The Indian Power Industry is one of the largest and most of import industries in India as it fulfils the energy demands of assorted other industries. It is one of the most critical constituents of substructure that affects economic growing and the wellbeing of our state. India has the world’s 5th largest electricity coevals capacity and it is the 6th largest energy consumer accounting for 3. 4 % of planetary energy ingestion. Due to the fast-paced growing of the Indian economic system. the country’s energy demand has grown at an norm of 3. 6 % p. a. over the past 30 old ages. In India. power is generated by State public-service corporations. Central utilities and Private participants. The portion of installed capacity of power available with each of the three sectors can be seen in the pie-chart below:
As per the latest Report of CEA ( Central Electricity Authority ) i. e. as on 31-03-2011. the Total Installed Capacity of Power in India is 173626. 40 MW. Of this. more than 75 % of the installed capacity is with the populace sector ( province and cardinal ) . the province sector holding the largest portion of 48 % . 1. Sum Installed Capacity: | Power for All by 2012
Sector| MW| % age|
State Sector| 83. 313. 65| 45. 88|
Central Sector| 56. 572. 63| 31. 15|
Private Sector| 41. 671. 84| 22. 95|
Entire | 1. 81. 558. 12| |
Fuel| MW| % age|
Entire Thermal | 118409. 48 | 65. 21|
Coal| 99. 503. 38| 54. 80| Gas| 17. 706. 35| 9. 75| Oil| 1. 199. 75| 0. 66| Hydro ( Renewable ) | 38. 206. 40| 21. 04|
Nuclear| 4. 780. 00| 2. 63|
RES** ( MNRE ) | 20. 162. 24| 11. 10|
Total| 1. 81. 558. 12| 100. 00|
Renewable Energy Sources ( RES ) include SHP. BG. BP. U & A ; I and Wind Energy SHP= Small Hydro Project. BG= Biomass Gasifier. BP= Biomass Power. U & A ; I=Urban & A ; Industrial Waste Power. RES=Renewable Energy Sources Working of the Power Industry: –
Thermal Power: – In India. major proportion of power is generated from thermic beginnings where the chief natural stuff used is coal. Around 83 % of thermic power is generated utilizing coal as a natural stuff whereas 16 % of thermic power is generated with the aid of Gas and 1 % of thermic power is generated with the aid of Oil.
Hydro Power: – Hydroelectric power or hydroelectricity is electrical power which is generated through the energy of falling H2O. India has hydro power coevals possible worth 1. 50. 000 MW. of which merely 25 % has been harnessed boulder clay day of the month. Nuclear Power: – A Nuclear Power Plant is a thermic power station in which the heat beginning is one or more atomic reactors. A atomic reactor is a device to originate and command a sustained atomic concatenation reaction. In the procedure. heat is generated which is so used to bring forth electricity.
Renewable Energy Beginnings: – The energy obtained from renewable beginnings like Sun. air current. biomass can be converted into power. Renewable energy beginnings have great possible to lend to bettering energy security of India and cut downing green-house gas emanations. India is among the five largest air current power generators in the universe. What does the Past Say? ? …
How has the relationship between India’s economic growing and Power coevals growing been? As seen in the graph below. there is a positive correlativity between the GDP Growth rate and the growing in Power Generation. As will be seen in the ulterior portion of this Shastra. India is presently confronting acute deficit of power. The Indian growing narrative looks positive which will take to higher economic growing and more demand for power. In order to prolong the growing in GDP. India needs to add power coevals capacity commensurate with this gait.
Plant Load factor – A Measure of Efficiency: – Plant Load Factor. a critical efficiency parametric quantity in the power industry is a step of the existent end product of a power works compared to the maximal end product it can bring forth.
