1. Financial Restructuring Of Discoms & Way forward 21 st November 2013 Delhi Dr Harish K Ahuja President Strategy & Corporate Affairs Strategy & Corporate Affairs 21/11/20131

2. Structure Power Sector Reforms : Fundamentals FRP of Discoms Why competition works better than regulations & privitization Way forward for taking discoms towards competitive mode. Some conclusions : Create Prosumers 21/11/20132

3. Private and Confidential – For Limited Circulation Only Moser Baer Projects Pvt Ltd 321/11/2013

4. Moser Baer Projects – Group Structure 4 Moser Baer (Projects Private Ltd. (MBPPL) Group Key Investors: Blackstone, IFCI, GE Thermal: Madhya Pradesh power project: 2,520 MW, Chhattisgarh power project, 1,320 MW Solar: Domestic – 223 MW EPC & Commissioned International: 63 MW Commissioned Hydro: North Eastern India and Nepal 2000 MW, Himachal Pradesh ~500 MW Coal Mining: MDO, Chhattisgarh Moser Baer Projects ThermalCoal MiningHydro Clean Energy (Incl. Solar Farms) Company is committed to high quality, low cost and timely delivery of world class projects 21/11/2013

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6. Economics of Power Reforms 21/11/20136

7. Unbundling and Competition 21/11/20137 Competition Regulation Regulation Competition Competition

8. Generation TransmissionDistribution Retail supply Circle of Power Sector Economics 21/11/20138 Multi Buyer Multi Supplier Market Forces Multi Buyer Multi Supplier Market Forces Natural Monopoly Regulation Discoms Competitive Segment + Regulated segment

9. Basic Elements of Power Reform 21/11/20139 Economic regulation Competition To bring Multiple Players especially in competitive segments i.e. Generation and Retail supply SET UP Independent REGULATOR to check -Monopoly Practices in Distribution/Transmission and avoid Market Power in generation IN Generation and Retail supply segment By Competitive wholesale Market By Competitive Retail market

10. Discoms : Bankruptcy to Revival NEED Of HOUR: To save discoms is to save complete value chain Losses – All Time High, - Load shedding. - The only buyer – Almost bankrupt - Banks have stopped lending MOP: Debt restructuring Political inference, Subsidy & Skewed tariff Public mindset : Electricity still a public good- Major bottleneck in reforming discoms SOLUTION ? Bail out Franchisee APDRP Privatization More competition- Open access a legal imperative

11. State Electricity Distribution Management Responsibility Bill,2013 21/11/201311

12. 21/11/201312 Financial management of discoms

13. Focal issues ry 1243 - Discoms Bailout : What Next Privitization of supply/content side! - Role of regulators! - Unbundle Discoms : Wire & content! ! 21/11/201313

14. Discom Bailout : what next 1243 21/11/201314

15. Generation Transmission Distribution Supply Where is Competition 21/11/201315 Multi Buyer Multi Supplier Market Forces Multi Buyer Multi Supplier Market Forces Natural Monopoly- Regulation Very Good GoodPoor Average Open Access It is a established fact that neither regulations nor privatization works,it’s the competition which serves the best of interests of electricity consumers

16. Unbunble Discoms! 2 Wheeling Business REGULATED Transparent Billing Initiate horuly metering drive by directing discoms to put smart/ABT meters Reduce cross subsidy. Promote direct subsidy to poor domestic& farmers through Smart cards. Promotion of renewable through regulatory cess in the begining till grid parity is achieved. APDRP: Mainly to strenghten distribution & transmission network Let Pension Funds & Insurance invest money in regulated wheeling business Supply Business Competition/Deregulation Discoms & other retail Players Let area discom supply company be default supplier for few more years i.e spot rates. Issue Guidilines for retail supplier on switching. Allow more consumers to be open access/deregulated in next 8 years ie 300 KW, 36000Units per year Open Derivative markets in next 2- 3 years to see price visibility. Promote competition on Demand side (It is a established fact that neither regulations nor privatization works,it’s the competition which serves the best of interests of electricity consumers ) Separate Wheeling & Supply business. 21/11/201316

17. Privitization Of Discoms 3 Past PPP model & Private discoms Delhi, Orissa, Surat, Mumbai,Ahemdabad, Noida, Calutta etc Chaturvedi Commitee :Mixed reactions Present Frenchaisee Bhiwandi, Agra,Jalgaon Shunglu commitee : Mixed reactions FUTURE No more transitory model. Bring in more suppliers Deregulated consumer can not be charged with regulated tariff SERC can not regulate Tariff for Deregulated consumers except CX & wheeling charges Even for charging power purchase cost explicit agreement of consumer necessary Open access consumers do not need permission of Discoms to choose other suppliers, Just information is sufficient Discoms though will be default supplier, but tariff would be mutually discussed. Supplier 21/11/201317

18. Role of Regulators 4 SERC – Tariff Fixation in regular intervals Reducing Cross subsidy in +- 20% Intrastate POC – not visible Enforcing Performance stds- No Load shedding. Prescribe I cap – 18% reserve margin with supplier Enforcing RPO/SPO : promoting prosumers Promoting deguralations/open access: By putting in place timelines for diffrerent loads ; 0.5 MW,100 KWS/50 K units Invest in ABT compliant meters to record houry consumption. Promote direct subsidy to poor dom & farmers through Smart cards. Promote use of solar pumps instead of seprate feede for agriculture CERC Move towards Price cap regulations instead of cost plus especially for interstate transmission : to avoid gold platting Open Access – Building Concensus Effective ISO- POSCO Derivative markets to give long term price signals to attract investment 21/11/201318

19. Create Prosumers “Electricity for all” Electricity generated would meet the Prosumer’s growing electricity demand and the surplus units would be feed back to the grid Ensures political backing and support Allows for capital and interest subsidy to be directly given to the consumer Rational planning for long term power procurement” More prosumers will reduce power demand,in turn will affect capacity addition. Saving in Transmission and Distribution cost R-APDRP (Part B) –Already in place R-APDRP Aims at - Renovation, modernization and strengthening the system With Net Metering, Discom can better serve energy deficit customers (industrial & commercial) & be more profitable, thus improving their financial health & reducing liabilities IT clubbed with Net Metering defined as a set of IT hardware, software and applications can reduce energy losses 21/11/201319

20. Thank You 21/11/201320