Power Grid Corporation of India Ltd.

Presentation to Shri Shashi Shekhar

Joint Secretary, Minister of Power

June,27, 2003 New Delhi

OBJECTIVES OF POWERGRID
The Corporation has set following objectives in line with its Mission and its status as Central Transmission Utility: - Undertake transmission of energy through Inter-State transmission system. - Discharge all functions of planning and coordination relating to Inter-State transmission system - Exercise supervision and control over the Inter-State transmission system. - Efficient Operation and Maintenance of Transmission systems. - Establish / augment and operate all Regional Load Despatch Centres and Communication facilities. Contd/-

OBJECTIVES OF POWERGRID
Contd/- To facilitate private sector participation in transmission system through Independent Private Transmission Company / Joint Ventures. - To assist various SEBs and other utilities in upgradation of skills & sharing of expertise by organising regular conferences, tailor-made training workshops directed towards specific technological and O&M areas and extending laboratory facilities for testing purposes etc. - Restoring power in quickest possible time in the event of any natural disasters like super cyclone, flood etc. through deployment of Emergency Restoration Systems. - To provide consultancy services at national and international level in transmission sector based on the in- house expertise developed by the organisation. - To participate in long distance trunk telecommunication business ventures.

ORGANISATIONAL STRUCTURE OF POWERGRID

Corporate Centre RHQ (7 No.) Lines/ Sub-Stations

NLDC RLDC(5 No.) SLDC RTU

POWERGRID Today
Incorporated in October, 1989. Commenced commercial operation from

April 1, 1992.
Notified as Central Transmission Utility in Dec 98. One of the largest and best managed transmission utility in the World with EHV network of over 46,000 ckm, wheeling more than 200 billion units (worth Rs. 40,000 Crore) per year - 40% of total generated power in the country. Sustained high system availability - about 99%. Consistently profit making.

POWERGRID Today
Rated EXCELLENT against MOU with MOP since 1993-94. Received The Prime Ministers MOU Award consecutively for 3 years since 1998-99. First ISO 9001 company in Indian Power Sector. Rated at the highest bracket by domestic credit rating agencies. During the FY 2002-2003, POWERGRID commissioned projects worth Rs 5,300 Crore. These projects were completed at a cost lesser by Rs 820 Crore than the GoI approved cost and ahead of schedule.

POWERGRID Growth
1992-93
39

2002-03 Growth(%)
79 102

Profile

Physical Performance
No. of Sub-stations

MVA capacity
Circuit kms Inter-regional transfer capacity (MW)

13,200
23,000 500

44,836
46,245 8,000

240
101 1500

Financial Performance (Rs Cr.)

Net profit Turnover 236 634 650 2,419 175 282

No. of employees
from NTPC (with HVDC)

5,725

6,339*

11

* Excluding 586 employees transferred from CEA (with RLDCs) and

LEGAL FRAMEWORKS IN 1910/1948 ACTS

The Electricity Laws (Amendment) Act, 1998 provided for: Transmission as a distinct activity. A new concept of Central Transmission Utility (CTU) at the National level / State Transmission Utilities (STUs) at the State level for ensuring centralized planning, coordination and control. CTU / STUs kept under Govt. ownership. Granted Apex Body status to RLDCs.

LEGAL FRAMEWORKS IN 1910/1948 ACTS

RLDCs/SLDCs to be operated by CTU/STUs respectively, unless specified otherwise by Central Government. CTU/STUs to be actively involved in private investment in transmission. Appropriate Commissions to issue the Transmission License to private parties upon the approval by CTU/STUs. Govt. used to give directions to POWERGRID to establish, operate & maintain Transmission System under Section 18A of 1948 Act.

PROVISIONS IN 2003 ACT & ITS IMPACT

Separate Companies for NLDC, RLDCs and SLDCs. Roles, responsibilities and functions of RLDCs / RPCs. Responsibility of short term planning of

transmission system. Functions of CTU and its privatisation. Role of CTU in Private Investment in transmission. Usage of transmission assets for telecom purposes. Open access to transmission system

SEPARATE COMPANIES FOR LDC FUNCTIONS.

The Act, under clauses 26(3), 27(2) and 31(2), envisages formation of separate Government companies for the operation of NLDC, RLDCs and SLDCs.

In line with the worldwide trends, the main transmission agency should be responsible for system operation functions on permanent basis, i.e., CTU shall operate NLDC and RLDCs, while STUs shall operate respective SLDCs, in line with the current practice.

ROLES AND RESPONSIBILITIES OF RLDCs VS RPCs

The Act under clause 2(55) and clause 28(1) defines the roles of REBs/RPCs as a facilitator for integrated operation of power system, and that of RLDCs as an agency responsible for integrated operation of power system in that region. The Act has only changed the name of the body i.e. from REB to RPC. Roles and responsibilities of RLDCs / RPCs need to be clearly demarcated by specifying their respective functions.

SHORT TERM PLANNING OF TRANSMISSION SYSTEM

As per the Act under clause 73(a), CEA has been mandated to formulate short term & perspective plan for power development in the country. In line with the statutory function of CTU for planning and coordination, the short term planning of inter-state transmission system should have been entirely left to CTU under the overall long term Electricity Plan developed by CEA.

PRIVATIZATION OF CTU
The Act under clause 38(1) provide for a Government Company to be CTU. However, the Act under third para of clause 38(1), provides further that the Central Government may transfer, and vest any property, etc., of CTU, to a company or companies to be incorporated under the Companies Act, 1956 to function as a transmission licensee, through a transfer scheme. This provision militates against the very concept of having a Government-owned CTU.

