Financial & operational opportunities for disco ms under uday

Financial & Operational Opportunity

Track for Discoms in India Under

UDAY

March 2016

Opportunity Track Market Report Series- EREP

“Power Distribution” the weakest link of Indian Power

value chain has consistently threatened the procurement

dynamics.

Research Base

Approximate savings per annum in the

cost of interest

$ 8 Billion

The long standing “Achilles” heel of Indian power sector has arguably been the power distribution facet courtesy the poor operational efficiencies and piling debt mount on respective Discoms. The weakest link of the power value chain has consistently pressurized India’s power industry and has threatened procurement dynamics putting a serious question mark over existing and upcoming power generation portfolio of the country.

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Financial & Operational Opportunity Track for Discoms in India Under UDAY| 1

Copyright© 2016 ENINCON, All rights reserved

0

5

10

15

20

Sav

ings

(In

US

D B

illio

n)

Overall Savings in Cost

14.6 UDAY touted as the next paladin to bail out the struggling Discoms, potentially could see them turn green in a time horizon of 3-4 years from 2015/16. Though optional for the states the objectives of the scheme are pretty direct and convincing provided they find timely application as well, which are depicted as below:

To ensure this objective Government did attempted FRPs for struggling Discoms in 2013 which tanked due to lack of timely implementation, forcing yet another scheme to turnaround the fate of state owned distribution utilities which has earned the nomenclature as UDAY (Ujwal DISCOM Assurance Yojana).

Exhibit 01: Principal Objectives of UDAY Scheme of GoI for State Owned Discoms & Key Numbers

ILLUSTRATIVE

Reduction in Cost of Interest of Discoms through debt takeover by States

Dramatically Improving Operational Efficiency of Discoms

Reducing the Cost of Power Procurement

Enforcing Financial Discipline on Discoms

1

2

3

4

What erstwhile was ignored, has now gained pinnacle importance by Government as the future of power sector at large depends upon better financial health and consistent operations of DISCOMS.

INR.880 Billion

INR. 460 Billion

G A I N INR.160 Billion

INR.160 Billion

Relief per annum

for Discoms Savings in

Cost of

Interest

Decrease

in Cost of

Supply

Savings through

Improved Coal

Supplies

Source: enincon perspective

Fifteen States in India have opted for

UDAY scheme so far

“Ujwal DISCOM Assurance Yojana” is regarded as one stop medicine to all woes of the

power distribution companies in India

Research Case

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Financial & Operational Opportunity Track for Discoms in India under UDAY| 2


Exhibit 02: UDAY Scheme for Discoms – An Infographic View (For Volunteer Discoms)

INFOGRAPHIC

0%

20%

40%

60%

Andhra…

Bih

ar

Jhar

khan

d

Mad

hya…

Raj

asth

an

Tam

il N

adu

Utt

ar P

rad

esh

Tela

nga

na

AT&

C L

oss

L

eve

ls

2014-15 (Actuals)

2018-19 (Projected)

30% 53%

17%

0.7

Discoms IPPs Non-Stressed Stressed

States of Andhra Pradesh,

Rajasthan and Telangana

plan to reduce AT&C loss

levels below 15% by 2018-19

60-70%

Exposure of Debts

for Public Sector

Banks in Percentage

– Discoms have

30% share

Of INR. 4 Trillion of

estimated staggering

losses, close to 2/3rd of

contribution comes from

8 states opted for UDAY

Tamil Nadu, Rajasthan, Uttar Pradesh and

Haryana to have best savings in the range of

INR.1 -1.80 for cost of supply. Rest of the

states would have a benefit of 80p/unit

Cost of Supply Savings Variance L H

States planned for less than 15% AT&C loss levels by 2018-19 States opted for UDAY scheme

