Power’s Coal Anorexia? Power Sector’s Growth Story Indian Coal Markets Conference Kolkata, 11th Sep. 2017 K. Biswal Director (Finance) NTPC Limited

Power Sector All India PLF Capacity Growth 1996 to 2017 83 GW to 320 GW @ CAGR ~ 6.50% The Indian Power growth story has been quite exciting till now The generating capacity has increased from 83 GW in FY96 to 320 GW in FY17 The installed capacity has grown at a CAGR of 6.50% during last 21 years During last 5 year it has grown at a CAGR of ~ 10% The PLF was in the range of 70 to 75% for a long period of time. However, after FY13, with the rapid increase in capacity, the PLF has shown a decline in the recent years – now it is in the range of 60 to 65% Besides significant capacity addition, there are other reasons also for lower PLF. One of the major reason is the financial health conditions of DISCOMs which has led to the subdued demand, thereby resulting into high load shedding Other reasons include expansion of RE projects & number of stranded assets in the power sector due to varied reasons like unavailability of fuel, financial condition of promoter, etc. Source: CEA

Electricity Vs GDP Growth Modest Generation Growth 5% to 7% YoY GDP growth affects Generation growth If we look at the growth in electricity generation on YoY basis, it has been modest during last 15 years with an average range of 5% to 7% So, although PLF has gone down, but with increased capacity, the power generation has increased consistently. The power generation has a strong relationship with growth in GDP. Higher the GDP, higher will be industrial demand for power and higher will power generation growth During last 10 years GDP has grown in an average range of 6% to 8%. Correspondingly electricity generation has recorded growth of 5-7% Source: Antique

Large Capacity & Renewables led to lower Coal PLF Coal Generation Thermal leads capacity addition, However Renewable picking up rapidly Coal PLF If we see generation of coal plants only, it has increased from 585 BUs in FY12 to 910 BUs in FY17 at CAGR of around 8% In the same period, the coal plants’ PLF has gone down from 74% to 60% The reasons behind lower PLF are: Large Power generation capacity addition – not only thermal but also renewable (although thermal leads the capacity addition but renewable capacity is also picking up rapidly and is expected to take over in near future) Subdued demand due to poor DISCOMs health Stranded Assets

Coal Sector Coal Reserves in India Coal Demand Vs Domestic Production Coal Reserves in India (MT)   Proved Indicated Inferred Total Coking 18400 13569 2101 34070 Non-coking 106916 128838 30249 266003 125316 142407 32350 300073 Source: MoC Indian Coal Sector moved from perennial shortage to surplus availability CIL target of 1 billion tonne by FY20 Improved coal quality through third party sampling (92 mines downgraded in FY16 & 177 mines in FY17) Indian Coal Sector has registered a modest growth in the recent years, especially during last 3-4 years. It has moved from perennial shortage to surplus availability. The difference between demand and domestic production has moved down to around 160 MT in FY17 as against 213 MT in FY15 The CIL offtake has improved from 462 MT in FY14 to 554MT in FY17 at CAGR of ~ 6.24%. Further, they target to achieve 1BT by FY20 The Govt has also taken steps to tackle legacy grade slippage by downgrading 92 mines in FY16 & 177 mines in FY17 and introducing third party sampling of coal With 300 BT of coal reserves, India will remain a coal based energy supplier for long period of time in future.

Coal Sector Rakes availability per day – Gradual improvement Critical coal evacuation rail-links to facilitate higher availability- Tori-Shivpur-Kathautia railway line in Jharkhand’s North Karanpura Jharsuguda-Barpalli-Sardega Railway Line in Ib Valley, Odisha Bhupdevpur-Korichapar-Dharamjagarh in Mand-Rajgarh Coalfields, Chhattisgarh If we look at the infrastructure facilities, they have also improved significantly during the recent past Rakes availability has gone up from 157 rakes per day in FY10 to 222 rakes per day in FY17 With following rail links, coal evacuation will improve further: Tori-Shivpur-Kathautia railway line in Jharkhand’s North Karanpura Jharsuguda-Barpalli-Sardega Railway Line in Ib Valley, Odisha Bhupdevpur-Korichapar-Dharamjagarh in Mand-Rajgarh Coalfields, Chhattisgarh

Renewable Energy Growth Renewable Growth higher than Thermal Growth Ambitious target of 175 GW by 2022 As per commitment made in COP 21 Climate Convention at Paris, India has to increase contribution from new and renewable energy sources i.e. non-coal sources. GOI has set an ambitious target of reaching 175 GW Renewable Energy by FY22. Currently, it is at ~ 57 GW In FY17 RE capacity (46% on YOY basis) has grown faster than thermal capacity (3.3%) This may be a big challenge for coal sector. However, since RE power is not available round the clock and with a fact that we have huge coal reserves, thermal power will still be a primary source of electricity for sustained power generation & Grid stability

