Power Grid Corporation India Ltd - 42 Pages, 519Kb

8/4/2019 Power Grid Corporation India Ltd - 42 Pages, 519Kb

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Firstcall India Equity Advisors Pvt Ltd

POWER GRID CORPORATION INDIA LIMITED (PGCIL)

BUY Target Price:Rs.114.00CMP: Rs.92.35 Market Cap.: Rs.388686.50mn.

Date: February 26, 2009

Key Ratios:

Particulars FY08 FY09E FY10E

OPM(%) 87 90 92

NPM(%) 31 25 33

ROE(%) 10.7 10.1 13.2

ROCE(%) 8.6 8.8 9.0

P/BV(x) 3.19 2.12 2.52

P/E(x) 29.77 25.69 17.08

EV/EBDITA(x) 10.70 8.10 7.46

Key Data:Sector Power

Face Value Rs.10.00

52 wk. High/Low (Rs.) 113.75/51.75

Volume (2 wk. Avg.) 988722

BSE Code 532898

SYNOPSISWe initiate the coverage of PGCIL and set a target

price of Rs.114.00 for long term.

PGCIL, a NAVRATNA PSU, is Indias principalelectric transmission company.

PGCIL is planning to invest a sum of Rs.550 billionover the next five years for strengthening the

national grid, including inter-regional transmission

system strengthening schemes.

The company is planning to increase the inter-regional power transfer capacity of the grid to

more than 37,000MW by 2012.

The company is eyeing opportunities in West Asiaand the African markets

Currently in the process of setting-up a newsubsidiary to handle the power management

functions of the company.

The topline and bottomline of the company isexpected to grow at a CAGR of 25% and 23%

respectively over FY07 to FY10E.

Share Holding Pattern:V.S.R. SastryVice President

Equity Research Desk

91-22-25276077

[email protected]

Dr. V.V.L.N. Sastry Ph.D.

Chief Research Officer

[email protected]


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Table of Content

Content Page No.

1. Investment Highlights 032.

Company Profile 08

3. Peer Group Comparison 324. Key Concerns 325. Financials 336. Charts & Graph 357. Outlook and Conclusion 368. Industry Overview 37


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Investment Highlights

Result UpdatesThe topline of the company increased 36% YoY to Rs.14774.40mn from Rs.10857.70mn of the

same period of the last year while bottomline has slipped into red by 3.1% YoY and stood at

Rs.3723.50mn. EPS of the company for the quarter stood at Rs.0.88.

Expenditure of the company for the quarter stood at Rs.2504.90mn from

Rs.1976.40mn.i.e, an increase of nearly 27%YoY. Staff cost for the quarter accounts for

10% of the revenue for the quarter and O&M expenditure accounts 7% of the revenue

of the quarter.

Interest expenditure increased 2.15times in comparison with the corresponding quarter

of the previous year and stood at Rs.6002.60mn. OPM and NPM for the quarter declined

to 88.81% and 25.2% respectively from 91.74% and 35.39% respectively.


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Revenue from transmission segment contributes 89% of the total revenue of thequarter and that from consultancy, ULDC/RLDC and telecom contributes 4%,4% and 3%

respectively. Details of segment-wise revenue are given below:

Segment Dec.08 Dec.07 % Chg.

Transmission 13954.2 10459.1 33%

Consultancy 589.6 627.1 -6%

ULDC/RLDC 664.5 457.7 45%

Telecom 427.6 309.7 38%

National Load Dispatch Centre (NLDC)The company has dedicated its National Load Dispatch Centre (NLDC) to the nation in

Feb. 2009. The NLDC is connected with 5 RLDCs which in turn are connected to 31 state

load dispatch centres. NLDC at Delhi is having a back-up at ERLDC, Kolkata. The set-up

cost for this is Rs.45.0cr.


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DividendThe board has proposed interim dividend at 5% on equity share capital of the company

for FY09. This means that Rs.0.50 per equity share of Rs.10.00 each.

Establishment of New Transmission Lines

The company will invest Rs.7032cr. over next four years to establish transmission lines

to supply power generated from Sasan UMPP to the electricity grid. Sasan UMPP,

owned by Reliance Power, is having a generation capacity of 4000MW of electricity.

These transmission lines will supply power to Madhya Pradesh, Punjab, Delhi, Uttar

Pradesh, Rajasthan, Haryana and Uttarakhand. This UMPP is expected to start

commercial operation by 2012.

Power grid has plans to invest Rs.55000cr. in establishing transmission lines during the

11th

five year plan. The company has invested Rs.6615cr. in the first year of the plan and

has a target to invest Rs.8000cr. in the current fiscal.

External FundingPGCIL has signed an agreement with World Bank (WB) for USD 400mn. The loan will be

utilized to fund power grids transmission project during the eleventh plan. The

company has targeted to invest Rs.55000cr. on projects during the eleventh five year

plan.

Accomplishment of Transmission LineThe company has completed 220km. transmission line in Afghanistan. The project has

been funded by Indian Govt. under the assistance programme to Afghanistan.

Formation of New SubsidiaryThe company is in the process of forming a new subsidiary to take care of the power

management functions of the company. The new subsidiary is expected to form by

March 2009.


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Joint Venture With NTPCPGCIL and NTPC have recently signed a deal to form a short-circuit testing joint venture.

Rs. 94.36 billion Investment PlansThe company has approved an investment of Rs.94.36 billion in the current fiscal yearfor its various projects. The investment constitutes common scheme and network for all

the four regions at an estimated cost of Rs.70.75billion. The company has also approved

for supplementary transmission systems associated with Damodar Valley Corporation

and Maithon Right Bank Projects at an estimated cost of Rs.23.61billion.

New Joint Venture

PGCIL and Teesta Urja has joined together to form a new company called Teesta Valley

Power Transmission. PGCIL & Teesta Urja have 26% and 74% stake respectively in the

joint venture. The project is likely to bear an estimated cost of Rs 7.08 billion, including

construction of 400 kv D/C Teesta - Mangan Transmission line (approx. length 10 kms)

and 400 kv D/C Mangan-Kishanganj Transmission Line (Approx. length 180 kms). The

project is planned for completion by September, 2011. The new company will develop

associated transmission system for evacuation of power from 1200 mw Teesta-III hydro

electric project (HEP) being developed in Sikkim by Teesta Urja. The project will be

based on build, own & operate (BOO) basis and will also provide transmission capacity

upto Kishanganj s/s of Power Grid to various private HEPs being developed in North

Sikkim.

Highlights of FY08 PerformanceDuring FY08, PGCIL commissioned transmission projects worth about Rs.6,000crores

thereby adding transmission network of 7350 circuit kms, 9 EHV Ac sub-stations and

transformation capacity of more than 13,700kVA.

Major projects commissioned during the year include, Kahalgaon-II (phase-I)

Transmission System (Rs.2830 crore), Vindhyachal-III Transmission System (Rs.690crore), 400 kV D/C Bina-Nagda Transmission Line ( Rs.388 crore), System Strengthening

III of Southern Region (Rs.285 crore). These additions to Power Grids network have

helped in improving power supply situation in various regional grids, facilitating

enhanced inter-regional power transfer capacity and reliability of the system.