Legend

Source: enincon perspective

INR 2.5 Trillion Piled up losses shall be

wiped off by FY’2018-19

through UDAY

75% of the Discoms debt taken over by the respective states

in a phased manner of 50% in FY’2015-16 and remaining 25% in FY’2016-17

Research Case

Potential Savings on cost of supply for all

states

INR 0.75-0.85 / Unit

Per Unit Savings of the Key

States (In INR/ Unit)

Haryana Uttar Pradesh

Rajasthan

Predicting a changing market with greater degree of accuracy demands thorough details and a trend to identify with. Ironically what UDAY offers on stage for State’s which opted for the scheme has neither to comply with. However, there will be certain implications on the state’s financial health courtesy the taking over debt of Discoms by state of upto 75% by 2016-17 in a phased manner of 50% in 2015-16 and another 25% in the following fiscal.

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Tamil Nadu

INR 1-1.80/Unit

Best Saving

Range

Key Uncertainties that will alter the long-term future post UDAY……… Increase in fiscal deficit Less pressure on liquidity and cost of market

borrowings to be consistent with state’s credit profile DDUGYJ, PSDF and IPDS – Will these schemes reduce

the burden on states‘ finance ? This would be done through issue of non SLR SDLs

(State Development Loans) directly linked to market or to existing lenders holding the debts of Discoms to appropriate extent. Hence, to estimate a ball park in terms of the risks for the State’s to be negated an identification of main uncertainties becomes quintessential in order to develop signposts to effect robust decision making process.

Though, tacky but UDAY might prove to be wild card for states to overcome the political embargoes and improve both the power situation and tariff conundrum in one go. However, challenges are umpteen which would shape even big with years to come and only efficient dealing of them would ensure UDAY as a fit for state’s else the financial condition would witness a sunset and delve so deep in darkness that restructuring will be difficult.

In order to address the much-felt need for the power distribution industry in India and to understand will UDAY be able to heel the financial dent which the Indian DISCOMs are facing as of now , enincon llp is coming up with a report tracking the financial and operational opportunity for Discoms in India under the UDAY scheme.

Research Case

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Desk

Business Stakeholders/Partici

pants

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Validated data & analysis

Opportunity mapping

& Market sizing

First hand sector

knowledge & inputs

Gist of the report in .pdf format for

ready use

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ENINCON

Research Objective & Results

Financial & Operational Opportunity Track for

Discoms in India Under UDAY examines the state wise

operational and financial opportunities for the power distribution companies in

India. The report evaluates how UDAY can prove to be a one stop solution for

cutting down the debt burden of Discoms in India along with improving the power

situation and tariff conundrum in one go. R

ese

arch

Ob

ject

ive

Re

sear

ch R

esu

lts

1. Examining the power

distribution scenario in India 2. Developing an understanding

about UDAY 3. Evaluating how UDAY can be a

role reversal for Indian Discoms 4. Evaluating the opportunities

associated with UDAY for improving the operational and financial crunch of power distribution companies in India

1. Evaluating the success and

failures of financial restructuring programme

2. State wise operational opportunity track for DISCOMs under UDAY

3. State wise financial opportunity track for DISCOMs under UDAY

4. Identifying best states to get benefitted most under UDAY


Market series

report- Opportunity

Track for Discoms

under UDAY-

Churning out the

financial &

operational

opportunity for

the Indian

power

distribution

companies



ENINCON Research reports

evolve a path finding

guide for all

stakeholders through

quality information and

analysis

Key Queries Resolved

• What is the power distribution scenario in India?

Must buy for

Power Distribution Companies State Electricity Boards Ministry of Power State Government Electrical Equipment Providers Banks Other Financial/ Lending

Institutes Transmission Service Providers O&M Service Providers Research Firms Research Bodies/ Institutes Industry Associations Consultants

Identifying eccentric

opportunities

Opportunities for PSUs and

the savings for DISCOMs

Opportunities for equipment manufacturers

Opportunities for equipment manufacturers

Power Distribution in India

Financial Opportunity

Operational Opportunity

• What are the operational

opportunities hidden for power distribution companies in India under UDAY?