Thermal Energy to compete Renewable Energy Solar Tariff per kwh moved from Rs.11 in 2010 to Rs.2.4 in May 17 Transportation cost to be rationalized Parity with imported coal Coal Cess Although, coal will remain to be a primary source of energy for power generation, but at the same time it has to be competitive. The RE power tariff has seen a significant DECLINE FROM Rs.11 per kwh in Dec10 to Rs.2.44 per kwh in May17 Recently, the GOI allowed the swapping of coal linkages between various power plants with nearest source of the fuel to save costs and decongest railway network. Besides estimated logistics savings of INR 60 billion, it would also lead to additional power generation of 3500 MW with potential benefit of INR35 billion Imported Coal prices have risen in recent months because China increased imports while production in Indonesia declined due to incessant rains. However, rising coal prices are expected to start declining from October Domestic coal prices should be in parity with imported coal prices with due adjustments of quality and transportation costs.

Power Sector Strong Growth Story Ahead………….

Power Sector – Growth Story (from subdued demand to actual demand) Today Target Installed Capacity ~330 GW ~ 515 GW by FY22 Generation (in BUs) ~1160 BUs ~1611 BUs by FY22 Peak Load Demand ~153 GW ~235 GW by FY22 ~ 3026 kWh (World average) Per capita consumption ~ 1075 kWh Renewable capacity ~57 GW 175 GW by FY22 Coal Requirement ~600 MT 727 MT by FY22 As you are aware that Government is focused on attaining affordable “24x7 Power for All”., we are witnessing significant changes in the entire power sector. Energy Sector is expected to grow at a CAGR of ~7-8%. There is a Big push towards Renewable Energy and the renewable capacity is expected to grow by 3 times in next 5 years from ~57 GW presently to 175 GW by 2022. With various reforms in the power sector as well as capacity addition we expect that per capita consumption will grow substantially. Transmission Capacity (Inter Reg) ~60 GW ~126 GW by FY22 AT & C Losses ~22.70% 15% by FY19 Government’s focus on attaining affordable “24x7 Power for All” by 2019. Source: MOC, MOP, CEA,NTPC

Strong Growth Drivers for Power Sector in India India’s GDP is expected to grow at ~8% over next 5 years. Electricity Demand in India is expected to grow at CAGR of ~7%. Demand Supply Growing population coupled with increasing urbanization to boost growth of consumption. Per Capita Consumption still one of the lowest Benefits of UDAY to yield results by improving financial capability of Discoms leading to increase in offtake. Facilitation of open access by States Increased coal production by coal companies in India to improve feedstock supply. Financial reforms undertaken by GoI such as 5/25 refinancing scheme to boost project viability. Falling prices of Solar energy. Investment in new inter-state transmission systems Energy requirement to rise at a healthy pace Indian GDP is growing at a Faster pace as compared to other developing countries, demand for energy will be in tandem with the growth of the economy. Although in FY17 peak and energy deficit numbers are lower but this is due to weak financial positions of discoms rather than reduction in demand. Further, there is a huge latent demand and with the electrification drive of the government the same is expected to contribute to annual incremental growth of the sector in a big way. With growth expected in IIP numbers going forward will also contribute to growth of the sector. Power Sector under Transformation

Improved policy Ecosystem….energising Power Sector Revised Tariff Policy Quantum jump in Index of ease of getting Electricity UDAY (A new dawn for distribution sector) Ensuring electricity for all Efficiency for affordable tariffs Environment for sustainable future Ease of Doing Business Turning around DISCOMs through Financial & Operational Efficiency Improvements 27 States & UTs are onboard Savings of ~Rs.12,000 crore due to reduction in interest cost Integrated approach towards making 24x7 affordable power for All SHAKTI Scheme for Harnessing Koyala Transparently in India From Shortage to Surplus Coal Reforms Transformational Policy for auction and allocation of coal linkages leading to : Affordable Power Access to coal Accountability in allocation of coal Flexibility in utilization of coal Coal Swapping & Rationalization of Coal Linkages Reduction in Coal Imports Coal quality improvement through third party sampling , supply of crushed coal Government of India is extending an active support to the sector through various regulatory interventions and reforms. UDAY has been the biggest and the most complete reform ever covering financial as well as operational parameters to improve the health of the Discoms. UDAY coupled with Revised Tariff Policy and Fuel reforms such as SHAKTI is an integrated approach towards making power affordable. UDAY has started to improve financial health of SEBs thereby stimulating demand for power

Conclusion – No Coal Anorexia 81 GW under construction of which 77% pertains to coal capacity UDAY strengthening the demand side management SHAKTI stimulating the supply side Under ‘Make in India’ vision of the Government, coal would continue to be India’s major energy supplier as it is abundantly available and economic fuel to drive the economic wheels of the nation.

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