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POWER SECTOR Industry Analytics
POWER SECTOR Industry Analytics
PGP-I
Power sector
SUBMITTED TO : DATE SECTION : : PROF. SAMIK SHOME 6/4/2009 C
SUBMITTED BY:
GROUP NO: 2
(08PG136) (08PG156) (08PG168) (08PG179) (08PG192) (08PG204)
ADITHYA RAJ ARVIND KUMAR SHARMA LOKESH MAHAJAN POONAM RATHI SAUMYA SAURABH SWATI AGARWAL
CONTENT
TOPIC
EXECUTIVE SUMMARY Chapter 1 OVERVIEW OF POWER SECTOR 1.1 Introduction 1.2 Global Overview Chapter 2 REVIEW OF LITERATURE Chapter 3 POWER SECTOR IN INDIA 3.1 Power Sector in India 3.1.1 Emergence of regional Power systems 3.1.2 Generation 3.1.3 Transmission 3.1.4 Power for All by 2012 3.1.5 Distribution Chapter 4 SEGMENTS IN POWER GENERATION 4.1 Thermal Power 4.2 Hydro Power 4.3 Nuclear Power 4.4 Solar 4.5 Wind 4.6 Small Hydro Chapter 5 REFORMS IN POWER SECTOR 5.1.1 Pre Reform Stage 5.1.2 Electricity Act 2003 5.1.3 Electricity Act 2007 Chapter 6 IMPACT OF POWER SECTOR 52 55 60 41 45 47 48 49 50 22 23 23 26 31 33 10 11 16
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LIST OF TABLES
TOPIC
1.
PAGE NO. 13 24 28 29 35 52 103 104 105 106 107 108 109 110 111 112 113 116 123 130
OECD Multinational Electricity companies Growth of Transmission Details of Sub-stations region Details of Funds released under APDRP Power Sector Reforms
7. Ratio Analysis of NTPC 8. Ratio Analysis of Power Grid Corp. 9. Ratio Analysis of Reliance Infra 10.Ratio Analysis of Tata Power 11.Ratio Analysis of Torrent Power 12.Ratio Analysis of Indowind Energy 13.Ratio Analysis of Energy Develop 14.Ratio Analysis of GVK Power 15.Ratio Analysis of JP Hydro 16.Ratio Analysis of KSK Energy
17. Comparative 18. Comparative
19.Trend Analysis
20. Porters
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LIST OF FIGURES
TOPIC
1.
State-wise hydro-power generation Growth of NTPC NTPC Performance Output of trend Analysis Exponential method Output of trend Analysis Moving Average method Porters Five Force Model
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POWER SECTOR
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EXECUTIVE SUMMARY
Availability of power is one of the important ingredients for industrial growth. It is an important infrastructure facility without which no industrial activity can be thought of in modern times. Increasing automation of Indian industries has created huge demand of power in India. This huge demand has resulted into demand supply gap in India in recent times. This report is based on the extensive study of the power sector in India. Both global and domestic perspectives of power sector focusing more on Indian players have been looked upon in this report. It includes the literature review by scholars which has analyzed the subject of power sector more extensively. The objective of this report is to get a comprehensive and apparent knowledge of the power sector, and to study the changes in power sector over a period of time there by analyzing various aspects of the power sector. In the report the power generation companies of the industry chosen, are the top five and bottom five companies of the power sector in India, based on the sales turnover. The trends in the demand, supply and generation in the power sector is discussed through the trend analysis. Before 2001, Indias electricity-supply was mainly owned and operated by public sector. It was running under the risk of bankruptcy. This created a serious impediment to investments in the sector at the time when India desperately needed them. This led to the emergence of Private players in the power sector. The NTPC, Reliance Infra, Tata Power, Power Grid, & Torrent Power are the market leaders in the power sector and have high Cumulative Annual Growth Rate (CAGR). This is because of the government support, inflow of foreign investment, growing demand and use of latest technology for power generation and transmission. The best management policies are adopted by these companies. The small players GVK power, Indowind Energy, Energy Development, JP Hydro, and KSK energy are also imparting new technology, and management policies to survive the competition and meet the demand of power sector.
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1.1. INTRODUCTION
An economys growth, development, ability to handle global competition is all dependent on the availability, reliability and quality of the power sector. As the Indian economy continues to surge ahead, electrification and electricity services have been expanding concurrently to support the growth rate. The demand for power is growing exponentially and the scope of growth of this sector is immense. Existing generation suffers from several recurrent problems. The efficiency and the availability of the coal power plants are low by international standards. A majority of the plants use low-heat-content and high-ash unwashed coal. This leads to a high number of airborne pollutants per unit of power produced. Moreover, past investments have skewed generation toward coal-fired power plants at the expense of peak-load capacity. In the context of fast-growing demand, large T&D losses and poor pooling of loads at the national level exacerbate the lack of generating capacity. India is one of the main manufacturers and users of energy. Globally, India is presently positioned as the 11th largest manufacturers of energy. It is also the worlds 6th largest energy users. In spite of its extensive yearly energy output, Indian power sector is a regular importer of energy because of huge disparity. Global and Indian economy have decelerated, but power is one of the few commodities in short supply in India. So, despite the sluggishness in production and demand for manufactured products, India remains power hungry, both in terms of normal and peak power demand. Power is derived from various sources in India. These include thermal power, hydropower or hydroelectricity, solar power, biogas energy, wind power etc. The distribution of the power generated is undertaken by Rural Electrification Corporation for electricity power supply.
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Company
AES EDF Tractebel Enron Intergen Mirant Transalta IP CDC
Source: http://www.tni.org/books/yearb05corporations.pdf.
As per the recent survery, the global electrical & electronics market is worth $1,038.8 billion, which is forecasted to grow to $ 1,216.8 billion at the end of the year 2008. If electrical & electronics production statistics are considered, the industry accounted for $1,025.8 billion in 2006, which is forcasted to reach $1,051.5 billion in future.
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The per capita consumption is seen to be far behind from the world average and very less when compared to other countries. So there is a need to improve it. Though India has achieved many milestones in generation still the there is a wide gap between demand and supply of power. This is the most important issue to be concerned.
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Sreekumar (2008) reviews the market-oriented power sector reforms initiated in India in the early 1990s. It brings out a public interest oriented critique of the three phases of the reforms firstly, privatization of generation, secondly, state sector restructuring and finally, the ongoing reforms since the passage of the Electricity Act 2003. Reforms were taken up as a response to the crisis in the sector. The article questions the success of the process in solving the crisis. While acknowledging positive elements like increase in transparency and participation, it criticizes the process for neglect of development issues like rural electrification and energy efficiency. The article concludes with some thoughts on developing an alternate reform approach.
Augustine (2007), tries to put forth a model pertaining to transportation because India is facing a huge increase in power consumption. The model is done with an aid of GAMS
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Remes (2007) talks about Russia fourth largest user of electricity in the world, he talks about RAO UES which controls all the transmission, distribution and supply of electricity, it controls everything except nuclear power. Anatoly Chubais, The very core of the reform has been to separate competitive businesses from natural monopolies, both legally, functionally and regulatory. Consequently, competitive parts generation companies, supply/sales companies and service companies have been separated into legally different companies from natural monopolies from Transmission Company, distribution companies and system Operator Company. It is of utmost importance for the future, to prevent the creation of any monopoly structures on the markets. UES is suggesting a change in the law allowing the Antimonopoly Agency to interfere immediately when the share of any company in any regional free-flow markets. Finally, concluding it can be said that Russia is ahead of the EU in the reform of the power sector and power sector monopolies. Russia has been able to create very sophisticated markets, with new elements, and with rational elements to the regulations.
Yemula, Medhekar, Maheshwari, Khaparde, Joshi(2007) have put their opinion about Interoperability in the power sector. According to Wikipedia, Interoperability is a property referring to the ability of diverse systems and organizations to work together (inter-operate). The term is often used in a technical systems engineering sense, or alternatively in a broad sense, taking into account social, political, and organizational factors that impact system to
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Singh (2006) address the Power sector reforms in India. Reforms were initiated at a juncture when the sector was plagued with commercial losses and burgeoning subsidy burden. Investment in the sector was not able to keep pace with growing demand for electricity. This paper takes stock of pre-reform situation in Indian power sector and identifies key concerns that led to initiation of the process of reform. The paper discusses major policy and regulatory changes undertaken since the early 1990s. The paper also illustrates changes in the market structure as we move along the reform process. It also discuss some of the major provisions of the recently enacted Electricity Act 2003 that aims to replace the prevailing acts which govern the functioning of the power sector in the country. In this context, it discuss two issues arising out of it, namely open access and multi-year tariff that we think would have a significant bearing on the performance of the sector in the near future. The paper also evaluates the reform process in the light of some of the regulatory changes undertaken. Finally, the paper briefly discusses the issues involved in introduction of competition in the power sector primarily through development of a market for bulk power.
