Tata Power provides electricity generation, transmission, distribution, and trading operations in India. The document analyzes opportunities and challenges for Tata Power to grow through new business lines like renewable energy, power services, and consulting. It estimates that entering these new lines could require hiring over 20 managers and engineers with an estimated annual salary cost of over 15 million rupees.

1. OPERATIONS STRATEGY FOR TATA POWER
Gaurang Gupta(pgp10.gaurangg@spjimr.org)
Jaikishan Gianani (pgp10.jaikishang@spjimr.org)
Abhaya Mishra(pgp10.abhayam@spjimr.org)
Muthu Kumar(pgp10.muthuk@spjimr.org)
Sumanth S V (pgp10.sumanthv@spjimr.org)

2. Agenda
1. Indian Power sector – An overview
2. Introduction to TATA Power
3. Problem Definition
4. Alternatives
5. Opportunity evaluation
6. Detailed analysis of the chosen option
7. Manpower Estimates
8. Overall financials

3. Power Sector in India: Drivers and Roadblocks
Drivers
Rapid economic growth has created a need for dependable and reliable supply of electricity
Electricity Act 2003 has opened up the power business in India leading to huge competition
Private sector is set to be the Major source of growth over the next decade
Advent of advance technology has led to the requirement of skillful manpower
New business model with cost reduction and risk mitigation are the key focus of the sector
Roadblocks
Implementation of the power sector reforms extremely slow
Limited supply of raw material is leading government regulations and raw material cost
Majority of current capability are public held and most of the operations are done in-house

4. Indian Power Sector - Snapshot
•India’s total installed capacity, as on 30 November.2011*, has been
estimated at 185496MW (captive capacity of 19509MW)
•The state contributes 83605 MW, central 57072 MW and Private
sector 44818 MW as of 30 November 2011.
• Installed Power Capacity in India (MW) • Installed Capacity by Sector
Private
Sector, a
Total 185496
small part
Thermal 121805
of the pie
Hydro 38748
Captive 19509
Rest 20162
Nuclear 478o

5. Indian Power Sector - Snapshot
•Thermal Power accounts for about 64% of power produced in
India, followed by hydro electric power at 23%.
•Of the thermal power mix still India is dependent heavily on the coal
reserves contributing about 84% of the total thermal generation followed
by Gas at about 15%
• Generation Mix • Thermal Power Mix
Coal Gas Oil
1%
Coal Based
Thermal– Main
15% source of energy
84%

6. Industry Highlights-Indian Power Generation in 2011
•The annual growth during in the energy generation during the year has been 5.55%
compared to CAGR of 5.17% during the period 2001-02 to 2010-11
•Thermal power generation achieved a growth rate of 3.81% while hydro 10.01%
due to revival of good monsoon.
•Nuclear generation achieved a remarkable growth rate of 41.04% due to improved
availability of power.

7. Demand and Supply Analysis
Power Generation (billion units)
2009-10
2007-08
2005-06
2003-04
2001-02
1990-91
0 100 200 300 400 500 600 700 800
Demand-supply gap (billion units)
1000
800
600
400
200
0
2005 2006 2007 2008 2009 2010
Demand Availability

8. Introduction to TATA Power
Power Business
Generation Transmission Distribution Trading Fuel & Logistics
3000 MW installed Mumbai &
Mumbai, NDPL – 30% equity stake with
capacity Powerlinks
AT&C losses Trading Unit Indonesian Coal Mines –
reduced from 50% 10 million tonnes of coal pa
2500 Mw in JV with PowerGrid for
to less than 18% assured
commission 1200 Km lines
Power Generation Installed Capacity ~ 3000 MW JVs for Fuel Assurance, Subsidiaries for Gen & Dist
Thermal – Trombay(MH) 1580 MW
Coal, Gas, Oil
Jojobera(JH) 428MW
Belgaum(KN) 81MW
Thermal – Waste Haldia(WB) 120 MW
Heat Recovery
Hydro Bhira, Bhivpuri 447MW
(MH)
Renewables Wind farms 228 MW
Solar 3 MW
TATA Power is a major private sector power company of the country.

9. Problem Definition
Revenues Net Profit ???
10,000.00 1000
???
Rs. (in Crores)
Rs. (in Crores)
8,000.00 800
6,000.00 600
4,000.00 400
2,000.00 200
0.00 0
Year Year
30%
25%
25% 23%
20% 20%
20% 18%
17% 16%
13% 14% 13%
15% 10%
10% 8%
6%
5%
0%
-5% 2003 2004
-1% -2% 2005 2006 2007 2008 2009 -2%
2010 2011
-3%
-10% -7%
NTPC TATA Power
TATA Power’s revenues have fallen YoY while NTPC has grown in the same period.

10. Alternatives
New
Growth by entering new business Growth by Innovation.
Enter power services business. Use of alternate fuels and technologies.
Business
Growth by scale Growth by Replication
Improve operations (better Acquire new similar power companies and
collections, running of plants at full set up similar power plants in other
Same
load, lower AT&T losses). geographies.
Same Location New
The four options have to be evaluated on the following parameters:
1. Feasibility- Can we do the business in India in the given context?
2. Investment- Is the business asset heavy or asset light?
3. Future cash flows- How fast will the cash start to flow in?