ROLE OF CTU IN PRIVATE INVESTMENT.

The 1910 Act under clause 27C(2) provides for licensee to work under direction, supervision

and control of CTU.

The 2003 Act under clauses 12 & 14 has placed CTU at par with other Transmission Licensees. CTU, being a statutory authority, should not be referred to as a Transmission Licensee. Its role should have remained as envisaged in the earlier Acts.

ROLE OF CTU IN PRIVATE INVESTMENT..

The 1910 Act under clause 27C(4) states that no

license application shall be entertained by CERC unless the applicant has obtained the approval of CTU. The 2003 Act under clause 15(3) states that any person can apply directly to CERC for the License, with a copy to CTU for recommendations. However, such recommendations of CTU shall not be binding on CERC.

CTU, being a statutory authority, no application for a

license should be entertained by CERC, unless the same is approved by CTU, in line with the existing provisions.

ADDITIONAL ISSUES IN 2003 ACT

The Act under clause 41 empowers CERC to look into the question of using transmission assets for any other purposes where as the existing Acts are silent on this issue.

Duties of generating companies include dedicated transmission lines also. Captive generating plants may also set up dedicated transmission lines.
Directions corresponding to 18A of 1948 Act needed.

ADDITIONAL ISSUES IN 2003 ACT

CTU & RLDC not to engage in generation and trading of electricity. CTU to provide non-discriminatory open access to its transmission system for use by any

licensee, generating company or consumer (clause 38-2-d).

Guidelines for determining tariff through a

process of bidding shall be issued by the Central Government (clause 63).

FUNCTIONS OF CTU
Undertake transmission of electricity through inter- state transmission system. Discharge all functions of planning and coordination relating to inter state transmission system. Ensure development of an efficient, coordinated & economical inter state transmission system. Provide non-discriminatory open access to its transmission system

FUNCTIONS OF CTU
POWERGRID was anyway performing almost all the functions, which the earlier amended statute & the Electricity Act 2003 bestowed upon the CTU. Notifying POWERGRID as CTU is thus a natural and logical step. Objectives of POWERGRID and the Statutory Role and Responsibilities of CTU go hand in hand and they are so much intermingled that they can not be separated.

ACTION PLAN FOR 2003-04

(In Rs. Crores)

Budget Estimate (2003 - 04) Scheme-wise break-up:

Ongoing Schemes New Schemes Completed Schemes Telecom
TOTAL :

: 2750
BE (2003-04) 2028.73 563.74 13.88 143.65 --------2750

Utilisation of Budget under the new schemes (Rs. 563.74 Crore) would largely depend on availability of investment approval of major projects like Sipat-I, Sipat-II, and Tala Transmission projects (about Rs. 343 Crore) - GoIs approval is awaited.

ACTION PLAN FOR 2003-04

Funding Plan for BE 2003-04
Internal Resources Development Surcharge Bonds/Domestic Loans Foreign Borrowings IEBR Net Budgetary Support Total 578 250 1127 715 2670 80 2750

Action Plan for next 10 years

POWERGRID Perspective

Plan

24

Addition of 60,000 ckm of Transmission Network with an investment of Rs. 71,000 crores to evacuate additional 1,00,000 MW by 2011-12 Mobilising adequate financial resources (including private participation) for the implementation of the plan, while maintaining sound financial health of the company

POWERGRIDs own investment Rs. 50,000 Crore and balance Rs. 21,000 Crore from Private Sector

Creation of National Grid and enhancing interregional transfer capacity from the existing level of 8,000 MW to 30,000 MW by 2012

POWERGRID Perspective Plan

Investment Program Rs/Crs.

X Plan

XI Plan
11,185

Total
20,895

Private Sector participation POWERGRIDs Outlay Total Central Sector

(Transmission + Telecom)

9,710

21,370

28,258

49,628

31,080

39,443

70,523

POWERGRID Perspective
A. Identified Funds : Internal Resources Development Surcharge X Plan 2,938 1,216

Plan
Total 8,019 3,083

Estimate of Funds to be Mobilised

XI Plan 5,081 1,867

Net Budgetary Support Committed ECB Domestic Fund tied up Total (A) B. Funds to be Mobilised: Total(A+B)

1,000 5,500 810 11,464 9,906 21,370

6,948 21,310 28,258

1,000 5,500 810 18,412 31,216 49,628

Investment and Funding Strategy

Future Funding Option Assumed
20%

Multilateral
10%

Suppliers' Credit Domestic

70%

Diversification into
Telecom

POWERGRIDs DIVERSIFICATION INTO TELECOM

POWERGRID diversifying into Telecom to

utilize spare telecommunication capacity of ULDC schemes and maximize return on its transmission infrastructure
Through an incremental investment In a limited manner and without affecting the

core business
Foray into telecom recommended by reputed

international consultants viz. IVO Power Engineering, Finland along with PricewaterhouseCoopers, UK

POWERGRIDs DIVERSIFICATION INTO TELECOM

POWERGRID has implemented /is implementing ULDC projects for Real Time Power System Management in all five Regions

Dedicated Telecom links under ULDC Schemes

Region Status/Completion
Completed Completed Completed By Mar 03 By Aug 03 By 2005

OFC (Km)
830 613 961 887 1,431 941

Northern Southern North Eastern Eastern Western NLDC

Total

5,663

POWERGRIDs DIVERSIFICATION INTO TELECOM

Fiber Optic Backbone Network of 14,000 Km, which will interconnect 60 major cities OFC under ULDC/ LDC schemes 5,663 Km Incremental Network required 8,437 Km

Total project cost

Rs. 934 cr.