Kumar, Khetan & Thapa (2005) highlights that India has set itself an ambitious target of more than doubling per-capita electricity consumption by 2011. Indian power sector, with current electricity shortages of over 11% of peak and 7% of energy, will be one of the key determinants to future growth. The Indian government has worked steadily to liberalise the sector and initiated reforms that culminated in the Electricity Act 2003. The Act brought together structural and regulatory reforms designed to foster competitive markets, encourage private participation and transform the states role from service provider to regulator. The Act
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Newbery (2005) says that Modern infrastructure, particularly electricity, telecom and roads, is critical to economic development. Electricity provides light, the ability to use modern equipment, computers and access to ICT. Telecom facilitate information exchange and access to the rest of the world, while transport infrastructure is critical for trade, and by lowering transport costs extends the market and increases competition. If there is a surplus of infrastructure, more investment adds little to total output, but if there is a deficit, then shortages constrain total output, magnifying the impact, so that the return to reducing that deficit can be very high indeed.
Banerjee (2004) says that the earliest electric power systems were distributed generation (DG) systems intended to cater to the requirements of local areas. Subsequent technology developments driven by economies of scale resulted in the development of large centralized grids connecting up entire regions and countries. The design and operating philosophies of power systems have emerged with a focus on centralized generation. During the last decade, there has been renewed interest in DG. This paper reviews the different technological options available for DG, their current status and evaluates them based on the cost of generation and future potential. The relevance of these options for a developing country context is examined using data for India. Different definitions of DG have been proposed. Some have linked this to the size of the plant, suggesting that DG should be from a few kW to sizes less than 10 or 50MW. This provides a review of alternative definitions of DG and suggests that DG be defined as the
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Swain, Singh and Kumar (2004) ,describes there were many inhibitors to growth in power sector but the main problem in the growth was Government Policy, which made it difficult for a private player to enter. This further created the problem that Indian entrepreneurs didnt have enough knowledge and experience in developing power projects. A whole new system was evolved where private players were invited to be an active participant. The system demanded financial, political and other major requirement in roads and communication. Some of the bold steps taken in the Act were moving generation and distribution out of License Raj, opening access to national grid and demolishing the Single Buyer model. The failure of the large structure and the changing global scenario has forced Government to think of ways to revive this fundamental infrastructure sector. Two ways that government can count on for future growth of this sector are Small Power Plants and Clean Development Mechanism.
Soronow, Pierce & Wang(2003), introduces FEA's Power Sector Model as the next step in derivatives pricing. Here the authors identified weather and marginal fuel prices as independent variables driving load levels and power prices. This is grounded in the understanding that, to a large extent, weather dictates load conditions, which, together with the marginal fuel price, determines the power price. The second step is to conduct a detailed empirical study of the nature and relationships among the various components under analysis. The goal of the study is twofold: to understand the relationship between the variables, as well as to determine the seasonal aspects inherent in each component. The approach is capable of capturing the essential power price characteristics such as seasonality in price and volatility, mean-reversion, price spikes, volatility clustering, and regional
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Tongia (2003), describes that Indias power sector is undergoing significant reforms, beginning in 1991, which are changing and diminishing the role of the government, which functioned earlier as the near monopoly integrated utility. Because of significant financial difficulties faced by the SEBs 1991 saw the enactment of legislation, the 1991 Electricity (Supply) Act, which opened up the sector to private participation, primarily in generation. The current thrust of reforms is on the distribution sector, reducing losses and increasing efficiency. This might just be a precursor to privatization, but there is a goal to full electrification by 2012. In the last few years, the T&D losses have stabilized somewhat, but there is only limited interest of private players into the sector, especially new players. Those who state that overall financial losses have increased after the reforms do not factor in the increase in costs due to generator price increases regardless of reforms, even from government generators and PSUs. Electricity Bill 2001 opens up the sector to private participation with limited approval obligations. This sector is vital to Indias growth and development. At the same time they have not sufficiently addressed structural changes for grid operation and discipline (dispatch), such as based on load duration curves, or access and penetration for the poor (especially how that affects financial performance). They are a step in the right direction, ending years of Government control and mindset.
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3.1.2. GENERATION
India has installed power generation capacity of 1,41,079.84 MW as on January 31, 2008, which is about 100 times the installed capacity of 1362 MW in the year 1947. Power generation has showcased a robust growth rate which is steadily improving year after year. 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. 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 from Bhutan. Abbreviation:
SHP BG BP
= = =
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U&I = RES =
Source: http://www.indexmundi.com/India/electricity_production.html The table shows the average shortage of electricity in India every year to be approximately between 7-8%.
3.1.2.1. STRATEGIES
The various strategies followed to achieve the goal in power sector are, Power Generation Strategy with focus on low cost generation, optimization of capacity utilization, controlling the input cost, optimization of fuel mix, Technology up gradation and utilization of Nonconventional energy sources
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3.1.3. TRANSMISSION
Transmission of electricity is defined as bulk transfer of power over a long distance at high voltage, generally of 132 kV. In India bulk transmission has increased from 3708 ckm in 1950 to more than 256,000 ckm today. The Government of India has an ambitious mission of POWER FOR ALL BY 2012. This mission would require that our installed generation capacity should be at least 2, 00,000 MW by 2012 from the present level of 1, 14,000 MW. To be able to reach this power to the entire country an expansion of the regional transmission network and inter regional capacity to transmit power would be essential. The latter is required because resources are unevenly distributed in the country and power needs to be carried great distances to areas where load centres exist. Ability of the power system to safely withstand a contingency without generation rescheduling or load-shedding was the main criteria for planning the transmission system. However, due to various reasons such as spatial development of load in the network, noncommissioning of load centre generating units originally planned and deficit in reactive compensation, certain pockets in the power system could not safely operate even under normal conditions. This had necessitated backing down of generation and operating at a lower load generation balance in the past. Transmission planning has therefore moved away from the earlier generation evacuation system planning to integrated system planning. While the predominant technology for electricity transmission and distribution has been Alternating Current (AC) technology, High Voltage Direct Current (HVDC) technology has
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Table.3: CUMLATIVE GROWTH IN TRANSMISSION SECTOR & PROGRAMME FOR 11th PLAN
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TRANSMISSION LINES 765 kV HVDC +/- 500kV HVDC 200kV Monopole 400kV 230kV/220Kv Total Transmission Line SUBSTATIONS HVDC BTB HVDC Bipole+Monopole Total-HVDC Terminal Capacity 765kV 400Kv 230/220Kv Total-AC Subtation Capacity ckm ckm ckm ckm ckm ckm VIII Plan 409 3138 0 36142 79601 119290 IX Plan 971 3138 162 49378 96993 150642 X Plan 1704 58728 162 75772 114629 198089 XI Plan 7132 11078 162 125000 150000 293372
Northern Region
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Source: http://cercind.gov.in/powergrid.htm
According to this table about 2.5% of Indian villages still remain unelectrified. In addition to state boards Power Grid Corporation of India Limited has a major role in transmission Power Grid Corporation of India limited (POWERGRID) 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. POWERGRID started functioning on management basis with effect from August, 1991 and it 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 also took over the operation of existing Regional Load Dispatch Centers from CEA, in a phased manner, which has been upgraded with State of-the-art Unified Load Dispatch and Communication (ULDC) schemes. According to its mandate, the Corporation,
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POWERGRID, notified as the 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.
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3.1.5. DISTRIBUTION
The total installed generating capacity in the country is over 1, 35,000 MW and the total number of consumers is over 144 million. A vast network of sub transmission in distribution system has also come up for the utilization of power by the ultimate consumer. However, due to lack of adequate investment on T&D works, the T&D losses have been consistently on higher side, and reached to the level of 32.86% in the year 2000-01.The reduction of these losses was essential to bring economic viability to the State Utilities. As the T&D loss was not able to capture all the losses in the net work, concept of Aggregate Technical and Commercial (AT&C) loss was introduced. AT&C loss captures technical as well as commercial losses in the network and is a true indicator of total losses in the system. High technical losses in the system are primarily due to inadequate investments over the years for system improvement works, which has resulted in unplanned extensions of the distribution lines, overloading of the system elements like transformers and conductors, and lack of adequate reactive power support. The commercial losses are mainly due to low metering efficiency, theft & pilferages. This may be eliminated by improving metering efficiency, proper energy accounting & auditing and improved billing & collection efficiency. Fixing of accountability of the personnel / feeder managers may help considerably in reduction of AT&C loss. With the initiative of the Government of India and of the States, the Accelerated Power Development & Reform Programme (APDRP) was launched in 2001, for the strengthening of Sub Transmission and Distribution network and reduction in AT&C losses. The main objective of the programme was to bring Aggregate Technical & Commercial (AT&C) losses below 15% in five years in urban and in high-density areas. The programme, along with other initiatives of the Government of India and of the States, has led to reduction in the overall AT&C loss from 38.86% in 2001-02 to 34.54% in 2005-06. The commercial loss of the State Power Utilities reduced significantly during this period from Rs. 29331 Crore to Rs. 19546 Crore. The loss as %age of turnover was reduced from 33% in 2000-01 to 16.60% in 2005-06.
