Financial Restructuring Of Discoms & Way forward

1. Financial Restructuring Of Discoms & Way forward 21st November 2013 Delhi Dr Harish K AhujaPresident Strategy & Corporate Affairs

2. Structure • Power Sector Reforms : Fundamentals • FRP of Discoms • Why competition works better than regulations & privitization • Way forward for taking discoms towards competitive mode. • Some conclusions : Create Prosumers

3. Moser Baer Projects Pvt Ltd Private and Confidential – For Limited Circulation Only

4. Moser Baer Projects – Group Structure Moser Baer Projects • Moser Baer (Projects Private Ltd. (MBPPL) Group • Key Investors: Blackstone, IFCI, GE • Thermal: Madhya Pradesh power project: 2,520 MW, Chhattisgarh power project, 1,320 MW • Solar: • Domestic – 223 MW EPC & Commissioned • International: 63 MW Commissioned • Hydro: North Eastern India and Nepal 2000 MW, Himachal Pradesh ~500 MW • Coal Mining: MDO, Chhattisgarh Thermal Hydro Clean Energy (Incl. Solar Farms) Coal Mining Company is committed to high quality, low cost and timely delivery of world class projects

6. Economics of Power Reforms

7. Unbundling and Competition Competition Competition Regulation Regulation Competition

8. Circle of Power Sector Economics Multi Buyer Multi Supplier Market Forces Generation Retail supply Discoms Competitive Segment + Regulated segment Transmission Distribution Natural Monopoly Regulation

9. Basic Elements of Power Reform Corporatization/Privatization To bring Multiple Players especially in competitive segments i.e. Generation and Retail supply Economic regulation SET UP Independent REGULATOR to check -Monopoly Practices in Distribution/Transmission and avoid Market Power in generation Competition • IN Generation and Retail supply segment • By Competitive wholesale Market • By Competitive Retail market

10. Discoms : Bankruptcy to Revival • NEED Of HOUR: To save discoms is to save complete value chain • Losses – All Time High, • - Load shedding. • - The only buyer – Almost bankrupt • - Banks have stopped lending • MOP: Debt restructuring • Political inference, Subsidy & Skewed tariff • Public mindset : Electricity still a public good- Major bottleneck in reforming discoms • SOLUTION ? • Bail out • Franchisee • APDRP • Privatization • More competition- Open access a legal imperative

11. State Electricity Distribution Management Responsibility Bill ,2013

12. Financial management of discoms

13. 1 2 4 3 ry Focal issues - Role of regulators! - Discoms Bailout : What Next - Unbundle Discoms : Wire & content! ! Privitization of supply/content side!

14. 1 2 4 3 Discom Bailout : what next

15. Where is Competition Multi Buyer Multi Supplier Market Forces • It is a established fact that neither regulations nor privatization works ,it’s the competition which serves the best of interests of electricity consumers Generation Supply Open Access Very Good Average Transmission Distribution Good Poor Natural Monopoly- Regulation

16. 2 Unbunble Discoms! • Promote competition on Demand side • (It is a established fact that neither regulations nor privatization works ,it’s the competition which serves the best of interests of electricity consumers ) • Separate Wheeling & Supply business. • Wheeling Business • REGULATED • Transparent Billing • Initiate horuly metering drive by directing discoms to put smart/ABT meters • Reduce cross subsidy • . Promote direct subsidy to poor domestic& farmers through Smart cards. • Promotion of renewable through regulatory cess in the begining till grid parity is achieved. • APDRP: Mainly to strenghten distribution & transmission network • Let Pension Funds & Insurance invest money in regulated wheeling business • Supply Business • Competition/Deregulation • Discoms & other retail Players • Let area discom supply company be default supplier for few more years i.e spot rates. • Issue Guidilines for retail supplier on switching . • Allow more consumers to be open access/deregulated in next 8 years ie 300 KW, 36000Units per year • Open Derivative markets in next 2-3 years to see price visibility.

17. 3 Privitization Of Discoms Supplier Past PPP model & Private discoms Delhi, Orissa, Surat, Mumbai,Ahemdabad, Noida, Calutta etc Chaturvedi Commitee :Mixed reactions Present Frenchaisee Bhiwandi, Agra,Jalgaon Shunglu commitee : Mixed reactions • FUTURE • No more transitory model. • Bring in more suppliers • Deregulated consumer can not be charged with regulated tariff • SERC can not regulate Tariff for Deregulated consumers except CX & wheeling charges • Even for charging power purchase cost explicit agreement of consumer necessary • Open access consumers do not need permission of Discoms to choose other suppliers, • Just information is sufficient • Discoms though will be default supplier, but tariff would be mutually discussed.

18. 4 Role of Regulators • CERC • Move towards Price cap regulations instead of cost plus especially for interstate transmission : to avoid gold platting • Open Access – Building Concensus • Effective ISO- POSCO • Derivative markets to give long term price signals to attract investment • SERC – • Tariff Fixation in regular intervals • Reducing Cross subsidy in +- 20% • Intrastate POC – not visible • Enforcing Performance stds- No Load shedding. • Prescribe I cap – 18% reserve margin with supplier • Enforcing RPO/SPO : promoting prosumers • Promoting deguralations/open access: By putting in place timelines for diffrerent loads ; 0.5 MW,100 KWS/50 K units • Invest in ABT compliant meters to record houry consumption. • Promote direct subsidy to poor dom & farmers through Smart cards. • Promote use of solar pumps instead of seprate feede for agriculture

19. Create Prosumers • “Electricity for all” • Electricity generated would meet the Prosumer’s growing electricity demand and the surplus units would be feed back to the grid • Ensures political backing and support • Allows for capital and interest subsidy to be directly given to the consumer • Rational planning for long term power procurement” • More prosumers will reduce power demand ,in turn will affect capacity addition. • Saving in Transmission and Distribution cost • R-APDRP (Part B) –Already in place • R-APDRP Aims at - Renovation, modernization and strengthening the system • With Net Metering, Discom can better serve energy deficit customers (industrial & commercial) & be more profitable, thus improving their financial health & reducing liabilities • IT clubbed with Net Metering defined as a set of IT hardware, software and applications can reduce energy losses

20. Thank You