Investment approval accorded by GoI in March 2002

Target Completion by 2004-05

POWERGRIDs DIVERSIFICATION INTO TELECOM

Obtained IP-II license in January 2001 Delhi-Mumbai Link was prioritised and commissioned in a record time of 9 months Links under commercial operation

Delhi-Chandigarh;
Delhi-Lucknow-Mumbai; Delhi- Jaipur;

Facilitating Distribution Sector Reforms (APDRP)

Appointed Advisor-cum-Consultant : 105 circles Direct Advisor-cum-Consultant : 37 circles (15 States) Co-ordinator : 14circles in 5 States (assigned to NPC, WAPCOS, ERDA). 54 circles (developed by SEBs) Ist Phase is over and cumulative projects worth Rs16,000 Crore already approved in the country. Projects worth Rs 5587 Crore approved, where POWERGRID was associated In addition APDRP program undertaken on turnkey and bilateral basis in three States namely Assam, Goa, Bihar.

Perspective Plan
- Development of National Power Grid

Need of National Grid

Uneven disposition of energy resources

Major Hydro resources in NER & NR Coal reserves mostly in Jharkhand / Orissa / West Bengal

Growth disparity ER surplus (Load did not grow as expected) Other regions deficit (Demand outstripped Gen. Cap. addition) Optimization of generation capacity addition Utilising time and seasonal diversity Spinning reserve optimisation Utilisation of operational surpluses Flexibility of adding IPPs along the National Grid

Cost of power transmission lower than cost of fuel transportation Transmission is more environment friendly than load centre based generation

Conservation of Right-of-Way -- especially in areas with scarcity of ROW viz. area near hydro projects, chicken - neck area, forest area, towns etc.

Development of National Grid : Strategy

Development in a phased manner commensurate with generation / load growth. Flexible Plan to accommodate change in load-generation pattern. Detailed studies carried out in consultation with CEA to evolve system elements

Existing ER surplus and operational surpluses in the time frame of 2006 - 07 are to be transmitted over National Grid
Uncertainty in generation capacity addition can be fine tuned from time to time including impact of time & cost overruns, if any. National Load Dispatch Center envisaged by 2005 - 06 for coordinated operation of National Grid

POWERGRID Perspective
National Grid, Phase-I

Plan

Interconnection of Regional Grids through HVDC Back-to-Back and AC links to take care of widely varied operational parameters Development of phase-I of National Grid completed when Sasaram HVDC B/B Link between ER and NR was commissioned in Sept. 2002. Cumulative Inter-Regional Transfer Capacity estableshed at the end of Phase-I : 5,000 MW

POWERGRID Perspective
National Grid, Phase-II (by 2007)

Plan

Strategy: High capacity Inter-Regional Transmission Highways envisaged along with major generation projects Hybrid HVAC and HVDC interconnection planned Development of Phase-II of National Grid has already commenced - 3000 MW capacity added 2000 MW HVDC bi-pole between Talcher-Kolar (Asias largest HVDC Bi-pole) 1000 MW 400 kV AC link between Rourkela and Raipur (Facilitate Interconnection of ER/WR & NER Cumulative Inter-regional transfer capacity at the end of 2002-03 8000 MW By the end of Phase-II Cumulative Inter-regional Capacity - 23,500 MW

POWERGRID Perspective

Plan

National Grid, Phase-III(by 2012)

Strengthening of inter-regional links to have a ring of 765 kV lines, inter-connecting Northern, Western and Eastern Regions synchronously
ER inter-connection with SR to be strengthened through HVDC bi-pole links (Asynchronous link)

After Phase-III
Cumulative Inter-regional Capacity - 30,000 MW

Private Sector
Participation

Private Sector Participation

Two routes identified Joint Venture (JV) route Independent Private Transmission Company (IPTC) route JV route Major transmission lines associated with Tala HEP in Bhutan, estimated to cost about Rs. 1,100 Crore, M/s Tata Power selected as JV partner Shareholders Agreement initialled at management level IA/ TSA initialled at working level PIB approval obtained in Dec02. CCEA awaited (investment approval + approval of creating a JV company)

Private Sector Participation

IPTC Route
Identified Project : 400 KV D/C Bina-NagdaDehgam Transmission line Estimated cost : Rs. 450 crore. Consortium of TNB & Kalpataru, the only bidder Tariff quoted is 77% higher compared to if the project to be undertaken by POWERGRID

Petition submitted by POWERGRID to CERC seeking direction

Hearing held on 25 June03, order awaited

Assistance
Sought

LIQUIDATION OF OUSTANDING DUES

Payable Outstanding as on May, 2003 Rs.429 Crore Includes Interest Rs. 171 Crore Major Defaulters BIHAR DVB MPEB Manipur Maharashtra Arunachal Tripura Rs. Rs. Rs. Rs. Rs. Rs. Rs. 102 crore 283 Crore 67 Crore 51 Crore 17 Crore 10 Crore 9 Crore

Madhya Pradesh, Maharashtra, Orissa, Delhi, Tripura, Arunachal Pradesh, Mizoram and Manipur have not signed the TPA for POWERGRID.