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Assistance for strengthening and up gradation of sub-transmission and distribution network. 25% of the project cost is provided as Additional central plan assistance in form of Grant to the state utilities. To begin with the Govt. also provided loan to the tune of 25% of the project cost. However in accordance with the recommendation of 12th finance commission, the loan component has been discontinued from FY 200506. Now utilities have to arrange remaining 75% of the project cost from FIs like PFC/REC or their resources. Special category state (like NE states, J&K, H.P, Uttaranchal and Sikkim) are entitled for 90% assistance in form of grant and balance 10% fund.
reduction by SEBs/ Utilities, is provided as grant. The year 2000-01 is the base year for the calculation of loss reduction, in subsequent years. The cash losses are calculated net of subsidy and receivables.
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State Andhra Pradesh Gujarat Haryana Kerala Madhya Pradesh Maharashtra Rajasthan West Bengal Punjab Total
Claim Year 2002-03 2001-02 2002-03 2003-04 2004-05 2001-02 2002-03 2004-05 2002-03 2001-02 2001-02 2002-03 2003-04 2004-05 2005-06 2003-04
Source: http://www.powermin.nic.in/distribution/apdrp/projects/about_apdrp.htm Schemes undertaken under APDRP are for renovation and modernization of sub-stations, transmission lines & distribution transformers, augmentation of feeders & transformers, feeder and consumer meters, high voltage distribution system (HVDS), consumer indexing, SCADA, computerized billing etc.
1. Project Formulation The State utilities to prepare for each of the high-density areas in order of priority, Detail Project Reports (DPRs), based on the Technical Manual prepared by the Expert Committee on Distribution, constituted by the Ministry of Power. These DPRs are to be vetted by NTPC or PGCIL and put up to MOP for sanction. The different project components shall include:
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of LT lines
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Computerized load flow studies so that investments could be undertaken for long-term strengthening of the distribution system. 6. Improving customer satisfaction Customer satisfaction can be improved through providing better quality power in terms of voltage fluctuations and reliability by reducing outages. These necessarily call for technical intervention in firstly ensuring that the assets already created are maintained in proper working condition and secondly through augmenting the system. Further, customer complaint redressal mechanisms are to be made more responsive and proactive through building transparent and reliable system with the help of computerization. The system should be capable enough to meet the growing demand of information conscious customers. 7. Computerization Creation of comprehensive, up to date consumer index and system databases on computerized platforms are essential for creation of platforms for efficient commercial and technical operation and management of any distribution system. The APDRP program has laid emphasis on this basic need and actions are on in many areas for creation of such databases. The energy accounting, billing and revenue management platforms are also planned under the APDRP program for realizing the objectives outlined above and provide better services to the customers. Implementations for these are under various stages in different areas. In addition provisions of computerized automatic data acquisition at the substations are planned. Based on the needs these would be hooked up to suitable Supervisory Control and Data Acquisition systems. 8. Turnkey Implementation The schemes proposed under APDRP have to be implemented in a very short time frame so that benefits of the investments are perceived and confidence is generated in the FIs that investments in the distribution sector can be bankable. Execution of the scheme adopting
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9. Technical Specification & Standardization The Expert Committee has also recommended standardization of technical specifications of equipment used in the distribution sector. Specifications are being drawn up for energy efficient and standardized equipments like electronic and static meters, transformers,
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transmission and distribution system and oversee implementation including quality checks.
Project Monitoring Agencies: To review the physical and financial progress of the
project and bring out concern areas to the notice of the MOP for immediate resolution to avoid time and cost over - runs.
Turnkey Contractors: To undertake design, manufacture, supply, erection, testing &
commissioning and provide maintenance facilities and performance warranty for the various components involved in the sub-transmission and distribution system. Project Evaluators: To conduct concurrent and post execution evaluation of the anticipated and actual benefits accrued consequent upon execution of the project.
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bridging the gap between the energy drawn from the system and the metered energy supplied to the customers. The MOU with the States has a provision for conducting energy audit on each feeder. But the results of the audit have shown that a fair amount of energy accounted for as supplied is based on assessment. For success of the program and improving revenue realization it is essential that all energy transactions are adequately metered and properly accounted. Just as any business would have to get its accounts audited it is necessary that this energy accounting is audited by eminent third parties so that the programme can sustain on its own strength in the coming years. For carrying out the detailed activities at field level agencies with sufficient experience in the respective areas of work are proposed to be identified and accredited. Any SEB can invite quotations from the accredited parties for the specific work and immediately place an award thereby saving considerable time and effort. This would facilitate in reduction of bidding time, bring in uniformity of terms of reference and work content. For the other activities especially those involving HR initiatives at SEB level and DSM and distributed generation concepts, discussions are being held with international financing agencies to support the programme. 11. Application of Information Technology Information technology and computer aided tools for revenue increase, outage reduction, monitoring and control, play a vital role in distribution management. It is, therefore, proposed to have a technology mission for customizing / development of cost effective and relevant solutions for consumer and control point data communications, remote monitoring, operation and control, etc. for the distribution network. Involvement of IT industries in this effort is envisaged. IT applications will be used in such processes in the distribution sector to ensure higher revenues as a result of segregation of T&D losses, and controlling commercial losses, especially for metering, meter reading, billing, collection and outage reduction. 12. Management Information System (MIS) Operational efficiency improvement and customer servicing also need to be addressed at various levels in the organization. In this regard, an effective Management Information System (MIS) is required to ensure effective flow of information to facilitate quick decision-
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Source: chmn@dae.gov.in
India has 3 major rivers: the Indus, the Brahmaputra, and the Ganga. It also has three major river systems? Central Indian, west flowing rivers of south India, and east flowing rivers of south India with a total of 48 river basins. The total potential from these river basins is 600TWh (Terawatt Hours) of electricity.
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the plant which is adjacent to the river. After generation the flow is diverted back to the main flow through the tail race. This type of hydro plants requires a diversion dam and has unregulated water flow.
Dam Storage In these types of hydro plants, large reservoirs are created by the
construction a sizeable dam across the river and the plants is situated at the toe of the dam. Here, water could be regulated to generate electricity depending upon the demand
Pumped Storage These types of plants have two reservoirs, one at the upstream of the
power plant and one at the downstream. When there is low peak demand, the water from the reservoir situated downstream is pumped0020back to the upstream reservoir. As of today, the total identified hydro potential is 1 48 701 MW (mega watt). According to the list of hydro electric projects in the country, a total of 29 572 MW,19.9% of the total? Has been harnessed and 13 286 MW is under construction. A total of 3 660 MW of pumped storage schemes have also been developed. Various initiatives for accelerated development have been taken up by the central government to harness the hydro potential in India. Some of these are Hydro Power Policy (1998) 50 000 MW initiative Preparation of viable models for private sector participation Ranking of projects R&M up gradation and life extension programmes Facilitation for trading and co-operation with other countries Execution of projects with interstate aspects by Central Public Sector Units
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Source: http://www.marketresearch.com/product/display.asp?productid=1695991
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The first stage, already commercial now, comprised setting up of PHWRs (pressurised heavy water reactors) and associated fuel cycle facilities. PHWRs use natural uranium as fuel and heavy water as moderator and coolant. The design, construction, and operation of these reactors is undertaken by public sector undertaking the NPCIL (Nuclear Power Corporation of India Ltd). The company operates 16 reactors (2 Boiling Water Reactors and 14 PHWRs) with a total capacity of 3900 MWe. In the second stage, it was envisaged to set up FBRs (fast breeder reactors) along with reprocessing plants and plutonium-based fuel fabrication plants. Plutonium is produced by irradiation of Uranium-238. The Fast Breeder Programme is in the technology demonstration stage. Under this stage, the IGCAR (Indira Gandhi Centre for Atomic Research) has completed design of a 500 MWe PFBR (prototype fast breeder reactor) being implemented by BHAVINI (Bharatiya Nabhikiya Vidyut Nigam). The third stage of the Indian Nuclear Power Programme is based on the thoriumuranium-233 cycle. Uranium-233 is obtained by irradiation of thorium. Presently this stage is in technology development phase. The ongoing development of 300 MWe AHWR (advanced heavy water reactor) at BARC (Bhabha Atomic Research Centre) concerns thorium utilization and its demonstration.
4.4. SOLAR India is endowed with rich solar energy resource. The average intensity of solar radiation received on India is 200 MW/km square (megawatt per kilometer square). With a geographical area of 3.287 million km square, this amounts to 657.4 million MW. However, 87.5% of the land is used for agriculture, forests, fallow lands, etc., 6.7% for housing, industry, etc., and 5.8% is either barren, snow bound, or generally inhabitable. Thus, only 12.5% of the land area amounting to 0.413 million km square can, in theory, be used for solar energy installations. Even if 10% of this area can be used, the available solar energy would be 8 million MW, which is equivalent to 5 909 mtoe (million tons of oil equivalent) per year.
