What are the key market trends of Indian Transmission sector? What are the growth drivers of this sector?
Some key trends the sector has witnessed over the last couple of years are:
Power Surplus Status: We as a nation have moved from an era or power deficit to surplus power. Currently, our installed capacity exceeds that of our demand. This is a huge achievement for the sector, where government, public as well as private sector has joined hands to deliver this.
Lowering T&D losses: Transmission and Distribution (T&D) losses, also referred to as Aggregate Technical & Commercial (AT&C) losses, while still high, have come down significantly. At an all-India level, the T&D losses have come down from 26.63% in 2011-12 to 21.81% in 2015-16. Government is targeting to bring it down to 15 % by 2019 through use of smart metering, better detection of theft, and more efficient transmission and distribution network.
One Nation One Grid: The power market in the country operates in five different grids and with the integration of the southern grid with the national grid, the country has the One Nation One Grid One Price is closer to reality. This means a seamless interconnected grid network across the country capable of transferring a watt of energy from a surplus zone to a deficit one.
Private participation: The opening of the transmission sector to private participation has been one important policy intervention. From there moving to a Tariff Based Competitive Bidding (TBCB) has not just laid a level playing field for all players but also reduced the project cost and timelines. Success of BOOM projects is a good testimony of healthy private participation in the sector.
Rise of renewables: Our renewables capacity, which includes solar and wind, are galloping at a very healthy clip. Of the 330 MW installed capacity as on June 2017, 58 GW comes from renewables. This was 44GW last year. Comparatively, thermal capacity rose by just 6GW during the same period. This gap will only rise in the years
to come.
Technology for transparency: Government is using technology to enhance transparency in the sector. Each power mission now has an app (e.g. URJA, UDAY, DEEP, TARANG etc.) which could be tracked by anybody. This is very helpful for all stakeholders.
The Growth drivers of transmission sector are:
• Govt scheme like UDAY to improve health of DISCOM
• IPDS, rural electrification programme, DDUGJY
• Allotment of funds into Clean energy fund, PSDF.
• Improvement in per capita consumption
• MVA/MW ratio
• Inter-regional transmission capacity
• Improvement in the last mile connectivity.
Sterlite Power is the first power sector company and the second infrastructure player to launch the initial public offering of its infrastructure investment trust (InvIT). How much funds did you raise through this IPO? What are the transmission projects in pipeline for which the company will utilize these funds?
We are happy and proud that the first transmission sector InvIT done by us. We raised Rs 2,250 crore through the listing of India Grid Trust (IndiGrid). The issue was subscribed 1.3 times.
IndiGrid currently has two revenue earning projects in its portfolio and it plans to acquire its sponsor’s, which is Sterlite Power, four additional inter-state power transmission projects. These four projects have a topline of Rs 300 crore and would add around 50-60% growth in topline post acquisition. The acquisition will add 3-5% growth in distribution per unit.
What kind of opportunities would you envisage for your company with the government’s reforms such as ‘Power for all’ and plans to add 88.5 GW of capacity by 2017 and 93 GW by 2022?
Indian power grid will see massive changes on both ends – demand will see a phenomenal growth due to Power for All and UDAY. Renewable integration will change generation footprint and profile. Transmission sector will have to make both ends meet – large scale new capacity will be needed.
With renewables taking centre stage in new capacity addition, inadequate transmission will act as the biggest bottleneck as renewable capacity addition takes just months to come up against years for the supporting power evacuation infrastructure. Hence, those transmission players with a strong focus on ahead-of-time delivery will be able to meet this challenge.
As per the CEA estimate, India would need 100,000 circuit km (ckm) of transmission lines and 2,00,000 MVA transformer capacity of substations at 220 kv and above voltage in the 13th plan. The transmission sector will see investments worth Rs 2,60,000 crore over the next five years to ensure that government’s vision of power for all is met. Private sector will have a huge role to play in this and we are confident of winning a fair share of this market.
What are the hurdles the company face while executing the projects? So, what kind of support would you expect from the government?
While the Ministry of Power has introduced policy for incentivizing early commissioning projects, issues related to revised SCOD (Scheduled Commercial Operational Date), upstream/downstream readiness are yet to be resolved. Deliberation on early commissioning policy and emulation of international best practices will make the standard bid document more effective. Developers like us who invest a lot in technology and project management to deliver projects ahead of schedule will be greatly encouraged if early commissioning is rewarded.
While in principal the states have agreed to move to TBCB, a push is required for its implementing. Competitive bidding will benefit consumers through reduced tariffs. Defining threshold limit for competitive bidding is also required at this stage. One of the key issues faced by infrastructure developers are those related to ROW and Forest clearances. Simplifying these clearances process will reduce the timelines involved and speed up the execution of the project.
Players from nations which don’t allow Indian developers to participate in their market should face similar restrictions. While FDI is important for the overall growth of power transmission sector, government should keep in mind the reciprocity given by other countries to us.
