M&A Prospects in Indian Power Generation Sector (Volume 2): Identifying Thermal, Wind, Solar and Biomass Power Plants likely to be up for Sale

September 2015 | 178 pages | ID: M6B18C9B2FFEN
Infra Insights

Abstracts

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

• Coal and Gas supply shortage has resulted in many power plants stranded or operating at a sub-optimal PLF levels, IPPs / MPPs are hardest hit
• The fuel shortage threatens India's power expansion plan
• Coal block auctions may have addressed fuel supply woes to some extent, but private power generators may have to face tariff under-recovery to the extent of 60-65 paise per unit.
• Auctioning of coal linkages will only add to the worries of the power generators as competitive prices will put pressure on their already debt laden balance sheets

Growth by Acquisition

• Recently, JSW Energy acquired the 1,391 MW hydroelectric power assets of Jaypee Group worth over Rs 9,700 crore.
• NTPC wants to achieve the objective of 128 GW of power capacities by 2032 and it 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, Tariff under-recovery, Fuel Linkage Issue, Burgeoning Debt Burden to force companies with leveraged Balance Sheet to put assets on the block

• 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 had acquired land, signed MoUs (memorandums of understanding), coal linkages, etc are now looking to sell and exit
• While auctioning the coal blocks is a very commendable step in terms of transparency and fuel security, sustainability of mining at these prices seems doubtful. Due to aggressive bidding, private power producers with capacities nearing 10,000 mw might face 60-65 paise tariff under-recovery resulting into a whooping shortfall of around Rs. 1300-1350 crore in 2015-16.
• Auctioning of coal linkages will also force new thermal power plants with capacity of around 15,000 MW to quote aggressive competitive prices and thereby resulting into a tariff under-recovery. Further, projects nearing completion also face time overrun due to time taken in planning process for auctions.

Contents

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. COAL BLOCK AUCTION AND COAL LINKAGE AUCTION

Introduction to Coal Block Auction
Coal Blocks Auctioned and Blocks up for Auctioning
Tariff Under-recovery due to auctions
Planned Coal Linkage Auction
Analysis of Impact of Coal Linkage Auction on Tariff

8. 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

9. IDENTIFYING KEY REASONS FOR EXITING POWER GENERATION BUSINESS

Private Indian Companies
MNCs Operational in India

10. REGULATIONS GOVERNING M&A IN INDIAN POWER SECTOR


11. INFRAINSIGHTS DUE DILIGENCE OF SHORTLISTED ATTRACTIVE ASSETS

Distress Sales vs Valuation Sales
Recommendation

12. POWER PLANTS ASSET DATABASE

Thermal Power - Coal & Gas
Biomass Power
Wind Power
Solar Power