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Solar energy resource: Since the accurate information about solar energy resource at a specific location is crucial for designing appropriate solar system. Solar energy resource assessment becomes an essential activity of any solar energy programme.
4.5. WIND
The suns energy falling on the earth produces large-scale motions of the atmosphere causing winds, which are also influenced by small scale flows caused by local conditions such as nature of terrain, buildings, water bodies, etc. Wind energy is extracted by turbines to convert the energy into electricity. A small-scale and large-scale wind industry exists globally. The small-scale wind industry caters for urban settings where a wind farm is not feasible and also where there is a need for
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According to the power generated, small hydro power is classified into small, mini/micro and Mico hydro.
In India, it is being classified as follows. Small hydro - 2 MW - 30 MW Mini - 100 kW - 2 MW Micro - 10 kW - 100 kW Mico hydro - 1 kW - 10 kW
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1992 1992-97
1995-96
1996
1997 1998
1999
2000
Source: www.cea.nic.in/power_sec_reports/general_review/0405/index.pdf
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5.1.2.3. LICENSING Trading has been recognized as a separate licensed activity along with transmission and distribution. However, a license is not required in respect of (i) trading by a distribution licensee, (ii) transmission, distribution or trading by any Govt., as the Govt. would be deemed a licensee.
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Improving the efficiency of various end-uses through better housekeeping correcting energy leakages, system conversion losses, etc ; Developing and promoting energy efficient technologies, and Demand management through adopting soft options like higher prices during peak hours, concessional rates during off-peak hours seasonal tariffs, interruptible tariffs, etc.
DSM, in a wider definition, also includes options such as renewable energy systems, combined heat and power systems, independent power purchase, etc, that utility to meet the customer's demand at the lowest possible cost. Often the terms energy efficiency and DSM are used interchangeably. However, it is important to point out that DSM explicitly refers to all those activities that involve deliberate intervention by the utility in the marketplace so as to alter the consumer's load profile. Energy efficiency issued in an all encompassing sense and includes any activity that would directly or indirectly lead to an increase in energy efficiency. To make this distinction precise, a program that encourages customers to install energy efficient lighting systems through a rebate program would fall under DSM. On the other hand, customer purchases of energy efficient lighting as a reaction to the perceived need for conservation is not DSM but energy efficiency gains. There has been growing recognition of the importance of energy efficiency in India's electricity sectors. The Ministry of Power (MoP) is the nodal agency for energy conservation in the country. The Bureau of Energy Efficiency (BEE), an autonomous body under the MoP, was set up in 1989 to coordinate initiatives and activities on energy conservation. Several state electricity boards( SEBs) have also set up Energy Conservation Cells, some of which have been assisting industries in conducting energy audits. Several reports have been attempted to estimate the potential for energy conservation in various consuming sectors and have also identified various Energy Efficiency technologies (EETs) for important end-uses.
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6.1.3. GLOBAL IMPACTS The Indian power sectors contribute about 52% of the carbon emissions in the country. Due to the magnitude of its electricity generation, Chinas total carbon emissions are over three times those from India and even on a per capita basis are over 2 times. However, as emissions per capita are low by international standards (EIA, 2003), and developing countries are not required to adopt greenhouse gas (GHG) reduction targets under the Kyoto protocol (in effect from February 16, 2005), global issues currently remain less important than local impacts. 6.2. NATIONAL ENVIRONMENTAL LEGISLATION AFFECTING THE
ELECTRICITY SECTOR Energy Conservation Act, 2001 (with effect from 2002) National Environment Appellate Authority Act, 1997 National Environment Tribunal Act, 1995 Ministry of Environment and Forests Environmental Impact Assessment Notification, 1994 (and additional notification of September 2005) Central Pollution Control Boards National Ambient Air Quality Standards Notification, 1994 Environment (Protection) Act, 1986, amended 1991 (followed by Rules and amendments of 1986, 1998, 1999, 2001, 2002, 2003, 2004) The Air (Prevention and Control of Pollution) Act, 1981, and Amendment, 1987 The Water (Prevention and Control of Pollution) Act, 1974, amended 1988
42nd Amendment, 1976, to the Indian Constitution (1949) a. Article.48A (directing the State to make efforts for the protection and improvement of the
environment)
b. Article 51A(g) (stating that every citizen has a fundamental duty towards protecting the
environment)
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6.3.
NATIONAL
ENVIRONMENTAL
POLICIES
RELEVANT
TO
THE
ELECTRICITY SECTOR National Electricity Policy, 2005 National Environmental Policy, 2004 Environmental Action Plan, 1993 (including cleaner technologies & development of alternative energy projects) The National Conservation Strategy and Policy of Environment and Development, 1992 The Policy Statement for Abatement of Pollution,1992 (including pollution prevention at source, adoption of polluter pays principle, & encouragement of best practices) National Water Policy, 1987 (with first priority for drinking water, followed by irrigation, hydro power, navigation, industrial and other uses)
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BOTTOM 5
JP Hydro
Reliance Infra
KSK Energy GVK Power
Indowind Energy
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Source:http://tempweb606.nic.in/index.php?option=com_content&view=article&id=40&Ite mid=86
COMPANY PROFILE: Company name Address : : NTPC Ltd NTPC Bhawan Scope Complex, 7-Institutional Area Lodi Road, New Delhi - 110003, New Delhi. Year of Establishment Chairman : : 1975 Mr. R S Sharma
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7.6. JP HYDROPOWER
The Company was incorporated on December 21, 1994 with the object, interalia, to set up hydro-electric or Thermal power projects and for the supply of general electric power. The Certificate of Commencement of Business was granted on January 9, 1995. Our registered office is in New Delhi. Jaiprakash Hydro-Power Limited (JHPL), a part of the Jaypee Group owns and operates the 300 MW Baspa-II Hydroelectric Project at District Kinnaur in Himachal Pradesh. Financial Institutions approved the Project at an estimated project cost of Rs.11, 020 million in March of the year 1995 and signed PPA as one of the pre-disbursement conditions. Executed the tripartite agreement between JHPL, JAL and GoHP in the same year 1995 consenting the transfer of all assets, liabilities, obligations, privileges and benefits arising out of MOU from JAL to JHPL. During June of the year 1997, the company signed PPA with HPSEB pursuant to Implementation Agreement with GoHP. In the same year, the financial institutions reappraised the project with a revised cost of Rs.12, 630 million. In January of the year 2008, JHPL made an amendment in the PPA to include provisions for escrow mechanism and letter of credit for realisation of payment from HPSEB. Accomplished the agreement with Siemens AG Consortium, Germany and Alstom T & D, France in the year 1999 for import of electromechanical equipment and GIS/GIB respectively. Again the financial institutions reappraised project cost at Rs.13, 450 million in the year 2000 and Rs. 16,120 million in the year 2002. The Baspa-II project - India's Largest Private Sector Hydro-Power project has been fully commissioned in 8th June of the year 2003 at a project cost of Rs 1624.72 crores and has started generating power. Jaiprakash hydropower filed prospectus with ROC, all decks cleared for IPO in power sector in third week of March 2005. During the year 2005-2006, the company entered into a memorandum of Understanding with the Power Grid Corporation of India Ltd to promote a Joint Venture Company for establishing a Transmission System for evacuating power from 1000 KW Karcham Wangtoo Hydro-Electric Project. To minimize the erosion due to silt (with large quartz content) during monsoons, two more modern technology
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PROFILE Company name Address : : JP Hydropower JA Annexe 54, Basant Lok, Vasant Vihar, New Delhi-110 057. Year of Establishment Name of CEO E-mail Production Capacity : : : : Dec.21,1994 Mr. Gagan Banga mm.sibbal@jalindia.co.in 300MW
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: : : : :
Production Capacity :
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PROFILE Name Address : : GVK Power GVK Industries Ltd. Paigah House, 156-159, SP Road, Secunderabad 500003, AP, India. Year of establishment : Chairman Tel Fax E-Mail : : : : 1994 Mr.G.V.krishna Reddy +91-40-27902663/4 +91-40-27902665 info@gvk.com 684MW
Production Capacity :
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Present Scenario It currently supplies power to a state utility and a few companies in Karnataka. Tamil Nadu Electricity Board (TNEB) is its major client. The company has purchased WEGs from reputed suppliers like NEPC-MICON, VESTASRRB, AMTL-Wind World and AWT to avoid dependence on single technology and single manufacturer. The company has offer Green Power' to customers that include SEBs and Corporates. Other than the above company has also into the business of providing Operations and Maintenance services for windmills. Recently, the company has ventured into turnkey projects for erection, installation and maintenance of windmills for corporate companies. The company has worked continuously to strengthen infrastructure and enhance the presence in this sector. The company has been selling the power generated to Tamil Nadu Electricity Board (TNEB) and various private corporate clients in Karnataka such as Hindustan Coca Cola Beverages Private Limited, Karnataka Distilleries Limited, United Breweries Limited, H&R Johnson India Limited, Delphi Automotive Systems Private Limited and Spicer India Limited. The electricity charges recovered for the corporate clients in Karnataka are more than the revenue generated from the sale to SEBs. Since the wheeling charges under the new policy are very exorbitant, the company has decided to sell the power generated from the proposed 9 MW project to BESCOM (KPTCL) where the realization per unit is higher as compared to sale to private corporate clients under the current guidelines.
