Infrastructure Financing of Power

DISCOMS

Group 1
Aayush Chelawat15P121
Ankit Vora

15P128

Vivek Kalra

15P180

Mohit Sharma

15P213

Nitish Shrivastava

13P216

Sagar Bhatia 15P224

Power System Network

Generates
electricity at
medium
voltage (6.6kV
to 25kV)
Sources tapped
for generation:
Thermal,
Hydro, Solar,
Wind, Nuclear

Generation

Transmission

Transmission of
electricity from
generating
station to
distribution
sub-station
HV (66kV or
132kV) or EHV
(132kV, 220kV,
400kV, 765kV)

Distribution of
power to
various
consumers at
low voltages
6.6kV to 33kV
for industrial
HT consumers,
440V 3-phase
to industrial LT
consumers,
single phase
220V to
households
Distribution
and offices

Generation
Sources of electricity generation in India

13%
14%

2%

Thermal
Hydro
Solar &
Wind

71%

Installed generation capacity in India:

298 GW (as on 31st March, 2016)
Power
generated
sources: 70.70%

from

thermal

Coal based power plants: 80% of

thermal plants

Nuclear

38%
62%

Private
participati
on
Governme
nt owned

Source: Ministry of Power

Electricity Act, 2003 de-licensed

generation, private players started
investing heavily in the generation
sector
Present
contribution
of
private
players: 38% of the total installed
generation capacity

Transmission
National Transmission Grids

India
is
divided
transmission grids

into

five

GoI decided to set up a national

grid in 1981
Northern
North
Eastern
Western

Southern

Eastern

Regional grids were interconnected

and synchronised into one national
grid
by
31st December, 2013
Total length of transmission lines
increased
Total length of transmission lines in India (66kV and above) (in circuit km)
from
5400003,50,201 circuit kms in 2006 to
460000

5,26,660 ckt kms by 2015, at a

380000 of 4.6%.
CAGR

circuit km

300000

Source: CRISIL

Distribution

2%
3% 2% 5%
26%
2%
1% 7%
9%
23%
22%

Electricity consumption FY14

Domestic
Non-Domestic
Agricultural
Industrial HT
Industrial LT
Public lighting
Public water
works
Bulk supply
Railway
Inter state

Source: PFC report

3% 3% 3%
22%
3%
2% 9%
15%
34%

8%

Revenue generated FY14

12.00
8.00
4.00
0.00

Distribution is transfer of
electricity from distribution
sub-stations to end users
Average cost of electricity
supply in India (ACS) =
5.15 per unit
Aggregate revenue realised
(ARR)
= 4.11 per Source:
unit CRISIL;
with
FY14
subsidy

Consumer category wise tariff per unit

7.76
3.84

1.75

8.04
6.86 5.99
5.10 5.11 4.79 6.54
3.43

Problems with DISCOMs

Total debt and net worth of state DISCOMs
Total debt of state DISCOMs
is rising Y-o-Y
NW is negative and falling
Y-o-Y
Consistent losses made by
the DISCOMs is evident

Book and cash losses of state DISCOMs

0
-200
in billion rupees
-400 -266
-362
-600 -447-526
-603
-610
-638
-800
-726 -709
Book loss -1000
Cash loss
-941
Source: CRISIL

Points
towards
financials of the
DISCOMs

weak
state

DISCOMs have turned into a

loss making business, and
government intervention is
critical in this scenario

PAT of DISCOMs as percentage of revenue (FY'14)

Eastern Region

Western Region

Southern Region
Andhra Pradesh
15%

1%

0%
40%
11%

0%
-9%

-40%
-80%

20%
3%

0%
-20%

-20%

-40%
-65%

-60%

0%
-19%

-42%

Northern Region

80%

4%

0%
-80%
-160%

-20%

-4%

-15%
-30%
-40%

-45%

North Eastern Region

9%

3%

-1%

-2%
3% 2%

Kerala

-1%

-70%-74%
-133%

0%
-200%
-400%
-600%

-137%
-27%-16%-58%

-171%
-196%
-460%

Source: PFC

Reasons for Ailing Health of DISCOMs

High AT&C (Aggregate Technical and
Commercial) losses
Technical losses occur due to voltage configuration of the
system, the pattern of loading of T&D lines, and the type of
load
Commercial losses occurs due to non-metering, non-billing or
pilferage of power
Gap between ACS (Average Cost of Supply)
and ARR (Aggregate Revenue Realised)
Ever rising cost of fuel and irregular tariff hikes are major
reasons for ACS > ARR
Between FY09 and FY12, ACS grew at CARG of 10.2% while
ARR increased at a CAGR of 6.1%

Government Initiatives to support State DISCOMs

1. Privatisation
of DISCOMs
(2002)

2. Accelerated
Power
Development
and Reforms
Programme
(2003)

3. Restructured
APDRP (2008)

6. Ujjwal
DISCOM
Assurance
Yojana (UDAY)
(2015)

5. Integrated
Power
Development
Scheme
and
Deen Dayal
Upadhyaya
Gram Jyoti
Yojana
(2014)

4. Financial
Restructuring
Plan (2012)

Privatisation of DISCOMs:
Private Distribution Licensees model
Privatisation involves the transfer of ownership of business and assets
from the stateDISCOM to a private company
The area awarded under this route becomes an autonomous unit,
functioning under the regulations of the SERCs
This model has been successful across most awarded circles. The
prime
reasons
for
success
of
private
licensees
is
sharpreductioninAT&C losses and regular tariff filings leading to tariff
hikes.