 POWERGRID sought a budgetary support of Rs. 4,907 crore for an investment programme of Rs. 30,143 crore (considering Debt:Equity ratio of 70:30) Planning Commission scaled down the investment to Rs. 21,370 crore with Net budgetary support to Rs. 1,000 crore. (Debt:Equity ratio of 80:20)

BUDGETARY SUPPORT TO POWERGRID IN X PLAN

Taking up the future incremental investment in the limiting debt-equity norm of 80:20 would create problems for the Corporation for fund mobilization
Further equity support of Rs 1257 Crore to maintain D:E ratio as 70:30. NBS to be made available in the form of Equity and not as Grant. Contd

POWERGRIDS PROPOSAL FOR COMPENSATION FOR NER-TS

POWERGRIDs losses due to pegging of the tariff @ 35 paise/unit as per Unified Common Pool Transmission Tariff (UCPTT)Rs. 1012 cr. till 2006-07 To cover this loss to the extent of only 50%, MoP recommended:

One time upfront grant of Rs. 385 crores and Equated annual installment of Rs. 33.46 cr. during Xth plan period from 2002-03 to 2006-07 (or additional upfront grant of Rs. 120.60 cr.)

The proposal is being considered by Planning Commission. Some clarification on existing assets was sought by Planning Commission which has since been furnished.

MEGA POWER PROJECT STATUS TO TRANS. PROJECTS

Accordance of Mega Power Project status for the transmission System associated with Mega Generation Project.
Sipat project of NTPC already granted this status. Associated

transmission project to be granted Mega Power Project Status. It meets the criteria which are comparable to those specified for Mega Power Projects:

System forms part of National grid Catering power needs of more than one state Introduction of 800 kV state-of-the-art technology Involvement of huge investment Transmission of large block of power thus reducing ROW requirements Economy of scale on account of lower T&D losses To keep the tariff low for financially poor states

INVESTMENT APPROVAL
CCEA may approve a basket of projects, while individual project approval may be delegated to MoP. Pre-PIB limits to be raised from Rs. 500 Crore to Rs. 1500 Crore. PIB Memo may be circulated while circulating the FR itself. Investment approval for projects involving cost up to Rs. 1000 cr. may be delegated to Board of Directors of POWERGRID.

ISSUES RELATED TO CERC

Review of depreciation norms in transmission tariff

CERC through their notification reduced rate of depreciation from 6.12% to 2.91%, which is adversely affecting the financial position of the company CERC insists that FERV be capitalized and recovered as tariff by spreading it over the years. This is putting extra financial burden on POWERGRID due to mismatch in inflow and outflow, which will have direct impact on internal resources and capability to add capacity.

Payment of FERV on pass through basis

Fixation of availability of transmission system at 95% instead of 98%

CEA has recommended 98% availability of transmission system to ensure grid stability and this norm should not be used for recovery of transmission charges.
Contd

ISSUES RELATED TO CERC

Contd

Utilisation of Development Surcharge

CERC has not notified Dev. Surcharge in revised tariff notification for Rihand-Dadri Line (1st case) Applicability of Depreciation Adversely affects the Financial ratios because of no RoE on Development Surcharge Implication of Income Tax on Development Surcharge Its utilisation on National Level may be allowed in stead of Regional level

OTHER ISSUES
The funding of Chandrapur HVDC B/B project includes ODA grant of about Rs 322 Crs

CERC, through its Tariff Order, has not allowed the ROE and Depreciation on Grant portion.
As POWERGRID has to maintain the asset and keep provision for its wear and tear, at least tariff components like Depreciation, O&M expenses and Interest on Working Capital may be allowed. GOI may notify the Tariff Policy at the earliest

OTHER ISSUES
Penal Interest @24% on cash equivalent of Deemed Export Benefits (Rs. 265 Crore) being refunded for Talcher-II project may be waived off by GOI to reduce the project cost. The proposal for declaring POWERGRID as Navratna, under consideration of DPE, may be expedited.

Thank You

FORMATION OF POWERGRID
Prior to formation of POWERGRID, various Central Sector Generating Companies e.g. NTPC, NHPC, NLC, THDC, NEEPCO, NJPC, NPC etc. were responsible for development of generation facility and the associated transmission system to deliver the power to the beneficiaries at their substations. As the capital outlay of generating plants was much more in comparison to associated transmission system, all the generating companies were giving more importance to generation facilities which led to bottling of power in some pockets.

FORMATION OF POWERGRID
These Generating companies were making efforts towards establishing generation facilities and associated evacuation systems, and no efforts were made by them to strengthen/augment Regional Grids/National Grid The transmission system not linked with the generation facilities were getting totally neglected To surmount these problems, Central Government in 1989 took a decision to establish POWERGRID for development of Regional/ National Grids

FORMATION OF POWERGRID
MANDATE Build, Operate & Maintain EHV AC and HVDC Transmission Systems including Load Dispatch Facilities under Central Sector.

MISSION Establishment and operation of Regional and National Power Grids to facilitate transfer of power within and across the regions with Reliability, Security and Economy, on sound commercial principles.

