Power Sector Investors’ Meet Ministry of Power, GoI

Outline of the presentation Socio Economic Trends and Power Sector Electricity Demand Outlook Drivers of Growth Myths Prevailing in the Sector Key Issues and GoI Interventions

Socio Economic Trends ` 1 2 3 4 5 Rapid Urbanization to drive Energy Demand 2 Better Utility- Consumer Engagement 3 Adoption of Cleaner Energy Sources 4 Rising trend of Electric Mobility ` 5 Adoption of electricity for cooking Increased Consumption will boost Manufacturing for appliances. Higher demand for products & services e.g. Smart Meters. Accelerated demand for RES technologies and services. E-mobility to create additional demand Rural sector consumers to increasingly adopt electricity as primary fuel for cooking. Rising trend of EV adoption to boost demand for EV Subsystems. Estimated No of Smart/Prepaid meters required ~70 Million, immediately New Business segments to help integrate VRE penetration in grid. India: Appliance energy consumption projection 482 TWh/yr Major contribution towards base demand. 380 TWh/yr Source: CEA, 2017 EV Ancillary Services such as battery swapping, recycling to receive major boost. Energy efficiency adoption to create new segments. Estimated* annual Energy Supply (BU) by RES 383 BU 2021 2026 Estimated Capacity requirement for HH cooking @20% adoption ~50 GW. Source: World Bank, 2008 Estimated Investment in EE, 2015-2040 $ 832 Bn. 124 BU 1. Smart Meter/ Estimated No of EVs by 2030 ~261 Million Strong demand to propel energy intensive industries e.g. steel and cement 2017 2022 Source: IEA 2015 Source: MoP New PPP ventures with Utilities Source: MoP *At Avg. PLF of 25% Source: NITI Ayog 2017, (Transformative Scenario) “The largest contribution to demand growth (2017-2040)- almost 30% - comes from India, whose share of global energy use rises to 11% by 2040 “(World Energy Demand 2040: 3305Mtoe) -IEA World Energy Outlook, 2017

Power Sector is enabling Social and Economic Transformation…. Increasing Per Capita Consumption 818 kWh (FY ’11) to 1122 kWh (FY ’17) Source: CEA 2017 Connecting the last household Requirement of additional 28,000 MW / 80,000 MUs per annum Source: SAUBHAGYA portal Making Utilities Efficient and Viable 25% reduction in DISCOMs financial losses in last 1 year Source: UDAY Portal 24X7 Affordable and Reliable Power Growth in energy billed by ~9% in FY17 against ~6% in FY16 Source: CEA, UDAY Portal Increasing transparency & Customer Inclusion Portals/APPs launched along with a National Power Portal

Positive Electricity Demand Outlook Key Drivers of Demand Growth Significant demand Potential: Similar Socio-Economic Conditions but different Annual per capita Consumption Present Power Demand growth CAGR: 5% Expected Power Demand growth CAGR (FY’17 –FY ‘22: 6% Source: CEA and 19th EPS Source: WB analysis and CEA Electrification and Last Mile Connectivity 24X7 Power for All Key Drivers of Demand Reliability of Supply Key Drivers of Demand Growth Hours of Supply Electrification of Transport

Drivers of Growth

24X7 Affordable and Reliable Power Increased Investment Opportunities Drivers of Growth 1 Increase in the Supply Base 4 Improvement in Governance & Transparency 24X7 Affordable and Reliable Power 2 Expansion of Transmission Network 5 Adoption of Emerging Trends & Technology Increased Investment Opportunities 3 Distribution Reforms & System Strengthening

Coal Sector Transformation: Shortage to Surplus to Superior Increase in Supply Base Increase in Supply Base Coal Sector Transformation: Shortage to Surplus to Superior Coal Mines (Special Provisions) Act, 2015: SHAKTI: Power Sector Linkage Policy Transparent Allocation of coal blocks to through E Auction Coal Linkage through transparent auctions COAL SECTOR TRANSFORMATION Linkage policy Non Regulated sector: Coal production by CPSEs: Transparent Allocation through E-Auction to steel and cement sectors. Sustained increase in production has led to fuel reliability and lesser imports Annual Domestic Coal Production Trend 2016-17 659 MT 2015-16 639 MT 2014-15 609 MT 2013-14 566 MT 2012-13 556 MT 2011-12 540 MT Source: CEA

