1

Strategic ManagementTata Power Company Ltd(TPCL)

and Jindal Power Ltd(JPL)
Group 4

Power Sector Value Chain

Generatio
n
M
aj
or
Pl
ay
er
s

Ch
all
en
ge
s

NTPC
Tata Power
Reliance
Adani
Jindal Power
1. Land
Acquisition
2. Govt
clearances
3. Fuel tie up
4. PPA
5. High Capital

Transmissi
on
PGCIL

1. Land
Acquisition
2. Govt
clearances
3. Capital

Distributio
n
SEB
BEST
NDPL

1. Adverse Govt
Policies
2. Capital
3. Losses
4. Pilferage
5. CRM

Indian power sector [1/3]

Continuous energy shortages : May continue given the low per
capita consumption of electricity in India
Low per capita consumption of electricity

India suffers from an energy deficit

(000 GWhr)

9.6%

9.9%

11.1%

Energy demand

10.1%

8.5%

Energy Supply

8.5%

8.7%

Canada
US
Australia
Japan
France
Germany
Russia
UK
China
World
Brazil
India

Deficit

13,227

16,406

(KWh)

10,514
7,847
7,318
7,083
6,533
5,518
3,312
2,933
2,441
917

Source: IEA, Key World Statistics 2011 (RoW), CEA (India, 2012-13)

Capacity addition better than expected in recent years

90,000

96.2%

53.8%

47.5%

51.5%

88.1%

100.0%

70,000

62,374
54,964

50,000

30,000

120.0%

40,245
22,245
21,402

21,180

20.0%

10,000

0.0%
7th Plan

8th Plan
Target MW

%
Source: CEA

(In GW)

80.0%

47

40.0%
19,119

9th Plan
Achieved MW

Achieved MW as % of Target

10th Plan

89

Achieved Private

60.0%

41,110

30,538
16,423

Target Private

Target Center & State

Achieved Centre & State

11th Plan

28

20
15
6
8

10
4
5
FY10

7
13

12

5
7
FY11

18

21

18

21

8
10

12
9

7
11

11
9

FY12

FY13

% of Target

42

15
13

12th Five
Year Plan
(FY12-17)

Achievements
from Apr12 till
Nov13 during
12th plan

Capacity addition for 12th Five Year Plan on target

Capacity addition by private players has

increased & major contributor in achieving

5
the target
in 11th plan

Indian power sector [2/3]

ovement in financial and operational performance of SEBs(1) through distribution reforms

Indian Historical T&D loss(% of

output)

1.

Scheme to restructure short-term

liabilities of large loss-making SEBs.
Banks will reschedule the repayment of
50% of the short-term loans by giving a
moratorium of three years. For the
balance 50% of the exposure, the SEBs
will issue
bonds guaranteed by the respective state
government

2.

SEBs are required to wipe out their deficit

within the next 3 years

3.

Issue of Model State Electricity

Distribution Management by the Union
Government. Responsibility of financial &
operational turnaround and long-term
sustainability of public distribution
companies to be on state governments

1/19 1/19 1/19 1/19 1/19 1/19 1/19 1/19 1/19 1/19 1/19
/15 /15 /15 /15 /15 /15 /15 /15 /15 /15 /15

T&D (% of o/p)losses by country (2012)

1/19/15
1/19/15
1/19/15
1/19/15
1/19/15
1/19/15
1/19/15
1/19/15
1/19/15
1/19/15
Source: CEA, International Energy Association
Notes:(1) SEBs: State Electricity Boards, T&D: Transmission and Distribution
(2) Data for India is for FY 2012 while for other countries is as of Dec 2011

4.

State governments allowed their SEBs to

apply to state regulators for tariff hikes.
Since 2011,
regulators
Gradual
Financial performance
ofstate
SEBs
are ahave
major
reduction in T&D losses: over the last 10
threat to power
generating
companies
years
average T&D losses
have reduced
revenue selling
from 34%power
to 24%. to SEBs

Indian power sector [3/3]

ia currently has and is projected to have a deficit in coal with the shortfall being met by imported coal

In India, coal based power plants

account for 59%(1) of the installed
generation capacity.

