Emerging Policy & Structural Dynamics in Power Sector is Tilting Towards Risk

  • Coal and Gas supply shortage as resulted in many power plants operating at a sub-optimal PLF levels, IPPs / MPPs are hardest hit
  • The fuel shortage threatens India’s power expansion plan
  • Economic Slowdown and Currency Devaluation has added to sustainability of viable business model in the power generation segment in India
  • New land acquisition bill is only likely to add to the woes of power project developers that are already struggling with multiple clearance requirements

Companies are Slamming Brakes on Growth Aspirations in India

  • Companies like Reliance and Adani has already slammed brakes on their rapid expansion plans in thermal power generation space
  • CLP Holdings, one of the largest foreign investors in India's power sector--has threatened to "reconsider" its projects in the country, saying it is bleeding every day because of a fuel shortage, infrastructure bottlenecks and lack of policy initiatives to support growth

Growth by Acquisition

  • NTPC is on the look out to acquire power projects that are stalled due to several technical, commercial and clearances reasons.
  • NTPC wants to achieve the objective of 128 GW of power capacities by 2032 and its anticipates land acquisition bill to lead to more time for land acquisition and it tide over this it has adopted acquisition as integral part of growth strategy

Rupee Devaluation, Fuel Linkage Issue, Burgeoning Debt Burden to force companies with leveraged Balance Sheet to put assets on the block

  • About 65,000 MW of thermal capacity across India runs the risk of turning into bad assets; Given a capital cost of Rs 5 crore per MW, that is upwards of Rs 3,00,000 crore at risk; much of this is bank loans as these projects, typically, came up with a 80 per cent debt component
  • Companies that had acquired land, signed MoUs (memorandums of understanding), coal linkages, etc are now looking to sell and exit
  • As per an estimate, as many as 700 thermal plants across India applied for an environmental clearance between 2006 and 2010. Between them, they were looking to add 701,820 MW of capacity—about six times India's overall power capacity in 2011 and seven times the target for the 12th five-year plan (2012-17)
  • Companies that ventured into energy sector to diversify are now exiting to focus on their core business; TVS Group recently decided to exit energy business, predominantly in wind energy segment the group sighted capital intensity as one of the reasons for exit, another company that has been looking for buyers of its Wind assets is DL
  1. Executive Summary
  2. Evaluating Factors Favoring Investments in Power Generation Sector in India
    • Demand Supply Scenario
    • Revenue Models (Merchant Sale, Open Access, PPA)
    • Regulations & Policies
    • Outlook
    • Trends in Power Prices in India ( Generation & Distribution Level)
  3. Evaluating Factors Risking Viability & Sustainability of Power Generation Sector in India
    • Widening Fuel Demand and Supply Gap
    • Challenges in securing Fuel Linkage
    • Impact of Land Acquisition Bill
    • Rupee Devaluation
    • Increasing Cost of Capital
    • Leveraged Balance Sheet
    • Restrictions on Importing BTG
    • Water Shortage
  4. Status Check on Upcoming & Planned Power Plants in India
    • Thermal Power – Coal & Gas
    • Wind Power
    • Biomass Power
    • Solar Power
  5. Status Check on New Investment / Expansion Plans of Companies in Power Generation Sector
    • Indian Companies likes of Adani, Reliance Power, Tata Power, CESC, Torrent, Lanco, GMR, Essar, NTPC
    • MNCs likes of CLP, GDF Suez, E.ON, AES
  6. Trends in M&A Deals in Power Generation Sector
    • Who’s buying – Analyzing Strategy
    • Who’s selling – Analyzing Reasons for Exit (Distress Sale, Strategic Exit)
    • Number of Deals in Value and Volume
    • View of Investment Bankers
    • Trends in Valuations
  7. Detailed Asset Profiling of Assets up for Sale – Primary Survey
    • Project – Location, Name, Capacity Current Status, Size, Fuel, Project Type
    • Technology Used
    • Date of Start of Construction & Planned Date of Commission
    • PPA Status, Fuel Linkage
    • Capital Investment – Equity vs Debt
    • Ownership Pattern
    • Challenges Faced
    • Looking for Stake Sale / Exit
  8. Identifying Key Reasons for Exiting Power Generation Business
    • Private Indian Companies
    • MNCs Operational in India
  9. Regulations Governing M&A in Indian Power Sector
  10. InfraInsights Due Diligence of Shortlisted Attractive Assets
    • Distress Sales Vs Valuation Sales
    • Recommendation
  11. Power Plants Asset Database
    • Thermal Power – Coal & Gas
    • Biomass Power
    • Wind Power
    • Solar Power

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