• What would be the opportunities for Discoms in metering , billing , power, trading , feeder segregation and many more etc?

• What are the key financial opportunity

parameters for the power distribution companies in India under UDAY?

• What could be new means of revenue generation for Discoms?

• How would they reduce the fiscal deficit and increase the liquidity?

• How UDAY scheme can change the current

picture of power distribution in India? And what are the opportunities for Discoms?

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UDAY Scheme

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Defence Manufacturing in India- Unleashing $ 40 Billion Opportunity| 5

1. Executive Summary 2. Power Distribution in India and the UDAY Scheme 2.1 Issues with Power Distribution in India 2.2 Financial Restructuring Programme - Evaluating Success & Failures 2.3 UDAY- Scheme Overview

3. Operational Opportunity for Discoms in Uttar Pradesh 3.1 Substation 3.2 Metering 3.3 Billing 3.4 Transformers 3.5 Equipments 3.6 Capacity Expansion 3.7 Feeder Segregation 3.8 Distribution Lines 3.9 Franchise / Private 3.10 Power Sale 3.11 Open Access 3.12 Cabling 3.13 Energy Efficiency Practices 3.14 Operation & Maintenance

4. Financial Opportunity for Discoms in Uttar Pradesh 4.1 New Source of Revenue Generation 4.2 Decrease in Fiscal Deficit 4.3 Increase in Liquidity 4.4 Ease in Availability of Loans 4.5 Revised Tariff Structure as per Universal Currency 4.6 Application of DDUGY & Integrated Power Development Scheme

Contents & Coverage



5. Operational Opportunity for Discoms in Uttrakhand 5.1 Substation 5.2 Metering 5.3 Billing 5.4 Transformers 5.5 Equipments 5.6 Capacity Expansion 5.7 Feeder Segregation 5.8 Distribution Lines 5.9 Franchise/ Private 5.10 Power Sale 5.11Open Access 5.12 Cabling 5.13 Energy Efficiency Practices 5.14 Operation & Maintenance

6. Financial Opportunity for Discoms in Uttrakhand 6.1 New Source of Revenue Generation 6.2 Decrease in Fiscal Deficit 6.3 Increase in Liquidity 6.4 Ease in Availability of Loans 6.5 Revised Tariff Structure as per Universal Currency 6.6 Application of DDUGY & Integrated Power Development Scheme

7. Operational Opportunity for Discoms in Jammu & Kashmir 7.1 Substation

7.2 Metering

7.3 Billing 7.4 Transformers 7.5 Equipments 7.6 Capacity Expansion

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Defence Manufacturing in India- Unleashing $ 40 Billion Opportunity| 5 Contents & Coverage



7.7 Feeder Segregation

7.8 Distribution Lines 7.9 Franchise/ Private 7.10 Power Sale 7.11Open Access 7.12 Cabling 7.13 Energy Efficiency Practices 7.14 Operation & Maintenance

8. Financial Opportunity for Discoms in Jammu & Kashmir 8.1 New Source of Revenue Generation 8.2 Decrease in Fiscal Deficit 8.3 Increase in Liquidity 8.4 Ease in Availability of Loans 8.5 Revised Tariff Structure as per Universal Currency 8.6 Application of DDUGY & Integrated Power Development Scheme

9. Operational Opportunity for Discoms in Himachal Pradesh 9.1 Substation

9.2 Metering

9.3 Billing 9.4 Transformers 9.5 Equipments 9.6 Capacity Expansion 9.7 Feeder Segregation 9.8 Distribution Lines 9.9 Franchise / Private 9.10 Power Sale 9.11 Open Access 9.12 Cabling 9.13 Energy Efficiency Practices 9.14 Operation & Maintenance

10. Financial Opportunity for Discoms in Himachal Pradesh 10.1 New Source of Revenue Generation 10.2 Decrease in Fiscal Deficit 10.3 Increase in Liquidity 10.4 Ease in Availability of Loans 10.5 Revised Tariff Structure as per Universal Currency 10.6 Application of DDUGY & Integrated Power Development Scheme