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In FY08, PGCIL is operating around 67,000 ckt. Kms. Of transmission lines along with 111

sub-stations with transportation capacity of more than 73,000 MVA. With the use of

state-of-the-art preventive maintenance techniques, average availability of transmission

systems during the year 2007-08 was maintained at 99.65%. PGCIL continues to wheel

about 45% of total power generated in the country through its transmission network.

In FY08, about 43,000MUs of inter-regional energy transfer was facilitated, an increase

of about 13% compared to the previous year (about 38,000MU). Growth of inter-

regional power exchange has helped in meeting more demand in energy deficit regions

besides achieving overall economy.

Under open access, more than 9,560 transactions were approved during the year

involving 30,000MUs of energy compared to 5787 transactions and 23,000MUs of

energy in FY07, increase of 30%. Energy worth about Rs.10,100 cr. transacted throughUI mechanism compared to Rs.6,814cr. in FY08, an increase of 48%.

During FY08, the company entered the capital market with an IPO of 573.9million equity

shares of Rs.10 each. Overall, the issue was subscribed 64.50times; the institutional

investors segment about 116 times and HNI 40 times.

During FY08, PGCIL secured 34 nos. of new consultancy assignment with project cost of

about Rs.1,840cr.l Company has realized consultancy fee of about Rs.235 cr. from its

ongoing consultancy projects during the year.

From its telecommunication business, PGCIL received revenue of Rs. 125 Crore during

FY 2007-08, a growth of 62% over last year (Rs. 77 Crore). Today, PGCIL is serving major

telecom players in mobile & NLDO segment and is also planning to tap customers in

entertainment and broadcasting industry.

The net sales of the company for FY08, increased by 15.2% at Rs.46,148.20million. The

net profit of the company stood at Rs.14,484.70 mn. i.e., 15.44% increased compared to

the previous year. Earning Per Share (EPS) of the company stood at Rs.3.60 for FY08.


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The expenditure of the company stood at Rs.10,518.00million, interest at Rs.13,395.50

million and depreciation at Rs.9596.50mn. During FY08 the company has paid

Rs.2820.00mn as tax.

Company Profile

Power Grid Corporation of India Limited (PGCIL) was incorporated on October 23, 1989 with an

authorized share capital of Rs.5,000 crore as a public limited company, wholly owned by the

Government of India. PGCIL started functioning on management basis with effect from August

and took over transmission assets from NTPC, NHPC, NEEPCO and other central / Joint sector

organizations during 1992-93 in a phased manner. In addition to this, it is also took over the

operation of existing Regional Load Despatch Centers from CEA, in a phased manner, which

have been upgraded with State-of-the art Unified Load Despatch and Communication (ULDC)

schemes. According to its mandate, the Corporation, apart from providing transmission systemfor evacuation of central sector power, is also responsible for 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.

Based on its performance PGCIL was recognized as a Mini-ratna company by the Government of

India in October 1998. PGCIL, notified as a Central Transmission Utility of the country, is playing

a major role in Indian Power Sector and is also providing Open Access on its inter-state

transmission system. In 2008, the Government of India has declared the company as a

NAVRATNA PSE.

PGCIL, as ISO 9001 certified company, has acquired in-house expertise at par with global

standards in the field of planning, Engineering, Load Despatch and Communication,

Telecommunication, Contracting, Financial and Project Management. PGCIL is executing various

consultancy assignments in these areas as a part of its Business Development Activity.

PGCILs first International Consultancy Contract with Bhutan Telecom for establishment of

OPGW system on turnkey basis in the Royal Kingdom of Bhutan was successfully completed on

schedule. As a result of on-going initiatives being undertaken in PGCIL to make its presence felt

internationally in dealing with all facets of power system, PGCIL in association with M/s Sigma

Enterprises , a Dubai based Co., has secured the prestigious International Consultancy

assignment against stiff competition from Dubai Electricity & Water Authority (DEWA) for

providing engineering consultancy services for 2x400kV GIS sub-stations and associated

Overhead Transmission Lines. The scope of the consultancy includes all activities like design,


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planning, engineering, EIA studies, preparation of tender documents, evaluation, assistance in

pre-award discussions & negotiations, preparation of award letters, inspection and witnessing

of type testing, site supervision, project management, payment certification and resolution of

corridor and outage requirement and co-ordinate for approval from various concerned

authorities in Dubai. The company has bagged two consultancy assignments in Afghanistan

against stiff competition from other international consultants.

PGCIL, in its efforts to ensure delivery of quality power and to maintain grid discipline,

implemented Availability Based Tariff (ABT) in all the five regions. This has stabilized the

frequency to prescribed banned as par IEGC i.e. 49.0Hz to 50.5Hz for large percentage of time

in all the five regions. ABT has also encouraged inter-state and inter-regional bilateral trading

resulting in meeting higher demand from the existing sources. Merit order operation of

generating units is gaining importance and many states are utilizing this facility to utilize the

system commercially. There is overall improvement in Grid stability and partial blackouts have

been drastically reduced, while it has been possible to save the grid from total blackouts.

PGCIL has envisaged establishment of an integrated National Grid in the country by the year

2012 with an inter-regional power transfer capacity of over 37,000MW. A perspective

transmission plan has been evolved for strengthening the regional grids with ultimate objective

of establishment of strong and vibrant National Grid to support the generation capacity

addition program of about 78,000MW during XI pan.

Efforts made by PGCIL in modernizing the Regional Load Despatch Centers (RLDCs),

implementation of Availability Based Tariff (ABT), power transfer through inter-regional links

and effective Operation & Maintenance measures using State-of-the-Art technologies have led

to overall improvement in power supply position in all parts of the country. It is demonstratedby the fact that there has been no major grid disturbance during in any part of the country in

the last 5 years.

PGCIL has taken lead role and making contributions in Govt. of Indias nation building schemes

of Accelerated Power Development and Reforms Programme (APDRP) and Rajiv Gandhi

Vidyutikaran Yojana (RGGVY) towards brining qualitative improvement in the distribution

sector.

Under APDRP, PGCIL is acting as Advisor-cum-Consultant (AcC) to lend its managerial and

technical expertise for improvement of distribution system in 177 distribution circles / towns/schemes spread over 18 states costing about Rs.6,626 crore. 81% of these schemes have been

commissioned and the remaining sanctioned schemes are expected to be completed by March

2009. PGCIL is also implementing some of these schemes on deposit work basis under bilateral


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arrangement in State of Bihar, Goa, Meghalaya, Uttar Pradesh, Tripura and Gujarat at a cost

about Rs.1,100 crore, 90% of which has been completed.

Under RGGVY, PGCIL has been assigned the job for execution of rural electrification in 68

districts covering 87,300 villages at an estimated cost about Rs,9,400 crore. Cumulatively, PGCIL

has electrifies 22,082 villages including 3 lac. BPL connections. During FY 2007-08, more than

5,000 nos. of villages were electrified by PGCIL.