The State sector. that has the highest installed capacity is the least efficient. The private sector public-service corporations have clocked good efficiency rates and the Central public-service corporations have managed to accomplish competent efficiency rates. Traveling frontward. with private participants being encouraged to come in the Power Sector. the province public-service corporations will be required to work on bettering their efficiency. Performance of the top sector participants in the yesteryear
Looking at the tabular array below. it can be clearly observed that hydro-power manufacturers like NHPC and SJVN operate at well higher net income borders than thermic power manufacturers. This is because thermic power manufacturers are required to pass a batch on Fuel ( Coal. Gas. Oil ) . Looking at the companies with a diversified portfolio of power. NTPC is the largest company ( on Net Gross saless ) . but Tata Power has registered the highest growing rates in Gross saless and Net Net income. Among hydro power manufacturers. NHPC’s public presentation has been really good. its Net Net income growth at a CAGR of 28 % .
Porter’s 5 Forces analysis
What are the growing drivers of the industry?
1 ) Demand-Supply Gap: –
India has ever been a power-deficient state. The demand for power is immense in India. As seen in the above graph. the supply of power in India has non been able to run into its demand. Under the Government’s “Power for all by 2012” program. it has targeted per capita ingestion of 1000 kWh by the terminal of the 11th Five Year Plan ( 2007-2012 ) as compared to degrees of 734 kWh in 2008-09. In order to supply per capita handiness of over 1000 kWh of electricity by twelvemonth 2012. it is estimated that capacity add-on of more than 1. 00. 000
MW would be required. This shows that immense capacity add-ons are required at good efficiency rates. bespeaking that the chances available in this sector are immense.
2 ) Government: –
The function of the Government in the development of Indian power industry has been really important. Government’s policies aim at protecting consumer involvements and doing the sector commercially feasible. Government regulates this industry in assorted ways ( Tariff control. Subsidies. environment norms. etc. ) due to its linkages to assorted industries and to the growing of the economic system. – Regulatory function of Government: – Equally far as ordinance is concerned. Electricity Act. 2003 is a really of import Act as it allowed private sector engagement in the coevals of power. therefore making competition. It besides allowed 100 % FDI engagement in the power coevals. transmittal and distribution. therefore bring oning investings in the power sector.
– Government Schemes: – The Government is puting in this industry through assorted development strategies: – * The Rural Electrification Program is an attempt to buoy up up small towns which have faced acute deficit of Power over the old ages. * ‘Power for All by 2012? program aims at a per capita ingestion of 1000kWh by the terminal of the 11th Five Year Plan ( 2007-12 ) . * The Accelerated Power Development and Reform Programme ( APDRP ) programme is being implemented so that the coveted degree of 15 per cent AT & A ; C ( Aggregate Technical and Commercial ) loss can be achieved by the terminal of 11th program ( Currently it is 30 % ) .
– Undertakings under grapevine: – The Government of India is be aftering nine Ultra Mega Power Projects ( UMPP ) of 4 GW each with an estimated single investing of US $ 4 billion ( Rs. 192 billion ) . Four of these undertakings are expected to be commissioned between 2011 and 2017. The UMPP is an enterprise by the authorities to join forces with power coevals companies to put up 4. 000 MW undertakings to ease the country’s power shortage state of affairs. 3 ) Natural Materials: –
Thermal power section. which has the largest capacity coevals portion in the Indian power industry. is dependent on inputs like coal. oil and gas for the coevals of power. Coal deficits and the low thermic quality of coal supplies cause breaks in power coevals and consequence in lower works burden factors. When domestic supply of coal is deficient. coal is imported. This is unfavorable for power companies as it leads to lift in costs. With these jobs associated with thermic power. the Power Companies enter in to Long Term Agreements ( LTA ) with coal providers or get coal mines to guarantee regular supply of coal. Besides. presently coal participants in India are following aggressive schemes by geting Coal mines outside India. Domestically. a good figure of coal mines have received environmental clearances. Such actions will be good for thermic power participants. Gas-based power works face jobs because of deficits in gas supply. The finds in the Krishna-Godavari Basin are expected to better gas handiness in India which is a large positive for India’s gas-based workss. 4 ) Transmission and Distribution: –