Source: CRISIL

Historical background of electricity supply

in Supply
DelhiUndertaking (DESU) was
Since 1957, the Delhi Electricity
responsible for providing electricity to the consumers in Delhi
In order to decrease the financial losses being incurred by DESU and to
improve the quality of the services being provided to consumers, in the year
1997, DESU was replaced by a government-owned entity called Delhi Vidyut
Board (DVB)
The performance of DVB also remained much below the expectation
Major reasons for dismay performance:
Entire distribution infrastructure was prone to theft
Meters were old and could be easily tampered with
Due to inadequate network strengthening, the network was heavily
overloaded
Due to the high power purchase cost and very low realization per unit of
T&D
(%) year on year losses
Financial losses (mn USD)
electricity,
DVBlosses
was making

55
50.7
49.6
48.7
48
50
47
45
42.3
45
40
35 1995 1996 1997 1998 1999 2000 2001

188.83175.83 182
173.17
200
126.67
150
96.33104.33
100
50
0 1995 1996 1997 1998 1999 2000 2001

PPP Model
Financial Model

PPP Model composition

Distribution licensees were assured a 16

per cent post tax return on equity (RoE)
GNCTD
invested in business
GNCTD
GNCTD directed DERC to come up with
the normative tariff order on the Bulk
DPCL
DPCL
Supply Tariff (BST) to facilitate the bidders
to have an understanding of the various
BSES
BSES
BSES
BSES
GENCO
TRANSCO
TPDDL
cost elements
GENCO
TRANSCO
TPDDL
YAMUNA
RAJDHANI
YAMUNA
RAJDHANI
The benefit/ losses accrued from the
over/under achievement of the loss
GNCTD: Government of Northern Capital Territory of Delhi
TRANSCO: Transmission Company i.e. Delhi Transco Ltd.
reduction trajectory would be distributed
GNCTD: Generation Companies i.e. Indraprastha Power
between the utility and the consumers in
Generation Company
Ltd. (IGPGCL) and Pragati Power
Company Ltd. (PPCL)
the following manner.
TPPDL: Tata Power Production & Distribution Company

Over achievement: The distribution

DPCL: Delhi Power Company Limited
licensee shall be allowed to retain 50
Subsidy support of USD575.7m through TRAN
per cent of the additional and
balance to customers

Under achievement: The entire

FY
200
200
200
200
200
shortfall in revenue on account of
under achievement would be borne
3
4
5
6
7
by the utility
Amou 227. 210
115
21.3 0
The utility was allowed the right to use
nt
3
3
the land of DVB for duration of the license

Results Achieved
During its first five years of operation against the contractual
obligation of AT&C loss reduction of 19.25 %, TPDDL was able to
decrease AT&C losses by 25.72%
Even after FY 2007, TPDDL has been able to surpass the loss
reduction targets set by the DERC and has been able to achieve
the AT&C loss level of 10.73 per cent by FY 2013

Turnaround

Losses (%)
25.72
19.25
17
11.05

1.50.5
0.34

5 4.26
2.25

4.54.5

20
15

22.03
18.56

20.35
16.74

18.68
15.16

17
13.1

13
11.49 12.5
10.73

10
7.29
5.5
4.25

Accepted

44.25
2.78

FY 2 0 0 3 FY 2 0 0 4 FY 2 0 0 5 FY 2 0 0 6 FY 2 0 0 7

Min. Specified

25

Actual

To tal

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Approved

Achieved

Awards & Accolades Won

Managerial Initiatives
Managerial
Managerial
Initiatives
Initiatives

Establishment of a dedicated
Corporate Strategy Planning
and Performance
Management Group

Creation of strong
management team

Adoption of three-tier
balanced scorecard
approach to achieve
organizational objectives

Assimilation of employees of
DVB in the work force of
TPDDL

Establishment of safe and

conducive work environment

Safety awareness and

practices

Technical
Technical
Initiatives
Initiatives

Decreasing ATC Losses

Replaced approximately
800,000
electromechanical
meters with tamper
proof static meters
having no accuracy
change over time
Improving the Low
Tension (LT)/ High
Tension (HT) ratio,
installing small capacity
transformers

System reliability
improvement
Decentralization of O&M
24*7 Maintenance
SCADA master control
centre
GIS mapping of all
assets
Meeting load growth
Establishment of new
grid substations and
augmentation of

Consumer
Consumer
Centric
Centric Initiative
Initiative

Involving economically
weaker consumers to
curtail theft
Adopting slums for
vocational training
Creating capacity to
pay
Health camps and
dispensaries to
improve lives
Initiatives to decrease
theft of electricity
Incentive of waivers
on the dues to
encourage the
payment of larger
part of overall dues
A waiver of 25 per
cent of the billed
amount to opt for
settlements
Ensuring cost
effective and prompt
resolution of cases

Financial
Financial
Commitment
Commitment

The implementation of
measures required for
system
improvement/upgradation
entailed huge capital
investment.

CAPEX(million USD)
7.8
7.2
6.2
4.5

4.8
4.1

FY06 FY07 FY08 FY09 FY10 FY11

Discussion Questions
For high loss making ventures, what makes
more sense : PPP or privatization?
Does an upfront investment in system
upgradation makes sense for power
distribution projects? Why/why not?
For a loss making entity, does it really make
sense to incentivize customers?