Subsidiaries

The company is having two subsidiaries and none of them is neither a listed company nor a sick

unit.

1. Parbati Koldam Transmission Company Limited (PKTCL).PKTCL was originally incorporated as Bina Dehgam Transmission Company Limited

(BDTCL) on September 2, 2002 with the objective of establishing the 400KV D/C Bina-

Nagda and 400KV D/C Nagda-Dehgam transmission lines. BDTCL was envisaged to be

transferred to an Independent Private Transmission Company (IPTC). The proposed

IPTC failed to get the license from the CERC. Hence, the Board of Directors decided that

BDTCL should be engaged in the implementation of the Parbati and Koldam

transmission systems through the joint venture route. The name of the company was

subsequently changed to Parbati Koldam Transmission Company Limited with effect

from December 30, 2005.

2. Byrnihat Transmission Company Limited (BTCL)

BTCL was incorporated on March 23, 2006. BTCL has been formed with the objective of

undertaking the implementation of the 220 KV D/C Misa Byrnihat transmission line.


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Joint Ventures

PGCIL is having the following joint ventures with different companies.

1. Powerlinks Transmission Limited (PTL)This is a joint venture between PGCIL(49%) and Tata Power (51%). PGCIL is responsible

for implementing the entire transmission system associated with the Tala Hydro-Electric

Project being developed at Bhutan. The company has entered into a joint venture

arrangement with The Tata Power Company Limited (Tata Power) for establishing

specific transmission lines associated with the Tala Hydro-Electric Power Project. (Tala

JV Transmission Project) on a BOOT basis. The joint venture company PTL has been

incorporated pursuant to this joint venture agreement for the purpose of implementing

the Tala JV Transmission Project.

2. Torrent Power Transmission Private Limited (TPTPL)This is the joint venture between PGCIL (26%) and Torrent Power Limited (74%). Torrent

Power Limited (Torrent) is implementing a power generation project at Akhakhol in

Surat, Gujarat. The company has entered into a joint venture arrangement with Torrent

for establishing associated transmission lines for the aforesaid generation unit (Sugen

Transmission Project). The joint venture company TPTPL has been incorporated

pursuant to this joint venture agreement for the purpose of implementing the Sugen

Transmission Project on a BOO basis. The joint venture with Torrent Power Limited

consists of 496 circuit kilometers of transmission line and one sub-station with a

capacity of 1,100 MW and is expected to be completed by Fiscal 2010.

3. Jaypee Powergrid Limited (JPL)This is the joint venture between PGCIL (20.63%) and Jaiprakash Hydro-Power Limited

(79.37%). Jaypee Karcham Hydro Corporation Limited (JKHCL) is setting up a 1,000

MW power generation project at Karcham in Kinnaur, Himachal Pradesh. PGCIL have

entered into a joint venture arrangement with Jaiprakash Hydro-Power Limited

(Jaiprakash) for establishing associated transmission lines for the aforesaid generation

unit (Karcham Transmission Project) on a BOO basis. The joint venture company JPLhas been incorporated pursuant to this joint venture agreement for the purpose of

implementing the Karcham Transmission Project. The joint venture with Jaypee


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Powergrid Limited consists of 468 circuit kilometres of transmission line with a capacity

of 1,000 MW and is expected to be completed by Fiscal 2011.

4. Power Grid- Reliance Energy Joint VentureThe Company has entered into a Joint Venture with Reliance Energy Ltd. The Joint

Venture Company has in its scope execution of about 300 kms. Transmission Lines from

Parbati to Koldam and Koldam to Ludhiana. The Company will have a 26% equity holding

in the Joint Venture Company and Reliance Energy Ltd will have 74% equity holding. The

above lines are part of elements of the Transmission system associated with Generation

Projects viz. Parbati-II HEP and Koldam HEP. NHPC is establishing 800MW Parbati-II HER

and NTPC is establishing 800MW Koldam HEP in the state of Himachal Pradesh.

5. POWERGRID IL&FS Transmission Pvt LtdPower Grid Corporation of India and Infrastructure Leasing & Financial Services(IL&FS)

entered into a joint venture to form the new joint venture (JV) company named`POWERGRID IL&FS Transmission Pvt Ltd`. Both, the company and IL&FS will have 50%

stake in the company. The main objective of the company is to undertake activities of

project development of intra transmission and sub-transmission works for state power

utilities, under Public-Private-Partnership (PPP) route within India and abroad including

Interconnection with neighbouring countries subject to bilateral agreement between

the countries. This JV will facilitate project preparation and development work for State

Transmission Units (STUs) and will act as a bid process coordinator (BPC) of STUs and

manage the bidding process for selection of the private Implementing agencies. The

joint venture company also has objective to undertake transmission projects in theneighbouring countries.

Company Business

The core business of the company is electric power. The company own and operate a large

network of transmission lines and infrastructure that constitutes most of Indias interstate and

inter-regional electric power transmission system and carries electric power across India.

The Indian power system has historically been divided into five regions for the planning andoperation of electricity generation, transmission and distribution, namely the Northern,

Southern, Eastern, Western and Northeastern Regions. In general, the Eastern and

Northeastern Regions generate more electricity than they consume and the other regions


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generate less electricity than they need. As a result, one of the overriding tasks of the

companys transmission business is to move electricity from the high generation regions to high

consumption regions.

As the owner and operator of most of the Inter State Transmission System (ISTS), the company

expands system progressively, connect new customers to the system and operate and maintain

the system.

Operating and Maintaining the ISTS

PGCIL carry out the day-to-day operations of the ISTS. The company takes continuous actions

regarding operation and maintenance to seek to ensure compliance with prescribed standards

as well as to achieve high availability of the system for uninterrupted power supply to

customers.

Maintenance of the ISTS involves the routine inspection and overhaul of transmission system

assets and the replacement of components. Condition assessment and monitoring techniques

are used to help optimise maintenance intervals and reduce system outages. PGCIL have

developed flexible working practices to take advantage of the system conditions for day-to-day

maintenance work and also modify the annual maintenance programme according to

generation maintenance schedules. The company also uses techniques such as live-line working

to enable certain types of maintenance to be carried out without taking transmission lines out

of service. Emergency restoration systems (ERSs) are used for early restoration in case of

natural disasters and other exigencies.

Renewal of the ISTS involves the refurbishment or replacement of transmission system

components. The company seeks to maintain inventories at optimal levels for system

requirements. PGCIL plan the renewal program through assessments of plant and equipment

conditions, reliability and life expectancy. Part of the ISTS was constructed in the 1980s and

1990s and consists principally of major assets with technical life of between 25 and 35 years.

The combination of these factors is taken into account in planning the renewal program.

Other Roles in Transmission

As the CTU, PGCIL participate in the following activities:

Undertaking the transmission of electricity through the ISTS; Planning and coordination relating to the ISTS, including coordination among state

transmission utilities, the GoI, state governments, generating companies, the regional


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power committees, the CEA, transmission licensees and any other parties deemed

appropriate by the GoI;

Ensuring development of an efficient, coordinated and economical interstatetransmission lines for the smooth flow of electricity from generating stations to load

centres; and

Providing non-discriminatory open access to the transmission system for use by anylicensee, generating company or consumer as and when such open access is required by

the applicable regulatory commissions in the various Indian states.