Power sector constitutes majority of the

coal consumption with a 67%(2) share of

Coal Supply and

Demand(in Mt)
1/19/15

1/19/15
1/19/15 1/19/15

1/19/15

1/19/15
coal usage

India accounts for 7% of total coal

reserves and 8% of total coal 1/19/15
production for 2012

In comparison, China accounts for

13% of total reserves; however share of
total production is 45% in 2012.

Due to slow growth in indigenous

supply of coal during FY2009 to
FY2012, coal imports increased from 59
million tons 1/19/15
in FY2009 to 105 million tons in FY2012

Government of India is taking several

to bridge
gap and mitigate
Coalsteps
import
is the
increasing
but the
due
impact of shortfall in coal supply

1/1
1/1
1/1
9/1
9/1
9/1
1/19/15
5
5
5
Growth in coal import
(in Mt)

1/1
9/1
5

1/1
9/1
1/19/15
5

1/1
1/1
1/1
9/1
9/1
9/1
1/19/15
1/19/15
5
5
5

1/1
9/1
5

1/1
9/1
5

to appreciation of dollar and policy change

in Indonesia Power producers adversely effected (Coal Prices increase)
Source: Ministry of Coal, Annual report 2012-13, http://www.coal.nic.in/cpddoc.htm
Ministry of Coal, Report of Working Group on Coal & Lignite for Formulation of Twelfth Five Year Plan (2012-2017)
Notes: (1) as of December 2013 (2) for the year 2010-11

Brief Overview of TPCL and JPL

Item

TPCL

JPL

Corporate
group

Tata Group

O P Jindal group(JSPL)

Geographical
diversification

Multi locational

Single location

Generation

Capacity of 8500 MW.

Capacity of 1000 MW.

Transmission

The 51:49 joint venture with

PowerGrid Corporation of
India for the 1,200 km Tala
Transmission Project.

Only 258 KM line for

exporting its power to
PGCIL.

Distribution

Licenses in Mumbai and

Delhi.

No presence in
distribution. Recently
announced a
subsidiary.

Trading
Business

Present.

Not prominent.

Others

Investment in other Tata

group companies

Its a subsidiary of
JSPL

Financial (1/2)
12000
10000

Sales

23%
growth per
annum

8000
6000
4000
2000
0

TPCL
JPL
No growth
in this
period
2500

Industry leader
(NTPC) registered a
growth of 25% per
year in Sales

PAT

9.5%
growth per
annum

2000
1500
1000
Industry leader
500
(NTPC) registered a
growth of 13% per
0
year in Profit
Tata Power has maintained a ROCE of 9
-10% over this period

TPCL
JPL

Financial (2/2)
4
3.5
3
2.5
2
1.5
1
0.42
0.5
0

D/E Ratio

0.75

TPCL
JPL

0.65
0.450.530.550.470.490.570.59

Industry
average is
1.20

1. Tata Power market share in power

business is ~8% compared to Jindal
Power which is ~2%.
2. Industry Leader NTPC has ~55% share
3. Tata Power & Adani Power share the
nd

rd

Power Sector Value Chain

Generati
on
High level
of
Technology
Capital
Intensive
Plant Load
Factor
Few
customers
Oligopolisti
c market

Transmissi
on
Medium
technology
Medium
capital
requiremen
t
Medium
losses
Medium to
large no. of
customers
Monopoly

Distributi
on
Lower level
of
technology
comparativ
ely
Medium
Capital
Higher
losses &
pilferage
Large
number of
customers
Administer
ed price
mechanism

TPCL Presence Across Value Chain

Gen
erati
on

Tran
smis
sion

Dist
ribut
io n

Installed base of ~8500 MW primarily

coal based
1106 MW is renewables sources
Multilocational (states)
Complete Fuel linkage for current
capacity

Very small presence

Two projects executed with strategic intent

Trombay Plant

CGPL UMPP project at Mundra

Maithon Power Limited

Halida Power Plant and Jojobera

Tata Power is amongst the 3

transmission licensees that bring power
into Mumbai

JV between Tata Power (51%) and Power

Grid Corporation of India Ltd. (49%)

Has gained wide experince with

operations in Mumbai and New Delhi.