Transmission of electricity is defined as the majority transportation of power over a long distance at a high electromotive force. Transmission and Distribution is every bit of import as coevals. The capacity add-ons to run into India’s turning power demand should be supplemented by equal transmittal substructure. Globally. every dollar invested in coevals has an equal sum invested in transmittal and distribution. However. in India traditionally every dollar invested in coevals has a corresponding half a dollar invested in transmittal and distribution. Due to this. transmittal capacity in India slowdown behind the coevals capacity. Huge investings are required in Transmission and Distribution if India’s power sector is to run into the lifting power demand. 5 ) FDI Equity Flows in Power Sector: –
In India. 100 % FDI is allowed in the Generation. Transmission and Distribution sections of the Power Sector. The FDI influx in the Power Sector has been on the rise in the last 5 old ages. This tendency is expected to go on in the coming old ages sing the immense chances available in the sector. FDI influx is of import for the power sector because it brings in money and India’s power sector is in immense demand of investings. More significantly. FDI besides brings in advanced engineering doing the sector more efficient. Hence. this proves to be a major growing driver for the power sector. 6 ) Growth Drivers for Power from Nuclear. Hydro and Renewable Energy Beginnings: – With the thermic power coevals section confronting the issue of deficits of coal ( major natural stuff ) . other power coevals beginnings like atomic. hydro and renewable energy beginnings will acquire attending in the coming old ages. Nuclear power undertakings account for 2. 75 % of India’s sum installed capacity which is about 4. 77 GW.
The Planning Commission’s adept commission on an Integrated Energy Policy has suggested in its study that there is a possibility of making a atomic power capacity of 21-29 GW by 2020 and 48-63 GW by 2030. The hydro power section offers investing chances as India is considered to hold hydro power coevals possible worth 1. 50. 000 MW ; of which merely 25 % has been harnessed boulder clay day of the month Using renewable beginnings to bring forth electricity has several advantages like a perennial energy beginning. potency for lower trust on imported dodo fuels and lower CO2 emanations. However. at present the major hurdle confronting rapid enlargement of renewable power is high initial cost as compared to the viing fuels. But taking in to consideration the environmental concerns. this section receives encouragement from the Government. Its portion in the country’s entire coevals capacity has increased from 1. 1 % in 2001-02 to 10. 63 % as on 31st March. 2011 and is expected to increase in the hereafter. These three non-thermal beginnings of power besides offer good investing chances. Companies are diversifying their power portfolios to take advantage of chances available in hydro power and renewable energy beginnings. Roadblocks ( Challenges ) : –
Power Sector is a extremely capital-intensive industry with long gestation periods. before the beginning of gross coevals. Since most of undertakings have a long clip frame ( 4-5 old ages of building period and runing period of over 25 old ages ) . there are some built-in hazards which this sector faces. Availability of Coal: –
Coal is the pillar of the power production in India and is expected to stay so in the hereafter. India has limited coal militias. plus. handiness of domestic coal is a challenge on history of assorted constrictions such as capacity enlargement of Coal India Limited ( the largest coal bring forthing company in the universe. coal block allotment. tribal land acquisition. environmental and forest clearances. etc. Transportation system of coal is a large concern in itself. Within the state. coal is transported by Indian Railways and in instance of imports ; coal is to be unloaded at ports. In both instances. India presently faces capacity deficit. Hence. a undertaking developer has to account for and pull off its logistics concatenation in a mode that ensures regular fuel supply which is a large challenge. Dependence on Equipment Suppliers: –
The power sector is to a great extent dependent on Equipment providers. In fact. equipment deficits have been a important ground for India losing its capacity add-on marks for the 10th five twelvemonth program. While the deficit has been chiefly in the nucleus constituents of boilers. turbines and generators. there has been deficiency of equal supply of Balance of Plant ( BOP ) equipment every bit good. These include coal handling. ash-handling workss. etc. Apart from these. there is deficit of building equipment every bit good. Hence. unequal supply of equipments is a cause of concern for the power companies. Aggregate Commercial and Technical Losingss: –