Open Access

The Electricity Act, 2003, requires transmission utilities to provide customers with non-

discriminatory open access to capacity, as available, in the utilities transmission networks.

CERC has issued regulations in respect of open access and instructed us, as the CTU, to

formulate a detailed procedure to facilitate the open access of the ISTS. In line with CERC open

access regulations, PGCIL provide the following two types of services to open access customers:

i. Short Term Open Access:Under this category of service, access is provided for a maximum period of three

months. Access is available on one of the following bases: advanced reservation (three

months in advance); first-come-first-served; day ahead; or same-day. The nodal RLDC is

entrusted with the responsibility of short term open access application processing and

scheduling, while making sure that the provision of short term open access applied for

will not affect the security of the grid. The company charge for short term open access

at rates equal to 25% of its applicable regular fixed charges for regional access and 50%

of its applicable regular fixed charges for inter-regional access. The company retains

25% of the short term open access charge and pass 75% of the charge on to its regular

customers in the form of rebate adjustments to their bills. However, CERC is presently

considering the removal of the short term open access charges.

ii. Long Term Open Access.Under this category of service, open access services are made available to customers

located anywhere in the country for a period of not less than 25 years. Any required


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augmentation of the transmission system must be done in consultation with PGCIL. The

customer is also required to enter into agreements with generators and other relevant

utilities.

Completed Projects

The following are some of the large or otherwise more notable completed projects of the

company:

Project Project Cost as per

tariff petition

submitted to CERC

(in Rs. Million)

Date of commissioning

System Strengthening Scheme in EasternRegion (Formerly part of Tala Suppl.)

3,130 February, 2007

Northern Region System Strengthening

Scheme-II

2,038 December,2006

Dulhasti Combined Transmission System 4,673 October, 2006

East-North Interconnection and Northern

Region Transmission System associated

with Tala HEP

5,220 August, 2006

Tehri Transmission System 8,610 May, 2006

Tala- Silliguri Transmission System 2,616 May,2006


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Rihand-II Transmission System 8,359 October, 2005

Tarapur 3&4 Transmission System 2,510 August, 2005

ULDC- West Region 1,574 August, 2005

Madurai-Thiruvananthapuram

Transmission System

2,478 July, 2005

ULDC- Eastern Region 2,835 June, 2005

Raipur- Chandrapur Transmission System 2,478 May, 2005

Augmentation of Capacity of

GajuwakaHVDC B/B Project

6,186 February, 2005

ULDC-Northeastern Region 1,907 June, 2003

East- South Interconnector ( Talcher-II

Trans. System)

30,007 April, 2003

System Strengthening of Southern Region 3,450 February 2003

East- West Inter-regional Links ( Raipur- 1,985 January 2003


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Rourkela)

Ongoing Projects

i. Transmission Lines

Sl. No. Name of the Trans line Length

(CKM)

GoI /

BoD

Appl.

Cost

(Appd.)

/

Ant.

Progress of Construction Completion Tgt.

Locs.

(no.)

Stubs

Setting

(no.)

TowerE

rect.

(no.)

Strng.(

ckm)

Sch. Ant./ Ac

1.0 INTER REGIONAL SYSTEMS

1.1 Kahalgaon Stage-II (Phase-II)

Trans. System

(400KV D/C Ranchi - Sipat

line)

816 Jan'05 464.02 1123 1088 1082 738 Oct'07 Sep'08

1.2 Trans. System associated

with Barh Gen. Proj. (3x660MW)

2447 Dec'05 3779.5 3707 2310 1927 648 Sep'09 Sep'09


with North-West Trans.

Corridor Strengthening

Scheme

600 Jan'06 483.10 987 700 425 168 Jan'09 Jan'09

1.4 East-West Trans. Corridor

Strengthening Scheme

1230 Jun'06 803.70 1614 108 Jun'09 Mar'10


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2.0 NORTHERN REGION

2.1 Northern Region System

Strengthening Scheme - I

(Balance portion)

91 Jan'04 271.80 252 252 252 91 July'07 May'0


Strengthening Scheme - III

180 Jun'04 230.52 404 404 404 180 Mar'08 Mar'08

2.3 System Strengthening

Scheme in Uttranchal

50 Jun'04 76.42 81 73 64 8 Mar'07 Dec'09

2.4 RAPP 5 & 6 Trans. System. 448 Jun'05 499.45 687 612 588 407 Mar'08 Dec'08

2.5 Koteswar Trans. System 36 Jun'05 260.34 84 73 27 Jun'08 Sep'09

2.6 Sewa - II Trans. System 209 Jul'05 98.47 345 330 290 150 May'0

8

July'08

2.7 Koldam HEP Trans. System 396 Sep'05 464.91 502 115 69 18 Sep'08 Sep'08


with PARBATI-II HEP. (to be

executed under JV)

129 Dec'05 358.42 323 Dec'08 Sep'10

2.9 System Strengthening

Scheme in Roorkee

(LILO of Rishikesh -

Muzaffarnagar 400KV S/C

line at Roorkee)

3 Dec'05 109.95 12 May'0

9

May'0


Strengthening Scheme - V

1222 Jun'06 721.25 1726 866 539 284 Jun'09 Jun'09

2.11 Trans. System Associated 543 Jul'06 557.24 Jan'10 Jan'10


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with PARBATI-III HEP

2.12 URI - II HEP Trans. System 114 Oct'06 238.25 320 32 May'1

1

May'1

2.13 System Strengthening in

South-Western part of

Northern Grid (Part-A)

Scheme

496 Oct'06 381.28 682 429 274 118 Apr'09 Apr'09

2.14 System Strengthening in

South-Western part of

Northern Grid (Part-B)

Scheme

187 Oct'06 150.26 513 243 169 12 Oct'09 Oct'09


Strengthening Scheme - VIII

68 Oct'06 220.69 179 11 Dec'09 Dec'09


Strengthening Scheme - VI

54 Jan'07 186.95 82 10 July'09 July'09

2.17 CHAMERA - III HEP

Transmission System

343 Sep'07

/

Apr'08

559.47 July'11 July'11


Strengthening Scheme - X

510 Dec'07 408.36 690 3 Dec'10 Dec'10


Strengthening Scheme - XI

320 Dec'07 417.76 Dec'10 Dec'10


Strengthening Scheme - XII

104 Feb'08 261.55 Nov'10 Nov'10

3.0 WESTERN REGION

3.1 SIPAT Trans. System Stage - I

(Balance Portion )

354 Dec'03 1672.9

8

958 958 958 354 Feb'07 Apr'08

3.2 Western Region


298 Jul'04 199.21 410 410 410 298 Nov'07 Jun'08


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(400KV D/C Sipat - Raipur )

