Tata Power: # 1 Indian Private Power

Player

June , 2005

KEY MESSAGES

Huge opportunity
in an evolving sector

Positioned to be a front runner

Tata heritage, established skills in generation, transmission and
distribution

Strategy under uncertainty

Three pronged approach to sustain position as Indias number 1
private power company by creating a portfolio of initiatives

KEY MESSAGES

Huge opportunity
in an evolving sector

Positioned to be a front runner

Tata heritage, established skills in generation, transmission
and distribution

Strategy under uncertainty

Three pronged approach to sustain position as Indias
number 1 private power company by creating a portfolio of
initiatives

INDIAN POWER SECTOR IS FUNDAMENTALLY ATTRACTIVE

Peak supply shortage of 11.7% (~13,000 MW)
(Western Region: 22.4%, Gujarat: 25.4%, MP: 18.5%,
Huge energy
deficit

Maharashtra: 16.5%)

Average supply shortage of 7.3% (Highest in Western

Region of 11.3%)
Demand of 212,000 MW (by 2012) vs, Current
capacity of 112,000 MW
Deficit likely
to widen

Demand drivers
Per capita power consumption is 50% of China
(475 kWh per annum vs. 1,020 kWh per annum for
China)

> US$170
billion
(Rs.8 lakh
crore) of
investment
required over
next decade

Industrial growth
Significant
inefficiencies

High AT&C losses estimated at 43-53%

US$ 4.5 billion (Rs.20,700 crore) loss
Low realised tariff (70%)

Source:

Ministry of Power presentation May 2004, SEB report 2004, Powerline research

VISION 2012 POWER FOR ALL BY 2012

Increase generation capacity from 112,000 MW to 212,000 MW

Increase private sector share from 11% to 16.5%
Increase inter-regional transmission capacity to 30,000 MW
(~ 9000 MW currently)

Reduce AT&C losses to 13% (43-53% currently)

Increase recovery of power cost through realised tariff to 100% (70%
currently)

Reduce peak energy shortage to 0 (11% currently)

Reduce average energy shortage to 0 (7% currently)

COMPLEX INDUSTRY STRUCTURE WITH MULTIPLE STAKEHOLDERS

Power is a concurrent subject

Multiple stakeholders with different functions

SEBs (30)

Central public
utilities

Central
government

*
*

*
*

30 State
governments

*
*

Public utilities

Sets the vision (Vision 2012)

Frames laws (Electricity Act, 2003)
Frames taxation policies
Sets investment guidelines (FI sectoral
limits etc)
New National Electricity Policy
New National Tariff Policy (Draft)
Owns and controls State Electricity
Boards
Constitutes state regulatory body
Determines extent of subsidies
Significant presence across the system
National Thermal Power Corporation
Power Grid Corporation of India
National Hydro Power Corporation

Accounts for 11% of generation

Present in distribution (e.g., Mumbai,

Delhi, Kolkata, Orissa parts of Gujarat)

Private sector

Two large players TPC and REL,

several small players - IPPs (e.g.,
GMR, Torrent ) and Distcoms (e.g.,
AESC, CESC)

POLICY MAKERS ARE MOVING IN THE RIGHT DIRECTION

Clearly stated vision Power for all by 2012, but no service standards
indicated
Central
government

Electricity Act, 2003 to promote competition and rationalise tariff

Generation delicensed
Open access of T&D networks
Regulatory framework established

US$ 1026 million (Rs.4514 crore) released under Accelerated Power

Development Reforms Programme

Regulatory setup in place in most states

State
government

Ten states have unbundled State Electricity Boards

Availability based tariff regime implemented
Distribution privatised in Orissa and Delhi
Focus on rationalisation of tariff structure

Regulators

New National Electricity Policy

New National Tariff Policy

NEW ELECTRICITY POLICY

GoI approved the National Electricity Policy (NEP) under section 3 of EA 03 in February
2005.
Aims and Objectives:
The National Electricity Policy aims at achieving the following objectives:
Access to Electricity Available for all households in next five years.
Availability of Power Demand to be fully met by 2012. Energy and peaking shortages to
be overcome and adequate spinning reserve to be available.
Supply of reliable and Quality Power of specified standards in an efficient manner at
reasonable rates.
Per capita availability of electricity to be increased to over 1000 unit by 2012.
Minimum lifeline consumption of 1 unit / household by the year 2012
Financial Turnaround and Commercial Viabilty of Electricity Sector.
Protection of consumers interest