The Aggregate Technical and Commercial Loss ( AT & A ; C ) is defined as the power lost due to inefficient transmittal and distribution substructure. India’s AT & A ; C losingss are every bit high as 30 % compared with 5-10 % in the developed markets which means out of every 100 units produced. 30 are lost during transmittal and distribution. Technical losingss are due to inadequate investings over the old ages for system betterment works. Commercial losingss are chiefly due to low metering efficiency. pilferage and larceny of power. This is a immense job for the power sector. Other Roadblocks taking to Demand Supply Gap: –
The power sector has other concerns like deficit of skilled work force for building and commissioning of undertakings. contractual differences between undertaking governments. contractors and their sub-vendors. hold in preparedness of balance of workss by the put to deathing bureaus. Troubles have been experienced by developers in land acquisition. rehabilitation. environmental and forest – related issues. inter-state issues. geological surprises ( peculiarly for Hydro undertakings ) and contractual issues. These issues continue to present challenges to keep the gait of development of power undertakings. Future Prospects and Decision:
India has stepped its development docket and power is an inevitable component of economic growing and development. Growth in the power sector is related to India’s GDP growing rate and hence. in order to prolong the growing of 8-9 % in GDP. India needs to continuously add power coevals capacity to commensurate with this gait. Although. the Indian power sector is one of the fastest turning sectors in the universe and energy handiness has increased by around 36 % in the past 5 old ages. the demand for power outstrips its supply. About 60 crore Indians do non hold entree to electricity. The energy and top outing shortages have been vibrating about dual figures for the past two old ages and the status might decline in the coming old ages sing the immense demand of power from India’s lifting population and rapid industrialisation and urbanisation. Hence. there is no decelerating down of demand for the Power Sector. therefore offering ample range for rapid capacity enlargement.
The Government is puting in this industry through assorted development strategies like Rajeev Gandhi Rural Electrification Program. ‘Power for all by 2012? and Accelerated Power Development and Reform Programme ( ARDRP ) . Ultra Mega Power Projects etc. It has besides been is promoting engagement of private participants in this Sector. Renewable energy beginnings are besides being encouraged sing the turning environmental concerns. Hence. the future chances of atomic power. hydro power and power from renewable energy beginnings are besides good Looking at the above points. the long term future chances of the Indian Power Sector appear to be Green ( Very Good ) . It is really of import that while puting in a company. an investor selects an industry. where the long-run hereafter chances are bright. We have seen that in the long tally the Indian Power sector is expected to hold good growing. Besides. it is every bit of import that the company has an first-class fiscal path record ( i. e. Green 10 Year X ray ) and its long-run future chances are Green ( Very Good ) .
*The 10 Year X-RAY facilitates analysis of the fiscal public presentation of the company sing the five most of import parametric quantities. A 10 Year period will usually embrace an full concern rhythm. Analyzing the public presentation over this clip frame is indispensable to understand how a company has fared during the good every bit good as bad times. The five most of import parametric quantities that one needs to look at are Net Gross saless Growth Rate. EPS Growth Rate. Book Value Per Share ( BVPS ) Growth Rate. Return on Invested Capital ( ROIC ) and Debt to Net Net income Ratio. Given below is the MoneyWorks4me appraisal for a few Power companies: At MoneyWorks4me we have assigned coloring materials codifications to the 10 Year X ray and Future Prospects of the companies. as Green ( Very Good ) . Orange ( ‘Somewhat Good’ ) and Red ( Not Good ) . Competitive Scenario:
While puting. one must ever put in the stocks of a company that operates in an industry with bright long-run chances. Further. the company’s 10 Year X ray and future chances should besides be Green. In the instance of the power sector. though. it is poised for good growing in the hereafter. it remains to be seen whether the above companies can wholly take benefit of this growing and reflect it in their public presentation. Because of the very nature of the power sector ( capital intensive+high debt ) . most of these companies have had muted growing in one or more of their parametric quantities. Hence. investors with some appetency for hazard can see puting in these companies. but merely at the right monetary value.