Opportunities in Generation: Catering future Base Load Increase in Supply Base Increase in Supply Base Opportunities in Generation: Catering future Base Load Renewable Sources 19th EPS Predicts a sustained growth in Energy and Peak Demand RE Installed Capacity CAGR (FY’10- FY‘18) : 22% Envisaged CAGR (FY’18- FY‘22) :22% Source: Draft, NEP 2016 Investment Line-up in next 5-10 Years Source: 19th EPS Enhancing RE Capacity 266 GW Addition Sustained Growth in Demand is inclusive of increasing Adoption of Energy Efficiency Measure 19th EPS is rather conservative compared with other credible sources. USD 310-350 Bn. 293 Global Firms Source: IBEF

Opportunities in Generation: Catering beyond Base Load Increase in Supply Base Increase in Supply Base Opportunities in Generation: Catering beyond Base Load Expected India Duck Curve with 20,000 MW Solar Generation Envisaged RE Capacity Entails higher Grid Penetration of Variable Sources Source: Draft, NEP 2016 Source: NLDC Ancillary Services Smart Grid Technologies Frequency Management Voltage Management Peak Load Management Human Error Avoidance RE Grid Integration: Opportunities Storage Devices Capacity Market Demand Supply Balance Excess RE Generation

Transmission: Growing in cohorts with Generation Expansion of Transmission Network Expansion of Transmission Network Transmission: Growing in cohorts with Generation Target vs Actual Transmission Capacity Addition (‘000 ckm) Target vs Actual Transformation Capacity Addition (‘000 MVA) Source: CEA Source: CEA 3.2 Lakh Crore Investment Opportunity in Transmission Sector FY ‘18-’22 Projects Awarded Till Date through Tariff Based Competitive Bidding (TBCB) 39 Project Value awarded in FY 2016 21,000 Cr Source: CRISIL Source: KPMG analysis Intra state TBCB to fuel the next wave of Investments in Transmission

Household Electrification Status Distribution Reforms and System Strengthening Electrification and Last Mile Connectivity: Outlay INR 42,561 Crores (DDUGJY) Segregation of Agriculture feeder Outlay: 15,190 Crore Universal Metering Outlay: 3,859Crore Access to Rural Households Outlay: 10,246 Crore System Strengthening Outlay: 9,997 Crore Non Paying Consumers Weak T&D Infra Village Electrification Status Household Electrification Status DDUGJY Un electrified Initially 18,452 Electrified Till Now 15,981 Remaining 1,370 Un -Connected Households Un electrified Initially 4,37,46,279 Electrified Till Now 2,79,18,695 Remaining 4,07,92,171 Intensive electrification to connect Villages Outlay: 1,333 Crore DDUGJY

Annual Demand to be realized by connecting all Households Distribution Reforms and System Strengthening Electrification and Last Mile Connectivity Last mile connectivity to all un-electrified households in rural areas and poor households in urban areas Outlay : Rs. 16,320 Crore About 4 crore households to be electrified by March 2019 SAUBHAGYA Source: MoP Demand Potential to be realized through Electrification of Households ~4 Crore HHs to be Electrified ~28 GW Annual Demand to be realized by connecting all Households Demand Implication Source: MoP Households in Crores

24X7 Reliable & Affordable Supply Distribution Reforms and System Strengthening DISCOM Transformation and Strengthening UDAY IPDS 24X7 Reliable & Affordable Supply Commercially Viable Discoms An integrated scheme for urban areas with outlay Rs 27,052 Crores, targeting IT Enablement (Quality and Reliability) System Strengthening Eliminate stress of Banking Sector from DISCOM exposure Key improvement under UDAY Achievements under IPDS IT enablement completed in 1367 towns; fresh sanctions for 1932 towns amounting to Rs 985 Crores. Old System strengthening projects completed in 970 towns; fresh sanctions for 3616 towns. Expected to boost industry performance, as IPDS directs interventions in urban areas where most industrial hubs/ centres are located Parameters FY16 FY17 Target FY18 ACS-ARR Gap (Rs. / kWh) 0.60 0.42 0.20 AT&C Losses (%) 21 20 17 Source: UDAY Portal UDAY Performance IPDS Source: MoP