NEW ELECTRICITY POLICY

Time schedules for different activities fixed under NEP, are summarised below:
National Electricity Plan to be finalised not later than September 2005.
Grid code to be notified by SERCs not later than September 2005.
Energy accounting and declaration of its results to be made mandatory not later than
March 2007.
CEA to develop meter regulations within 3 months
SERCs to introduce ABT regime at State level within 1 year
Enabling regulations for inter and intra State trading and also regulations on power
exchange to be notified by regulators within 6 months
GoI to provide incentive based assistance to states to reduce T & D losses
Policy to provide for adequate support to economically backward consumers. SERCs to
designate all such consumers to encourage consumption of say 30 Units per month.
Tariffs for such consumers to be at least 50% of the average (overall) cost of supply.

NEW TARIFF POLICY - Objectives

Performance based cost of service regulation for tariff determination to continue for some
time, on basis of the guidelines, which are as below:
Return on Investment notified by CERC to be adopted by SERCs
Equity norms 70:30 Debt Equity in excess to be treated as loans advanced. For
equity below norms actual equity to be considered for tariff calculations.
Depreciation CERC to notify rates of depreciation
Cost of Debt Lender agreement to have provision for re-fixation of interest rate every 3
years.
Forex Risk cost of hedging to be allowed for debts in foreign currency
Multi Year Tariff MYT framework to be adopted for Tariff form April 2006.. 5 year control
period to be followed initial control period could be 3 years
Duties and Taxes Present level of duties to be revised to make them reasonable.

HOWEVER, THE SECTOR IS EVOLVING WITH SEVERAL CRITICAL

ISSUES STILL TO BE RESOLVED
How to make the sector attractive for new players?

Implementation of open access: Regulatory norms on subsidy

Distribution deregulation: Schedule? Timeline on disinvestment?
Derisking investment: Payment guarantees? Other options?
Policy regarding cross subsidy, increasing subsidy, theft control?
Continued regulatory freedom? Maturing regulatory learning curve?

KEY MESSAGES

Huge opportunity
in an evolving sector

Positioned to be a front runner

Tata heritage, established skills in generation, transmission
and distribution

Strategy under uncertainty

Three pronged approach to sustain position as Indias
number 1 private power company by creating a portfolio of
initiatives

TPC IS PART OF THE TATA GROUP, ONE OF THE

LARGEST BUSINESS HOUSES IN INDIA
Indias first
Pioneer in
industrial
development

Hydro power project (1910)

Integrated iron and steel works (1907)
Chain of luxury hotels (1902)
Indigenous passenger car (1998)

Worlds largest integrated tea operations

Asias largest software exporter
Over 90 operating companies with market cap. of US$32 billion
(Rs.139861, crore)
Strong financials

Groups turnover equivalent to 2.6% of Indias GDP (2004

revenues: US$14.3 billion, Rs.65,424 crore)

Over 2 million shareholders

Committed to
social and
environmental
causes

Medical assistances to villages

Drought relief
Afforestation
Emission control

#1 IN MARKET CAPITALISATION
Market capitalisation (as on March 31, 2005)
US$ billion

Tata
group

ONGC

Reliance IOC
group

Infosys

Wipro

Bharati

SBI

AV Birla ITC
Group

HLL

Ranbaxy

THE TATA GROUP: AT THE FOREFRONT OF INDIAN ECONOMIC

GROWTH
Businesses

Companies

Sales

Employees

Beyond
business

1904

2004

Textiles, Hospitality, Steel &

7 business sectors

Power

Tata & Sons

Central India Mills
Svadeshi Mills
Ahmedabad Advance Mills
Indian Hotels

Tata Sons
Tata Industries
80+ operating companies

US$ 26 million (Rs.122 crore)

US$ 14.3 billion (Rs.65,424 crore)

~ 5,000

220,219

J N Tata Endowment

Trusts, TIFR, TISS, Tata Memorial

Without compromising values!

