COVER STORY COVER STOR

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1 COVER STORY Power evacuation in India today poses a bigger challenge than power generation and with the transmission sector investment being around 30 per cent, against generation investment which is as a thumb rule 50 per cent inefficiencies have naturally been increasing. 3 4 POWER TODAY JUNE

2 India s current aggregated technical & commercial (AT&C) losses have been estimated to be around 27 per cent of the electricity generated. Such high AT&C losses are counted as one of the main reasons for the state electricity board s (SEBs) financially weak status. Transmission specialists observe that with each 1 per cent reduction in the all India AT&C losses for the sector, there could be a 5 per cent decrease in cash losses up to Rs 3,900 crore. Then why has such a grim situation not been handled efficiently? This can be attributed to the fact that power is a concurrent subject with policy makers, with the Centre and states holding joint responsibility for the development of the sector in India, while execution is largely the latter s responsibility. Similarly, transmission is another sector stuck in the concurrent Centre- State relationship. As such, the central transmission utility (CTU) is responsible for the wheeling of power generated by the central generating units and inter-state independent power producers (IPPs). Thus, while the inter-state transmission responsibility lies with the CTU, the state transmission utility (STU) on the other hand ensures intrastate transmission. India s 3 lakh ckm transmission network is set to be one of the largest and most complicated lines in the world. Inter-state is an inter-region transmission being carried out by the CTU (a function of state owned Power Grid Corporation of India Ltd or PGCIL). India has demarcated five transmission regions viz. northern, eastern, western, southern and north eastern, that are synchronously interconnected and operate as a single National Grid. PGCIL, which acts as both a Quick bytes Currently, India has around 313,437 circuit kilometre (ckm) of transmission lines and 596,100 MVA of substation transformation capacity. The government is expected to offer Rs 1 lakh crore of power transmission projects in the next 6-8 months. PGCIL owns and operates about 106,804 ckm of inter-state transmission lines in India. The Government of India notified 14 power transmission schemes worth Rs 33,900 crore. A 20-year plan shall require an investment outlay of Rs 260,000 crore. CEA has estimated a need for almost 126,650 MW of interregional transmission capacity during the 13th Five Year period. Around 22,100 ckm of transmission lines and 65,554 MVA of transformation capacity have been achieved during CTU and a central government owned transmission company, is supported at the Centre by a structure similar to that executed by states with Transcos. Over the past decades, power capacity has witnessed commendable growth with total installed capacity of 267 GW and peak power demand of 141 GW. However, when compared, the evacuation network is nowhere near these numbers. Let s hear the reasons for this from the horse s mouth. In an exclusive interview with POWER TODAY, PGCIL s Director (Projects), IS Jha explains that in the 11th Five Year Plan it was decided to add 78,000 MW of power generation, however, power projects of around 1.50 lakh MW were added, considering previous backlog of projects which missed their deadlines, creating burden on the existing and planned transmission network. He narrates, At the beginning of the 12th Five Year Plan, the government thought that the northern region would be an importer of power from either the eastern or north-eastern regions due to their close proximity. Similarly, the western region could import power from the southern states. But, as one cannot predict the game of cricket, the same in the power sector. While the government decided to build power transmission lines in all the regions, the respective states however were unable to evacuate power due to failure in hydro power projects in eastern and north-eastern regions and similarly in the southern states. In fact, the then Maharashtra government had signed a power purchase agreement of about 800 MW with the southern states, which was never received. Meanwhile, in this game of power, PGCIL was on the receiving end of many experts who alleged that it was the state-run company s inability to handle system operation and grid management that has exacerbated the problem. But consider this: The southern region is facing acute shortage of power due to delay of about 8,000 MW generation projects Kudankulam (2,000 MW), Krishnapatnam UMPP (4,000 MW), Tuticorin JV (1,000 MW), Neyveli JUNE 2015 POWER TODAY 35

