1. Opportunities & Obstacles in India for Distributed Energy Generation by Pinaki Bhadury Thermax Limited India 13 th September 2007 New Energy Strategy of the EU & CR New Energy Strategy of the EU & CR within the framework of the world power supply & development

2. 13th September 2007AEM Conference, Prague2 Prozdravit ze Indie Greetings from India

3. 13th September 2007AEM Conference, Prague3Topics DE in India DE Opportunities Obstacles for DE Way forward Indian DE Market Developments About Thermax

4. 13th September 2007AEM Conference, Prague4 Distributed Energy (DE) in India Indian DE was born 107 years back! –1899 CESC installed the 1 st Power Plant of 1 MW for Calcutta (Kolkata) city –1905 BEST installed 4.3 MW Power Plant for Bombay (Mumbai) for supply to city & its tramways –Soon followed other cities Surat Ahmedabad With rapid increase in demand –Larger capacity power plants took birth Lead to decline of DE in India Pics courtesy CESC & BEST CESC : Calcutta Electricity Supply Company BEST : Bombay Electricity Supply & Tramways Company

5. 13th September 2007AEM Conference, Prague5 DE in India Re-Emergence of DE –Captive Power Plants Sugar Cogen Refineries Cement Textile –Small hydro in the hilly regions Today, about 19% of India’s installed capacity is in DE Photograph courtesy : Arvind Mills Limited & Thermax Limited

6. 13th September 2007AEM Conference, Prague6 DE Opportunities Drivers for DE in India –Increasing Demand-Supply Gap Poor implementation of projects Inadequate capacity addition –Poor availability & reliability Most of small cities & towns get electricity only for 5-6 hrs/day! Rural areas get electricity only for 3-4 hrs/day! Industries have to live with –Frequent interruptions –Frequencies between 48.5 – 51.5 Hz! IndiaChina Population1.13 Billion1.33 Billion GDP$ 1000 Billion$ 2450 Billion Installed Capacity172 GW606 GW Cap Addition/Yr6 GW70 GW Source : Ministry of Power, India, India Census,CIA Factbook, Xinhua New agency, Chinese State Regulatory Commission Presently in India the Peak Demand shortage is 20% average and Energy Supply shortage is 17%!

7. 13th September 2007AEM Conference, Prague7 DE Opportunities Drivers for DE in India –Poor & inadequate T&D network Many areas do not have access to any grid In parts of India, grid can not reach due to terrain High T&D (ATC) loss – 35% national average!! India will need to invest in transmission as much as in generation in the next 20 years –High cost of electricity for Industries Average cost is US 10¢/kWH –Indian Electricity Act 2003 Captive Power Plants delicensed –Excess capacity allowed to be sold to others For Rural Electrification, distributed generation has been planned for areas where grid can not reach –Stand alone systems for supply to rural households

8. 13th September 2007AEM Conference, Prague8 DE Opportunities Business opportunities –Captive Power Plants (On-site generation) Presently estimated to be at 40 GW –Addition at 3000 MW per year Estimated addition 12 GW by 2012 (conservative) Commercial Complexes (CHPC / Trigen) –Multiplexes –Malls & Recreation Centres Industries (Cogen & Stand-alone systems) –Cement Plants –Sugar Cogen Plants –Textiles –Chemical –Industrial Parks –IT Parks

9. 13th September 2007AEM Conference, Prague9 DE Opportunities Business Opportunities –Rural Electrification 60% (600 million) of India’s population is Rural –They reside in about 630,000 villages & towns 44% (250 Million) of the Rural population have no access to electricity –Target to electrify all villages –Provide electricity to every household by 2012 –Remote villages will have DE, 18,000 villages to be electrified –Rural Business Hubs Increasing economic activity around a cluster of villages Electricity generation using local resources –Target to achieve 10000 MW in next 8 years

10. 13th September 2007AEM Conference, Prague10 DE Obstacles Energy Planner’s Mindset – “Bigger, the Better” –“Small & Medium sized plants are sub-optimal” –Power should be generated at source Pit-heads RLNG terminals and distributed to consumers Regulatory –Though Electricity Act 2003 allows sale of excess power to 3 rd party It requires distribution license State Regulators do not permit 3 rd party sale –Supreme Court of India recently ruled in favour of a State Regulator –Government has amended the Act so as to allow third party sale without a licence