11. New power plants: Opportunities
Power sector has targeted per capita consumption of 1000 KWh by the
end of 11th 5 year plan (2007-2012) compared to levels of 734 KWh in
2008-09.
Eleventh five year plan period sets up an ambitious capacity addition
targets to the tune of 62 GW. Majority capacity addition will be seen in
thermal sector which will account to 81.45% of total capacity addition by
2012.
The captive power generation units represents 10% of total installed
capacity. It has increased at a CAGR of 7% since 2005-06. This growing
trend is set to continue.
Power generation grew at a rate of 6.6 per cent in 2009–2010, as
compared with 2.7 per cent in 2008–09.

12. New power plants- challenges
Aligning new vendors and making new purchase contracts for coal and
gas for thermal power stations
Inventory management: The inventory of coal has to be critically
managed. The demand varies with seasons and across day
Delay of projects due to shortage of equipments which are to be
provided by BHEL
Capital Investment: Very high capital investment need for new power
plants with very high
Land acquisition: Delays in new land acquisition policies lead to
increase in the number of unfinished projects. There is a significant
mismatch of expectations of the Project Affected persons (EAP)
Source: KPMG Report

13. Renewable Energy- Opportunity
Capacity addition of 30,000 MW is envisaged during 12th plan for
renewable, raising the total capacity to 54,000 MW by 2022. This will have
40000 MW of wind power alone
Potential from renewable energy sources is estimated to be approximately
85,000 MW. Total potential for wind power in India is estimated at 48.5 GW
The government has announced a generation based incentive of ` 0.50 per
unit of electricity from wind power projects. This is done to increase
investments in wind projects
Research analyst firm, GBI Research predicts that the global carbon trading
market will experience a dramatic growth after 2012 and reach USD 1.2
trillion by 2020.
Low import duty for several raw materials and components, capital subsidy
and provision of accelerated depreciation for solar projects. 100% EOU is
permissible for solar products

14. Renewable Energy- Challenges
High capital costs: Solar power plants= 17 crore per MW and operational
cost 13.45-18.44 per KW. Wind Power Plant=5.5-6 crore per MW
Cost of technology development and production need to be reduced
significantly from current levels
Quality and consistency issues of renewable power arising from the
intermittent nature of electricity from wind and solar sources
Creditworthiness of counter parties has posed challenges
The demand for carbon allowances fell sharply in late 2008 and early
2009 as the recession reduced economic output, resulting in much lower
emissions than had been expected.

15. Power services business-Opportunities
The amendment in the Indian Electricity Act has paved the way to private
players to foray into the O&M services in India.
Renovation, modernization, up-rating and life extension of old thermal and
hydro power plants is also likely to contribute to the quick turnaround of
generation capacity expansion.
National Training Policy for the power sector mandate: A minimum of 1.5%
of the salary budget of the organization may be allocated for training to begin
with this should gradually be increased to 5% of the salary budget
100 per cent FDI is allowed in the Indian power sector
The Government of India (GoI) is planning nine ultra mega projects of 4 GW
each with an estimated individual investment of US$ 4 billion (INR 192
billion).

16. Power services- Challenges
• Competition • HVL Lab • Attracting the • Setting up a
Testing
O&M
Consulting
Training
from OEM needed skilled talent new training
manufacturers centre
• Equipment • Development
• Acquiring and of in house • Getting
experienced infrastructure expertise trained
manpower faculty
• Effective • Salary
• Cost of procurement escalation • Training &
employees system to Development
ensure • Training of infrastructure
• Equipment availability of the manpower
and spares
technology

17. Transcending the Stereotype bewilderment
Operational
Decisions &
Capability
Strategic Decisions
Operational
Challenges &
Capability
Solution lies in transcending the obvious
Identify or create Seize the unobvious
Develop or acquire
new market / opportunity
Capability
opportunity

18. Power Services- Market Identification
Power Power
Generation consumption
Large /
Utility Power Captive Merchant Medium
plants Power plants power plants Scale
Industries
• Their business is to • Company owned power plants • These plants manufacture • Consumers of power. They do
produce and sell power to that produce high quality and sell power in the open not own CPPs but have power
retail consumers power for self consumption market agreements with state
• Power sector majors like • These are gaining importance • The power is traded at companies
NTPC, NHPC fall in this because of their ability to market price, risk • The number of electrical
category. provide high quality and completely born by the equipment owned and operated
• Core competence – uninterrupted power supply developer in these companies is
operations and • Core competence is not power • Diesel and Gas are the substantial
maintenance of power generation primary sources because of • This sector is the cash cow
utilities • Electricity Act 2003, have lower installation cost and which has not been tapped
• They are listed companies allowed the these power un- availability of coal • This sector has a substantial
and have a substantial stations to supply the surplus • Core competence is trading spend on O&M and the number
public holding to the grid and estimation of players are many