3 TS-II expansion (500 MW) and Kalpakkam PFBR (500 MW). The problem has been compounded due to non-availability of gas for about 7,000 MW projects in Vemagiri, Andhra Pradesh. As a large number of generation projects were planned for commissioning in the southern region during the 11th Plan, this has resulted into a power surplus region, with no discoms having applied for longterm access to the region. Of the 22,000 MW total longterm access sought by IPPs in Odisha and Chhattisgarh, only 550 MW target to the southern region was sought. The Raichur- Sholapur transmission system was originally envisaged to transfer power from the southern region to the western region; but the line has now become a lifeline to the southern region as the generation projects could not come up. MARKET STRUCTURE Currently, India has around 313,437 circuit kilometre (ckm) of transmission lines (refer Progress of transmission sector at the end of April-2015) and 596,100 MVA (refer Progress of sub stations at the end of April-2015) of substation transformation capacity. But, in spite of witnessing impressive growth in regards to power generation, evacuation of power is still a concern on account of inadequate investment. However, a lot is unfolding on the power transmission front as dedicated efforts are being undertaken by the Indian government to improve the country s transmission network. Just a few days back, it was reported that the government is expected to offer Rs 1 lakh crore of power transmission projects in the next 6-8 months and also initiate dialogues for reviving the ailing SEBs, which signifies momentum. One major milestone achieved by the Indian power sector is that the Southern grid has PGCIL FACES EQUALLY LARGE CHALLENGES LIKE PRIVATE PLAYERS Takes us through some of your significant achievements in the transmission sector? We are a USD 1.4 billion global infrastructure EPC major and the largest transmission line construction company in India. Some of our significant accomplishments include; successful completion of the prestigious 1,200 kv double circuit test line at Bina substation awarded by Power Grid Corporation of India Ltd (PGCIL). This is the first 1,200 kv D/C line in the world, with each tower weighing more than 400 meter and at a height of 130 meter; we also executed the most prestigious river crossing project with mid-stream towers in Haldia, West Bengal. Height of the individual river crossing (RC) towers is 775 feet, which is about 75 per cent height of the Eiffel Tower and is a first of its kind in India; we have also recently successfully commissioned a 765 kv GIS substation in Thiruvalam, the second-of-its-kind in India and a landmark project for KEC on the power distribution front. Players are very unhappy with the government favouring PGCIL. Your take? With regards to PGCIL being nominated for some transmission projects, this was mainly done in order to expedite execution of these projects as PGCIL has the capability to execute projects at a much faster pace as compared to other players who are likely to encounter delays on account of land acquisition and RoW issues etc. Time and again PGCIL has Vimal Kejriwal, MD & CEO, KEC International Limited demonstrated its capabilities and delivered projects with high levels of efficiency. Likewise, large private players like Sterlite grid, CESE etc. are also well equipped and do have the capability to execute large scale transmission projects on PPP mode. Speaking of level playing field, PGCIL faces equally large challenges like private players, but are very well equipped and capable to manage and overcome these challenges effectively. Additionally, PGCIL has huge set-ups and has diversified overheads, thus making it better placed vis-à-vis competition. What are the bottlenecks in the transmission sector? Bottlenecks include lack of enhanced support for increasing exports and manufacturing in India. The support provided by Indian government is significantly less as compared to other countries like China etc. To elaborate more on export incentives, in the recently announced Foreign Trade Policy , GoI withdrew export incentives for SAARC countries which will impact India s competitive strength and ultimately reduce our exports. (For full interview, log on to 36 POWER TODAY JUNE

