ANALYSIS OF POWER SECTOR

PRESENTED BY :
ZAHERA BOHRA
ROHIT SOMANI
RAKHI JAIN
MD AZHARUDDIN
LUCKY PARASHAR
ANKITA JAIN
 INTRODUCTION
Bloodline of Industrial growth


Increased demand due to increased automation –

demand-supply gap

Need to generate more supply with less harm to
environment

Deregulation has led to fierce competition in global
market
 Global Overview
 Average Annual Growth Rate from 1971 to 2004 – 3.7%

 Developing countries consume 30% of world’s energy

 America:
Less than 5% of world’s population
consumes more than 26% of World’s energy

 Energy demand expected to rise by 95%

 Global consumption expected to rise by 50% by 2030

CONTD…
High prices of oil & natural gas will slow down growth
of demand in long term
Energy demand
OECD Countries: 0.7%
Non-OECD Countries: 2.5%
India & China future key consumers
1980 : 8%
2005 : 18%
2030 : one quarter of world energy consumption
(projected)



 Comparative Per Capita
Consumption Of Electricity (Kwh)
INDIAN power sector: history
 The process of electrification commenced in 1880 the establishment of a
small hydroelectric power station in Darjeeling

 Commercial production and distribution started in 1889, in Kolkata

 year 1947, the country had a power generating capacity of 1,362 MW by
private utility companies

 Post 1947, all new power generation, transmission and distribution in the
rural sector and the urban centers under the purview of State and
Central government agencies.

 State Electricity Boards (SEBs) were formed in all the states.

INDIAN POWER
SECTOR:OVERVIEW
 Predominantly controlled by public sector undertakings(PSUs)


 65% of Total installed capacity is under PSUs


 The consumption sector is divided into Commercial and Retail
sector

 Differential rates are applied on consumption on both the sectors

 The power sector is regulated by The Electricity (Amendmend)
Act 2007 AND The National Electricity Policy, 2005



 GENERATION
 March ‘09,the installed power generation capacity stood at
147,000 MW, 100 times the installed capacity of 1362 MW in
the year 1947.

 The growth in generation during 2006-07 was 7.3% and in 2007-
08 was 6.33%

 Heavy investment in recent years on renewable sources of energy
such as wind energy

 Electricity generation:
Ø 75% by thermal power plants,
Ø21% by hydroelectric power plants and
Ø4% by nuclear power plants.

Segments in Power
Generation
 SEGMENT WISE CAPACITY:
1. THERMAL POWER


Current installed capacity :93392.64 MW or 63.3%.

Coal based power : 53.3%
Gas based power: 10.5 %
Oil based power.09%
Maharashtra is the largest producer of thermal power in
the country.
2. HYDRO POWER

Total potential : 600TWh


 CONTD…
3. NUCLEAR POWER GENERATION:


Installed capacity :126993.97 MW with a 3% share at

3900 MW
2.79% of total electricity generation


4. WIND ENERGY


Total wind potential around 45 000 MW

The technical potential that is based on the availability
of infrastructure is estimated to be around 13 000 MW




 CONTD…

5. SOLAR ENERGY
 Average intensity of solar radiation received on India is 200
MW/km square which amounts to 657.4 million MW
 However, 12.5% of the land area amounting to 0.413 million
km square can be used

 DEMAND
 The demand for energy has grown at an average of 3.6% p.a.over the
past 30 years.

 The total demand for electricity in India is expected to cross 950,000
MW by 2030.

 The gap between demand and supply has been ever increasing due to
faster rate of growth of demand

 More than 50% of India's commercial energy demand is met through the
country's vast coal reserves,

 Gap Between Demand And Supply Of Power

Source: http://www.indexmundi.com/India/electricity_production.html
 CONSUMPTION


 India is world's 6th largest energy consumer, accounting for
3.4% of global energy consumption.

Per capita power consumption stood at 612 kWh.



INDIAN ELECTRICITY CONSUMPTION
 10TH PLAN:POWER SECTOR
The Tenth Plan for fiscal years 2002 to 2007 targeted a
capacity addition of 41,110 MW


Subsequently revised to 30,641 MW


However at the end only 21,180 MW of capacity was
added.

 “Planning is perfect but Path to achieve the target is not
perfect”
 11TH PLAN: HIGHLIGHTS
 To achieve the objectives of POWER FOR ALL BY 2012 National
Electric Policy has been designed.