Future Financial Outlook

54325 31953 2419 650 10418 7300 4818 1420 14587 8559 3125 24645

Present

2006-07 Turnover PAT Capital Employed Net Worth

2011-12

OPERATIONAL PERFORMANCE Sustained high system availability - over 98% for last 10 years despite limited / no redundancy in the network, through adoption of latest techniques including: Hot Line Maintenance Emergency Restoration System Regular Preventive Maintenance
Thermo-vision

Scanning Condition Monitoring of Equipment Gas & Insulating Oils Testing Facilities. Stringent Quality Control Measures

HOT LINE MAINTENANCE

Technological

Excellence

Technological Excellence
Application of Series Compensation to improve power transfer capacity (Kishenpur-Pampore, Kanpur-Ballabgarh, Panki-Muradnagar, RourkelaRaipur etc.)
Upgrading of Lower Voltage Lines to Higher Voltage - 66 to 132 KV, 132 KV to 220 & 400 KV, 220 KV to 400 KV, 400 kV to 800 kV

Uprating of transmission lines by enhancing Conductor Temperature Limit - From 75C to 85 C resulting in approx 30% increase in power capacity with approx. 1% increase in cost of line
Composite Long Rod Insulators for better performance

Technological Excellence
Flexible AC transmission systems Multi Conductor Transmission Lines Bundle, Multi Circuit in

Controlled shunt reactors association with BHEL)

(developed

Sub-station automation
Compact Air Insulated Sub-stations / Gas Insulated Sub-stations Inhouse standardisation foundation design of towers and

TOWARDS GREEN ENVIRONMENT

POWERGRID developed Environmental and Social Policy & Procedures (ESPP)
First PSU to develop such policy The

key principles of ESPP are Avoidance, Minimisation and Mitigation

Policy

developed through detailed interaction with the Public, NGOs, Project Affected Persons, Financial Institutions, Government agencies, etc.
strictly adhered to in all transmission projects

Being

TOWARDS GREEN ENVIRONMENT

TOWARDS GREEN ENVIRONMENT

DISASTER MANAGEMENT
Evolved most effective Disaster Management System to minimize the impact of natural calamities like floods, cyclones, Earthquake etc.

Quick restoration of power supply through Emergency Restoration System

Gujarat cyclone in 1998, restored within a week Orissa Cyclone in October, 1999, restored within 11 days Gujarat earthquake in January, 2001 Restored power supply within one week Reconstructed 10 damaged Sub-stations within a record time of 3 months, dedicated to the Nation by the Honble Prime Minister

Erection of ERS by Helicopter

Accolades

Comments of the World Bank

The availability of POWERGRID system is high (over 98%); System expansion is progressing at a fast pace and POWERGRIDs largest ongoing projects are being implemented in a highly satisfactory manner -The World Bank, Oct. 96 POWERGRIDs institutional development and growth has been impressive. It has amalgamated staff into a surprisingly homogenous team
- The World Bank, Oct. 96

Engineering Specifications, Contract and Project Management, Contract documents has been of excellent quality
- International Consultants to The World Bank, Nov. 96

Comments of the World Bank

Our mid-term review highlighted the impressive performance growth of POWERGRID since the approval of PSDP-I in March, 1993 and then had to express the Banks deepening concern about the loss of direction since mid-1995. The World Bank mission was very pleased and impressed to discover the start of a turnaround. The backlog at the Board has been cleared and project implementation is being accelerated. Staff morale is improving and POWERGRID is recovering the sense of urgency and direction that used to characterize its efforts to improve. - The World Bank, Dec 1996

Comments of the World Bank

Evolution of innovative Dispute Resolution Panel proved to be very useful and disputes in the single problem project have been resolved - We greatly appreciate the reactivation of 800 kV KishenpurMoga Project Some of the POWERGRIDs largest on-going projects are funded under World Bank loans and are being implemented in a highly satisfactory manner. Projects are on schedule and reflect POWERGRIDs competence in inter-national competitive bidding
-The World Bank, Nov. 98 -The World Bank, Nov. 98

Although there is frustration on the part of Cobra, a review of the issues does not indicate unfairness or mismanagement on the part of POWERGRID. This contract is properly managed by POWERGRID with no evidence of unfairness.
- International Consultants to The World Bank

Comments : Others
POWERGRID represents an exciting mechanism to centralise Indian Power structure on a national basis. ADB welcomes POWERGRID and look forward to working with it in the future. Imagination is needed in planning POWERGRIDs future and its management appears to be truly abreast of them.
- Asian Development Bank, Feb. 2000

Here is an organization that meets its commitments and values time. I wish there are more organizations with a similar outlook
- Dr. Shankar Sen, Former Vice Chancellor, Jadhavpur University & The former Power Minister, WB Govt.

POWERGRID Perspective

Plan
(Rs Crore)

Future Investment Programme X and XI Plan

Central Sector Investment Private Sector Investment POWERGRID Investment 70,523 20,895 49,628

Funding Plan
Internal

Resources Dev. Surcharge Multilateral/ECB Bonds/Domestic loans/NBS

8,019 3,083 14,607 23,919

Total

49,628

POWERGRID - The Transmission Organization with Incorporated in 1989, mandated

Establishment, Operation & Maintenance of Regional & National Power Grids including Load Dispatch Centers Started operation on management basis w.e.f. August, 1991 for the assets owned by NTPC/ NHPC/ NEEPCO etc Tr. Assets of above companies transferred alongwith manpower as per Presidential Ordinance & commencement of commercial operation since 1992-93. Notified as Central Transmission Utility, the statutory body in December 1998 through Amendment of Electricity (supply) Act, 1948, to discharge the following functions related with inter-state transmission Undertake Inter-state Transmission of energy Planning and co-ordination for inter-state trans.

BUDGET UTILISATION
(In Rs. Crores)

Budget Estimate (2002 - 03) Revised Estimate (2002- 03)

: 3352 : 2687

RE
(2002-03)

Actual
(2002-2003)

On Going & Completed SchemesNew Schemes Telecom TOTAL :

2408 151* 128* --------2687

2445 50 66 ----------2561

* Shortfall for want of Investment Approval for Tala & Sipat transmission projects and delayed approval of Telecom Project & Raipur-Chandrapur Trans. Sys.. BPTA for RaipurChandrapur is yet to be signed as SR beneficiaries went back on their commitments.