4 been synchronously connected with the National Power Grid, thus interconnecting all the five regional grids, says Vimal Kejriwal, MD & CEO, KEC International Ltd. Further, in order to strengthen and upgrade the transmission network numerous schemes like the Integrated Power Distribution Scheme for rural and semi-urban areas and Deen Dayal Upadhyaya Gram Jyoti Yojana for feeder separation for agricultural populace, have been devised. With regards to inter-state transmission, PGCIL owns and operates about 106,804 ckm of inter-state transmission lines in India. During the 12th Plan, an investment of about Rs 100,000 crore is envisaged by PGCIL for the development of inter-state transmission systems, which includes development of High Capacity Power Transmission Corridors (HCPTCs) apart from inter-regional links. This will be used to augment the transmission system by about 40,000 ckm of transmission lines and about 100,000 MVA of transformation capacity. The inter-regional power transfer capacity is envisaged to be augmented to about 72,250 MW by the end of the 12 th Plan ( ). Besides, for integration of renewable capacity into the grid Green Energy Corridors are proposed at an estimated investment requirement of Rs 43,000 crore. According to Sharan Bansal, Director, Skipper Limited, without a robust national grid, effective and smooth evacuation of power cannot take place. Recently we have seen quite a few new transmission system projects being announced for e.g. the Rs 10,000 crore North Eastern Region Power System Improvement Project (NERPSIP) as well as the 800 KV-6,000 MW HVDC Raigarh Pugalur Transmission project. Progress of transmission sector at the end of April-2015 (All fig. in CKM) At the end of 10th plan 11th plan During 12th Plan (Upto April 2015) THE TBCB ROUTE Meanwhile, with the government announcing Rs 26,000 crore projects under tariff-based competitive bidding (TBCB) route, the optimism of private transmission companies stems from the relatively high value of business that is now up for grabs. Private firms in the sector are keen on becoming integrated players by investing in the transmission sector, where the rate of return is on a par with the generation sector (around 16 per cent). Companies like KEC International, Kalpataru Transmission, Sterlite Grid, L&T Infrastructure Development Projects, Essel Infraprojects, Tata Projects and Adani Power will obviously be competing to enhance their portfolio in the sector that is dominated by PGCIL. 12th Plan (Upto April 2015) +500 kv HVDC Central 4,368 5, ,948 State 1,504 1, ,504 JV/Private 0 1, ,980 Total 5,872 9, , kv Central 1,775 4,839 10, ,106 State Private 0 0 1,994 1,994 Total 2,184 5,250 13,400 18, kv Central 48,708 71,023 12,007 83,030 State 24,730 30,191 10,203 40,394 JV/Private 2,284 5,605 7,235 12,840 Total 75, ,819 29, , kv Central 9,444 10, ,582 State 105, ,010 13, ,348 JV/Private Total 114, ,980 13, ,828 Grand Total 198, ,481 56, ,174 Source: Ministry of Power But they do have an unequal competition in PGCIL which has a robust balance sheet and gets a chunk of its projects on nomination basis, also having grabbed 30 per cent of the projects offered under the bidding route so far. To this, Devendra Chaudhary, Special Secretary, Ministry of Power, Govt of India, who earlier evaded our question on level playing field for private players, told POWER TODAY that his ministry through TBCB will be awarding transmission projects worth Rs 33,900 crore in the coming year. I would like to put it on record that we do provide a level playing field and these projects through TBCB route, are a step towards it, he added. However, most private players JUNE 2015 POWER TODAY 37

5 PGCIL IS NOMINATED WHEN PROJECTS ARE TIME-BOUND Can you take us through the initiatives taken by PGCIL in the transmission space post FY2011? We are executing projects concurrently. Since FY11, we have completed transmission projects worth Rs 60,760 crore involving 30,000 ckm of EHV lines and 63 new EHV substations with a total transformation capacity of 1.24 lakh MVA. In FY15 itself (last nine months), about 6,500 ckm of EHV lines, with about 20,000 MVA of transformation capacity has been added. There was news that PGCIL has unable to complete projects given on nomination basis by the government. You must understand that the southern region is facing acute shortage of power due to delay of about 8,000 MW generation projects and the problem has been compounded due to non-availability of gas for about 7,000 MW projects in Vemagiri of Andhra Pradesh. As a large number of generation projects were planned for commissioning in the southern region during the 11th Plan, this has resulted into a power surplus region, with no discoms having applied for long-term access here. Of the 22,000 MW total long-term access sought by IPPs in Odisha and Chhattisgarh, only 550 MW target to the southern region was sought. Raichur-Sholapur transmission system was envisaged for transfer of power from the southern to the western region; but the line has instead become a lifeline to the former IS Jha, Director (Projects), Power Grid Corporation of India Ltd because the generation project could not come up. Meanwhile, we have taken prompt action to complete eight high capacity transmission lines to facilitate power transfer to the southern region. To enhance inter-regional transfer capacity, a large number of links including Raigarh-Pugulur-N Trichur 800 kv 6,000 MW HVDC line have been taken up for implementation on war-footing. There are allegations that the government is not encouraging level playing field in this sector. We don t buy these