Power. Transmission. &Distribution. otel. Pesticide. oal. Industry. Hospital Industry nking Express Service. Express Service Cr.

Transcription

1 inum Banking Cotton & Cotton Ya Construction Educat Chlor-Alkali CRAMS Crude Oil Gems & J Natural Gas Pesticides Generation Steel Pa anganese Ore Pharmaceutical Refining & Marketing ight Transport Cement Commercial Vehicle omponent Business Process Management (BPM) arel oal Shipping Sugar Tractor Telecom Tower wo Wheeler Tyre Crude Oil Man Made Fibre & Distribution Telecom-Wireles n Made Fibre Paper Housing Finance Passenger Vehicl Hospital Roads & Highways Zinc & L Shipbuilding Aluminum nking Express Service Steel Two The Wheeler Indian Gems & Jewellery Express Service Cr Passenger Vehicle CRAMS gy Sources otel ads Freight Transport ed November 2013 Reta Cotton & Cotton Yarn Tracto Pesticide Natural Gas

2 All-India power demand has tapered-f (March-Sept) in FY14 with a slowdown in GDP growth (since FY11/12) and delay in restructuring state DISCOMs. The demand grew by only 1.7% YoY in Sep-13 and 2.6% YTDFY14 led by f-take backdown by DISCOMs coupled with continuing load shedding in tier-ii/iii cities in Northern/Southern region. CARE Research expects a gradual recovery in power demand with DISCOMs going slow on 1) implementing financial restructuring package (FRP), 2) buying power from the open market and 3) entering into fresh long term power purchase arrangements (by inviting Case-I/II bids). CARE Research has analysed 11 states comprising 30 DISCOMs. These states were short listed as they constituted ~80% all-india power demand in the last three years and continue to dominate in the 12th Plan. While the power demand in these states grew at 5.9% CAGR in the 11th Plan (FY08-12), CARE Research expects it to grow at 6.1% CAGR in the 12th Plan (FY12-17E). Demand at decade low, though early signs visible, gradual recovery is expected Indian transmission sector lags generation; PGCIL to play a catch-up game CARE Research expects an investment over Rs1.8tn in Indian transmission sector in the 12th Plan led by PGCIL. The inter-regional capacity stands at 31.8GW as on August CARE Research expects inter regional capacity to reach ~66GW by the end 12th Plan. CARE Research expects the Southern grid connectivity by early FY15E resulting into one single national grid facilitating power flow from surplus western region (GUJ, MP, CHG and MAHA) to power hungry southern states (AP, TN and Karnataka). The 30 DISCOMs (11 states) under study have effected series tariff hikes in the last three years, however, CARE Research believes that tariff hike alone can't bailout the DISCOMs given 1) substantial Regulatory Assets on DISCOM balance sheets, 2) untreated gap which has left tariffs far from being cost reflective, 3) unsustainable levels cross-subsidization with a slowdown in high paying subsidizing consumers (such as commercial and industrial) and 4) emergence group captive model wheeling away high paying consumers. Tariff hikes alone can't bailout DISCOMs... structural improvement & financial discipline imperative DF model is emerging as a preferred model for PPP in the Distribution sector... Although, privatization in the Distribution sector was initially carried out in order to encourage the public private partnership through licensing model, Distribution Franchisee (DF) model is emerging as a preferred model due to 1) Asset ownership resting with DISCOM, 2) Acceptance DF model (v/s privatization) by the stakeholders i.e. DISCOM, state government and the consumers on account same tariff levels in the DF area/circle and 3) DF model is far more flexible, which can be fered to rural/semi-urban/urban areas/circle (v/s privatization interest seen only into urban areas). Further, there are various types DF models developed to suit DISCOM needs and create supporting infrastructure to reduce AT&C losses to normative levels (~15%) in a time bound manner. CARE Research has developed a Proprietary Scoring Methodology for DISCOMs to comprehensively assess them based on four major parameters 1) State support, 2) Regulatory environment and policy support, 3) Key structural parameters and 4) Key financial parameters. CARE Research believes that above mentioned parameters comprehensively assess the current position DISCOMs given limited level disclosures and non-availability their audited financials in specified time limit. Further, in our endeavour to provide complete picture practices followed by state regulator and actions the state, we have also incorporated some qualitative aspects in our methodology. The scoring methodology is however constrained as only few financial parameters are available for FY11/FY12 and even has a lag 2 years in case some DISCOMs. Distribution sector benchmarking...