3.3 Sipat - II Supplementary

Trans. System

1123 Jun'05 813.67 1822 1473 1027 229 Jun'08 Dec'08

3.4 Western Region

Strengthening Scheme - III

65 Feb'06 75.65 125 125 119 61 Aug'08 Jun'08

3.5 Western Region

Strengthening Scheme - II

7075 Jul'06 5221.2

3

(3581.4

0-PG &

1639.8

3 JV)

2551 602 148 July'10 July'10


with Gandhar-II (GBPP)

850 Aug'06 653.21

3.7 Western Region

Strengthening Scheme - V

435 Dec'07 477.69 648 8 Sep'10 Sep'10

3.8 Western Region

Strengthening Scheme - VI

112 Feb'08 340.72 Nov'10 Nov'10

4.0 SOUTHERN REGION

4.1 Kaiga 3 & 4 Trans. System 759 Mar'05 588.25 1133 836 790 479 Dec'07

4.2 Neyveli TS - II Trans. System 830 Jan'05 691.83 1218 1165 1006 501 Dec'07 Aug'09

4.3 Kundankulam - APP Trans.

System

1844 May'05 1779.2

9

2263 1618 1542 1059 Nov'08 Nov'08

4.4 System Strengthening -VII of

SR

248 Apr'05 279.30 346 221 121 18 July'09 July'09

5.0 EASTERN REGION


21/42


5.1 Trans. System Associated

with TEESTA -V HEP

(400KV D/C Teesta-V HEP -

Siliguri)

226 Jan'04 208.75 341 341 341 226 May'0

8

May'0

5.2 Eastern Region


1142 Oct'06 975.96 1593 675 86 Oct'09 Oct'09

5.3 Eastern Region

Strengthening Scheme - II

146 Dec'07 227.52 365 Jun'10 Jun'10

5.4 Transmission System for

Start - up Power to DVC and

Maithon Right Bank Gen.

Project.

320 April'08 290.49 698 April'1

0

April'1

6.0 NORTH EASTERN REGION

6.1 NER System Strengthening

Scheme - I (Missing link

Trans. System in NER)

14 May'06 58.93 43 Sep.'0

9

Sep.'0

6.1.1 132KV S/C Kopli - Khandong 12 40 Sep.'0

9

Sep.'0

6.1.2 LILO of 132KV Dimapur -

Kohima at Dimapur (PG)

2 3 Sep.'0

9

Sep.'0


22/42


ii. National Load Dispatch & Communication System

Sl.

No.

Name of the

Scheme

GoI /

BoD

Appl.

Cost

(Apprvd.)

Ant.

Status of Construction Completion Tgt.

Schedule Ant./Act

1.0 National Load

Despatch

Communication

May'05 44.96 Engg. in progress in EMS/SCADA

packages & Telecom package. FAT

completed in Telecom packageof

NR link. Civil works under progress.

Equipment supplied & erection

under progress. SAT commenced.

Data base updation under progress.

May'08 July'08

EMS/SCADA

Package

Telecom

Equipment

Project Implementation

PGCILs project implementation capabilities encompass all facets of a project development,

from conceptualization to construction to the commissioning of a project, at which point it can

begin operation.

The company have adopted an integrated project management and control system (IPMCS)

for the planning, monitoring and execution of projects. Under the project management system,

various project implementation activities are broken down with identified key milestones to

enable the monitoring and control of critical paths of implementation. Project procurement is

divided into well defined contracts to be awarded through competitive bidding. Following the

award of contracts, integrated plans govern the implementation of the project, including

control of the quality of materials and work during construction.

i. Planning & ConceptualizationOn an ongoing basis, PGCIL interact with various departments of the GoI and with

generating companies, traders and the state utilities, in order to plan and evaluate

implementation of new transmission projects so as to ensure that the goals of


23/42


adequacy, reliability and security of the electric power system are achieved. Among

many other factors, the companys planning efforts take into account possible future

transmission configurations for interconnected areas, optimal utilisation of rights of

way, grid operational constraints, environmental and social effects and cost

comparisons. Based on the ongoing planning, the company is able to formulate views in

respect of the appropriateness and feasibility of projects that have been conceived.

The conceptualisation of new power transmission projects is finalised by PGCIL based on

overall transmission system requirements, in consultation with the CEA and other

interested parties, including generators, intended beneficiaries, state transmission

utilities (STUs) and traders. Before the finalization of any new transmission project,

the beneficiaries are identified and targeted, and the generating capacity that such

project will service is allocated among the beneficiaries in accordance with the

requirements and availability of the region. The entire tariff for the transmission system

is shared by the beneficiaries. The tariff, which is set according to CERC regulations, is

recovered from the beneficiaries irrespective of the actual transmission of power.

PGCILs transmission projects fall into the following broad categories:

Generation-linked transmission projects, to facilitate the transfer of power froma specific new interstate or inter-regional generation project to its intended

beneficiaries;

Grid-strengthening projects, to strengthen power transfer capacity and add toreliability and security; and Inter-regional transmission projects, to strengthen power transfer capacity

between regions and allow for inter-regional power exchanges.

The types of projects identified above facilitate the development of integrated regional

power grids and the national grid. Upon the finalisation of a scheme, a Feasibility cum

Detailed Project Report (FR) is prepared. This report addresses the justification for the

project, the scope of work, cost estimates, pricing, financing and other matters, and is

prepared for the consideration of the competent approving authorities.


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ii. Design & EngineeringPGCIL have in-house competency in the design and engineering of EHV systems up to

800 kV AC, and HVDC systems up to 500 kv. and also have experience in the design and

engineering of transmission lines and substations for different wind zones, climatic

conditions, seismic zones, terrains, seashores and tough hilly terrain. The company

possesses advanced software tools for electric system simulation studies and for thedesign of various kinds of towers, substation structures and foundations, including in

regard to the electrical line parameters of transmission line and sub-station design,

insulation co-ordination, grounding and other matters.

PGCIL is also finalizing, in association with a number of renowned international

consultants, the design and technical specifications for an 800 kV HVDC system, which

to the companys knowledge has so far not been implemented anywhere in the world.

iii. Tendering process and award of contractsProcurement requirements for a project are divided into a number of well defined

contracts and are awarded on a competitive bidding basis. In each case, qualifying

requirements for bidders are stipulated and the bids are evaluated by a tender

committee. Award recommendations are put up for approval to the appropriate

authorities consistent with the applicable delegation of powers in the Company. The

highest authority for the approval of any award recommendation is The Board of

Directors. In the case of contracts funded by multilateral agencies, the awardrecommendations are also sent to them to confirm that they have no objection.

The tendering process is subject to guidelines of the GoI; applicable guidelines of

concerned multilateral funding agencies such as the World Bank and the Asian

Development Bank that are financing the project; guidelines or similar terms set out in

any applicable loan agreement; and PGCILs own Works & Procurement Policy and

Procedures (WPPP), which were established to strengthen transparency.

iv. Detailed engineeringAfter contracts are awarded, detailed engineering is carried out as per the tender

specifications, site conditions and applicable domestic and international standards and


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practices. Drawings and related documents are either generated in-house or prepared

and submitted by the contractor. These are checked and approved to ensure

compliance to the stipulated technical specifications and requirements and the site

condition before the project is taken up for construction. Only type-tested equipment

conforming to technical requirements and applicable national and international

standards are put into service as part of the companys transmission line and substation

infrastructure.