allegations. As per the current government guidelines, all interstate transmission projects are to be implemented under the tariff-based competitive route, with few a exemptions like when the projects require a compressed time schedule. When transmission projects are required urgently and implementation involves technical challenges, the decisions are taken on nomination basis to Power Grid, who as the central transmission utility can complete them in the shortest possible time. (For full interview, log on to are of the opinion that the government is biased while releasing transmission projects and further allege that while they release projects to PGCIL on nomination basis, the latter justifies this as due to urgency of the project and reduction of bidding time. We have got the expertise in this field and are capable financially and technically to complete allocated projects in stipulated time, Jha from PGCIL says. Meanwhile, the transmission space offers huge opportunities for both private players and PGCIL. India has been one of the first movers to open up its transmission sector to private players and has attracted significant interest from them. While PGCIL can be competitive in TBCB given its scale and in depth expertise, this route also offers a unique opportunity for private players to enhance their presence in the transmission space, feels MN Ravi Shankar, CEO-BD & Power Trading, Adhunik Power and Natural Resources. With almost Rs 26,000 crores worth of projects due to be awarded under TBCB route, it opens a plethora of opportunities for the private sector to strengthen its roots. Introduced to bring about thrust on private participation in transmission, TBCB has witnessed acceptance and increased participation from private players despite initial hiccups and some continued drawbacks. Furthermore, TBCB has matured over the years with participants placing more realistic bids in recent times, leading to lesser delays and suspension of projects. Meanwhile, with other government initiatives such as implementation of Point of Connection regime, the transmission tariff structure has been further rationalised to allow more investor confidence in India s 38 POWER TODAY JUNE

6 transmission sector. Given the huge market size and opportunities coupled with favourable government policies, publicprivate-partnership shall continue to grow in the near future. This is evident as in the 12th Five Year Plan, $16 billion from a total $35 billion investment in the transmission sector is expected from the private sector. Private firms now stand a chance of having a bigger share in the transmission space much like their counterparts in the generation segment, but this all depends on when the projects take off, says Rathin Basu, Chairman, Alstom India Ltd. However, analysts warn that the future of private sector firms in the transmission sector cannot be bright if the government continues with its policy of keeping TBCB as the second option. Case in point: PGCIL has since 2013 been placing bids that are as much as 60 per cent lower than the average bids of private participants, thus crowding out the fledgling private sector competition. INVESTMENTS REQUIRED The enhanced private enthusiasm in transmission is primarily driven by the lucrative rate of return of 16 per cent, which is same as that of the generation segment. Transmission business currently offers huge opportunities and market for growth. For every Rs 1 of investment in generation, 50 cents need to be invested in transmission for integrated growth of power sector. However this ratio currently stands at 30 cents, indicating the huge market potential and growth opportunity available. With almost 469 GW of power generation capacity expected by the end of the 13th Plan, the Central Electricity Authority (CEA) has estimated a need for almost 126,650 MW of inter-regional transmission capacity during the same period. NER System strengthening Scheme II Transmission lines Biswanath Chariyalli (POWERGRID) Itanagar 132 kv D/c (Zebra conductor) line Silchar (POWERGRID) Misa (POWERGRID) 400 kv D/c (Quad) line Ranganadi Nirjuli (POWERGRID) 132 kv D/c line Imphal (POWERGRID) New Kohima 400 kv D/c line (to be initially operated at 132 kv) Surajmaninagar P.K.Bari 400 kv D/c line (to be initially operated at 132 kv) This transforms into a fund requirement of around Rs 160,000 crore at central level and another Rs 100,000 crore at the state level. Cash strapped SEB`s and limited investment ability at the Center, have led policy makers to develop favorable regulatory regime for enhanced participation of private players in the transmission sector. Both TBCB and viability gap funding (VGF) bidding have been successful in attracting interest of all major power sector players. Furthermore, policies and regulations are also being deliberated and streamlined to expedite growth of this sector. On top of this, the