 To fulfill the objectives of the NEP, a capacity addition of 78,577 MW

has been proposed for the 11th plan.


 This capacity addition is expected to provide a growth of 9.5 % to the

power sector.


 The total fund requirement for generation projects, during the Eleventh
Plan period is estimated at Rs. 4,108,960 million,


 2,020,670 million for the central sector,

 Rs. 1,237,920 million for the state sector
 Rs. 850,370 million for the private sector.


 The total fund requirement includes the fund requirement estimated at

Rs. 1,891,950 million for start-up generation projects benefiting in the
Twelfth Plan



FACTORS DRIVING POWER DEVELOPMENT
Rising living standards of sizeable segments of
population


Growth in the manufacturing sector and emergence of

India as a manufacturing destination in the world

Increasing urbanization

Thrust on rural electrification




 SHORTFALLS OF INDIAN POWER

SECTOR
Electricity losses in India during transmission and
distribution are extremely high and vary between 30
to 45%.


Due to shortage of electricity, power cuts are common

throughout India and this has adversely effected the
country's economic growth.


Theft of electricity, common in most parts of urban

India, amounts to 1.5% of India's GDP.


Around 56 percent of India’s rural population or 78

million households do not have access to electricity.

 FUTURE PLANS : “ POWER FOR ALL BY
2012 ”
 ‘POWER FOR ALL BY 2012’:This mission would require that our
installed generation capacity should be at least 2, 00,000 MW by 2012

 The transmission perspective plan for 11th plan focuses on the
strengthening of National Power Grid through addition of over
60,000 ckm of Transmission Network by 2012

 The existing inter-regional power transfer capacity is 17,000 MW, which
is to be further enhanced to 37,000 MW by 2012 through creation of
“Transmission Super Highways”.

 POWERGRID is working towards achieving its mission:



“Establishment and Operation of Regional and
National Power Grids to facilitate transfer of power within and
across the regions with reliability, security and economy, on
sound commercial principles".
 COPMANIES IN POWER SECTOR
 ELECTRICITY GENERATION


 National Thermal Power Corporation (NTPC),

 National Hydroelectric Power Corporation (NHPC) and
 Nuclear Power Corporation of India (NPCI)
 Maharashtra State Electricity Board (MSEB),




 TRANSMISSION AND DISTRIBUTION

 State Electricity Boards (SEBs)
 private companies.

ANALYSIS OF STOCK PRICE
MOVEMENTS:
 COMPANY ANALYSIS



 NATIONAL THERMAL POWER CORPORATION(NTPC)
TATA POWER
 NATIONAL THERMAL POWER
CORPORATION(NTPC)
 NTPC, India’s largest power company, was set up in 1975 to accelerate
power development in India.


 Today it has emerged as an “Integrated power Major”, with a significant

presence in the entire value chain of power generation business.


 Its current generating capacity of 30144 MW



 NTPC has embarked on plans to become a 75000 MW company by 2017


 With 19.11 per cent of the country's capacity, NTPC accounted for 28.51
percent of the total power generation in India in the year 2007-08
 KEY FINANCIAL VARIABLES
RATIOS MAR’04 MAR’05 Mar’06 Mar’07 Mar’08
EBIT(%) 12.71 21.30 18.66 22.84 23.55
ROCE(%) 18.04 13.15 12.26 14.69 15.25
RONW(%) 14.64 13.90 12.95 14.13 14.08
D/E 0.43 0.42 0.46 0.52 0.54
RATIO
CURRENT 1.59 1.72 2.11 2.42 2.32
RATIO
EPS 6.73 7.04 7.06 8.33 8.99
DPS 1.39 2.40 2.80 3.2 3.5
ASSET 0.47 0.52 0.57 0.65 0.70
T/O
 TATA POWER
 Incorporated in the year 1919 at Mumbai
 India’s largest integrated private sector power utility,
 Tata Power pioneered the generation of electricity in India.
 The core business of Tata Power Company is to generate,
transmit and distribute electricity.
 Tata Power has an installed power generation capacity of
above 2785 Mega Watts,
 April’08, Tata Power completes the Signing of Financial
Agreements for 4000 MW Ultra Mega Power
Project,coming up at Mundra, Gujarat
The cost of the project is estimated at INR 17000 crores
(USD 4.2 billion).
 KEY FINANCIAL VARIABLES
RATIOS MAR’05 MAR’06 Mar’07 Mar’08 Mar’09