Currently, Indowind Energy sells power to TNEB at Rs 2.70 per unit. It sells power to corporate clients in Karnataka at Rs. 4.05 per unit (however, the company has to pay wheeling charges at 10%).Is setting up a wind farm of 9-MW capacity in Karnataka at an investment of Rs 49.7 crore. Intends to sell this project for an appropriate price. The project divisions profit before tax (PBT) margin was 23.5% in the year ended March 2007 (FY 2007).
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PROFILE: Name Address : : Indowind Energy Indowind Energy Ltd. Kothari Buildings, 4th Floor, 114, M.G.Road, Nungambakkam, Chennai-600034, Tamil Nadu, India. Establishment Chairman Tel Fax E-Mail Main Buyer : : : : : : 1995 Mr. K.V.Bala +91 44 28331956 / 57 / 58 / 59 +91 44 28330208 contact@indowind.com Titan,Coca-Cola,Spicer,Axis Bank,TVS 17.915MW
Production Capacity :
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8.1.2 Turnover Ratios: 1. Interest Cover Ratio: It is a ratio used to determine how easily a company can pay interest on outstanding debt. The interest coverage ratio is calculated by dividing a company's earnings before interest and taxes (EBIT) of one period by the company's interest expenses of the same period. The lower the ratio, the more the company is burdened by debt expense. When a company's interest coverage ratio is 1.5 or lower, its ability to meet interest expenses may be questionable. An interest coverage ratio below 1 indicates the company is not generating sufficient revenues to satisfy interest expenses. 2. Fixed Asset Turnover: A long-term, tangible asset is held for business use and not expected to be converted to cash in the current or upcoming fiscal year, such as manufacturing equipment, real estate, and furniture. A high fixed asset turnover is preferred since it indicates a better efficiency in fixed assets utilization.
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3. Inventory turnover: Its a ratio showing how many times a company's inventory is sold and replaced over a period. This ratio measures the stock in relation to turnover in order to determine how often the stock turns over in the business. It indicates the efficiency of the firm in selling its product. It is calculated by dividing the cost of goods sold by the average inventory. Inventory represents one of the most important assets that most businesses possess, because the turnover of inventory represents one of the primary sources of revenue generation and subsequent earnings for the company's shareholders/owners. Possessing a high amount of inventory for long periods of time is not usually good for a business because of inventory storage and obsolescence costs. However, possessing too little inventory isn't good either, because the business runs the risk of losing out on potential sales and potential market share as well. The days in the period can then be divided by the inventory turnover formula to calculate the days it takes to sell the inventory on hand or "inventory turnover days". 4. Debtors Turnover Ratio: Indicates the relation between net credit sales and average accounts receivables of the years. Its also known as debtors velocity. This ratio indicates the efficiency of the concern to collect the amount due from debtors. It determines the efficiency with which the trade debtors are managed. Higher the ratio, better it is as it proves that the debts are being collected very quickly. 5. ROCE: Return on Capital Employed (ROCE) is used in finance as a measure of the returns that a company is realizing from its capital employed. It is commonly used as a measure for comparing the performance between businesses and for assessing whether a business generates enough returns to pay for its cost of capital. 6. RONW: Return on Net Worth is the ratio of net income after taxes to total net worth at the end of the year. This ratio indicates the return on stockholder's total equity. Also known as Return on
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Power Sector Report (Apr - 2009) *(For aggregate data refer to table of comparative ratio analysis top/bottom 5 companies)
8.1.3. FIVE YEARS RATIO ANALYSIS OF THE INDIVIDUAL COMPANIES IN INDIAN POWER SECTOR (2004-2008)
8.1.3.1. NTPC (National Thermal Power Corporation)
In NTPC the debt-equity ratio has not changed since 2004 as the values the change is only 0.01 during 2004 to 2006 and the change is 0.07 during next two years. This shows the lower level of financial leverage which is not a good sign for the company. However companys profitability determines the debt equity ratio yet the high profitability of the company do not suggest such a lower value of debt equity ratio. It can be seen exactly same trend in the long term debt to equity ratio of NTPC. Current ratio of the company is showing U-shape trend during 2004 to 2008 and like previous days company has again reached to good liquidity position. The fixed asset turnover ratio has shown 50% growth in last 5 years but it is still low and company should maximise its asset utilisation. A high debtor turnover ratio is showing the good debt collection ability of company. Interest cover ratio of the company is continuously increasing showing that the company is becoming stronger in the ability of meeting interest expenses. Table.7: Ratio Analysis of NTPC (2004-08) YRC NTPC 200403 NTPC 200503 NTPC 200603 0.43 0.43 1.86 0.60 12.92 24.00 4.69 42.66 15.11 14.86 NTPC 200803 0.50 0.50 2.23 0.72 14.21 17.62 6.33 38.38 15.72 14.36
Key Ratios Debt-Equity Ratio 0.42 0.42 Long Term Debt-Equity Ratio 0.42 0.42 Current Ratio 2.39 1.65 Turnover Ratios Fixed Assets 0.49 0.55 Inventory 10.75 12.84 Debtors 2.92 24.65 Interest Cover Ratio 2.46 4.47 PBIDTM (%) 54.72 43.06 ROCE (%) 17.24 14.14 RONW (%) 13.03 14.85 Source: Derived from data available on Capitalline.
Inventory turnover of the company is showing the increasing capability of selling the product but at the same time it can be observed that companys profitability is decreasing (decreasing profit %) and this trend can be attributed to the fact that company is not using
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In Power Grid Corp. the debt to equity ratio is higher than that of NTPC but it is still not very good. The company can take advantage of financial leverage as its profitability is very high. However the return on capital employed and return on net worth are not good as compared to NTPC. The decreasing current ratio during the last 5 years is showing increasing current liabilities of the company which in turn has lowered companys liquidity. Table.8: Ratio Analysis of Power Grid Corp. (2004-08) Power Grid Power Grid Power Grid Power Grid YRC Corpn 200403 Corpn 200503 Corpn 200603 1.50 1.44 0.57 0.13 17.26 8.10 2.23 90.95 8.95 10.65 Corpn 200803 1.69 1.62 0.59 0.14 21.35 5.80 2.43 91.41 9.82 12.99
Key Ratios Debt-Equity Ratio 1.46 1.47 Long Term Debt-Equity Ratio 1.46 1.44 Current Ratio 1.28 0.81 Turnover Ratios Fixed Assets 0.12 0.12 Inventory 12.66 13.19 Debtors 2.12 5.37 Interest Cover Ratio 1.72 2.11 PBIDTM (%) 102.15 94.16 ROCE (%) 8.55 8.01 RONW (%) 9.23 8.99 Source: Derived from data available on Capitalline.
In Power Grid we can observe very low fixed asset turnover ratio which tells the under utilisation of companys fixed assets. The increasing Interest cover ratio is showing companys increasing capability of paying the interest which is a good sign for companys future financing ability in the financial market. A high debtor turnover ratio is showing the good debt collection ability of company.
8.1.3.3. Reliance Infra
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200403 200503 Key Ratios Debt-Equity Ratio 0.39 0.62 Long Term Debt-Equity Ratio 0.39 0.54 Current Ratio 1.47 2.23 Turnover Ratios Fixed Assets 0.93 0.96 Inventory 38.82 18.16 Debtors 6.75 5.94 Interest Cover Ratio 6.97 4.80 PBIDTM (%) 22.96 23.92 ROCE (%) 10.13 8.52 RONW (%) 10.61 9.98 Source: Derived from data available on Capitalline.
The fixed asset turnover has increased slightly but company should still do efforts to increase the utilisation of its fixed assets. Inventory turnover is lower now as compared to 2004; however it is not very low as electricity is fast selling product. Interest cover ratio and debtor turnover ratio are going down which is not good sign for the company and it is showing companys falling ability to meet the interest expenses and collecting the receivables from debtors. The profitability is satisfactory which can be seen in PBIDTM and RONW of the company.
8.1.3.4. TATA Power
The profitability of TATA Power is going down which can be seen by PBIDTM%, ROCE and RONW. However the debt to equity ratio of the company is very low but with the decreasing rate of return it cannot think for debt to increase the ratio. Inventory turnover ratio and the debtor turnover ratio have not changed significantly and they are showing stability of the firm.
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Key Ratios Debt-Equity Ratio 0.42 Long Term Debt-Equity Ratio 0.42 Current Ratio 1.52 Turnover Ratios Fixed Assets 0.78 Inventory 13.15 Debtors 5.27 Interest Cover Ratio 3.59 PBIDTM (%) 31.90 ROCE (%) 14.70 RONW (%) 10.78 Source: Derived from data available on Capitalline.