government has also planned for an integrated, inter-regional, inter-state and intra-state transmission network. This 20-year plan shall require an investment outlay of Rs 260,000 crore, says Sanjeev Gupta, a merchant banker and Managing Director, Nexgen Financial Solutions Pvt Ltd. The above plan target will bring down AT&C losses initially to around per cent and thereafter in the interim period to 15 per cent, and eventually to less than 10 per cent. It is estimated that, 10 per cent energy conserved translates to 100 billion units of energy conserved, which can light up 11 crore lives (assuming that per capita energy consumption = 917 units). Status Under Bidding FINANCING TRANSMISSION A transmission project, like any other infrastructure ones is seeded by equity. Typically, this is leveraged by raising an appropriate debt, with a traditional ratio of 70:30. However, more innovative solutions have experienced structures like: 1. Debt:Equity of 80:20 or 75:25 2. Debt:Quasi Equity:Equity of 70:10:20 3. Other variants of these options also exist involving structures as per specific requirements of the promoters and the project. Debt constitutes around 70 per cent these days and depending upon the promoter s strength maybe up to 80 per cent of project cost. Though, it is one of the most important elements of project financing, promoters find a lot of conviction in the fact that four to five specialised lending institutions are focused on the power sector. Besides, around 60 per cent of total infrastructure financing by banks go towards power sector lending, while courtesy nonrepayments, NPAs, assets liability mismatch and others remain starved for adequate funds. GOVERNMENT INITIATIVES The Government of India notified 14 power transmission schemes worth Rs 33,900 crore during , which have all been allotted for bidding by private sector companies. These schemes will facilitate ways for the transfer JUNE 2015 POWER TODAY 39

7 of power from new hydro electric projects in Bhutan (refer Transmission system for transfer of power from new HEPs in Bhutan) and the generation linked projects in Chhattisgarh and Odisha, among others. These include 765 kv and 400 kv transmission system strengthening schemes/ programmes in the northern, western, southern (refer Transmission system beyond Vemagiri and connectivity lines for Maheshwaram) and the north-eastern regions (refer NER System strengthening Scheme II). The government has notified nine transmission schemes worth Rs 12,272 crore during July 2014, and a further five transmission schemes worth Rs 21,659 crore were notified in February All these had been allocated to the Bid Process Coordinator (BPC) namely REC Transmission Projects Company Limited (RECTPCL), a wholly owned subsidiary of REC Ltd and PFC Company Limited (PFFC), for carrying out bidding under TBCB route. The bid process is underway by both BPCs. According to the Ministry of Power, a total of 22,100 ckm of transmission lines and 65,554 MVA of transformation capacity have been achieved during the highest-ever recorded in a year. This transmission capacity reach and the range covering transmission lines in as achieved by the Ministry, stands against it s set target of 22,100 ckm of transmission lines and 65,554 MVA of transformation capacity. Progress of sub stations at the end of April-2015 (All fig. in MVA/MW) At the end of 10th plan 11th plan During 12th Plan (Upto April 2015) 12th Plan (Upto April 2015) 500 kv HVDC converter/btb station Central 6,500 8,250 1,250 9,500 State 1,700 1, ,500 Private 0 0 2,500 2,500 Total 8,200 9,750 3,750 13, kv Central 0 24,000 81, ,500 State 0 1,000 8,000 9,000 Private ,000 12,000 Total 0 25, , , kv Central 40,455 77,225 21,950 99,175 State 52,487 73,172 20,020 93,192 JV/Private Total 92, ,027 41, , kv Central 4,276 6,436 1,740 8,176 State 152, ,771 46, ,640 JV/Private 0 1, ,567 Total 156, ,774 48, ,383 Grand Total 257, , , ,880 Source: Ministry of Power GREEN CORRIDOR There is a growing demand from grid operators for a new transmission corridor in the country, especially considering renewable energy additions which may account for 35 per cent of the total energy mix, if connected to the grid. Since most renewable energy addition is limited to Tamil Nadu, Gujarat, Rajasthan and J&K, it would be a prime point on the government s agenda to evacuate green energy from these states. Since the country is talking about adding 176 GW of RE power, this is something which has not gone down well with most experts. For them it is indeed a cause for concern and will create havoc given current transmission infrastructure. They feel that the current RE development has placed a huge burden on the transmission network in order to fulfill last mile connectivity to these RE generation plants. That said, Dr. Rajib K Mishra, Director, Power Trade Corporation, explains Since power generated from RE projects are highly unpredictable in nature and not pure, it automatically puts pressure on the grid infrastructure. A source in Gujarat government on the basis of anonymity says, After adding substantial renew projects in the state, we are now unable to connect the new ones to the grid, which has led IPPs to sell it to the other states. To this, Deepesh Nanda, Head- Power, GE South Asia, India adds, With so many varied additions in the offing, it will be a tough task managing and balancing the grid. Meanwhile, a majority of RE generation developers prefer to invest in their own transmission evacuation system in order to connect to the nearest grid network. However, a large number of then who have neither been 40 POWER TODAY JUNE