Over the years, PGCIL have standardized most of its designs and technical specifications

to save time on detailed engineering in respect of items which are of a repetitive nature.

v. Quality assurance and inspectionIn order to ensure the quality implementation of various projects, PGCIL have adopted a

total project quality assurance and inspection concept. The company have developed

and implemented systems and procedures aligned to the requirements of ISO-

9001:2000 (Quality Management Systems), ISO14001:2004 (Environment ManagementSystems) and OHSAS 18001:1999 (Occupational Health and Safety Management

Systems). PGCIL have been certified for compliance to these standards and

specifications by international accredited bodies.

The company specifies quality requirements in the technical specifications for projects,

and vendors and sub-vendors are selected based on stipulated qualifying and technical

requirements. Goods and equipment are manufactured as per the agreed quality plan,

and there are check points to confirm that technical requirements are being met at

different stages of manufacturing. The process is also monitored for quality assurance

during manufacturing. Major components and raw materials are sourced from approved

sub-vendors of acceptable quality. PGCIL also carry out quality surveillance and process

inspection periodically at the manufacturing facilities of vendors. The final product is

tested according to national and international standards before it is dispatched to the

project site for installation. The company also implement agreed field quality plans to

ensure quality during installation and the testing and commissioning of goods and

materials at the site. PGCIL have inspection offices around the country so that it can

make timely inspections and have also implemented a web-based inspection

management system for the total inspection process.


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vi. Project monitoringFor the purpose of project implementation as well as operation and maintenance, the

companys operations are divided on a regional basis. While the awarding of major

contracts is done from the corporate headquarters, post-award contract management is

done by the regional offices. A centralised Monitoring Group, located at the corporate

and regional headquarters, monitors the implementation of projects and keepsmanagement informed about progress and critical areas requiring their 0intervention.

Grid Management and Load Despatch Function

A crucial aspect of the operation of an electric power system is the management of load

despatch in real time with reliability and security on an economical basis. PGCIL have

modernised the existing five RLDCs and state load despatch centres and their communication

networks, down to the level of individual substations. The company undertook and completedthis work under the ULDC Project. The company is currently establishing a National Load

Despatch Centre (NLDC), which it expect to complete in 2008.

Based on the declared capacity of interstate generating stations and the entitlements of states/

beneficiaries, daily generation schedules are prepared. Deviations from these schedules by

either generators or customers attract unscheduled interchange (UI) charges.

In certain circumstances, including in the case of unscheduled demand or unscheduled supply,

there can be mismatches of demand and supply of electric power across the system. In such

circumstances, the ISTS may be put under strain, and the company, acting as the load despatch

manager, may instruct generators to curtail their generation or load centres to refrain from

drawing the power they are seeking to draw, notwithstanding their regular contract

arrangements.

Role of PGCIL in Distribution and Rural Electrification

In general, distribution refers to the movement of electric power after it leaves transmissionand moves downstream towards consumers. The electric power distribution system in many

parts of India is in need of modernisation, capacity expansion and sectoral reform. The GoI has

taken a number of initiatives to improve electric power distribution in general and rural


27/42


electrification in particular. One of these is known as the APDRP and another is known as the

RGGVY.

Under the APDRP, PGCIL have been appointed as an Advisor-cum-Consultant (AcC), and in

that role is consulting on and monitoring the development of 178 electricity distribution

schemes spread over 18 states, covering urban and semi-urban areas. PGCIL is alsoimplementing distribution improvement schemes in seven of those states, namely Bihar, Goa,

Gujarat, Meghalaya, Uttar Pradesh, Tripura and Mizoram. The company implements these

schemes by following a process that includes design, engineering, the awarding of contracts,

inspection and monitoring.

Under the RGGVY, PGCIL have entered into agreements to implement rural electrification

projects on behalf of SPUs in nine states, namely Bihar, Uttar Pradesh, West Bengal, Gujarat,

Rajasthan, Orissa, Chattisgarh, Assam and Tripura. These projects entail the progressive

provision of infrastructure for approximately 88,000 villages in 68 districts. Through December31, 2006 PGCIL have implemented the electrification of over 8,800 villages in the states of

Bihar, Uttar Pradesh, West Bengal, Gujarat and Rajasthan.

Other Businesses

i. ConsultancySince Fiscal 1995, the company has provided transmission-related consultancy advice to

approximately 90 clients in the context of over 200 assignments, both domestically and

internationally. These consultancy services include system engineering and feasibilitystudies, the review of load despatch and communications systems, contract and

procurement services, turnkey execution of transmission and sub-transmission projects,

supervision of rural electrification projects, the implementation of intrastate availability-

based tariffs and the preparation of distribution code.

PGCIL acquire its consultancy assignments through bidding processes, from marketing

and from potential clients approaching us. The company take on a wide variety of

assignments, so long as it believe that it have the in-house expertise needed to provide

assistance. The company staffs its assignments with teams of specialists from

throughout its organisation. Employees take on consulting duties that fit within the

areas of expertise they have developed by working in our core business. A central

department coordinates, facilitates and supports service delivery.


28/42


Domestic clients include almost all of the state power utilities in India. Among others,

PGIL have undertaken and are currently undertaking international consulting

assignments in Nepal, Bhutan and Afghanistan. The companys assignments tend to fall

into one of three broad categories:

Work under the APDRP and the RGGVY;The execution of transmission- and communication system-related projects on aturnkey basis; and

Technical consulting assignments for Indian utilities and utilities in other countries.The company seeks to leverage its experience in the power transmission sector to

continue to expand the consultancy operations in India and abroad.

The following table sets forth certain information in respect of a selection of our larger

or otherwise more notable consultancy assignments:

1. Completed

Assignment Client Year of Award

Turnkey execution of transmission line

from Indra Sagar to Indore

MPSEB FY04

Strengthening of sub-transmission

scheme in Bihar

BSEB FY04

Turnkey execution of 400kV DC Vishnu

Prayag-Muzaffarpur transmission line

UPPCL FY03

Augmentation of sub-transmission and Electricity Department FY03


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distribution system in Northern Goa of Goa

Turnkey execution of 220kV transmission

line and upgrading of Tivim substation.