Emerging trends: Indicative Opportunity Sizing Adoption of Emerging Trends and Technologies Emerging trends: Indicative Opportunity Sizing Decentralized Distributed Generation Electric Vehicles Smart Meters Storage Ancillary Services High prospects if initiated at the DISCOM level In Solar Rooftop, 40 GW capacity addition target by 2022 INR 23,450 Cr* central financial assistant for solar roof top installations proposed by MNRE States aggregating capacities and inviting bids Increase base- load demand, higher PLF Effective channel for renewable peak power EV Estimates** as per report by Niti Ayog for 2030 Business As Usual scenario: 26 million Transformative scenario: 261 million Installation of 35 million by end of 2019 (envisaged under UDAY) EESL procuring 50 lakh smart meters for 2 States through competitive bidding Estimates on EV battery domestic manufacturing under different stages as per report by Niti Ayog -Battery pack1: Potential: 120 GWh - End to end manufacturing2: Potential: 2410 GWh High significance with increased VRE Total quantum of spinning reserves (primary, secondary and tertiary) is more than 13,500 MW# Currently, tertiary frequency control Going forward, market based ancillary service framework * Proposed Sristi Scheme, MNRE ; **GDP Growth rate @ 7.4% CAGR; 1Cell import 2Cathodes import, # CERC Estimates for 2015

Investment Potential b/w 2015-2040 as per India Energy Outlook, 2015 Likely Investment Potential in Major Segments Investment Potential b/w 2015-2040 as per India Energy Outlook, 2015 Areas Investment (Approx.) In INR In USD Coal Generation INR 22 Lakh Cr $ 354 Billion Nuclear Generation INR 6 Lakh Cr $ 96 Billion Hydro INR 8.8 Lakh Cr $ 141 Billion Renewables INR 38.4 Lakh Cr $ 611 Billion Investment in Transmission & Distribution networks INR 53.2 Lakh Cr $ 845 Billion Source: India Energy Outlook, 2015 On the Distribution side, new trends and emerging areas like Rooftop Solar, EVs, Smart meter, Storage, Ancillary Services etc. to open additional avenues of investment DISCOM turnaround through UDAY to improve the overall performance of power sector, thereby making it more investment friendly

Myths prevailing in the Sector

Myths prevailing in the Sector UDAY is not Performing Reality: UDAY is a 3 year long programme where performance of the States is contingent to the time spent under UDAY, as different states have joined UDAY at different points in time Early results under UDAY are encouraging, with some distinct benefits on operations. Going forward, improvement in metering to enhance the performance Performance slack in some states may be attributed to interlinked factors like lead time of interventions, data-lag and seasonality of operations etc. UDAY Performance UDAY is not creating demand Reality: UDAY is a supply side intervention which aims to release the latent demand, that exists in the system due to short supply of power to the consumers. Under UDAY, total energy billed by DISCOMs increased by 9% in FY17* over FY16, indicating a considerable growth in consumption, which in the past years had grown around 5-6%. Growth in Energy Sales

Myths prevailing in the Sector Increase in rural connection under SAUBHAGYA, will result in increase in losses and low cost recovery Reality: SAUBHAGYA scheme would ensure energy access to all households; expected increase in demand of 28 GW. Increase in Demand would lead to lower fixed costs due to higher PLFs. 100% metering is integral to SAUBHAGYA ensuring theft control and revenue recovery Losses are being camouflaged in Agriculture Year wise total Input Energy, total Sales, Agriculture Sales in MUs and year wise Percentage Agriculture Sales 26.0% 26.6% Source: CEA Above details are for 14 states contributing 95% of the Agriculture sales. Pecentage of Agricultural sales have remained largely in the same range from FY14 to FY16. Therefore, there is no tell-tale sign of losses being loaded on the Agricultural category.

Key Issues and Ongoing GoI Interventions

Major reasons for stress Action taken for resolution of Stress Key Issues and Ongoing GoI Interventions Stressed Projects (coal based) in Power Sector Current Status Major reasons for stress Action taken for resolution of Stress Commissioned capacity: 24,405 MW Under construction capacity: 15,725 MW Total stressed capacity: 40,130 MW Comprises 34* projects Non-availability of fuel No PPA tie-ups Delayed payments by Discoms Inability- infuse equity, service debt Aggressive tariffs by bidders in PPAs Regulatory/ contractual disputes Legal Issues- auctioned coal mines Other financial issues like non- compliance of Joint Lender Forum (JLF) decisions, RBI restrictions on funding of cost overrun, etc. Shakti Scheme: To provide assured supply of coal through allocation and auctioning Pilot scheme- to procure 2500 MW Amendment in Mega Power Policy: Competitive bidding for future PPAs, Remove liquidity crunch with developers -Ensuring project competitiveness Steps by Lenders - Joint lender forum, Flexible restructuring (5/25); invocation of SDR; Scheme for Sustainable Structuring of Stressed Assets (S4A) - NCLT through IBC Act, 2016, SARFAESI, DRT. * As per list provided by Dept of Financial Services