3 Outlook Table Section- I CARE Research's Outlook Demand at decade low, though early signs visible, gradual recovery expected Regulatory environment in T&D sector still evolving, regulatory independence evolving Indian Sector lags generation; PGCIL to play a catch-up game Tariff hikes alone can't bailout DISCOMs, Structural improvement and financial discipline is imperative DF is a preferred model for PPP route in the Distribution sector Distribution sector benchmarking: GUJ stands out a leader MAHA pioneered DF model and feeder separation, AP is strong in financial position MP is a new rising star RAJ & HARY, hope still floats however, lot needs to be done While strong state support saves the day for TN, PJB remains in a weak position UP-decade reforms in vain Consolidated scores for various DISCOMs Current Policy and Regulatory framework History and evolution Indian Electricity Act National Tariff Policy Indian Grid Code The Distribution Liability Bill and its impact Indian sector Section- II Section Structure Indian transmission sector and historical perspective capacity addition in last 3 five year plans Regional grids and its importance National grid and its benefit PPP in transmission (JV v/s BOOT/BOO) and its progress Competitive bidding and the way forward. Smart grid, its applications in Indian context and way forward Indian Distribution sector History Indian Distribution Distribution capacity addition in last 3 five year plans Energy volume and consumer base AT&C losses - Trend, analysis and initiatives Central support and their status: R-APDRP and RGGVY Focus Distribution Franchisee model Introduction Business model Franchisee v/s pvt. Ownership Existing and upcoming Franchisees Issues and Challenges Conclusion DISCOM Finances and the Financial Restructuring Plan (FRP)

4 Scoring methodology Scoring methodology and description parameters Relative mapping various state DISCOMs on important parameters Andhra Pradesh DISCOMs Chhattisgarh DISCOM Gujarat DISCOMs Haryana DISCOMs Karnataka DISCOMs Madhya Pradesh DISCOMs Maharashtra DISCOM Punjab DISCOM Rajasthan DISCOMs Tamil Nadu DISCOM Uttar Pradesh DISCOMs Annexures Grid Corporation India 1 Demand growth witnesses a significant slowdown Energy deficit too dipped to decade low Decade low PLFs due to demand slump Early signs visible, but gradual recovery expected While Haryana & UP remain deficit Punjab to be power surplus by FY15E Southern states to remain deficit...albeit deficit expected to come down in AP/TN Western states remain surplus...with Maharashtra last one to be surplus India is expected to witness rise in share T&D capex in the 12th Plan Inter-Regional Capacity - plan wise (MW) While, 11th Plan target was overachieved in certain categories 12th Plan focus remains on 765KV & 500kv HVDC lines Tariff hikes by the states Table SECTION- III Company Section List Graphs & Tables Executive Summary Section- 1 CARE Research Outlook Current Policy and Regulatory framework SECTION- II Section Evolution Sector Salient features and impact Electricity Act, 2003 Electricity structure post Electricity Act, 2003 Status compliance APTEL order OP No : For financial year

5 Indian sector Key milestone Grid synchronisation Market structure the transmission sector Table Growth transmission lines at the end the each plan Growth Sub- stations at the end the each Plan India is expected to witness rise in share T&D capex in the 12th Plan Inter-Regional Capacity - plan wise (MW) While 11th Plan target was overachieved in certain categories 12th Plan focus remains on 765kV & 500kV HVDC lines Intensity in MW/ meter at different voltage level Details HCPTC (High Capacity Corridors) Private sector participation in the transmission sector List projects under tariff based competitive bidding mechanism Evolution Pricing Charges in India Concept smart grid Pilot Smart Grid Projects Indian Distribution sector Electricity consumption pattern sees a change in 10th and 11th Plan AT&C losses reduction remained sticky Responsibility flow diagram R- APDRP project Sanction RGGVY projects Achievement RGGVY projects Funding RGGVY projects Details projects under XIIth Plan Difference between a private licensee model and DF model Types Distribution Franchisee model Existing and upcoming Franchisees Fiscal deficit state under FRP Fiscal Deficit v/s permitted FRBM limits Scoring methodology Summary DISCOM Scores Andhra Pradesh DISCOMs Reduction in AT&C Losses (%) Share generation mix Andhra Pradesh (FY11-FY16) Chhattisgarh DISCOM Generation mix CSPDCL (FY11-FY16) Gujarat DISCOMs Share Generation mix Gujarat