OBJECTIVES OF POWERGRID
The Corporation has set following objectives in line with its Mission and its status as Central Transmission Utility:

- Undertake transmission of energy through Inter-State transmission system. - Discharge all functions of planning and coordination relating to Inter-State transmission system with (i) State Transmission Utilities; (ii) Central Government; (iii) State Governments; (iv) Generating companies; (v) Regional Electricity Boards; (vi) Authority; (vii) Licensees; (viii) Transmission licensees; (ix) Any other person notified by the Central Government in this behalf. Contd/-

MAJOR ON-GOING PROJECTS

*

Cost in Rs. Cr. Ant. Commn. Appd. Ant. Meramundali - Jeypore 167 143 May03 Series Compensation on 26 26 Aug03 Panki Muradnagar Tehri Trans. System 702 702 Line I - Sep03 * Line II- Dec03 * ULDC Scheme in NER 264 264 Jun03 Bihar Grid Strengthening 163 163 Jan04 Madurai Trivandrum 196 196 Mar04 KahalgaonBshariff (II Ckt) 136 136 Apr04 Tala-Siliguri 232 232 Dec04** ULDC Scheme in ER 397 397 Dec04

Clearance regarding Rajaji National Park obtained from Supreme Court in Oct02. ** Matching with Tala HEP

Contd

MAJOR ON-GOING PROJECTS

Contd
Cost in Rs. Cr. Ant. Commn. Appd. Ant. Aug. of Gajuwaka B/B Project (Gajuwaka-II) 769 Dhauliganga Trans. System 151 System strengthening Scheme 110 in Western Region Ramagundam- III 390 Tarapur 3 & 4 Trans. System 237 Rihand-II Trans. System 1044 ULDC WR 262 Dulhasti Combined Tr. System 567

769 151 110

Jan05 Jan05 Jan05

390 Aug05 237 Sep05 1044 Aug05 235 Mar06 567 Jul06

Investment and Funding Strategy Future Investment Requirements

X Plan A. Transmission
Generation Linked Projects Grid Strengthening Projects Inter-regional /Inter Country Links ULDC Projects Investments in JV Others

Rs/Crs
68,023 19,634
3,192 41,875 1,016 204 2,102 2,500 1,004 1,496 70,523

XI Plan 39,183 9,219

5,420 22,525

Total

28,840 12,340
3,192 12,005 1,016 204 83 2,240 1,004 1,236 31,080

B. Telecom
Base Network Equity in NLDO & JV

2,019 260
260 39,443

Total (A+B)

Investment and Funding Strategy

Alternative Options (If Pvt. Investment fails)
If the Private Participation fails POWERGRID funding will increase to that tune. Total POWERGRID investment up to Rs 70,523 Crs To achieve Debt : Equity Ratio of 80:20 additional equity support of Rs 2,100 crs from external sources is necessary Additional equity requirement may be provided by GOI as NBS. So total NBS could become Rs 3,100 Crs.

Investment and Funding Strategy

Improved Revenue Realization Revenue Realization may be improved to 100% (as per Ahluwalia Committee recommendations) Internal resource generated will be Rs 16,302 Crs and Development Surcharge will be at Rs 3,627 Crs as estimated. In such a case External equity injection of Rs 2,100 Crs will not be required. The Equity contribution 30% of the required investment (including the Rs 1000 Crs NBS).

Investment and Funding Strategy

Cess/Infrastructure Status/Diversification/IPO Creation of National Power Grid Fund through imposition of Cess on consumers in the Power Sector or Through additional Taxation through Fiscal Policy According Mega Power benefits to Transmission will reduce the cost of the projects Leveraging Transmission Investment by surplus from Diversification By tapping the Domestic Capital Markets by means of an Initial Public Offer (IPO).

Investment and Funding Strategy

Funding Scenario If Pvt. Investment Fails

POWERGRID FUNDING Internal Resources Development Surcharge Bonds/Domestic Loans Foreign Borrowings IEBR Net Budgetary Support Equity From External Source Total

X & XI Plan 7039 3966 39493 16925 67423 1000 2100 70523

ACTION PLAN FOR 2003-04

Projects to be Commissioned in 2003-04
1. 2. 3. 4. 5. 6. 7. 8.
9.

Series Compensation on Panki-Muradnagar Meerut-Stabdinagar LILO Of Panki-Naubasta (Feroz Gandhi Unchahar TL-II) Mehramundali-Jeypore ICT at Biharshariff (Bihar Grid Strengthening) Ranganadi-Ziro TL Bongaigaon-Malda at Purnea Purnea-Dhalkhola ULDC North-Eastern Region already commissioned

Stringing to be completed (CKM.) - 1369

Diversification into
Distribution

POWERGRID Diversification
Diversifying into Distribution
MOP assigned 37 circles in 15 states to POWERGRID as advisor-cum-consultant under APDRP Also entrusted co-ordination of other 14 circles assigned to NPC, WAPCOS and ERDA & 54 circles being developed by SEBs. Separate Subsidiary contemplated for:
Sub-transmission Distribution

87

Companies system

being

system

POWERGRID Diversification
Benefits to SEBs : Improvement in Reliability and Reduction in outages Increase in Revenue
Remote

metering for HT consumers

Average

billing for domestic consumers followed by six monthly reconciliation no. of collection centres