Why hydro needs revival Key Issues and Ongoing GoI Interventions Revival of Hydro Why hydro needs revival NEW HYDRO POLICY 2017 Revival of stalled projects, improving investor confidence Tariff affordability and push for PPAs through Hydropower Purchase Obligation Hydropower qualities critical for future- Flexibility, Fastest ramping, Voltage regulation, Reactive power absorption, Black start. Meeting peaking power and grid integration requirement for 175 GW RE. Providing level playing field with Renewables Bringing discipline- Project Construction/ Mgmt. Water Storage- Flood moderation/Strategic Needs The following have been proposed: Declaring all hydropower (irrespective of size) as Renewable Energy. Providing hydropower purchase obligations apart from solar RPO. Financial support in the form of interest subvention/ equivalent support. Financial support for storage/ flood moderation hydropower projects.

Annexures

UDAY

Comparative Progress of H1 UDAY Performance UDAY has a clear impact towards improvement in operational efficiency and decline in overall losses  S. No.  Parameter  Unit  Base year Data (31.03.2016) Achievement FY 2016-17 Comparative Progress of H1 Achievement H1 FY17 Achievement H1 FY18 1 AT&C Losses (In %) 21 20 24 23 2 ACS-ARR GAP (Rs./unit) 0.60 0.42 0.46 0.37 3 Energy Billed MUs 69,31,52* 75,77,88 3,76,287 4,21,192 Increase: 9.3% *Data as per PFC report Back to Myths UDAY snapshot Note: In all slides base year data of AT&C and GAP is as per PFC report (calculated as per revised methodology). Rest Data as per UDAY portal

UDAY Performance Operational Achievements in Key UDAY parameters till H1,FY18 Operational efficiency indicators Base year Data (FY16) Progress during UDAY period Overall Progress Target (April’16 – June’17) Achievement (April’16 - June’17) Achievement (April’16 – June’17) in %age Overall No. to be achieved Overall achievement till June'17 Overall %age achievement Urban Feeder Metering (Nos) 40,302 2,027 5,006 100% 45,555 45,308 99% Rural Feeder Metering (Nos) 86,404 10,801 13,285 1,03,681 99,689 96% Domestic connections (In Lakhs) 1,364 136 116 86% 1,867 1,480 80% UJALA LED-bulb (In Lakhs) 637 1,147 1,679 2,146 2,315 *Note: States have filled data till Q1 FY18 Back to Myths UDAY snapshot

Quarterly Performance UDAY Performance Energy Billed by DISCOMs (MUs) in UDAY States increased at a relatively higher rate 9% in FY17 against 6% in FY16 Quarterly Performance Annual Performance MUs MUs 9% 10% MUs 6% MUs MUs Back to Myths UDAY snapshot Source: PFC Report FY 2015-16

Impact of tariff hike on Total Income (%) UDAY Performance A total of 19 States have increased their tariff either in FY 16 or FY17. Tariff hikes have resulted in an additional revenue of Rs. 10,009 Cr. in FY 16 and Rs. 20,427 Cr. in FY17 State wise Tariff Hike FY 2016-17 FY 2015-16 UDAY: Pre and Post Period Impact of tariff hike on Total Income (%) Pre-UDAY FY 16 2.31% Post-UDAY FY 17 4.35% FY 2017-18 FY 2015-16 Back to Myths UDAY snapshot

IPDS

Integrated Power Development Scheme Rs 27,052 Cr sanctioned under IPDS - Rs 26,236 Cr System strengthening + Rs 985 Cr IT + Rs 69 Cr Smart meters for Old Kashi Pilot System Strengthening projects for 3616 towns – Rs. 26,236 Cr sanctioned including Rs. 16,314 Cr as GOI Grant, Rs. 4817 Cr released Quantum of work envisaged for System Strengthening in Urban sector :- Back

DDUGJY

Deen Dayal Upadhyay Gramin Jyoti Yojana (DDUGJY) Rs.42561 Crore sanctioned including GoI Grant of Rs.32607 Crore. Component wise details are as follows: Electrification of UE Villages through Grid Rs. 2,667 Crore Metering Rs. 3,859 Crore System Strengthening Rs. 9997.45 Crore Feeder Separation Rs. 15190.89 Crore