Govt. of Goa FY02

Turnkey execution of 110/11 kV

substation and LILO line at

Pillaithiruvasal, Kairakal

Pondicherry FY00

2. Ongoing

Assignment Client Year of Award

Construction of NLDC at Thimpu in

Bhutan

Bhutan Power

Corporation

FY07

Strengthening of sub-transmission

scheme under Phase II, Part 1

MOP, Govt. of Bihar

and BSEB

FY07

Field survey and preparation of bid

documents for Turkmenistan

Sheberghan transmission line

AEAI/ USAID FY07

Establishment of SLDC at Rishikesh and

two sub-LDC at Kashipur and Dehradun

UPTCL FY06


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Turnkey execution of 400kV transmission

system

WBPDCL FY06

Accelerated electrification of villages and

rural householsa in Uttar Pradesh

Porvanchal Vidyut

Vitran

FY05

During FY08, PGCIL secured 34 nos. of new consultancy assignment with project cost of

about Rs.1,840cr.l Company has realized consultancy fee of about Rs.235 cr. from its

ongoing consultancy projects during the year.

ii. Telecommunication

PGCIL have diversified into the telecommunication business by creating a

telecommunication network principally using our overhead transmission infrastructure. Thecompany own and operate a fibre-optic cable network that as at March 31, 2007 consisted

of over 19,000 kilometres and connected over 60 Indian cities, including all major

metropolitan areas. The company has been leasing bandwidth on this network to more than

60 customers, including major telecom operators such as Bharat Sanchar Nigam

Limited,Videsh Sanchar Nigam Limited, Tata Teleservices Limited, Reliance Communications

Limited and Bharti Airtel Limited.

The companys telecommunication network benefits from the extensive geographic reach

of its power transmission network. PGCILs telecommunication network covers substantially

all the main territories of India. In addition, the company is currently one of the few

telecommunications network providers that have a presence in remote areas of India, such

as Jammu & Kashmir, Himachal Pradesh and the North Eastern region (Assam, Manipur,

Meghalaya, Nagaland and Tripura).

The total capital expenditure approved by the Cabinet Committee on Economic Affairs

(CCEA) for the establishment of our telecommunications network is Rs. 9,342.3 million.

Beyond this, further capital expenditure will be governed by market requirements.

PGCIL have been granted the Infrastructure Provider-I (IP-I) and Internet Service Provider

Category-A (ISP-A) licences. In July 2006 the company acquired a National Long Distance

(NLD) License, which increases its target market by enabling it to offer its services to non-

licensed service providers such as entities in the corporate, government and defence

sectors. Since then, the company has added such end-user customers as the Indian Army,


31/42


Indian Intelligence Bureau, Central Reserve Police Force, National Infomatics Centre and a

number of corporations, including Infosys Technologies Ltd. and Ericsson India Pvt. Ltd.

Under its NLD License, the company may participate further in the national long distance

business through tie-ups with other telecom service providers.

From its telecommunication business, PGCIL received revenue of Rs. 125 Crore during FY

2007-08, a growth of 62% over last year (Rs. 77 Crore). Today, PGCIL is serving majortelecom players in mobile & NLDO segment and is also planning to tap customers in

entertainment and broadcasting industry.

Research & Development

PGCIL is constantly striving to excel in its technological leadership which is essential for

sustainable business growth and to maintain competitive edge over others in national and

international market. The organization through its technological leadership is catering to

diverse geographical climate and terrain conditions utilizing existing transmission infrastructure

along with creating new transmission capacities in a cost effective manner. Towardstechnological advancement, PGCIL has established several fully automated remote controlled

400kV substations like Bhiwadi, Kolar, Gajuwaka, Chandrapur etc. Many more sub-stations are

being planned on similar lines with a view to optimize upon operational costs.

PGCIL has also introduced INVAR power conductors, which can sustain high temperature upto

2000c against the normal 85

0c. This can wheel electric power more than two times the normal

line. PGCIL also using Thyristor Controlled Series Compensation (TCSC) and uprating/upgrading

of lines etc. to enhance power carrying capacity of existing lines. Futher, in order to conserve

the precious Right of Way, width of 765 kV transmission towers has been reduced from usual

85 mtrs. To 64 mtrs. For the first time in the world. Further, at selected location the tower

height was raised to 75 mtrs., which makes it taller than the Quatab Minar, to save precious

forests and protect wildlife. PGCIL commissioned 400kV Gas Insulated Substation (GIS), first

time in the country at Maharani Bagh, New Delhi, which reduced 75% land requirement over

conventional EHV Air Insulated substation. Besides, 765kV Single Circuit Sipat-Seoni

transmission line was commissioned to evacuate bilk power from pit head power station at

Sipat, which is first time at 765 kV level, operating in the country.

PGCIL envisages established a Centre for Power Transmission Research and Application which

shall supplement the facilities of existing Research Institutions and provide opportunities forapplied research in power transmission sector. PGCIL has also constituted an advisory body

consisting of eminent experts from power utilities, research and academic institutions and

consultants from India as well as from Canada, USA and Brazil to facilitate adoption of latest


32/42


technologies for construction, monitoring and maintenance of transmission system suiting

Indian conditions.

Peer Group Comparison

Name of the

company

CMP

(As on, Feb.

26, 2009)

Market

Cap.

(Rs. Mn.)

EPS

(Rs.)

P/E

(x)

P/BV

(x)

Dividend(%)

Power grid 92.35 388686.50 3.44 27.00 2.88 5% (For FY09)

Tata Power 730.90 1522112.70 35.17 20.78 11.45 10% (For FY08)

NTPC 184.20 161812.30 9.01 20.44 0.51 9% (For FY09)

Neyveli Lignite 73.90 123982.70 6.47 11.42 1.37 10% (For FY08)

Key Concerns

A major part of the companys income derived from the transmission of powerto the State Power Utilities and many of them have a weak financial position.

Higher debt level.


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Financials12 Months Ended Profit & Loss Account (Standalone)

Description (Rs. Million) 31Mar.08A 31Mar.09 E 31Mar10E

12m 12m 12m

Net Sales 46,148.20 59,843.44 70,016.82

Other Income 4,667.10 3,737.75 4,201.01

Total Income 50,815.30 63,581.19 74,217.83

Expenditure 10,518.00 9,720.69 10,152.44

Operating Profit 40,297.30 53,860.50 64,065.39

Interest 13,395.50 25,329.75 25,329.75

Profit Before 26,901.80 28,530.75 38,735.64

Depreciation And Tax

Depreciation 9,596.50 10,891.31 11,902.86

Profit Before Tax 17,305.30 17,639.44 26,832.78

Tax 2,820.60 2,479.61 4,024.92

Profit After Tax 14,484.70 15,159.83 22,807.87


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Equity Capital 42,088.40 42,088.40 42,088.40

Reserves 92,985.30 108,145.13 130,953.00

EPS (Rs.) 3.44 3.60 5.42

A=Actual, E=Estimated

Quarterly Ended Profit & Loss Account (Standalone)

Quarter Ended on ---> 30 June 08 30 Sep.08 31 Dec. 08 31March09E

Description (Rs. Million) 3m 3m 3m 3m

Net Sales 12,940.30 15,876.90 14,774.40 16,104.10

Other Income 1,138.80 852.8 852.3 893.85

Total Income 14,079.10 16,729.70 15,626.70 16,997.95

Expenditure 2,264.80 2,383.20 2,504.90 2,567.79

Operating Profit 11,814.30 14,346.50 13,121.80 14,430.16

Interest 5,639.90 7,024.00 6,002.60 6,663.25

Profit Before 6,174.40 7,322.50 7,119.20 7,766.91

Depreciation And Tax

Depreciation 2,637.90 2,744.50 2,746.10 2,762.81

Profit Before Tax 3,536.50 4,578.00 4,373.10 5,004.10

Tax 479.60 613.7 649.6 736.71

Profit After Tax 3,056.90 3,964.30 3,723.50 4,267.39

Equity Capital 42,088.40 42,088.40 42,088.40 42,088.40

EPS (Rs.) 0.73 0.94 0.88 1.01


35/42


Charts


36/42


1 Year Comparative Graph

POWER GRID CORP. BSE SENSEX

Outlook and Conclusion

Power Grid Corporation (PGCIL), a NAVRATNA PSE, is Indias principal electric power

transmission company. The company is planning to spread its business overseas. It is eyeing

opportunities in West Asia and The African markets. The company has plans to increase its

power lines network by 11% in FY09 and the total targeted investment for the year is Rs.85

billion. PGCIL wants to add 8,000km. of lines to its existing network of 70,000kms in this year.