8 COVER STORY Around 120 transmission projects are delayed due to developer s inability to acquire land and timely clearances. granted connectivity to the grid by the respective transmission companies nor invested in their own systems. To tackle this, many experts suggests that there is a requirement for a green corridor. A senior official from PGCIL explains, Such transmission corridors will be required in the next five years and have been firmed up through the established process of coordinated transmission planning. Their implementation is being taken up progressively. Now, since the current government has clearly emphasised on RE generation, one can sense the urgency too, wherein the government bypassed the TBCB route and nominated PGCIL to develop a green corridor for 20,000 MW of solar and wind power projects. While PGCIL was earlier selected on a nomination basis for the execution of the Bhuj-Banasthali-ChittorAjmer 765 kv green corridor project to harness solar energy in Gujarat, officials said that for the next leg of this corridor, the state-run company has been asked to extend this corridor from Ajmer (Rajasthan) to Suratgarh and Moga (Punjab), again on a nomination basis. PGCIL is learnt to be negotiating a soft loan through the Manilabased Asian Development Bank for this leg of the project. THE BOTTLENECK At present, as many as 120 transmission projects have faced delays because of the developer s inability to acquire land and get timely clearances from all stakeholders. There have Transmission system for transfer of power from new HEPs in Bhutan Transmission lines Status Alipurduar - Siliguri 400 kv D/C line (2nd) with Quad moose conductor Under Bidding Kishanganj - Darbhanga 400 kv D/C line with Quad moose conductor been instances of transmission lines being forced to take a different route than planned, resulting in the entire project budget going out of control. Power transmission constraints have also made it difficult to evacuate excess power and channel it to regions that face shortages. On top of it, fluctuations in steel prices always hamper margins of private players. Case in point: Sterlite Grid was the L1 bidder to construct the double line circuit transmission project at Jabalpur. The project has been stuck over three years with the developer now requesting the Central Electricity Regulatory Commission (CERC) for a cost revision. It is expected that if CERC revises it, the cost incurred will be passed on to the consumer, in which case, the whole purpose of TBCB is lost. In the end, the buck always stops at transmission when it comes to the power sector. Now, with transmission being an emerging star it is the JUNE 2015 POWER TODAY 41

9 Recently bagged transmission projects in India Company Name Project Title / Details Location Budget (`Crore) Alstom T&D India Alstom T&D India BS Ltd Kalpataru Power Transmission Ltd Kalpataru Power Transmission Ltd L&T Construction L&T Construction L&T Construction L&T Construction The company has got three orders from Bihar State Power Transmission Company Ltd to build two 220 kv and four 132 kv air insulated substations (AIS). Bagged an order from Bhabha Atomic Research Centre to provide a 220/11 kv, 25/31.5 MVA substation for its Challakere unit in Chitradurga, Karnataka. Bagged a contract for constructing 765 kv double circuit transmission line between Raipur in Chhattisgarh and Wardha in Maharashtra. KPTL has bagged order for supply and erection package of 765 kv D/C Hyderabad GIS Wardha Station transmission line (Part-III) from PGCIL. KPTL won an order for supplying package of 765 kv D/C Jabalpur - Orai transmission line from PGCIL. Bagged an EPC order from Bihar State Power Transmission Company Ltd for the supply, installation, testing and commissioning of 220 kv double circuit transmission line. The power transmission & distribution business of the company has bagged order from PGCIL for turnkey construction of 765 kv double-circuit transmission line associated with inter regional system strengthening scheme. The power transmission and distribution business has received order from Bihar State Power Transmission Company for the supply, installation and commissioning