19. Operations and Maintenance
Boiler Generator Transformer
Load Motor Switch Gear

20. Operations & Maintenance
To ensure continuous supply of power with the aim of having zero outages, reliable quality and optimum
utilization of established facilities for serving the client
Prospective Clients ► Complete onsite staff to handle daily O&M
functions
Oil Power Cement Metals
► Preventive maintenance and periodic repair to
ensure that the plant remains in peak condition
Services Offered
► Performance improvements through innovation &
cross learning
► Risk management and Quality assurance
► Lead, train and manage the staff to establish a
culture of technical competence, individual
responsibility and teamwork
► Provide training and indoctrination to the
permanent plant manager on the
policies, procedures and philosophy of
management
Competitors

21. Testing and Commissioning
High Extra
Voltage High Insulation
Testing Voltage Testing
Equipment Testing
Switch
Relay
Gear
Testing
Testing

22. Testing & Commissioning
Providing advanced testing services (especially extra high voltage testing) as a complete solution from
testing to installation to trial runs.
Prospective Clients
► Supply, installation, testing &
Oil Power Electrical Cement Metals commissioning of Electrical System of
Equipment Industrial/Captive Power Plants
► Vibration Analysis and Dynamic
Services Offered
Balancing
► Development of turbo generator
spares by reverse engineering
► Relay testing
► Commissioning (ETC) of power
transformers & ETC EHV switchyards
► Turbine Re-blading and Slow Speed
Balancing at site
► Annual testing contracts for process
industries
Competitors

23. Training Services

24. Training Services
Enhancing human and organizations excellence in domains of power and energy by blending frontier
technologies with management to facilitate HRD interventions that are instrumental in providing
reliable economic and clean power
Prospective Clients Mandatory induction level training for
transmission & distribution (T&D)
Oil Power Electrical Cement Steel personnel similar to the generation
personnel
Equipment Enhance human and organizations
excellence by blending frontier
technologies with management leading to
reliable, economic and clean power
Customer satisfaction through reduction in
the cost of delivered power and supply of
reliable and quality power at adequate and
improving levels of efficiency and
accountability
Establish, maintain and manage
laboratories, workshops, experimental
transmission lines, sub-stations and other
facilities required in the pursuance of its
objectives
Competitors

25. Consulting Services

26. Consulting Services
Addressing customer issues for power and energy domains by providing cutting edge solutions for
feasibility study of new power plants: cost reduction, benchmarking and energy conservation projects
for established plants
Prospective Clients • Combine strategic, financial/economic and technical
Oil Power Electrical Cement Steel advice as an integrated consultancy service to public
Equipment and private sector clients
• Thorough Investigation in case of failures
• Feasibility study, Strategic planning and economic
analysis
• Manage complex regulatory challenges encountered
during development of generation facilities
• Identify potential risks to project success, and
develop operational solutions aimed at maximizing
site profitability
• Identify new and better ways to produce energy-
related products
• Analysis and development of sustainable energy
systems and advice on Clean Development
Mechanism, carbon footprint etc.
Competitors

27. Manpower Estimates
Testing
Consulting
No of Managers 4
Total Manpower 8 Annual Salary 10,00,000
No testing engineers 16
Annual Salary 15,00,000
Annual Salary 6,00,000
Wage Bill 1,20,00,000 Wage Bill 1,36,00,000
Training O&M
Total Manpower 4 Power Plant Served 2
Annual salary 10,00,000 No of shifts 2
Admin 2 Industry Plants served 50
No of Shifts 1
Annual Salary 3,00,000
Manpower to run 1 shift 4
Wage Bill 46,00,000
Total Manpower 216
Salary 40,000
The figures are indicative and they will change
Annual Salary 4,80,000
with the growth of TATA power’s business.
Wage Bill 10,36,80,000

28. Overall Financials
Overall Financials (` crores)
1800 236 250
1,573
1600
1400 200
1200 1,098
144 142 150
1000
800 694 92
84 100
600
401 53
400 45
50
29
200 16 151
10
0 0
2012 2013 2014 2015 2016
Total Revenue EBIT Net Profit
Even with a pessimistic approach, TATA Power will get to `1500 crores revenues in the next
5 years.
The net profit will be in the tune of `142 crores.
And all this will happen without any significant addition of assets (capital investment).

30. Detailed Financials
Operations & Maintenance (` Crores) Testing (`Crores)
1600 1,467
220 250 80 7
6.168
1400 70 6
200 54
1200 60
1,014 4.4 5
1000
132 132 150 50
39 3.4 4
800 631 40 2.8
85 28 2.2 3
600 76 100 30 21 1.8
355 49 20 1.3 1.4 2
400 39 0.9
12 116 26 50 0.6 1
200 8 10
0 0 0 0
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Revenues EBIT Net Profit Revenues EBIT Net Profit
Consulting (` Crores) Training (`Crores)
20 8 25 3.1 3.5
6.817 21
7 3
15 5.514 6
20
2.116 2.1 2.5
4.211 4.3 5 15 12 2
10 3.1 9 3.3 4 9
1.5 1.3
2.5 1.5
2.2 6 1.8
3 10 7 1.0 0.9
5 2 0.7 1
1.2 0.6
5 0.4
1 0.5
0 0 0 0
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Revenues EBIT Net Profit Revenues EBIT Net Profit