To enhance its business, the company is looking forward to form new joint ventures and

subsidiaries.

At the market price of Rs.92.35, the stock trades at 25.69x and 17.08x for FY09E and FY10E

respectively. On the basis of EV/EBDITA, the stock trades at 8.10x and 7.46x for FY09E and

FY10E respectively. Earning Per Share (EPS) of the company for the earnings of FY09E and FY10E

are seen at Rs.3.60 and Rs.5.42 respectively. We expect the topline and bottomline of the

company will grow at a CAGR of 25% and 23% respectively over FY07 and FY10E. We

recommend to BUY this stock with a target price of Rs.114.00 for long term.


37/42


Industry Overview

The power sector is high on India's priority as it offers tremendous potential for investing

companies based on the sheer size of the market and the returns available on investment

capital. In the past few years, there has been considerable growth in power plants based on

renewable sources of energy.

The All India installed capacity of electric power generation stations under utilities stood

at147402.81 MW with thermal power plants constitute 64.6% ( coal-53.3%, gas-10.5% and oil-

0.9%) of the installed capacity followed by 24.7 from hydro power, 2.9% nuclear and 7.7%

renewable sources. The power sector has seen a growth at a CAGR of 5% over the last five

years.

Sector MW %age

State Sector 76185.57 52.5

Central Sector 48970.99 34.0

Private Sector 22246.05 13.5

Total 147402.81

Source: Mini. of power

India has the fifth largest electricity generation capacity in the world- low per capita

consumption at 631 units; less than half of China.

Generation

Overall generation in the country has been increased from 662.5 BU during 2006-07 to

704.45BU in 2007-08. There has been significant improvement in the growth in actual

generation over the last few years. As compared to annual growth rate of about 3.1% at the

end of 9th Plan and initial years of 10th Plan, the growth in generation during 2006-07 and

2007-08 was of the order of 7.3% and 6.33% respectively.


38/42


Year Generation (Billion Units)

1990-91 264.3

1995-96 380.1

2000-01 499.5

2001-02 515.3

2002-03 531.4

2003-04 558.32004-05 587.4

2005-06 617.5

2006-07 662.5

2007-08 704.5

Source: Ministry of Power

The electricity generation target for the year 2008-09 has been fixed at 744.344 BU comprising

of 631.270 BU thermal; 118.450 BU hydro; 19.000 BU nuclear; and 5.624 BU import.

Transmission & Distribution

Indias transmission and distribution network consists of 5.7mn. circuit kilometers makes it the

third largest in the world. The entire country has been divided into five regions for transmission

systems like Northern Region, North-Eastern Region, Eastern Region, Western Region and

Southern Region.

The Government of India has an ambitious mission of POWER FOR ALL BY 2012. This missionwould require that our installed generation capacity should be at least 2, 00,000 MW by 2012.

In order to ensure that the generated power reaches the entire country, an expansion of the

regional transmission network and inter regional capacity to transmit power would be

essential.


39/42


CUMLATIVE GROWTH IN TRANSMISSION SECTOR and PROGRAMME FOR 11th

PLAN

Unit

At the end

of VIII Plan

ie March1997

At the end

of IX Plan

ie March2002

At the end

of X Plan ie

March2007

At the end

of XI Plan

ie March2012

Transmission Lines

VIII Plan IX Plan X Plan XI Plan

765 kV ckm 409 971 1704 7132

HVDC +/- 500kV ckm 3138 3138 58728 11078

HVDC 200kV

Monopoleckm 0 162 162 162

400kV ckm 36142 49378 75772 125000

230kV/220kV ckm 79601 96993 114629 150000

Total Transmission

Lineckm 119290 150642 198089 293372

Substations

VIII Plan IX Plan X Plan XI Plan

HVDC BTB MW 1500 2000 3000 3000

HVDC

Bipole+MonopoleMW 1500 3200 5200 11200


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Total-HVDC Terminal

CapacityMW 3000 5200 8200 14200

765kV MVA 0 0 2000 53000

400kV MVA 40865 60380 92942 145000

230/220kV MVA 84177 116363 156497 230000

Total- AC Substation

CapacityMVA 125042 176743 251439 428000

Source: National Electricity Plan(vol-II) Transmission

The majority of generation, transmission and distribution capacities are either with public

sector companies or with state electricity board (SEBs). Private sector participation is increasing

especially in Generation and Distribution.

Potential & Outlook of Power Sector

Large demand-supply gap: All India average energy shortfall of 9.9% and peak demandshortfall of 16%.

The implementation of key reforms is likely to foster growth in all segments:o Unbundling of vertically integrated and distribution network.o Open Access to transmission and distribution network.o Select distribution circles to be franchised / privatized.o Tariff reforms by regulatory authorities.

Opportunities in generation for:o Ultra Mega Power Plants (UMPP) 6 projects of 4000 MW each.o Coal based plants at pithead or coastal locations (imported coal)o Natural gas/CHG based turbines at load centers or near gas terminalso Hydel power potential of 150000MW is untapped as assessed by the

Government of India.

o Renovation, modernization, up-rating and life extension of old thermal andhydro power plants.

Opportunities in Transmission network ventures-additional 60,000 circuit km. oftransmission network expected by 2012. Government is planning to reduce the T&D

losses to 15% by 2012.

o Private sector participation possible through JV and 100% equity mode.


41/42


Total investment opportunity of about US$200 billion over a five year horizon. Over 78,000MW of new generation capacity is planned in the next five years.

_________________________________________________________

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation

for the purchase or sale of any financial instrument or as an official confirmation of any

transaction. The information contained herein is from publicly available data or other

sources believed to be reliable but we do not represent that it is accurate or complete and it

should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of its

affiliates shall not be in any way responsible for any loss or damage that may arise to any

person from any inadvertent error in the information contained in this report. This document

is provide for assistance only and is not intended to be and must not alone be taken as the

basis for an investment decision.


42/42

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Road, Chembur

Mumbai 400 071

Telephone: 2527 6077, 2527 6089

Power Grid Corporation India Ltd - 42 Pages, 519Kb

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