TPC: INDIAS #1 PRIVATE POWER PLAYER, PRESENT

ACROSS THE BUSINESS SYSTEM
Generation

Transmission

Distribution

National Thermal

Power Grid

State Electricity Boards

Power Corporation
(21,249 MW)

Corporation of India
(41,000 Ckms)

National Hydro Power

TPC (2,200 Ckms)

Reliance Energy Limited

(5 million consumers)

Calcutta Electricity Supply

Corporation (2,475
MW)

company (2 million
consumers)

TPC (1 million

TPC (2,300 MW)

consumers)

Ahmedabad Electricity

Reliance Energy

supply company (1
million consumers)

Limited (941 MW)

Project management and consulting

Tata Projects
TCE

TATA POWER: A COMPANY WITH MANY FIRSTS

Tala
transmission
line (1,300 Kms)
Successful Delhi
distribution
First Pumped
Storage Unit in
India
First to introduce
SCADA and Fibre
Optic ground wire
communication
First Flue Gas
De-Sulphurisation
plant
First to
commission
GIS mechanism
First 500 MW
thermal unit in
India
First Hydro
Electric power
plant in India

GENERATION: CREATING EXCELLENCE IN MUMBAI

Unique islanding system ensures uninterrupted power to Mumbai
Reliability

during grid disturbance

Plant availability of 94.52% (thermal) and 92.72 (Hydro)

State of the art distributed control system
Lowest T&D losses in India of 2.4%
T&D

5% reduction achieved in FY 2004 vs. FY 2003

Tariffs

Emission
control

Among the lowest SO2 emissions in the world

Latest technology to reduce emissions (e.g., Fly Ash Aggregator,
Flue Gas De-sulphurisation etc.)

SO2 EMISSIONS AT TROMBAY ARE AMONG THE LOWEST IN THE

WORLD
SO2 emissions
Metric tonnes per day

IFC

Denmark

USA

Canada

TPC,
Trombay

TPCs PERFORMANCE IS REFLECTED IN STRONG

FINANCIAL RESULTS . . .
Profits
US$ million

EBITDA

EBITDA CAGR
of 6.5%

2001

2002

2003

PAT

2004

2005

FY05 Exchange Rate:

US$ 1- Rs. 43.98

Operating margins
Per cent

2001

2002

2003

2004

2005

. . . AND SUSTAINED EPS

Market capitalisation

EPS

of
US$ 1.36 billion
(Rs.6,300 crore)

Cents

Annualised return of
over 100% (BSE
Sensex 53%)

FII holding increased

from 7% in 2003 to 14%
in 2004 and 21% as at
31-03-2005
2001

2002

2003

2004

2005

FY05 Exchange Rate:

US$ 1- Rs. 43.98

67% floating stock

OPPORTUNITY TO IMPROVE PLANT LOAD FACTOR

Plant load factor at Trombay

Per cent

2001

2002

2003

2004

2005

Graph showing Share Price of TPC Vs REL Vs BSE index during

FY03 To FY05
800

6800

Sensex

400

5100

REL

200

TPC

Points

Rs / share

600

3400

1700

TPC

REL

Sensex

Achievements FY05
Coal Contract:
Average spot Rate $ 42 PMT and Long term contract of $ 23 PMT
Reduction in Manpower:
Reduced 300 employees. Average yearly savings of Rs. 12 Crs. One time payment Rs. 24
Crs.
Sale of Non Core Assets:
Sold shares of Tata Telecom, Tata Honeywell, Haldia, Tata Petrodyne and Tata Ceramics
Net profit booked of approx Rs. 221 Crs.
Broadband Business Transferred:
Transferred Broadband business to a new Corporate Entity.
Funds Raised:
1. Domestic Debentures: Rs. 600 Crs. at YTM of 7.10 for 10 years
2. FCCB: 200 Million at YTM of 3.88%

DISTRIBUTION: CREATED A SUCCESS STORY AT NDPL THE

ONLY SUCCESSFUL PRIVATISATION IN DISTRIBUTION
Reduced T&D
losses

Improved
Network

Increased
Reliability

Better customer
service

Reduced from

Over 25%

US$ 142 million

Electronic

(Rs.640 crore)
invested to
improve
reliability

metering

53% to 35.5%
as of Feb 05.
i.e. an effective
reduction of
18% in less
than three
years

capacity added

Package
substitution

Fully remote
operated grid
stations

High voltage
distribution
system

Average
interruptions
per annum
reduced by
67%

Online account
management

24 hour call
center

100,000 legacy
pending
complaints
resolved

NDPL meets 27% of energy of New Delhis but as

per data of SLDC, NDPL accounts for less than
2% of the breakdowns in Delhi in terms of
million units (Mus)

NDPL - The Victory Curve

(trend of AT&C loss)

NDPL has made an effective reduction of 18% since the time of takeover.