11. 13th September 2007AEM Conference, Prague11 DE Obstacles Financial Restraints –Imposition of unrealistic taxes & duties on DE generation 10 – 37% of generation cost even if for own consumption Cross subsidy charges on sale to third party as high as 50% of power price (as much as US 5¢/kWH) –Higher duties on capital equipment DE plants are imposed 22% more duties than Mega Power Plants –Sales Tax (VAT) on inputs like fuel, lubricants Not applicable on Utility Large & Mega Power Plants Fuel Constraints –Non-availability of fuels Natural Gas Coal –Poor Distribution system Absence of a National Gas Grid High cost of coal transportation

12. 13th September 2007AEM Conference, Prague12 Way Forward for DE in India What needs to be done 1.Need to influence policy makers about advantages of DE for India in its generation mix –Study India’s long term generation & distribution needs –Design the generation mix based on Central & Distributed Generation –Lobby through International agencies 2.Create ‘Buy-in’ for DE at –Central level –State level Through seminars, conferences & references for DE India urgently needs to look at DE proactively as one of the options for meeting its burgeoning energy needs. Now is the time, or it will be too late

13. 13th September 2007AEM Conference, Prague13 Indian DE Market Developments On-site Industrial Power Plants (Captive Power Plants) –Encouragement from the government to sale extra capacity Grid / Transcos / Power Traders Direct Users –Capacity augmentation to National Generation capacity Distributed Generation in Rural markets –Use of local resources –Hybrid systems of Solar / Biomass / Wind / Micro Hydro systems –Owned & operated by the village people –Quick to implement & start –No need of complicated and expensive distribution network

14. 13th September 2007AEM Conference, Prague14 About Thermax Thermax Limited –A major Energy & Environment Indian engineering company –Turnover of Rs 23.62* Billion (US$ 583 Million) –Addresses all the Utility requirements of the Industry –Three Manufacturing locations in India –One Manufacturing location in China *As of 31 st March 2007

15. 13th September 2007AEM Conference, Prague15 Our Vision To be a globally respected high performance organisation offering sustainable solutions in energy & environment

16. 13th September 2007AEM Conference, Prague16 Our Businesses Boilers & Heaters Vapour Absorption Chillers Speciality Chemicals Turnkey Power Plants Air Pollution Control Waste & Waste Water Solutions

17. 13th September 2007AEM Conference, Prague17 Our Business Purpose

18. 13th September 2007AEM Conference, Prague18 Our Location Works : Chinchwad, Pune, 160 kms south of Mumbai (Bombay) H.O. : Thermax House, 4, Mumbai-Pune Road, Shivajinagar, Pune

19. 13th September 2007AEM Conference, Prague19 Overseas Locations Thermax Inc. Detroit, USA Thermax doBrazil Sau Paulo, Brazil Thermax Europe Ltd. Luton, UK Thermax (Zhejiang) Cooling & Heating Engineering Co. Limited Thermax Ltd. Nairobi, Kenya Thermax Ltd. Jebel Ali, UAE Thermax Ltd. Kuala Lumpur, Malaysia Thermax Ltd. Moscow, Russia

20. 13th September 2007AEM Conference, Prague20 Thermax Group Thermax Corporation Thermax Limited Boiler & Heater Products Boiler & Heater Projects Water & Waster Water Solutions Enviro Absorption Cooling Chemical Business Power Generation Business Wholly Owned Subsidiaries Thermax Inc., USA Thermax doBrazil, Brazil Thermax Europe Limited, UK Thermax Hong Kong Limited, Hong Kong Thermax Engineering Construction Company Thermax Instrumentation Limited Thermax (Zhejiang) Cooling & Heating Engineering Co. Limited, China

21. 13th September 2007AEM Conference, Prague21 Thermax & Indian Power Sector Offers unique solutions for Distributed Generation –Biomass based power generation –Waste Heat based power generation –Combined cycle plants Has a dedicated turnkey power plant design, manufacturing and commissioning business –Have commissioned up to now 277 MW plants –Further 300 MW capacity under execution

22. 13th September 2007AEM Conference, Prague22 For further information & clarifications, contact: Pinaki Bhadury, Head – Business Analysis, Research & Strategy Thermax Limited D-13, MIDC, R D Aga Road, Chinchwad Pune 411019 INDIA Phone : +91 20 27475941, 66122802 (Direct) Fax : +91 20 27470648 email : pbhadury@thermaxindia.compbhadury@thermaxindia.com