LoI for power distribution in

Jamshedpur

Subsidiary of Tata Power (51%) with the

remaining 49% held by Government of
Delhi

License to distribute power to north and

north-west Delhi

Among the 3 private licensees in Delhi

Approximately 13 lakh customers

JPL Presence Across Value Chain

Genera
tion

Trans
missio
n

Distrib
utio n

Only one power plant at

Raigarh

Mainly for captive purpose

Rest is sold on merchant

basis

It has 258 KMs of tramsission

line from its plant to the
nearest Power Grid lines
from transmitting the power

However just announced a

distribution subsidiary for
distribution in Chattisgarh Area

No presence

No major presence

1000 MW power plant in Raigarh

D/E ratio 80:20
Capital expenditure Rs. 4.5
crores / MW
PLF 88%
Coal from Captive mines near by

Business Models (Tata Power Vs Jindal

Power)

Tata Power
Model

Capacity
(MW)

Regulated returns

3,425

% of overall
capacity

Returns

Upside

40%

Fixed return on equity

Savings on Norms +
PLF incentive

Fixed tariff +
PLF driven

Savings on capex + CDM

certificates / RECs as
applicable

PPA driven
(14-19%)

Merchant sales + saving on

PPA terms + PLF incentive

Regulated tariff
mechanism 465
5%
(renewables)
Captive power plant 428

5%

Merchant: Market Merchant: No cap on returns

Bilateral: PPA driven
Bilateral: Per PPA

Merchant & Bilateral

Offtake

120

~2%

Case II (bidding)

4,000

48%

Bid driven

121

~1%

Bid driven

Others

Tata Power Projects

Off-take counterparty

Mumbai Operations (Thermal &

BEST, TPTCL, TPDDL, DVC,
Hydro), Maithon, Jojobera (Unit
NDPL, WBSEBL
2 and 3), TPDDL

Wind, Solar

Jojobera (Unit 1 and 4 ) and

IEL

BESCOM, GUVNL, TPC-D,

Tata Motors, TANGEDCO

Tata Steel

Haldia (120MW)

Bilateral: PPA with WBSEDCL

PLF incentives

CGPL

Gujarat, Maharashtra, Punjab,

Rajasthan, Haryana

PLF incentives

Belgaum (81MW), Lodhivali

(40MW)

PPAs have expired

Risk mitigation strategy through Portfolio

diversification.

JPL is working
basis- no long term PPA
in Merchant
15

Tata Power is aiming for 26000 MW by 2020

Till 2004 company operated
the Mumbai plant for more
than 50 years.
They carried out its ramp up
on their own to sustain the
performance as well as
achieve Benchmark
performance.

1/19/15

Operational
Excellence
1/19/15 1/19/15

Executional
Excellence

1/19/15

1/19/15

1/19/15

Attaining Growth

1/19/15

1/19/15

1/19/15

Post 2004 to 2013 company

executed several projects
within time and budget.
They executed these projects
on their own.
Given the operational &
executional excellence
company is planning to
expedite its growth strategy.
Even looking overseas
opportunity
Securing fuel supply (50 MT
coal per annum)

TPCL- Attaining Growth

Merger &
Acquisition

It may be a
future option
UMPP

Product
Diversification
(BM)

Captive

Growth

Regulated/
Distribution
Dagachu Hydro
Power
Corporation Ltd.
Joint venture
and Alliances

PGCIL(transmiss
ion),
DVC(generation)
Cennergi Pty.
Ltd.

Global
(Overseas)
expansion

Bhutan, Vietnam,
SouthAfrica

Renewable Energy : TPCL Vs JPL

Hydro Project:

Hydro Project:

Three projects of 447

MW in Maharastra

6MW Pilot project on

Kurket river in Raigarh
Plan to leverage this
experience to bid for
upcoming Hydro
projects in Nepal,
Himachal Pradesh and
Arunachal Pradesh.

Renewable Energy:
29 MW Solar plants
398 MW wind power
project across different
states
13% of TPCL power
portfolio is from
renewable
category and in
future targeting
0% to 25% from
this category

Renewable Energy:
Plan to set up 500 MW
Solar plant in Rajasthan
22 MW wind power
project in Maharashtra.

Thank You!

http://
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http://
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tion-plans-to-opt-out-of-retail-distribution-to-cut-losses/articleshow/34
320998.cms
http://powermin.nic.in/whats_new/pdf/Final_Model_Dist_Bill.pdf
http://
businesstoday.intoday.in/story/india-mining-rules-problems-government-pol
icies/1/200968.html
http://www.coal.nic.in/cpddoc.htm