Increased Use

of IT for Energy accounting of stringent Anti-theft Laws

Enforcement

POWERGRID Diversification
POWERGRIDs Strategy is based on High growth potential in the business in line with the core competence. Commitment of Govts. for reforms with fund allocation under APDRP scheme. Association with SEBs as AcC in 33 circles in 16 States under APDRP scheme. Leveraging its vast human resources and knowledge base Leveraging its rapport with GOI and SEBs Leveraging its strong Balance Sheet as comfort to lenders, who are shying away from SEBs Leveraging its IT enabled infrastructure for better management of distribution network Employees participation as equity stake holders to the extent of 26% in the Subsidiary Company

POWERGRID Diversification
Reputed Domestic consultant appointed to formulate the business strategy Recommendations of the consultant : Separate subsidiaries for Sub-Transmission and Distribution business and strategic alliance with SEBs Business Models for Transmission Build - and Transfer Build Lease Operate and Transfer Contract Add - and Operate Rehabilitate Operate and Transfer Business Models for Distribution Licensing Agreement with Tariff based on fixed rate of return Licensing Agreement with Performance based Tariff Energy Performance Contracting

POWERGRID Perspective
Resource Mobilization
X Plan

Plan

XI Plan

Total

Internal Resources

2,938

5,081

8,019

Development Surcharge
Bonds/Domestic Loans Foreign Borrowings IEBR Net Budgetary Support

1,1216
8,002 8,214 20,370 1,000

1,867
14,917 6,393 28,258 0

3,083
22,919 14,607 48,628 1,000

Total

21,370

28,258

49,628

POWERGRID Perspective
X Plan A. Transmission
Generation Linked Projects Grid Strengthening Projects Inter-regional /Inter Country Links ULDC Projects Investments in JV

Plan
Rs/Crs
Total 47,129 11,456 3,192 29,159 1,016 204

POWERGRIDs Investment
XI Plan 27,999 5,945 5,420 14,615 19,130 7,436 3,192 7,199 1,016 204

Others

83
2,240 1,004

2,019
260

2,102
2,500 1,004

B. Telecom
Base Network Equity in NLDO

1,236
21,370

260
28,258

1,496
49,628

Total (A+B)

Investment and Funding Strategy

Future Funding

Foreign Currency Debt

Current Funding from World Bank, ADB, JBIC, European Investment Bank, KfW etc. to the tune of US $ 1,500 Million Presently outstanding loan from IFI is 5055% of Total Borrowing Funding from Multilateral agency to go down due to their policy not to fund Gen. Linked projects. Future Funding envisaged at Rs. 9,400 Crore (about 30% of funding gap)

Investment and Funding Strategy

Resource Mobilisation
Internal Resource (IR)
Past Trend 1997-98 to 2002-03
Investment : Rs 11,000 Cr IR : Rs 1580 Cr (14%) : Projects are being implemented with High Leverage pulling down the profit

Reasons for Low IR

No return on a portion of equity (Rs 603 Cr) Aberration in previous tariff norms Tariff pegged @35 paise in NER No return on asset worth about Rs 1000 Crore CERC disallows even O&M and Depreciation on grant High levels of Sundry Debtors Bullet Repayment in the Year 1998-99 and 2001-02 Nil IR

To minimise the future risk capital structure for projects need to be at least 70:30

Investment and Funding Strategy

Resource Mobilisation
Internal Resource (IR)
Future Projection X Plan
Investment : Rs 21,370 Cr IR : Rs 2938 Cr (14%) Planning commission has fixed the outlay with D:E ratio of 80:20 adding Dev. Surcharge and NBS of Rs1000 Cr to IR Strings attached to Dev. Surcharge

Therefore to maintain D:E ratio of 70:30:

Investment may have to be scaled down OR Equity Support from GoI

Future Projection XI Plan

Investment : Rs 28,258 Cr IR : Rs 5081 Cr (18%)

If Securitisation Scheme operates in true letter and spirit, IR may go up to

Rs 5,000 Cr( 24 % of Investment) in X Plan Rs 8,500 Cr (30 % of Investment) in XIPlan

Investment and Funding Strategy Resource Mobilization

Development Surcharge CERC has not notified Dev. Surcharge in Project specific tariff notification Rihand-Dadri Line Applicability of Depreciation Adversely affects the Financial ratios because of no RoE Applicability of Income Tax Contd.

Investment and Funding Strategy

Resource Mobilisation Net Budgetary Support (NBS) Resource Mobilisation by POWERGRID for X Plan falls short in achieving a Debt: Equity ratio of 80:20 NBS by Planning commission to bridge this gap is Rs1000 Cr NBS to flow as Equity instead of Grant

Investment and Funding Strategy Resource Mobilization Domestic Bond/ Loan

Future Funding envisaged as Rs. 22,000 Crs
(about 70% of funding gap) During 2001-2002 fund mobilization from domestic markets was Rs. 2400 crs. Average annual fund raising : @ Rs 2200 Crs ( to raise Rs. 22000 Crs in 10 years )

Revenue From Telecom

Higher growth in telecom to supplement transmission sector Income from NLDO business has been assumed to flow from 200708 onwards Assumed Revenue Rs 663 Cr in X Plan and Rs 2078 Cr in XI Plan

Investment and Funding Strategy

Resource Mobilization
Net Budgetary Support (NBS) Resource mobilization by POWERGRID for X plan falls short in achieving a Debt : Equity ratio of 80:20 NBS sanctioned by Planning Commision to bridge this gap is Rs. 1000 Crs No necessity of NBS during the XI plan

Contd.