Regulatory Target of 2006-07: 31.1%, well within reach in 2005-06

NDPL Supply Reliability

NDPL Transforming Power Distribution Operational Parameters

NDPL Transforming Power Distribution Commercial Parameters

NDPL Capital Expenditure

NDPL - Transparency with Consumers

The SUGAM Experience

50 years since independence
No power Distribution Utility thought about 100%
transparency
2 year ago
NDPL became the First Power Utility in the country to
provide On-line Information on Consumption, Billing &
Payment to 100% consumers
Now through Website 100%
Consumers can:
View Bill
View Consumption Graph
Print Duplicate Bill
Make payment

NDPL - Enhancing Consumer Convenience

Consumer Care and Communication

Fully networked consumer care centers launched

July 2002: 20 options for payment of Bills

April 2005: 1134 locations for payment of Bills

NDPL Excellence Recognized

KEY MESSAGES

Huge opportunity
in an evolving sector

Positioned to be a front runner

Tata heritage, established skills in generation, transmission
and distribution

Strategy under uncertainty

Three pronged approach to sustain position as Indias
number 1 private power company by creating a portfolio of
initiatives

SIGNIFICANT EFFORTS BEING MADE TO ACHIEVE COST

COMPETITIVE OPERATIONS

Organisational transformation

Regulatory
Management
Tata
Business
Excellence
Model

Growth

Defend
Current Business

Strategy & Main Drivers

The Growth drivers are:

Seeking increase in capacity through New projects, Domestic & International
acquisition and Expansion
Seeking backward integration by acquiring Captive Coal Berths
Growth in Other Businesses
The drivers to Defend Current Business are:
Thru 3SCR
Other initiatives
The Organizational Transformation drivers are:
HR Initiatives
TBEM
Risk Management

THREE PRONGED APPROACH TO SUSTAIN POSITION AS INDIAS #1

PRIVATE POWER COMPANY
Develop portfolio
of generation
assets

Flexible fuel strategy as not locked into a single fuel: a multi-fuel

strategy to deliver lowest cost power in key markets

Invest in a portfolio of assets lock in strategic markets/sources, create

options in other markets

Actively grow
distribution
footprint

Expanding portfolio of customers (bulk, residential)

Partner with select state governments

Multiple capabilities to grow at rapid pace

Building world
class team

Operational excellence
Distribution skills
Regulatory management
Business development and project execution skills

THREE PRONGED APPROACH TO SUSTAIN POSITION AS INDIAS #1

PRIVATE POWER COMPANY
Develop portfolio
of generation
assets

Actively grow
distribution
footprint

Flexible fuel strategy as not locked into a single fuel: a multi-fuel strategy to
deliver lowest cost power in key markets

Invest in a portfolio of assets lock in strategic markets/sources, create

options in other markets

Expanding portfolio of customers (bulk, residential)

Partner with select state governments

Multiple capabilities to grow at rapid pace

Building world
class team

Operational excellence
Distribution skills
Regulatory management
Business development and project execution skills

A CHANGING PORTFOLIO OF CUSTOMERS OVER TIME

More profitable, more sticky, less risky

Attractiveness of
customer base

Tied wholesale to
state distributors
(SEBs)

Wholesale/trading

Timing

Large, but mix of loads

Many SEBs unviable

Immediate

Rapid growth in

Immediate

traded power

Direct to large
customers enabled by
open access and
captive power policy

Own distribution
operations acquired or
franchised

Changing mix,
over time

High industry growth

3-5 years

(4-6%)
Open access mandated
for 1 MW+

Sticky customer base

Private participation
models emerging

THREE PRONGED APPROACH TO SUSTAIN POSITION AS INDIAS #1

PRIVATE POWER COMPANY
Develop portfolio
of generation
assets

Actively grow
distribution
footprint

Flexible fuel strategy as not locked into a single fuel: a multi-fuel strategy to
deliver lowest cost power in key markets

Invest in a portfolio of assets lock in strategic markets/sources, create

options in other markets

Expanding portfolio of customers (bulk, residential)

Partner with select state governments

Multiple capabilities to grow at rapid pace

Building world
class team

Operational excellence
Distribution skills
Regulatory management
Business development and project execution skills

Own Critical Primary Fuel

A pithead based plant is inherently less susceptible to

adverse outcomes for serving all states in most cases.