11. Operational Opportunity for Discoms in Haryana 11.1 Substation

11.2 Metering


12. Financial Opportunity for Discoms in Haryana 12.1 New Source of Revenue Generation

12.2 Decrease in Fiscal Deficit 12.3 Increase in Liquidity 12.4 Ease in Availability of Loans 12.5 Revised Tariff Structure as per Universal Currency 12.6 Application of DDUGY & Integrated Power Development Scheme

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13. Operational Opportunity for Discoms in Rajasthan 13.1 Substation

13.2 Metering


14. Financial Opportunity for Discoms in Rajasthan 14.1 New Source of Revenue Generation


15. Operational Opportunity for Discoms in Punjab 15.1 Substation 15.2 Metering 15.3 Billing 15.4 Transformers 15.5 Equipments

15.6 Capacity Expansion 15.7 Feeder Segregation 15.8 Distribution Lines 15.9 Franchise / Private 15.10 Power Sale 15.11 Open Access 15.12 Cabling 15.13 Energy Efficiency Practices 15.14 Operation & Maintenance

16. Financial Opportunity for Discoms in Punjab 16.1 New Source of Revenue Generation


17. Operational Opportunity for Discoms in Maharashtra 17.1 Substation 17.2 Metering 17.3 Billing 17.4 Transformers 17.5 Equipments 17.6 Capacity Expansion 17.7 Feeder Segregation 17.8 Distribution Lines 17.9 Franchise / Private 17.10 Power Sale

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17.11 Open Access 17.12 Cabling 17.13 Energy Efficiency Practices 17.14 Operation & Maintenance

18. Financial Opportunity for Discoms in Maharashtra 18.1 New Source of Revenue Generation


19. Operational Opportunity for Discoms in Madhya Pradesh 19.1 Substation 19.2 Metering 19.3 Billing 19.4 Transformers 19.5 Equipments 19.6 Capacity Expansion 19.7 Feeder Segregation 19.8 Distribution Lines 19.9 Franchise / Private 19.10 Power Sale 19.11 Open Access 19.12 Cabling 19.13 Energy Efficiency Practices 19.14 Operation & Maintenance

20. Financial Opportunity for Discoms in Madhya Pradesh 20.1 New Source of Revenue Generation


21. Operational Opportunity for Discoms in Gujarat 21.1 Substation 21.2 Metering 21.3 Billing 21.4 Transformers 21.5 Equipments 21.6 Capacity Expansion 21.7 Feeder Segregation 21.8 Distribution Lines 21.9 Franchise / Private 21.10 Power Sale 21.11 Open Access 21.12 Cabling 21.13 Energy Efficiency Practices 22.14 Operation & Maintenance

22. Financial Opportunity for Discoms in Gujarat 22.1 New Source of Revenue Generation 22.2 Decrease in Fiscal Deficit 22.3 Increase in Liquidity 22.4 Ease in Availability of Loans 22.5 Revised Tariff Structure as per Universal Currency 22.6 Application of DDUGY & Integrated Power Development Scheme

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25.7 Feeder Segregation 25.8 Distribution Lines 25.9 Franchise / Private 25.10 Power Sale 25.11 Open Access 25.12 Cabling 25.13 Energy Efficiency Practices 25.14 Operation & Maintenance

26. Financial Opportunity for Discoms in Chhattisgarh 26.1 New Source of Revenue Generation 26.2 Decrease in Fiscal Deficit 26.3 Increase in Liquidity 26.4 Ease in Availability of Loans 26.5 Revised Tariff Structure as per Universal Currency 26.6 Application of DDUGY & Integrated Power Development Scheme