Investment and Funding Strategy

Resource Mobilization International Financial Institutions Current Exposer from IFIs viz, World Bank, ADB, JBIC, EIB, WMB, KfW etc. to the tune of US $ 1,500 million. IFI funding is about 50-55% of Total Borrowing by POWERGRID Future funding commitment from IFI Rs. 6000 Crs World Bank has put conditionality in funding Generation Linked Projects Contd.

Investment and Funding Strategy Resource Mobilization

Domestic Funding
Future Funding from the Domestic Market envisaged at Rs. 22,000 Crs (about 70% of funding gap) During 2001-2002 fund mobilization from domestic markets was Rs. 2400 crs. Average annual fund raising @ Rs 2200 Crs to raise Rs. 22000 Crs in 10 years Revenue From Telecom Higher growth in telecom business can be generated which will supplement transmission sector needs. Income from NLDO business has been assumed to flow from 2007-08 onwards

DEVELOPMENT OF NATIONAL GRID

PHASE-I (By 2002)

NR
AURAIYA

NER
500 MW

MALANPUR

500
SAHUPURI

MW

BONGAIGAON MALDA SASARAM BIRPARA

DEHRI

VINDHYACHAL KORBA CHANDRAPUR

BUDHIPADAR

ER

WR
KOLHAPUR

1000 MW
BALIMELA

500 MW
U.SILERU GAZUWAKA

EXISTING
BELGAUM

UNDER CONST.

EXISTING 400 kV

SR
DW EE P

220 kV
N ANDAMA R NICOBA

LA KS HA

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&

DEVELOPMENT OF NATIONAL GRID

PHASE - II (By 2007)

URI

WAGOORA DULHASTI RAVI

KISHENPUR

JULLANDHAR MOGA BALLABGARH (DELHI RING) HISSAR LUCKNOW BHIWADI M'BAD ALLAHABAD /UNNAO MALANPUR SINGRAULI 500MW B'SHARIF KAHALGAON /BARH DEHGAM NAGDA BINA SATNA SEONI SIPAT KORBA RAIPUR CHANDRAPUR 1000MW HIRMA VINDHYACHAL N.K. KRISHNA NAGAR ROURKELA G'PUR PURNEA VARANASI SILIGURI/BIRPARA A'PUR MEERUT TEHRI

CHICKEN NECK

BHUTAN
TEESTA TALA RANGANADI KATHALGURI MARIANI MISA BONGAIGAON

NR JAIPUR
SHIROHI

300 0M W
ZERDA

LIMBDI JETPUR

GANDHAR/ AMRELI KAWAS CHEGAON VAPI BHANDARA PADGHE

NER BANGLA DESH

PIPAVAV BOISAR

DHABOL KOYNA

LONIKAND KARAD

WR SR
20 00 M W

TALCHER JEYPORE

ER

RAMAGUNDAM GAZUWAKA LEGEND EXISTING/ IX PLAN VIJAYAWADA 765 KV LINES KRISHNAPATNAM CHITTOOR 400 KV LINES HVDC B/B HVDC BIPOLE X PLAN

KOLHAPUR

PONDA KAIGA

NARENDRA SIRSI

MANGALORE BANGALORE KOZHIKODE HOSUR SOUTH CHENNAI SINGARPET CUDDALORE PUGALUR KARAIKUDI KAYAMKULAM TRIVANDRUM KAYATHAR

LA P EE DW HA KS

N AND ANDAMA R NICOBA

COCHIN

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DEVELOPMENT OF NATIONAL GRID

PHASE - III (By 2012)

URI

WAGOORA DULHASTI RAVI SATLUJ

KISHENPUR

JULLANDHAR MOGA BALLABGARH (DELHI RING) HISSAR LUCKNOW ARUN G'PUR PURNEA VARANASI 500MW B'SHARIF KAHALGAON /BARH DEHGAM NAGDA BINA SATNA SEONI SIPAT KORBA RAIPUR CHANDRAPUR 1000MW MW 00 20 HIRMA VINDHYACHAL N.K. KRISHNA NAGAR ROURKELA SILIGURI/BIRPARA BHIWADI M'BAD AGRA ALLAHABAD /UNNAO MALANPUR SINGRAULI A'PUR MEERUT TEHRI

CHICKEN NECK

BHUTAN
TEESTA TALA RANGANADI BONGAIGAON

DIHANG DAMWE KATHALGURI MARIANI

NR JAIPUR
SHIROHI

MISA BADARPUR TIPAIMUKH

300 0M W
ZERDA

LIMBDI JETPUR

GANDHAR/ AMRELI KAWAS CHEGAON VAPI BHANDARA TARAPUR AKOLA PADGHE

NER BANGLA DESH

PIPAVAV BOISAR

DHABOL KOYNA

LONIKAND KARAD

WR

AMRAVATI

TALCHER JEYPORE

ER

RAMAGUNDAM

KOLHAPUR

SR
20 00 M W
NARENDRA SIRSI

GAZUWAKA

LEGEND EXISTING/ IX PLAN X PLAN XI PLAN

VIJAYAWADA 765 KV LINES KRISHNAPATNAM CHITTOOR 400 KV LINES HVDC B/B HVDC BIPOLE

PONDA KAIGA

MANGALORE BANGALORE KOZHIKODE HOSUR SOUTH CHENNAI SINGARPET CUDDALORE PUGALUR KARAIKUDI KAYAMKULAM TRIVANDRUM KAYATHAR

LA D HA KS EP WE

N AND ANDAMA R

COCHIN

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NICOBA