EBIT% 13.41 11.90 7.79 10.38 10.63

ROCE(%) 8.37 8.69 7.61 6.96 7.32
RONW(%) 10.82 11.07 11.63 10.88 10.66
D/E 0.57 0.51 0.61 0.39 0.61
RATIO
CURRENT 1.86 2.18 2.22 1.78 1.64
RATIO
EPS 27.86 30.85 35.21 39.42 41.65
DPS 7.50 8.50 9.50 10.50 11.50
ASSET 0.72 0.77 0.79 0.91 0.81
T/O
 COMPARATIVE RATIO ANALYSIS OF TOP 5
COMPANIES
YRC AGRREGAT NTPC 08 POWER RELIANCE TATA TORRENT
ED GRID CO INFRA 08 POWER POWER 08
08 CO 08

KEY RATIOS:
Debt – Equity 0.75 0.50 1.69 0.58 0.47 0.86

Ratio term Debt

Long 0.73 0.50 1.62 0.51 0.43 0.85

– Equity Ratio
Current Ratio 1.59 2.23 0.59 2.41 1.81 0.76

Turnover ratios
Fixed Assets 0.47 0.72 0.14 1.12 0.93 1.09

Inventory 14.20 14.21 21.35 20.75 13.65 22.78

Debtors 4.65 17.62 5.80 4.80 4.11 9.61

Interest 2.96 6.33 2.43 4.73 4.57 7.30

coverage ratio
PBIDTM (%) 35.38 38.38 91.41 27.36 18.28 16.10

ROCE (%) 8.79 15.72 9.82 9.80 7.67 8.39

RONW (%) 9.07 14.36 12.99 11.48 8.12 7.55

Porter’s Five Force Model
BARRIERS TO ENTRY: SUBSTITUTES:

Heavy investment Biomass

Fuel linkage Renewable Source Of India
Payment guarantees from
State Governments
Retail distribution COMPETETORS
licensed, etc.
 Not very High
 Currently due to high
demand
BARGAINING POWER OF BARGAINING POWER OF
SUPPLIERS: BUYERS:
Not very high as Low power of retail customers is
Government controls tariff low
structure. Govt is a big buyer and payment
by Govt can be more erratic

Power sector Life cycle stage

Power sector is now in growth or expansion

stage
O P P U R T U N IT IE S :
THREATS
 FUTURE OF POWER SECTOR DEPENDS UPON:
 Ensuring Adequate Supply of Coal with Consistent Quality

 Ensuring Availability of Gas for Power Generation:

 Power Sector Reforms

 Reduction in Cost of Power

 Rationalization of Fuel Prices

 Energy Efficiency and Demand Side Management

 Role of Nuclear and Hydro Power

 Role of Renewable
 IMPACT OF BUDGET
 Increasing investment in infrastructure to above 9% of GDP by 2014 IN
POWER SECTOR
 The Accelerated Power Development and Reforms Program (APDRP),
which is aimed to increase reliability and quality of power supply has
got increased budget allocation to Rs 2,080 crore for 2009-10 from
Rs.800 crore for 2008-09.
 Expected to provide more funds in the hands of the state distribution
utilities to upgrade their network, infrastructure and improve their
financial position
 The Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY), launched by
the Central Government in 2005 to provide access to electricity to all
household in India by 2012, has received budget allocation to Rs 7,000
crore for 2009-10 from Rs 5,500 crore for 2008-09.
 The proposed National Gas Grid will be beneficial for power generation as
it would enable setting up of gas-based power plants near centres of
consumption along the gas grid
 REASONS FOR INVESTMENTS
 1. Power sector is now in growth or expansion stage
 Usually Investors should buy at the
End of the nascent stage
During its growth stage
Here, Investors can get high gain from the industry if
they remain invested for long terms

2. Enormous growth potential
3. Irrational demand-supply gaps

 4. Right time to buy stocks as growth is entailed on account of

rising consumption
5. Recession proof


Consistent demand
Assured buyer

 CONTD…
6. NTPC, Tata Power & Neyveli Lignite show positive
growth
7. Companies reported growth (Such as NTPC of 14%

YoY net sales & 6% YoY profit in FY09)

8. Government taking steps to enhance competition in the

market