27. Operational Opportunity for Discoms in Bihar 27.1 Substation 27.2 Metering 27.3 Billing 27.4 Transformers 27.5 Equipments 27.6 Capacity Expansion 27.7 Feeder Segregation 27.8 Distribution Lines 27.9 Franchise / Private 27.10 Power Sale 27.11 Open Access 27.12 Cabling 27.13 Energy Efficiency Practices 27.14 Operation & Maintenance

23. Operational Opportunity for Discoms in Andhra Pradesh 23.1 Substation 23.2 Metering 23.3 Billing 23.4 Transformers 23.5 Equipments 23.6 Capacity Expansion 23.7 Feeder Segregation 23.8 Distribution Lines 23.9 Franchise / Private 23.10 Power Sale 23.11 Open Access 23.12 Cabling 23.13 Energy Efficiency Practices 23.14 Operation & Maintenance

24. Financial Opportunity for Discoms in Andhra Pradesh 24.1 New Source of Revenue Generation 24.2 Decrease in Fiscal Deficit 24.3 Increase in Liquidity 24.4 Ease in Availability of Loans 24.5 Revised Tariff Structure as per Universal Currency 24.6 Application of DDUGY & Integrated Power Development Scheme

25. Operational Opportunity for Discoms in Chhattisgarh 25.1 Substation 25.2 Metering 25.3 Billing 25.4 Transformers 25.5 Equipments 25.6 Capacity Expansion

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28. Financial Opportunity for Discoms in Bihar 28.1 New Source of Revenue Generation 28.2 Decrease in Fiscal Deficit 28.3 Increase in Liquidity 28.4 Ease in Availability of Loans 28.5 Revised Tariff Structure as per Universal Currency 28.6 Application of DDUGY & Integrated Power Development Scheme

29. Operational Opportunity for Discoms in Odisha 29.1 Substation 29.2 Metering 29.3 Billing 29.4 Transformers 29.5 Equipments 29.6 Capacity Expansion 29.7 Feeder Segregation 29.8 Distribution Lines 29.9 Franchise / Private 29.10 Power Sale 29.11 Open Access 29.12 Cabling 29.13 Energy Efficiency Practices 29.14 Operation & Maintenance

30. Financial Opportunity for Discoms in Odisha 30.1 New Source of Revenue Generation 30.2 Decrease in Fiscal Deficit 30.3 Increase in Liquidity 30.4 Ease in Availability of Loans 30.5 Revised Tariff Structure as per Universal Currency 30.6 Application of DDUGY & Integrated Power Development Scheme

31. Operational Opportunity for Discoms in Karnataka 31.1 Substation 31.2 Metering 31.3 Billing 31.4 Transformers 31.5 Equipments 31.6 Capacity Expansion 31.7 Feeder Segregation 31.8 Distribution Lines 31.9 Franchise / Private 31.10 Power Sale 31.11 Open Access 31.12 Cabling 31.13 Energy Efficiency Practices 31.14 Operation & Maintenance

32. Financial Opportunity for Discoms in Karnataka 32.1 New Source of Revenue Generation 32.2 Decrease in Fiscal Deficit 32.3 Increase in Liquidity 32.4 Ease in Availability of Loans 32.5 Revised Tariff Structure as per Universal Currency 32.6 Application of DDUGY & Integrated Power Development Scheme

33. Operational Opportunity for Discoms in Kerala 33.1 Substation 33.2 Metering 33.3 Billing 33.4 Transformers 33.5 Equipments 33.6 Capacity Expansion

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33.7 Feeder Segregation 33.8 Distribution Lines 33.9 Franchise / Private 33.10 Power Sale 33.11 Open Access 33.12 Cabling 33.13 Energy Efficiency Practices 33.14 Operation & Maintenance

34. Financial Opportunity for Discoms in Kerala 34.1 New Source of Revenue Generation 34.2 Decrease in Fiscal Deficit 34.3 Increase in Liquidity 34.4 Ease in Availability of Loans 34.5 Revised Tariff Structure as per Universal Currency 34.6 Application of DDUGY & Integrated Power Development Scheme

Financial & operational opportunities for disco ms under uday

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