Loadcenter CCGTs only make sense (especially in the

Northern Region states) if gas prices are in the region of ~
U. S. $ 3.00 per MMBTU, which, in our opinion, is highly
unlikely.

In the assumed base case scenario, when gas prices

remain the U. S. 5 per MMBTU range, imported coal
based load centre plants are a third option after pit-head
coal.

Low delivered tariff base load generation capacity

As competition increases the power industry is likely to

see Commodity type pricing.

TPCs plants will, therefore, have to generate and deliver

power at competitive tariffs.
Only then our plants be base loaded to at least 80% PLF

Plants will have to deliver power in the identified state

markets at tariffs of about Rs. 2 per kWh (at the States
TRANSCO bus).
Alternatively, this delivered tariff could be within the first quartile of
the new capacity being added to serve the identified state market.

Low delivered tariff base load generation capacity (Contd.)

The reason form this tariff level are three fold

Competitors such as Reliance, NTPC and Sterlite are setting up

plants that can deliver power at these costs.

Generation costs of existing depreciated SEB / NTPC plants are

already below these levels.

It is possible for TPC to meet these cost targets,

Selective presence in Transmission

Most of TPCs low cost generation facilities will be located

in the coal rich Eastern states of Orissa and Jharkhand.

Inter-regional transmission links from the East to the North

and the West currently have no spare capacity.

Critical for TPC to connect its generation facilities through

dedicated inter-regional transmission lines up to suitable
PGCIL points in the Western and Northern Regions.
This will partially reduce our dependence on inefficient state owned

grids and reduce transmission costs of TPC power.

Evacuation of power further from these points up to the

markets of TPCs choice will have to be studied further by
PGCIL
This will be subject to the pooled tariff principle currently being

adopted.

Forward Integration into Distribution

A mture and economically viable wholesale market is absent

in India today

Sale of large quantities of power to SEBs is fraught with

collection and price risks.

Customer ownership is essential to control cash receipts.

Owning distribution will give TPC an additional long-term
competitive advantage when generation markets
commoditize.

Globally several successful power companies are integrated

players who successfully differentiate themselves in the
front-end with customers.
RWE in Germany, Endesa in Spain and Enel in Italy

International experience has, in fact, proved that standalone

distribution is also a viable option.

Defending the Mumbai License Area Business through five major

initiatives

Tariff Reduction Through Operational Improvements (3SCR)

Tariff Reduction Through Reconfiguration of Units and
Changes in the Fuel Mix at Trombay

Securing Customers Through Power Purchase Agreements

Proactive Regulatory Management to Project Profits and
Distribution Assets

Ensure Competitiveness Though a Level Playing Field on

Standby Charges

Growth Drivers Prospecting

Few projects where the Company is actively considering growth and
expansion:
Greenfield - Within India
1000 MW
1000 MW
1000 MW
Captive Coal Blocks
Distribution
Transmission
Line thru Joint Venture

Pithead Thermal Power Project - Maithon (JV with DVC)

Coastal Thermal Power Plant in Maharashtra - Vile
Generation Project for North India (incld. Delhi)
Of the 10 blocks applied for we expect allotment of 2-3
blocks [Jharkhand/ Chattisgarh/ AP]
Parallel distribution in Adityapur
Also studying various states for Distribution circles
Western Region strengthening and Maithon Transmission

Greenfield - Outside India

1000 MW
500 -1000 MW
450 MW
After Due Diligence, separate
prospective project

Gas/ Coal based Project in Bangladesh

Power Plant in South Africa
Project in Iran
approval would be taken before investing money in the

Thank You

Statements in this presentation describing the Companys objectives, projections, estimates and expectations may be
forward looking statements within the meaning of applicable securities laws and regulations. Actual results could differ
materially from those expressed or implied. Important factors that could make a difference to the Companys operations
include, among others, general economic and business conditions affecting the demand for electric power in the areas
in which the Company operates, changes in Government regulations, tax laws and other statutes and incidental factors.