IEX: Building Power Market for India... Devesh Singh – Regional Head (SR) Website:

In this presentation … Power Trading in India Power Exchange - Mechanism  Trading of Power  Trading of REC

Who are we ? Promoters Joint Equity Partners: Technology :

EA 2003 and enabling provisions on Power Market Electricity Act 2003 –The intent and object of the EA 2003 is to develop power market through increased competition, more players and protect consumer interests –Development of Power Market – EA 2003, Section 66, “The Appropriate Commission shall endeavor to promote the development of power market…”, guided by the National Electricity Policy –Suitable safeguards to prevent adverse effect on competition –Recognize Trading as a distinct activity –Definition under section(2) (47): “Purchase of electricity for resale thereof” –Adequate and progressive provisions governing open access both : to transmission networks (inter-state and intra-state) and to distribution networks

Introduction of New Products Short & Medium Term transactions for peak/off-peak load balancing Duration of Transactions (Few hours to 3 years) Hours of Supply Round the Clock Evening Peak / Morning Peak Night Off Peak / After Noon Off Peak “As and When Available” Power for balancing Scheduled Interchanges “Weekend / Holiday Power” Banking of Power

Indian Power Market Long Term Power Purchase Agreements Upto 25 Years Medium Term 3 months- 3years OTC Licensed traders (42) OTC Licensed traders (42) Short-Term OTC Intraday- 3 months Exchanges Balancing Market Intraday - 3 months Unscheduled Interchange 1. Intra-day 2. DAM 3. DAC 4. Daily 5. Weekly 1. Intra-day 2. DAM 3. DAC 4. Daily 5. Weekly Real Time

What is IEX On-line National Automated Electronic Standardised Contracts Central Counterparty Delivery… Exchange as Organized MarketplacePower-specific Spot Intra-Day Day-ahead Forward Weeks Months Voluntary

IEX capabilities Spot Auction (Closed or Open) for real time prices Continuous Trading for Long-term contracts Automated matching engine Online risk management system Online clearing & banking interface for margins & trade proceeds payment Derivatives - for Hedging & Price Discovery ⁻Forwards ⁻Futures Physical or financial settlement

IEX Self Regulating Institution Due diligence before Membership Networth Criteria Security deposit & Margins Voluntary participation IEX Counterparty SLDC Clearance

NASDAQOMX Six Sigma Efficiency “Error Free” operation since inception Capable for handling –Day Ahead Auction –Term Ahead Bilateral –Market splitting upto 30 areas –National, Regional and State level Contract –RPS & Certificates Trading Tried & Tested Global Technology

IEX: Market Segments… Day-Ahead Market (Since June,2008) Day-Ahead Market (Since June,2008) Term-Ahead Market (Since Sep,2009) Term-Ahead Market (Since Sep,2009) Intra Day Day-Ahead Contingency Daily Matching through Continuous Trade Session Weekly Contracts Matching through Open Auction Intra Day Day-Ahead Contingency Daily Matching through Continuous Trade Session Weekly Contracts Matching through Open Auction Hourly Contracts Matching through Close Auction* Hourly Contracts Matching through Close Auction* * Without Market split feature Market splitting feature REC Market (Since February,11) REC Market (Since February,11) REC Contracts Matching through Auction* REC Contracts Matching through Auction*

Day-ahead Market

IEX Bid Areas

IEX - DAM Product Description [1/2] Order Types: –Hourly or Portfolio Orders Min 1 hour Different Price-Quantity Pairs Partial Execution Possible –Block Orders Relational Block Bid Consecutive hours during the same day –Customized block bid allowed Firm commitment to purchase or sell Order Characteristics –SLDC Clearance should be ≥ 1 MW –Minimum Order quantity can be less than 1 MW –Minimum volume step: 0.1 MW –Minimum price step: Rs 1 per MWh ( 0.1p/kWh)

Trading Availability –Every Calendar Day Bidding –Double sided Closed Auction Order Entry / revise /cancel –Entry of orders on D-1 from 10:00 hrs to 12:00 hrs related to Delivery Day (D day) Contract –Clearing Price : Area Clearance Price –Cleared Volume –Total Contract Value: Cleared Volume multiplied by ACP –Final settlement adjusted for any force majeure deviations Delivery Point –Periphery of Regional Transmission System in which the grid-connected entity, is located IEX - DAM Product Description [2/2]

Time Line for scheduling of Collective Transaction 10:0014:0018:0012:00 Market Participants to place their Bids PX to send Scheduling Request to NLDC based on margin specified by NLDC RLDCs/SLDCs to incorporate Collective Transactions in the Daily Schedule PX to send provisional unconstrained solution to NLDC and flow on TS as informed by NLDC 13:0015:00 NLDC to check for congestion. In case of congestion shall intimate PX regarding to the period for congestion and available margins NLDC to confirm acceptance. PX to send files to SLDCs for scheduling 17:30

Price (Rs./kWh) Sale Purchase Rs/kWh MW Price MW 2.5 Portfolio A, MW SUM, Purchase Portfolio C, MW Portfolio B, MW SUM, Sale Net transaction Rs./kWh MCP: MCV (Market clearing volume): Price Calculation Algorithm ….each hour

Trader Station: Single Bid

Trader Station: Block Bid

Both Buyers and Sellers to absorb losses –Buyer draw less than Contracted Power (Contracted Power – losses) –Seller inject more than Contracted Power (Contracted Power + Losses) Average Transmission Losses of the Region where the Entity is geographically located Additional Losses for Wheeling, if necessary –To be notified in advance by NLDC –Only for Injection Treatment of Losses

Treatment of Losses… for buyer NR (Regional) Loss: 6% S1 (State) loss: 4.85 % Buyer X bids for 100 mw at its respective regional periphery 100 MW at NR periphery 100 MW at NR periphery NR Loss 6% NR Loss 6% 94 MW at S1 periphery S1 Loss 4.85% S1 Loss 4.85% MW at Buyer End X (Buyer) X (Buyer) Bid Volume Scheduled Drawal <= SLDC Clearance Scheduled Drawal <= SLDC Clearance Maximum Bid= Volume in standing clearance + Regional & State losses

Treatment of Losses… for seller SR (Regional) Loss: 6% A1 (State) loss: 4.85% Seller Y bids for 100 mw at its respective regional periphery SR Loss 6% SR Loss 6% MW Injected by seller at its end A1 Loss 4.85% A1 Loss 4.85% Y (Seller) 106 MW at state periphery 100 MW at regional periphery Bid Volume Scheduled Generation <= SLDC Clearance Scheduled Generation <= SLDC Clearance Maximum Bid= Volume in standing clearance – Regional & State losses

Congestion Management

Congestion Management SR WR S1 50 MW RS 8000 S1 50 MW RS 8000 B1 50 MW RS 8500 B1 50 MW RS 8500 S1 50 MW Rs 8/u S1 50 MW Rs 8/u B1 50 MW RS 8.5/u B1 50 MW RS 8.5/u B2 150 MW RS 9000 B2 150 MW RS 9000 B2 150 MW Rs 9/u B2 150 MW Rs 9/u S2 40 MW RS 8500 S2 40 MW RS 8500 S2 40 MW Rs 8.5/u S2 40 MW Rs 8.5/u S3 50 MW RS 7500 S3 50 MW RS 7500 S3 50 MW Rs 7.5/u S3 50 MW Rs 7.5/u B1 100 MW Rs 6/u B1 100 MW Rs 6/u S1 80 MW Rs 9.5 S1 80 MW Rs 9.5 B3 30 MW Rs 7/u B3 30 MW Rs 7/u B3 30 MW RS 7000 B3 30 MW RS 7000 Deficit 100 MW Deficit 100 MW S1 80 MW RS 9500 S1 80 MW RS 9500 B1 100 MW RS 6000 B1 100 MW RS 6000 S2 120 MW RS 8000 S2 120 MW RS 8000 S2 20 MW Rs 8/u S2 20 MW Rs 8/u S3 100 MW RS 5500 S3 100 MW RS 5500 S2 100 MW Rs 5.5/u S2 100 MW Rs 5.5/u Surplus 100 MW Surplus 100 MW Required Flow 100 MW

Congestion Management SR WR S1 50 MW RS 8000 S1 50 MW RS 8000 B1 50 MW RS 8500 B1 50 MW RS 8500 B2 150 MW RS 9000 B2 150 MW RS 9000 S2 40 MW RS 8500 S2 40 MW RS 8500 S3 50 MW RS 7500 S3 50 MW RS 7500 B1 100 MW RS 6000 B1 100 MW RS 6000 S1 80 MW RS 9500 S1 80 MW RS 9500 B3 30 MW RS 7000 B3 30 MW RS 7000 Deficit 100 MW Deficit 100 MW S2 20 MW RS 8000 S2 20 MW RS 8000 S2 100 MW RS 5500 S2 100 MW RS 5500 Surplus 100 MW Surplus 100 MW Allowed Flow 20 MW Surplus 20 MW Surplus 20 MW Highest Seller getting rejected Lowest Buyers getting rejected Deficit 20 MW Deficit 20 MW

Risk Management System  D-1 At 09:30 Hrs : Pre-trade Margin Check.  equal to the initial margins or average of last 7 days’ trading value, whichever is more.  D-1 At 12:30 Hrs : Preliminary Obligation Margin Check Preliminary Obligation =< Funds Available (incl initial margin) Block funds.  D-1 At 15:30 Hrs : Pay-ins  At D+1 14:00 Hrs : Pay-out.  D-1 At 09:30 Hrs : Pre-trade Margin Check.  equal to the initial margins or average of last 7 days’ trading value, whichever is more.  D-1 At 12:30 Hrs : Preliminary Obligation Margin Check Preliminary Obligation =< Funds Available (incl initial margin) Block funds.  D-1 At 15:30 Hrs : Pay-ins  At D+1 14:00 Hrs : Pay-out. Trader Member Facilitator Member  D-1 At 09:30 Hrs : Pre-trade Margin Check.  equal to the 100% of the bid value to be provided by Client directly to IEX in Client Settlement account  D-1 At 15:30 Hrs : Pay-ins  At D+1 14:00 Hrs : Pay-out.  D-1 At 09:30 Hrs : Pre-trade Margin Check.  equal to the 100% of the bid value to be provided by Client directly to IEX in Client Settlement account  D-1 At 15:30 Hrs : Pay-ins  At D+1 14:00 Hrs : Pay-out.

Performance so far… IEX won India Power Award for “ Best e-enabled consumer platform” 17 th November,2009

OA status in India Northern Region StatesBuySell Haryana Punjab Rajasthan HP & J&K Uttaranchal Delhi & UP East & North Eastern Region StatesBuySell Assam & Bihar Manipur & Mizoram Tripura & Sikkim Jharkhand Arunachal Pradesh Meghalaya Orissa West Bengal Western Region StatesBuySell Madhya Pradesh DNH&DD-UT Gujarat Chhattisgarh Maharashtra Southern Region StatesBuySell Andhra Pradesh Karnataka Tamil Nadu Kerala 2-Jul-15

Participation at IEX

Over 2 years of Adequate Liquidity 29 State Utility 990+ Portfolios 738 Direct consumer 520+ participants on single day Cleared Volume :19 Billion Units DAM Volume Record  MUs constrained (23 rd September ’ 10)  MUs unconstrained (23 rd September 10)

IEX monthly Average Price

IEX Monthly Volume

IEX Dominant Market Share (DAM+TAM)

Entities eligible for Membership:  Inter-State Generating Stations (ISGS)  Distribution Licensees  State Generating Stations  IPPs  CPPs and IPPs (with consent from SLDC)  Open Access Customers (with consent from SLDC)  Electricity Traders / Brokers Who Can become Members of IEX ?

IEX Membership Category Proprietary Member (right to trade and clear on its own account) Generator- Distribution licensees- IPPs - CPP- MPPs –O A consumers Proprietary Member (right to trade and clear on its own account) Generator- Distribution licensees- IPPs - CPP- MPPs –O A consumers Professional (trade and clear on behalf of its Clients) NO CREDIT /FINANCING Professional (trade and clear on behalf of its Clients) NO CREDIT /FINANCING Electricity Traders (trade and clear on behalf of its Clients) CREDIT /FINANCING Electricity Traders (trade and clear on behalf of its Clients) CREDIT /FINANCING Clients Grid Connected Generator, Distribution licensees, IPPs, CPP, MPP, OA consumers Trader Client With valid PPA Clients Grid Connected Generator, Distribution licensees, IPPs, CPP, MPP, OA consumers Trader Client With valid PPA

Financial Requirements Membership Category: Proprietary / Professional Member The financial criteria for payment options available on IEX are: Fees Professional & Proprietary & Electricity Trader (Full Payment Option) Proprietary member (Light Payment Option) Admission feeRs. 35,00,000*Rs. 10,00,000 Interest Free Security Deposit Rs. 25,00,000Rs. 10,00,000 Annual Subscription Fees Rs. 5,00,000Rs. 2,50,000 Processing FeesRs. 10,000 TOTAL Rs. 65,10,000Rs. 22,60,000 Exchange Transaction1p/kWh2p/kWh

How to Move Ahead… ► Become Member or Client (of a Member) » Rs 22.6 Lacs +2p/kWh transaction fee or » Rs 65.1 lacs + 1p/kWh transaction fee or » 1Lakh ► Technical Requirements – Standing Clearance from UTs/State SLDC » ABT Meters » Sufficient transmission capacity – Connectivity with exchange can be done in two ways » Internet Immediate » Leased Line ► Start Buying from IEX or Sell surpluses to IEX

Financing by REC  Members can get finance from Rural Electrification Corporation to fulfill their trade obligations at a nominal interest rate(8.5%).  Procedure :  Member will apply to REC for sanction of credit limit.  After due verification, REC shall sanction the credit limits  Tripartite agreement between IEX – REC – Member  Member allowed to bid to exposure limit, net of utilization till date.  Each tranche of disbursements by REC to IEX on behalf of the participants shall be treated as a separate loan for the purpose of determination of loan period, payment of interest, other charges and repayment of loan.

Renewable Energy Certificates

Introducing an another option… REC Sale of Electricity at Market Price in open market Sale of electricity to DISCOMs at State regulated tariff Feed-in Tariff [State Regulated Tariff] REC [Solar & Non-Solar] Sale of RECs at Power Exchange * - Weighted Average Pooled Price at which distribution licensee has purchased electricity (including cost of self generation, long-term and short term purchase) in the previous year, but excluding the cost of RE power purchase Sell to DisComs at Price ≤ Pooled Cost of Power Purchase* REC Option Electricity Green Attributes

Salient Features of REC Mechanism ParticipationVoluntary REC Denomination1 MWh Validity365 Days after issuance Categories1.Solar REC 2. Non-Solar REC Trading PlatformPower Exchanges only BankingNot Allowed BorrowingNot Allowed Transfer Type Single transfer only, repeated trade of the same certificate is not possible Penalty for Non-compliance‘Forbearance’ Price (Maximum Price) Price GuaranteeThrough ‘Floor’ Price (Minimum Price)

Trading at IEX Trading Day Last Wednesday of every Month Market Clearing Closed Double sided auction Trading Time Hrs By 1530 Hrs Verification by Central agency for Valid REC by cleared seller at IEX By 1600 Hrs Central agency confirms REC By 1630 Hrs IEX finalizes trade By 1700 Hrs Buyer & Sellers informed to Central Agency By 1800 Hrs Invoice raised (proof of REC trade)

100 REC Rs REC Rs REC Rs REC Rs REC Rs REC Rs Cleared volume : 600 RECs MCP: Rs 2200/REC BUYSELL A 100 Rs 3900 A 100 Rs 1500 B 600 Rs 2200 B 200 Rs 1700 C C 300 Rs 2000 MCP Rs /REC, Cleared Volume : 600 RECs

AccreditationFee & Charges Application Processing Fee Rs Accreditation Charges (One Time – for 5 Years) Rs. 30,000 Annual ChargesRs. 10,000 Re-Validation Fees (After 5 Years Rs RegistrationFee & Charges Application Processing Fee Rs Accreditation Charges (One Time – for 5 Years) Rs Annual ChargesRs Re-Validation Fees (After 5 Years Rs State Nodal AgencyCentral Agency IssuanceFee & Charges Fees Per REC issued Rs. 10 Central Agency REC - Fee & Charges RedemptionFee & Charges Fees Per REC issued Rs. 10 IEX

REC - Fee & Charges Impact Assumptions: Project of Capacity = 1 MW Capacity Utilisation Factor = 22% No. of Units Generated = MU No. of REC Issued = 1927 Cost Impact of Fee and charges in First Year Similarly the cost impact (in Paise / Unit) for: TWO YearTHREE YearFOUR YearFIVE Year 2.15 Paise1.65 Paise1.32 Paise1.20 Paise

REC trade at IEX

Benefit for RE Generators from REC Mechanism Installed Capacity of a Plant in MW10.0 Average RE Generation PLF/CUF over a Year22.0% Annual Generation in MUs Option 1: PPA with State UtilityOption 2: Availing REC Benefit DescriptionAmount (Rs)DescriptionAmount (Rs) 1A. State Regulated Tariff (Rs./kWh)3.75 2A. Market Rate/APPC for Electricity (Rs./kWh) B. Income from CERs (Rs./kWh))0.402B. Income from RECs (Rs./kWh)) C. Total Revenue per year (Million Rs.) C. Income from CERs (Rs./kWh))0.40 2D. Expenses for availing and trading RECs (Rs/kWh) E. Total Revenue per year (Million Rs.) Net benefit derived by an RE Generator from REC Mechanism [2E – 1C] (Amount in Million Rs.) % Improvement in cash-flow for RE Generator per year31.7%

How to commence …participation on IEX New Membership only for those interested in REC trading Professional REC Member Proprietary REC Member New Clients : No Registration fees ( FY 11-12) Buyers : Very Simple Process of filing registration with IEX Sellers : Complete 4-step procedure before registration with IEX

IEX Initiatives Continuous communication with Users IEX Daily SMS Service for Trade Details IEX Monthly Bulletin IEX hourly Trade Prices displayed on its website

Thank You !!! Promoters Joint Equity Partners: Technology :