Emerging Policy & Structural Dynamics in Power Sector is Tilting Towards Risk

  • Coal and Gas supply shortage has resulted in many power plants stranded or operating at a sub-optimal PLF levels, IPPs / MPPs are hardest hit
  • The fuel shortage threatens India's power expansion plan
  • Coal block auctions may have addressed fuel supply woes to some extent, but private power generators may have to face tariff under-recovery to the extent of 60-65 paise per unit.
  • Auctioning of coal linkages will only add to the worries of the power generators as competitive prices will put pressure on their already debt laden balance sheets

Companies are Slamming Brakes on Growth Aspirations in India

  • Companies like Reliance and Adani has already slammed brakes on their rapid expansion plans in thermal power generation space
  • CLP Holdings, one of the largest foreign investors in India's power sector--has threatened to "reconsider" its projects in the country, saying it is bleeding every day because of a fuel shortage, infrastructure bottlenecks and lack of policy initiatives to support growth

Growth by Acquisition

  • Recently, JSW Energy acquired the 1,391 MW hydroelectric power assets of Jaypee Group worth over Rs 9,700 crore.
  • NTPC wants to achieve the objective of 128 GW of power capacities by 2032 and it anticipates land acquisition bill to lead to more time for land acquisition and it tide over this it has adopted acquisition as integral part of growth strategy

Rupee Devaluation, Tariff under-recovery, Fuel Linkage Issue, Burgeoning Debt Burden to force companies with leveraged Balance Sheet to put assets on the block

  • As per an estimate, as many as 700 thermal plants across India applied for an environmental clearance between 2006 and 2010. Between them, they were looking to add 701,820 MW of capacity-about six times India's overall power capacity in 2011 and seven times the target for the 12th five-year plan (2012-17)
  • Companies that had acquired land, signed MoUs (memorandums of understanding), coal linkages, etc are now looking to sell and exit
  • While auctioning the coal blocks is a very commendable step in terms of transparency and fuel security, sustainability of mining at these prices seems doubtful. Due to aggressive bidding, private power producers with capacities nearing 10,000 mw might face 60-65 paise tariff under-recovery resulting into a whooping shortfall of around Rs. 1300-1350 crore in 2015-16.
  • Auctioning of coal linkages will also force new thermal power plants with capacity of around 15,000 MW to quote aggressive competitive prices and thereby resulting into a tariff under-recovery. Further, projects nearing completion also face time overrun due to time taken in planning process for auctions.
  1. Executive Summary
  2. Evaluating Factors Favoring Investments in Power Generation Sector in India
    • Demand Supply Scenario
    • Revenue Models (Merchant Sale, Open Access, PPA)
    • Regulations & Policies
    • Outlook
    • Trends in Power Prices in India (Generation & Distribution Level)
  3. Evaluating Factors Risking Viability & Sustainability of Power Generation Sector in India
    • Widening Fuel Demand and Supply Gap
    • Challenges in securing Fuel Linkage
    • Impact of Land Acquisition Bill
    • Rupee Devaluation
    • Increasing Cost of Capital
    • Leveraged Balance Sheet
    • Restrictions on Importing BTG
    • Water Shortage
  4. Status Check on Upcoming & Planned Power Plants in India
    • Thermal Power - Coal & Gas
    • Wind Power
    • Biomass Power
    • Solar Power
  5. Status Check on New Investment/Expansion Plans of Companies in Power Generation Sector
    • Indian Companies likes of Adani, Reliance Power, Tata Power, CESC, Torrent, Lanco, GMR, Essar, NTPC
    • MNCs likes of CLP, GDF Suez, E.ON, AES
  6. Trends in M&A deals in Power Generation Sector
    • Who's buying - Analyzing Strategy
    • Who's selling - Analyzing Reasons for Exit(Distress Sale, Strategic Exit)
    • Number of Deals in Value and Volume
    • View of Investment Bankers
    • Trends in Valuations
  7. Coal Block Auction and Coal Linkage Auction
    • Introduction to Coal Block Auction
    • Coal Blocks Auctioned and Blocks up for Auctioning
    • Tariff Under-recovery due to auctions
    • Planned Coal Linkage Auction
    • Analysis of Impact of Coal Linkage Auction on Tariff
  8. Detailed Asset Profiling of Assets up for Sale - Primary Survey
    • Project - Location, Name, Capacity Current Status, Size, Fuel, Project Type
    • Technology Used
    • Date of Start of Construction & Planned Date of Commission
    • PPA Status, Fuel Linkage
    • Capital Investment - Equity vs Debt
    • Ownership Pattern
    • Challenges Faced
    • Looking for Stake Sale/Exit
  9. Identifying Key Reasons for Exiting Power Generation Business
    • Private Indian Companies
    • MNCs Operational in India
  10. Regulations Governing M&A in Indian Power Sector
  11. InfraInsights Due Diligence of Shortlisted Attractive Assets
    • Distress Sales vs Valuation Sales
    • Recommendation
  12. Power Plants Asset Database
    • Thermal Power - Coal & Gas
    • Biomass Power
    • Wind Power
    • Solar Power

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