The fixed assets of the company are not being utilised efficiently so there is scope for the company for enjoying the operational leverage and the profitability can be improved.
Companys cost of capital seems to be high due its low debt to equity ratio as we know that the shareholders expectations are always high as compared to the interest on debt. However the debt to equity ratio of the company is very low but with the decreasing rate of return in last two years it cannot think for debt to increase the ratio. Table.11: Ratio Analysis of Torrent Power (2004-08) Torrent Pow. Torrent Pow. YRC 200403 Key Ratios Debt-Equity Ratio Long Term Debt-Equity Ratio 0.39 0.36 200503 0.40 0.40 Torrent Power 200609 0.35 0.35 Torrent Power 200803 0.86 0.85
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Companys current ratio is also very low showing its lower capability to meet current liabilities. Long term debt to equity ratio is also very low. At the same time company is not utilising its fixed assets efficiently which can be seen in the form of its fixed asset turnover ratio.High inventory turnover ratio and debtor turnover ratio are sufficient to justify companys position on the top 5 companies of the industry. Profitability of the company is satisfactory but it is not showing a satisfactory growth during last five years except in the year 2005.
Indowind Energy has been able to increase its profitability during last 5 years but this company comes in bottom 5 companies due to its sales turnover size. Company is continuously increasing the value of debt to equity ratio by increasing the debts and enjoying the financial leverage but its value is still very low which shows the future scope of increasing the debt. But company presently is not in a condition of increasing the debt because of its lower rate of return on capital employed. Table.12: Ratio Analysis of Indowind Energy (2004-08) Indowind YRC Key Ratios Debt-Equity Ratio Long Term Debt-Equity Ratio Current Ratio Turnover Ratios Fixed Assets Energy 200406 0.09 0.09 1.99 2.63 Indowind Energy 200506 0.15 0.15 3.11 0.93 Indowind Energy 200606 0.19 0.19 8.27 1.08 Indowind Energy 200806 0.78 0.69 5.46 0.47
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Current ratio of the company has been increasing sufficiently which is a good indication for the suppliers and creditors. Inventory turnover ratio and debtor turnover ratio are not showing positive trend and it is not good for the financial health of the company. Interest cover ratio of the company has grown slightly showing satisfactory condition to the lenders of the company. However the profit % has been increasing but company is not able to retain the earnings as we can see it in the form of decreasing ROCE and RONW.
8.1.3.7. Energy Develop Co.
Debt to equity ratio of the company is going continuously down even after the increase in the return and profitability (except 2008). Thus the company should improve the balance of the capital structure and should enjoy the financial leverage. Exactly same trend can be seen in the long term debt to equity ratio of the company between 2004 and 2008. Sharply falling current ratio is a worrying situation of the company showing its inability to meet the current liabilities. Its a negative signal for the supplier and creditors. Table.13: Ratio Analysis of Energy Develop Co. (2004-08) Energy YRC Key Ratios Debt-Equity Ratio Long Term Debt-Equity Ratio Current Ratio Turnover Ratios Fixed Assets Inventory Debtors Interest Cover Ratio PBIDTM (%) ROCE (%) RONW (%) 200403 1.09 1.09 18.50 0.16 9.92 9.59 1.34 80.25 9.67 4.68 Energy 200503 0.91 0.91 27.62 0.19 12.41 3.74 2.62 88.24 13.42 14.60 Energy 200603 0.60 0.60 2.55 0.28 20.12 2.24 7.11 90.60 14.88 17.97 Energy Devlop.Co 200803 0.00 0.00 1.10 1.23 109.57 5.56 49.84 36.78 26.72 20.39
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With the financial ratios it can be seen that however companys profit% has grown significantly yet company is not able to retain the earnings and the capital structures balance is becoming worse. Debt equity ratio is going down which is showing the high cost of capital in the form of equity. Return on capital employed and return on net worth are still low. Table.14: Ratio Analysis of GVK Power Infra (2004-08) GVK Power YRC Infra 200503 Key Ratios Debt-Equity Ratio 9.37 Long Term Debt-Equity Ratio 9.12 Current Ratio 1.61 Turnover Ratios Fixed Assets 162.67 Inventory 0.00 Debtors 9.57 Interest Cover Ratio 4.63 PBIDTM (%) 55.60 ROCE (%) 8.73 RONW (%) 39.38 Source: Derived from data available on Capitalline. GVK Power Infra 200603 0.20 0.20 7.68 257.11 0.00 16.18 2.21 163.79 7.55 3.88 GVK Power Infra 200803 0.16 0.00 1.68 131.56 0.00 7.73 16.04 386.10 8.36 8.78
Current ratio is also not satisfactory except in (2006). Debtor turnover ratio is good but inventory turnover is creating doubt about companys progress. Fixed assets of the company are being utilized efficiently but during last two years fixed asset turnover ratio is showing downward trend which is probably be due to enhancement of the asset side of the balance sheet. The only positive signal is for the lenders in the form of higher interest cover ratio.
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Looking at the good profit % and good rate of return (RONW and ROCE) we can say that company should take advantage of financial leverage and should improve its capital structure balance in the form of debt and equity. As the companys debt to equity ratio is going down it can be said that the overall cost of capital is increasing in the form of dividends and other expectations of shareholders. Companys inventory turnover is showing exceptional movement downward in the year 2005. Table.15: Ratio Analysis of Jaiprakash Hydro (2004-08) Jaiprakash Jaiprakash YRC Hydro 200403 Hydro 200503 Jaiprakash Hydro 200603 1.72 1.46 0.97 0.17 59.82 1.68 1.85 83.54 11.14 12.49 Jaiprakash Hydro 200803 1.02 0.88 1.91 0.18 53.78 1.31 2.73 103.17 13.91 15.80
Key Ratios Debt-Equity Ratio 2.13 1.95 Long Term Debt-Equity Ratio 2.12 1.79 Current Ratio 0.91 0.93 Turnover Ratios Fixed Assets 0.36 0.19 Inventory 2,857.33 214.03 Debtors 6.01 2.42 Interest Cover Ratio 1.48 1.44 PBIDTM (%) 88.46 87.33 ROCE (%) 12.50 11.38 RONW (%) 11.48 9.23 Source: Derived from data available on Capitalline.
Interest cover ratio has grown and reached to a satisfactory level providing good signal to the lenders. Fixed assets of the company are under utilized as the fixed asset turnover ratio is very low. Debtors turnover ratio is coming down which is an alarming situation for the company to recover the debts given outside. Profit is however showing rosy picture but return is not growing in accordance with it which shows companys lesser ability to retain the earnings.
8.1.3.10. KSK Energy
The ratio analysis of the company showing that company is facing a very tough time now and not a single indicator is providing satisfactory picture of the financial health of the
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200603 Key Ratios Debt-Equity Ratio 0.83 Long Term Debt-Equity Ratio 0.80 Current Ratio 3.78 Turnover Ratios Fixed Assets 7.75 Inventory 0.00 Debtors 0.00 Interest Cover Ratio 6.08 PBIDTM (%) 148.22 ROCE (%) 14.98 RONW (%) 18.47 Source: Derived from data available on Capitalline.
In such a condition cannot go for debt also. Rather than using financial leverage and operational leverage company should improve debtor turnover ratio and inventory turnover ratio. So the financial health of the company can be improved. Also we can see that no lender will allow debt to this firm easily because the interest cover ratio has come down significantly.
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We can also see the similar values of long term debt to equity ratio and overall debt to equity ratio for each of the top five companies, which show that in NTPC (0.50), Reliance Infra (0.51) and TATA Power (0.43) the value of long term debt to equity ratio is low, showing a lower level of financial leverage. In Torrent Power the value comes at 0.86 which is slightly high than industry showing medium level of financial leverage. In case of Power Grid Corp. the value is more than double the industry average which shows a higher level of firms financial leverage. The policy of Power Grid Corp. can be beneficial to the shareholders in long run but at the same time it enhances the risk involved in the business. In case of current ratio the current assets should meet current liabilities at least twice. In NTPC (2.23) and Reliance Infra (2.41) we can see the favorable value of current ratio which
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YRC Key Ratios Debt-Equity Ratio Long Term Debt-Equity Ratio Current Ratio Turnover Ratios Fixed Assets Inventory Debtors Interest Cover Ratio
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Looking to the interest cover ratio we see that all the bottom 5 companies which were taken for the study have the value of it greater than 1.5 so the performance of none of these is questionable in terms of interest cover but we can see a big difference among all these. KSK Energy has marginally acceptable value (1.58), Jaiprakash Hydro and Indowind Energy are near to the industry average i.e. appreciable value. GVK Power Infra (16.04) and Energy Develop Co (49.84) have very high values which show their very high capability of the interest coverage. Looking to debtors turnover ratio we observe that the industry average is at 4.65, Indowind Energy, Jaiprakash Hydro and KSK Energy are not good in collecting the debt as they have very low values while the performance of Energy Develop Co and GVK Power Infra is very good in this field which have high value of debtors turnover ratio. Return on capital employed is highest in Energy Develop Co (26.72%) showing a good opportunity for the stakeholders and shareholders. Jaiprakash Hydro (13.91%) is also showing good return on the capital employed. Indowind Energy and KSK Energy have lower return than industry average while GVK Power Infra is reaching very close to the industry average in the ROCE. A nearly similar variation can be seen in the return on net worth RONW. However the profitability is good in each of these companies as compared to the industry average of PBIDTM% yet Energy Develop. Co is showing least profitability while GVK Power Infra (386.10), Jaiprakash Hydro (103.17) and KSK Energy (98.62) are showing very high PBIDTM% or a very high profitability. Thus it is seen that every industry has different kind of strength and weakness in the power sector. This analysis is done taking into account one parameter at a time; a complexity of analysis is obvious when we take more than one parameters at a time.