6 Table Haryana DISCOMs Reduction in AT&C Losses during FY10-FY13 Share Generation mix Haryana (FY12-FY16) Update on FRP Karnataka DISCOMs Reduction in AT&C Losses during FY10-FY13 Share Generation mix Karnataka Madhya Pradesh DISCOMs Reduction in AT&C Losses during FY09-FY11 Share Generation mix MP Maharashtra DISCOM Reduction in AT&C Losses (%) Share Generation mix Maharashtra Punjab DISCOM Share Generation mix Punjab Rajasthan DISCOMs Share Generation mix Rajasthan Update on FRP Tamil Nadu DISCOM Share Generation mix TANGEDCO Update on FRP Uttar Pradesh DISCOMs Reduction in AT&C Losses during FY09-FY11 Share Generation mix UP Background Key Financials Key Financial Ratios Capex from FY08 FY13 (Target v/s Achieved) Capex in the 12th Plan Quarterly Capitalisation rate (Rs bn) Yearly Capitalization rate (Rs bn) SECTION- III Company Section

7 Credit Analysis & Research Ltd. (CARE), promoted in 1993 by some the leading Indian banks and financial institutions including Industrial Development Bank India (IDBI), Canara Bank and others is amongst the premier credit rating agencies in India and provides credit rating, research and information services. CARE Ratings is well equipped to rate all types debt instruments including Commercial Papers, Fixed Deposits, Bonds, Debentures, Hybrid Instruments, Preference Shares, Loans, Structured Obligations, Asset Backed Securities, Residential Mortgage Backed Securities etc. CARE's rating methodologies are in line with the best international practices. CARE Research & Information Services (CARE Research)is an independent division CARE. CARE Research services a variety business research needs with credible, high-quality research and analysis on various facets the Indian Economy and Industries. The Publications include Reports, Debt Market Review, Budget Analysis and other policy impact analysis and special commentaries on topical issues.care Research fers both subscription-based reports as also customized reports on request. The reports by CARE Research provide insightful data and analysis on various industry sectors and CARE's outlook on the same. The one-year subscription to the report on ' & Distribution ' by CARE Research includes access to half yearly updates from the date subscription. To view list industries under our coverage you can visit For any queries regarding the content & scope the report kindly reach us at careresearch@careratings.com To place an order, please contact: Manish Sukhija Business Development - CARE Research Credit Analysis & Research Ltd. 503, Kaledonia, Sahar Road, Off Western Express Highway, Andheri (E), Mumbai Cell: , Tel.: (Direct), (Board) CORPORATE OFFICE MUMBAI Credit Analysis & Research Ltd. 4th Floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway, Sion (East), Mumbai Tel: , Fax: , care@careratings.com 503, Kaledonia, Sahar Road, Off Western Express Highway, Andheri (E), Mumbai Tel.: REGIONAL OFFICES AHMEDABAD 32, Titanium, Prahaladnagar Corporate Road, Satellite, Ahmedabad Tel: Fax: BENGALURU Unit No , 11th Floor, Prestige Meridian II, No.30, M. G. Road, Bangalore Tel: , Fax: CHANDIGARH 2nd Floor, S.C.O , Sector 34-A, Chandigarh CHENNAI Unit No. O-509/C, Spencer Plaza, 5th Floor, No. 769, Anna Salai, Chennai Tel : / Fax: HYDERABAD 401, Ashoka Scintilla, , Himayat Nagar, Hyderabad Tel: Fax: JAIPUR 304, Pashupati Akshat Heights, Plot No. D-91, Madho Singh Road,Near Collectorate Circle, Bani Park, Jaipur Tel: / 14 KOLKATA 3rd Floor, Prasad Chambers, (Shagun Mall Building), 10A, Shakespeare Sarani, Kolkata Tel: / 02 Fax: NEW DELHI 13th Floor, E-1 Block, Videocon Tower, Jhandewalan Extension. New Delhi Tel: / Fax: PUNE 9th Floor, Pride Kumar Senate, Plot No. 970, Bhamburda, Senapati Bapat Road, Shivaji Nagar, Pune Tel: MALDIVES 4th Floor, CHAMPA Center Point, Chandhanee Magu, Male' Republic Maldives. Tel: / Mobile: / Fax: