Innovation Courage Trust 1 l Energy I Real Estate I Agro I Metal & Minerals I Shipping I Power I Ports I SEZs I ICDs I Logistics

Innovation Courage Trust 2 l Energy I Real Estate I Agro I Metal & Minerals I Shipping I Power I Ports I SEZs I ICDs I Logistics Profit Gas & Free Market Development Rajeev Sharma Chief Executive Officer – Adani Energy Ltd

Innovation Courage Trust Gas Scenario & Pricing Profit Gas Gas Utilisation Policy & Profit Gas “in Kind” Public & Private Sector views AEnL Perspective

Innovation Courage Trust Gas Scenario & Pricing Profit Gas Gas Utilisation Policy & Profit Gas “in Kind” Public & Private Sector views AEnL Perspective

Innovation Courage Trust Gas Scenario & Pricing APM GasNon - APM Gas Domestic ProdnLNG Pre-NELP GasNELP Gas Term Contract Gas Spot Gas Administrated PricesMarket Linked Free Market Prices (53 MMSCMD)(50 MMSCMD) (26 MMSCMD)(24 MMSCMD) (21 MMSCMD) (5 MMSCMD) (19 MMSCMD)(5 MMSCMD)

Innovation Courage Trust Gas Scenario APMNon-APMAPMNon-APM Share of APM Gas is set to reduce

Innovation Courage Trust Gas Pricing Share of APM gas is to reduce substantially over next 5 years –Gas prices shall be evolved by players in the Market Share of Gas in Private sector increasing –Pvt. Sector to hold majority of the gas in coming years –Role of Govt. in gas markets naturally fading Move from administered pricing to market determined pricing mechanism in last decade –Increase in role of private sector –Process expedited by import of LNG, especially the spot cargoes Evolution of Free market –Producers free to sell gas at market determined prices –“Arms Length” negotiations between related entities Stage is set for Free Gas Market in India

Innovation Courage Trust Gas Scenario & Pricing Profit Gas Gas Utilisation Policy & Profit Gas “in Kind” Public & Private Sector views AEnL Perspective

Innovation Courage Trust Profit Gas “… Globally 40 ~ 50% gas comes as “Profit Gas. Most of it is taken in Value, but there are countries where Govt. prefers it in kind” “Profit Gas” is the fraction of gas that Private Players have agreed to share with the Govt. under the PSC Profit Gas in “Value” (Cash) ? Profit Gas in “Kind” ?

Innovation Courage Trust Need for Profit Gas in “Kind” To secure gas supplies for its priority sectors –Power, Fertiliser units and CGD networks To allocate gas for socio-economic development work –Allocation gas for development / support to specific industrial segment To safeguard itself against price volatility –Govt. (through PSU units in Power & Fertiliser sector) is one of the largest consumers of gas –Provide stable price regime to its units Gas in ‘Kind” means making Govt a player (seller) in the market

Innovation Courage Trust Impact of Profit Gas in “Kind’ Makes Govt. a significant player (as seller & Buyer) –Becomes the preferred supplier for set of customers Power & Fertiliser units in Public Sector –Limits options for free trade of gas for producers Reduced market (non-PSUs) Limits the ability to realise true value of gas Govt. gets the ability to create benchmark prices –Tendency to create sub-market price –Creates ‘dual pricing’ mechanism as per current practice Sub-market price – for Priority sector Market determined – for others –Makes price determination and price visibility difficult Uncertainty on producer’s share of gas –Back & forth switching from “in Kind” to “in Value” –Inability to commit long term gas Profit Gas in “Kind” creates indirect regulation in market

Innovation Courage Trust “Cash” as alternative to “Kind” Gas Higher Govt. revenues –Large revenue stream in ‘high price’ era “Cash” can support various socio-economic activities in different sectors –Funds can be utilised for non Oil and gas activities also Market Determined pricing –“Single” pricing –No need for creating sub-market prices Helps in making priority sectors develop business models to sustain market prices / conditions –Way to remove subsidies Subsidies (if required) to priority sectors can be supported through allocations from “Cash” earnt –Higher accountability and transparency “Cash” can substitute “Kind” without affecting Govt.’s priorities

Innovation Courage Trust Gas Scenario & Pricing Profit Gas Gas Utilisation Policy & Profit Gas “in Kind” Public & Private Sector views AEnL Perspective

Innovation Courage Trust Gas Utilization Policy & Profit Gas in “Kind” Profit Gas in “Kind” Objective is to: –Secure gas for priority sector –Support socio - economic developmental activities –Safeguard against high prices and volatility Gas Utilization Policy Objective is to: –Strengthen core sectors of economy –Optimal utilization of scarce resource –Power, Fertiliser, Domestic use to be accorded high priority for gas allocation “Gas Utilisation Policy” achieves the same objectives as “Kind” Gas - Do we need both?

Innovation Courage Trust Free Market Development - Hurdles Govt. Directions for allocation of gas (through Gas Utilization Policy) Whom to Sell? How much to Sell? What Price to sell at? Profit Gas makes Govt. a large player (Seller) in market Profit Gas means gas sales by Govt. at sub- market prices Profit Gas in “Kind” alongwith Gas Utilisation Policy can create indirect regulations & impede market development

Innovation Courage Trust Gas Scenario & Pricing Profit Gas Gas Utilisation Policy & Profit Gas “in Kind” Public & Private Sector views AEnL Perspective

Innovation Courage Trust Public vs Private views Public Sector view It’s a Govt. right which is known to Contractor before submission of bids Producer’s share (after deduction of Govt.’s share) can be forecasted in narrow range and hence does not create any uncertainty Preventing Govt. from taking gas in Kind” is to have complete control on the marketing and making additional margins by selling gas at premium Profit Gas “in Kind” is common in South East countries Reduces Producers risk of market Private Sector view Gas in “Kind” is being taken to sell it at sub-market prices Govt.’s right / ability to switch back & forth between “in kind” and “in value” creates uncertainty Most Govt.’s prefer profit gas in “in value” Restricts market for producers and limits premiums based on market conditions – leading to indirect price regulation Seen as hurdle to market access – one of the reasons why big players are not seen in NELP rounds

Innovation Courage Trust Gas Scenario & Pricing Profit Gas Gas Utilisation Policy & Profit Gas “in Kind” Public & Private Sector views AEnL Perspective

Innovation Courage Trust AEnL’s Perspective Share of APM Gas is set to reduce –Share of gas in private sector increasing with Govt.’s encouraging policies –Leading to free market place Profit Gas “in kind” has potential to : –Make Govt. a large player (as seller) –Create market at sub-market prices Contradicts Govt.’s efforts to free the market –Limit marketing freedom of producers Gas Utilization Policy can achieve the objectives & obligations of Govt. –Priority allocation to key sectors Power, Fertiliser & CGD –Price based on “market determination” / “arms length” negotiations No “U –Turn” – Let the good work continue

Innovation Courage Trust 20 l Energy I Real Estate I Agro I Metal & Minerals I Shipping I Power I Ports I SEZs I ICDs I Logistics For free Gas Market

Innovation Courage Trust Thanks “Everything that is really great and inspiring is created when one can labor in freedom” ….Albert Einstein