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8.2.1.2. Applications: Regressions may be used for a wide variety of purposes where estimation is important. For example, a marketer may employ a regression to determine how sales of products might be affected by investments in advertising. An employer may perform a similar analysis to estimate an employee's job evaluation scores based on the employee's performance on an aptitude test. Statistical technique used to establish the relationship of a dependent variable, such as the sales of a company, and one or more independent variables, such as family formations, Gross Domestic Product, per capita income, and other economic indicators .Bring exactly how large and significant each independent variable has historically been in its relation to the dependent variable, the future value of the dependent variable can be predicted. Essentially, regression analysis attempts to measure the degree of correlation between the dependent and independent variables, thereby establishing the latter's predictive value.
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8.2.1.4. Hypothesis: H0: The null Hypothesis is that Transmission& Distribution, Consumption and Production do not have any significant effect on the sales of the company. H1: The alternate Hypothesis is that Transmission & Distribution, Consumption and Production have significant effect on the sales of company. 8.2.1.5. Interpretation: I. Energy Developement: In case of Energy Development R square and Adjusted R square values are 0.998 and 0.993, Significance value is 0.052 which is > 0.050, therefore, Null Hypothesis is accepted. Regression Equation : Sales = 290.655+0.007(TnD)+0.288(consumptn)+0.240(Prodn)
II.
GVK Power: In case of GVK Power R square and Adjusted R square values are 0.989 and 0.956, Significance value is 0.056 which is > 0.050, therefore, Null Hypothesis is accepted. Regression Equation: Sales = 21.811-0.003(TnD)-0.197(consumptn)+0.257(Prodn)
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IV.
JP Hydro: In case of JP Hydro R square and Adjusted R square values are 0.912 and 0.647, Significance value is 0.039 which is < 0.050, therefore, Null Hypothesis is Rejected. Regression Equation: Sales = 159.016+0.028(TnD)+0.918(consumptn)-0.771(Prodn)
V.
KSK Energy: In case of KSK Energy R square and Adjusted R square values are 0.997 and 0.990, Significance value is 0.067 which is > 0.050, therefore, Null Hypothesis is Accepted. Regression Equation: Sales = 87.629+0.002(TnD)-0.318(consumptn)+0.489(Prodn)
VI.
NTPC: In case of NTPC, R square and Adjusted R square values are 0.991 and 0.998, Significance value is 0.068 which is > 0.050, therefore, Null Hypothesis is Accepted. Regression Equation: Sales = 62159.474-4.356(TnD)-77.689(consumptn)+253.518(Prodn)
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In case of Power Grid R square and Adjusted R square values are 0.991 and 0.965, Significance value is 0.059 which is > 0.050, therefore, Null Hypothesis is Accepted. Regression Equation: Sales = 5886.594-0.512(TnD)+14.895(consumptn)+32.493(Prodn)
VIII.
Reliance Infrastructure:
In case of Reliance Infrastructure R square and Adjusted R square values are 0.983 & 0.933, Significance value is 0.164 which is > 0.050, therefore, Null Hypothesis is Accepted. Regression Equation: Sales= 8055.025+0.068(TnD)+5.052(consumptn)+16.748(Prodn)
IX.
Tata Power: In case of Tata Power R square and Adjusted R square values are 0.935 and 0.739, Significance value is 0.022 which is < 0.050, therefore, Null Hypothesis is Rejected. Regression Equation: Sales = 441.374-0.166(TnD)-12.785(consumptn)+19.863(Prodn)
X.
Torrent: In case of Torrent R square and Adjusted R square values are 0.826 and 0.306, Significance value is 0.015 which is < 0.050, therefore, Null Hypothesis is Rejected. Regression Equation: Sales = 14238.745-3.147(TnD)-74.953(consumptn)+116.640(Prodn)
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8.3.1. Output
Interpretation:
The output (Fig.7) shows that there has been gradual and continuous growth in power generation in India, the trend analysis using exponential method also shows the similar curve in growth, showing the projected power generation for the year 2008-09 in the growing pattern.
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Interpretation:
The output (Fig.8) shows that there has been gradual and continuous growth in power generation in India, the trend analysis using moving average method also shows the similar curve in growth, showing the projected power generation for the year 2008-09 in the growing pattern.
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Source: http://faculty.css.edu/dswenson/web/525ARTIC/porter5forces.html Porter has identified five competitive forces that shape every industry and every market. These forces determine the intensity of competition and hence the profitability and
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8.6.2. PORTERS FIVE FORCES ANALYSIS - POWER SECTOR IN INDIA Table.20: FIVE FORCES ANALYSIS Many projects have been planned but due to slow regulatory environment, the supply is far lesser than demand. Currently, India needs to double its generation. Many projects have been planned but due to slow regulatory environment, the supply is far lesser than demand. Currently, India needs to double its generation capacity to meet the potential demand. The long-term average demand growth rate is 6%. Barriers to entry are high, as entering this business requires heavy investment initially. The other barriers are fuel linkages, payment guarantees from State Governments, Retail distribution licensed, etc. Not very high as Government controls tariff structure. However, this may change the future. Bargaining power of retail customers is low, as power is in short supply. However, Government is a big buyer and payment by Government can be more erratic. Not high currently. The Electricity Act, 2003 will encourage investments,
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Supply Demand Barriers to Entry Bargaining Power to Suppliers Bargaining Power of Customers Competition
Internal factors The strengths and weaknesses internal to the organization. External factors The opportunities and threats presented by the external environment to the organization
SWOT analysis is a flexible concept that can be used in various scenarios from assessing projects or business ventures, making decisions, solving problems, evaluating candidates for a position to marketing strategy formulation. Fig.10: SWOT Analysis
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Source: http://www.excelsia.ch/htmlgb/blog/index.php?entry=entry090108-234052
The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to the competitive environment in which it operates. As such, it is instrumental in strategy formulation and selection. The following diagram shows how a SWOT analysis fits into an environmental scan:
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Source: http://www.dolphinventures.com/swot_analysis.htm
STRENGHTS AND OPPORTUNITIES OF POWER SECTOR: Well established and vast transmission and distribution network. Highly qualified engineering and technical personnel. Regulatory framework is further facilitated with enactment of Electricity Bill, 2003.
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Poor infrastructure has led to heavy T&D losses. Old and poor transmission and
distribution network has led to frequent power outages and poor quality of power
Lack of proper metering and theft has led to large scale losses. Only 51% of the power
generated is billed and only 41% is realized Moreover, Government provides power to agricultural sector at subsidized rates and also free of cost in some states. All these factors have resulted in financial disorder of the State Electricity Boards (SEBs). Restoration of SEBs financial health and improvement in their operating performance continues to be a critical issue. The Government of India has signed a Memorandum of Understanding (MOU) with various states reflecting the joint commitment of centre and states to undertake reforms in a time bound manner
Poor return to utilities, which affect their profitability and capacity to make further
investments
Increasing gap between unit cost of supply & revenue, approximately Rs 1.10/ unit Managerial and financial inefficiencies in state sector utilities have adversely affected
generation
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to poor operational performance. Adding to the problems, SEBs need huge money to measure up competition from efficient private players
The major risk of privatizing a critical sector like power is the precedence of
commercial over public interest. Some of these interests that will take a back seat include development of environment friendly generation and provision of electricity for rural areas. The new Electricity Act does not provide any specific financial incentives for private players to address public issues
The SBEs which are right now holding 60% of total installed capacity, will be hit
adversely by some provisions of the new electricity act such as delicensing of generation and open access for IPPs and CPPs, there by such units will take away the most lucrative customers (like industrial and commercial users) from the SEBs. This will not only affect SEBs but also the entire power sector for near term.
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Most of the SEBs though are supported by state government, are running under loss. This is because of power theft, transmission losses, use of conventional methods for power generation and transmission and out dated management policies. Indian power sector has been witnessing a wide demand supply gap. Although electricity generation has increased substantially, it has not been able to meet the demand. India is going to build an additional capacity of 1 lakh MW by 2012 including private sector contribution. In a bid to bring structural transformations, necessary reform programs should be carried out in distribution and transmission process.
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REFERENCE
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DATABASE:
Capital line plus CEA Central Electricity Authority India Indiaenergyportal.org Ministry of Power
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WEB PAGES:
www.ebrd.com/projects/eval/showcase/psr.pdf
LITERATURE REFERENCE:
Augustine .A(2007), Modeling Indian Power Sector, pp: 173-181. www.cs.utexas.edu/~achal/IndianPowerSector.pdf Banerjee. R (2004), Comparison of options for distributed generation in India, Journal of Energy Policy, Elsevier - Article in Press, 6th June, 2004, Vol 37 (1), pp: 1-11. http://www.whrc.org/Policy/COP/India/Banerejee_Energy%20Policy%20(in%20press).pdf Kumar. S, A. Khetan & B. Thapa (2005),Indian Power Sector Emerging Challenges to Growth. Reprinted from World Power, pp: 1-5. http://www.icfi.com/Markets/Energy/doc_files/indian-power-sector.pdf Newbery. D ,(2005), Power sector reform, private investment and regional co-operation, Journal of South Asia: Growth and Regional Integration, pp: 143-170 http://siteresources.worldbank.org/SOUTHASIAEXT/Resources/Publications/4488131171648504958/SAR_integration_ch6.pdf Remes .M (2007), Russia forerunning EU in power sector forum, Journal of Baltic Rim Economies, Expert article 154, 21st December,2007, pp: 20-21 http://www.tse.fi/FI/yksikot/erillislaitokset/pei/Documents/bre/expert_article154_62007.pdf Schwartz. J (2008), Lighting Update (ENERGY STAR, Legislation, Trends, Incentives and Opportunities) Journal of Todays Lighting Distributor, May/June 2008, pp: 12-13. http://www.icfi.com/Markets/Energy/doc_files/lighting-update-schwartz.pdf Singh. A (2006), Power sector reform in India: current issues and prospects, Elsevier in its journal Energy Policy, Vol: 34 (16) http://ideas.repec.org/s/eee/enepol.html Soronow. D, M. Pierce & K. Wang (2003), The Power Sector Model, Journal of NEWFRONTIERS, pp: 18-19. www.fea.com/resources/pdf/a_power_sector_model.pdf Sreekumar. N (2008), Market-Oriented Power Sector Reforms: A Critique, Journal of Governance and Public Policy. http://ideas.repec.org/s/icf/icfjgp.html Swain. N, J P Singh and D. Kumar (2004) Analysis of Power Sector in India: A Structural Perspective. http://www.ieiglobal.org/ESDVol5No2/indianreform.pdf
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Appendix
APPENDIX
Spss Outputs Regression Analysis ENERGY DEVELOPMENT: Input Data for SPSS Year 2004 2005 2006 2007 2008 Output: Variables Entered/Removed(b) Sales 7.29 8.5 12.98 61.68 65.74 Transmission&disbn 3599 3198 2733 4413 6662 Consumption 497.2 510.1 519 587.9 517.2 Production 533.3 547.2 556.8 630.6 665.3
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a Predictors: (Constant), prodn, consumptn, TnD ANOVA(b) Mode l 1 Regressio n Residual Total Sum of Df Mean Square 1178.383 5.831 F 2.081 Sig. .052
Squares
a Predictors: (Constant), prodn, consumptn, TnD b Dependent Variable: sales Coefficients(a) Unstandardized Mode l Coefficients Std. B Error Standardized Coefficients T Beta Sig.
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GVK POWER: Input Data for SPSS Year 2004 2005 2006 2007 2008 Sales 7.13 7.32 11.57 11.15 26.97 Transmission&disbn 3599 3198 2733 4413 6662 Consumption 497.2 510.1 519 587.9 517.2 Production 533.3 547.2 556.8 630.6 665.3
R of
Anova(b)
Sum
of Df 3 1 4
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INDOWIND ENERGY: Input Data for SPSS Year 2004 2005 2006 2007 2008 Sales 41.79 18.67 23.31 24.37 25.59 Transmission&disbn 3599 3198 2733 4413 6662 Consumption 497.2 510.1 519 587.9 517.2 Production 533.3 547.2 556.8 630.6 665.3
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a All requested variables entered. b Dependent Variable: sales Model Summary Std. Mode l 1 R .769(a) Adjusted R Square R Square .591 .635 of Estimate 0.26309 Error the
ANOVA(b) Mode l 1 Regressio n Residual Total Sum of df 3 1 4 Mean Square 61.158 126.857 F .482 Sig. .042
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JP HYDRO: Input Data for SPSS Output: Variables Entered/Removed(b) Year 2004 2005 2006 2007 2008 Sales 300.02 304.99 277.55 335.77 307.63 Transmission&disbn 3599 3198 2733 4413 6662 Consumption 497.2 510.1 519 587.9 517.2 Production 533.3 547.2 556.8 630.6 665.3
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Model Summary Std. Mode l 1 R .955(a) Adjusted R Square R Square .912 .647 of Estimate 0.35616 Error the
ANOVA(b) Mode l 1 Regressio n Residual Total Sum of Df Mean Square 526.385 152.675 F 0.344 Sig. .039
Squares
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Coefficients(a) Unstandardized Mode l 1 Coefficients Std. B (Constant) 159.016 TnD .028 Consumpt .918 n Prodn -.771 Error 5.657 .015 .352 .462 Standardized Coefficients T Beta 2.093 1.565 -2.147 1.505 1.900 2.607 -1.668 .033 .008 .045 .014 Sig.
KSK ENERGY: Input Data for SPSS Year 2004 2005 2006 2007 2008 Sales 0 6.05 6.47 16.53 50.16 Transmission&disbn 3599 3198 2733 4413 6662 Consumption 497.2 510.1 519 587.9 517.2 Production 533.3 547.2 556.8 630.6 665.3
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Model Summary Std. Mode l 1 R .999(a) Adjusted R Square R Square .997 .990 of Estimate 2.04206 Error the
ANOVA(b) Mode l 1 Regressio n Residual Total Sum of df Mean Square 536.238 4.170 F 3.594 Sig. .067
Squares
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NTPC: Input Data for SPSS Year 2004 2005 2006 2007 2008 Sales 18868.4 22732.4 26904.9 32817.3 37302.4 Transmission&disbn 3599 3198 2733 4413 6662 Consumption 497.2 510.1 519 587.9 517.2 Production 533.3 547.2 556.8 630.6 665.3
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Model Summary Std. Mode l 1 R 1.000(a) Adjusted R Square R Square .991 .998 of Estimate 1.390 Error the
ANOVA(b) Mode l 1 Regressio n Residual Total Sum of Df 3 1 4 Mean Square F 73862311.3 1.654 99 109158.150 Sig. .068
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a Dependent Variable: sales Regression Equation: Sales = 62159.474-4.356(TnD)-77.689(consumptn)+253.518(Prodn) POWER GRID: Input Data for SPSS Year 2004 2005 2006 2007 2008 Sales 2263.03 2513.07 3145.34 3589.85 4614.82 Transmission&disbn 3599 3198 2733 4413 6662 Consumption 497.2 510.1 519 587.9 517.2 Production 533.3 547.2 556.8 630.6 665.3
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ANOVA(b) Mode l 1 Regressio n Residual Total Sum of Mean Square F 1157505.33 1.612 0 30775.240 Sig. .059
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RELIANCE INFRASTRUCTURE: Input Data for SPSS Year 2004 2005 2006 2007 2008 Sales 3510.88 4152.69 3956.05 5769.26 6152.12 Transmission&disbn 3599 3198 2733 4413 6662 Consumption 497.2 510.1 519 587.9 517.2 Production 533.3 547.2 556.8 630.6 665.3
Output:
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ANOVA(b) Mode l 1 Regressio n Residual Total Sum of Mean Square F 1808954.90 19.709 1 91784.751 Sig. .164
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TATA POWER: Input Data for SPSS Year 2004 2005 2006 2007 2008 Sales 4237.05 3935.63 4568.67 4725.92 5937.36 Transmission&disbn 3599 3198 2733 4413 6662 Consumption 497.2 510.1 519 587.9 517.2 Production 533.3 547.2 556.8 630.6 665.3
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ANOVA(b) Mode l 1 Regressio n Residual Total Sum of Mean Square F Sig. .022
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TORRENT : Input Data for SPSS Year 2004 2005 2006 2007 2008 Sales 0 0 3831.52 1392.95 3628.65 Transmission&disbn 3599 3198 2733 4413 6662 Consumption 497.2 510.1 519 587.9 517.2 Production 533.3 547.2 556.8 630.6 665.3
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ANOVA(b) Mode l 1 Regressio n Residual Total Sum of df 3 1 4 Mean Square F 3887950.44 1.588 5 2448557.95 3 Sig. .015
Coefficients(a)
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