of a 220 kv double-circuit transmission line. The power transmission & distribution business has bagged an order from PGCIL for the construction of a 765 kv double circuit transmission line in Uttar Pradesh. L&T Construction Bagged an order from PGCIL for the construction of 220 kv multi-circuit and double circuit transmission lines in Jammu & Kashmir. L&T Power Grid Corporation (PGCIL) Power Grid Corporation of India The power transmission and distribution business has bagged order from PGCIL for the EPC of 765 kv double circuit transmission line between Wardha and Hyderabad. PGCIL is setting up 150 km 765 kv D/C Chittorgarh- Ajmer Transmission lines project. The contract is awarded to Kalpataru Power Transmission Ltd. The company board has approved the investment proposal for substation extensions for transmission system associated with Vindhyachal-V (500 MW) project of NTPC (Part-A) with commissioning schedule of 30 month from the date of investment approval. Betul, Madhya Pradesh Chitradurga, Karnataka Raipur, Chhattisgarh Hyderabad, Telangana Jabalpur, Madhya Pradesh Bihar Uttar Pradesh Bihar NA NA NA Uttar Pradesh 430 Uttar Pradesh Hyderabad, Telangana Chittorgarh, Rajasthan Singrauli district, Madhya Pradesh NA POWER TODAY JUNE

10 Connectivity lines for Maheshwaram (Hyderabad) 765/400 kv polling s/s Transmission lines Maheswaram (PG) Mehboob Nagar 400 kv D/c line Nizamabad Yeddumailaram (Shankarpalli) 400kV D/c line collective responsibility of the Centre and all the state governments to emphasise more on last mile connectivity. Their approach should be urgent in order to timely address underlying issues and ensure that power demand in the future is effectively met. CHALLENGES AND INDUSTRY SOLUTIONS Equity: Most transmission projects have seen very aggressive bidding, thereby impacting returns on equity. Furthermore, the power sector or other infrastructure developers have not attracted too much capital to this sector. Thus, the typical challenges include: 1. Sufficiency of funds; 2. An exhibited success track record comprising a. Financial strength b. Technical capability 3. Co-sponsors with differential worthiness; 4. Exits - unclear to private equity and foreign direct investors in the transmission sector. Status Under Bidding These challenges are proposed to be mitigated using the following tools: 1. Cross guarantee by co-sponsors; 2. Assignment of co-sponsor s un-encumbered interest without their prior consent ; 3. Providing guarantee for the project financing by stronger and more credit worthy promoter; 4. Attracting PE to a specific project backed by promoter s and project s strength; 5. Attracting quasi-equity, based on project returns, qualitative promoters and management team. Debt: The key challenges include 1. Inadequate debt funds; 2. Unattractive cost of debt funding say in the region of over 12 per cent p.a.; 3. Delay in project financing spread over sanction, documentation and thereafter disbursement, due to various challenges especially at the lenders end; Transmission projects to be awared in the next 12 months on TBCB Project Estimated cost (in `cr) Agency in charge of bidding Inter-state transmission system for 4,440 To be notified renewables in northern region Additional inter-regional AC link for 8,570 PFC import of power into southern region System strengthening beyond Vemagiri 7,032 PFC North Eastern regional system strengthening 1,652 PFC scheme II Common transmission system for 2,748 PFC phase-ii & OPGC project in Odisha Transmission system streengthening for 1,809 PFC HEPs of Bhutan Total 26, Weak lenders coming in as part of consortium financing; 5. Limited success of innovative financing tools like takeout, credit enhancement and 5/25. Some of the solutions: 1. Underwriting of 100 per cent of the debt requirement; 2. Synchronisation of lender terms during documentation; 3. Using external commercial borrowings (ECBs), lease rentals, supplier s credit, LCs & bank guarantees to lower the cost; 4. Ensuring that much negotiated business position is exactly what is documented as part of the consortium documentation. To reduce the AT&C losses in India: Unleashing power sector reforms with a sense of urgency; Controlling Losses including technical (due to energy dissipated during T&D) and commercial (due to theft; pilferage and defective, tampered and erroneous meters); Strengthen and upgrade the transmission network; Arrange for enhanced investment levels. This typically comprises of five main challenges: 1. Attracting players; 2. Planning and project award; 3. Project execution; 4. O&M; 5. Exit; Ensuring level playing field between public and private transmission companies. Some special schemes formulated by the govt to control AT&C losses are: o One Nation, One Grid, One Frequency. o Power System Development Fund (PSDF) of Rs 7,500 crore for grid security. PT RAHUL KAMAT JUNE 2015 POWER TODAY 43