in little ponds No vertical integration 17

18 Top segment closed to competition > 500 MW MW < 100 MW Top 5 Nepali firms Guaranteed concession rights of 2,500 MW (each > 500 MW) over 15 years Firms partner with government Leverages government balance sheet 18

19 Mid segment mixed competition > 500 MW MW Open to firms with capitalization greater than x Some preferential tariff < 100 MW 19

20 Small segment competitive > 500 MW MW < 100 MW Open to all firms High preferential tariffs 20

21 For mid and small segment, end exclusive rights at identification stage Development Construction Operation Don t grant exclusive license at this point Exclusive right to construct and operate plant on a first come first served basis, if: - Environmental clearance met - Finance closure - Supplies bank guarantee equivalent to 5-10% of project cost, which government returns upon commissioning for free equity 21

22 End hydro speculation Development Construction Operation No FDI until the point the plant is ready to break ground 22

23 Thank you Bishal Thapa T: T: