The energy sector 1

The Energy Sector-A
financial study
Team members(BFIA
1b)
Priyank Misra
(75140)
Shantanu Vashishth
(75150)
Puneet Arora
(75141)

Contents
Balance Sheet.
Income Statement.
Ratio analysis.
Beta estimation.
Indian Power-sector Scenario.
Relevant Budget Highlights and Noteworthy recent developments

Royal Dutch Shell
BASIC PROFILE
 Royal Dutch Shell plc. operates as an oil and gas company worldwide.
 The company explores for and extracts crude oil and natural gas.
 It also converts natural gas to liquids to provide cleaner-burning fuels;
 markets and trades natural gas;
 extracts bitumen from mined oil sands and convert it to synthetic crude oil;
and
 generates electricity from wind energy.
 it converts crude oil into a range of refined products, including gasoline,
diesel, heating oil, aviation fuel, marine fuel, lubricants, bitumen, sulphur,
and liquefied petroleum gas (LPG);
 and produces and sells petrochemicals for industrial use.
 the company produces a range of base chemicals, including ethylene,
propylene, and aromatics;
 and intermediate chemicals, such as styrene monomer, propylene oxide,
solvents, detergent alcohols, ethylene oxide, and ethylene glycol.

Ratio analysis
1) Liquidity Ratios
 Current Ratio:-
CR=Current Assets ÷ Current Liabilities
 Quick Ratio:-
QR=Quick Assets*÷Current Liabilities
*Quick Assets=Current Assets net of inventory

 Absolute cash ratio=(Cash + marketable securities) ÷ Current Liabilities
 Internal Interval Measure Ratio:-
IIMR=Quick Asset ÷ Average Daily Operating Expenses*
Average Daily Operating Expenses=(COGS + Other operating expenses – Non-cash Operating cost)÷No. of days in a year

 Debt-Equity Ratio=Debt ÷ Equity
0.00
0.05
0.10
0.15
0.20
0.25
Dec '11 Dec '10 Dec '09 Dec '08 Dec '07
Debt-Equity Ratio
Debt-Equity Ratio

3)Activity Ratios
 Debtors’ Turnover ratio=Net credit sales ÷ Average receivables
 Working Capital Turnover=Net Sales ÷ working capital

4)Profitability Ratios
 Operating Ratio=(Operating Profits ÷ Net Sales)*100
Net Profit Ratio=(Net Profit/Net Sales)*100

Beta Estimation
file://localhost/Users/puneet/Downloads/RDS Beta.xlsx
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
2005 2006 2007 2008 2009 2010 2011 2012
Annual Betas
Annual Betas

Indian power sector
scenario
India has the world’s 5th largest electricity generation
capacity and it is the 6th largest energy consumer
accounting for 3.4% of global energy consumption.
The country’s energy demand has grown at an average of
3.6% p.a. over the past 30 years.
In India, power is generated by State utilities, Central
utilities and Private players.

Installed Capacity
file://localhost/Users/puneet/Desktop/Power Sector at a Glance
ALL INDIA.html

Challenges
1. Availability of Coal: -
India has limited coal reserves, plus, availability of domestic coal is a
challenge on account of various bottlenecks such as capacity expansion of
Coal India Limited , coal block allocation, tribal land acquisition,
environmental and forest clearances, etc.
Transportation of coal is a big concern in itself. Within the country, coal is
transported by Indian Railways and in case of imports; coal is to be
unloaded at ports. In both cases, India currently faces capacity shortage.
Hence, a project developer has to account for and manage its logistics
chain in a manner that ensures regular fuel supply which is a big
challenge.

2. Dependence on Equipment Suppliers: -
• Equipment shortages have been a significant reason for India
missing its capacity addition targets for the 10th five year plan.
While the shortage has been primarily in the core components of
boilers, turbines and generators, there has been lack of adequate
supply of Balance of Plant (BOP) equipment as well. These include
coal handling, ash-handling plants, etc. Apart from these, there is
shortage of construction equipment as well. Hence, inadequate
supply of equipments is a cause of concern for the power
companies.
3. Aggregate Commercial and Technical Losses: -
• India’s AT&C losses are as high as 30% compared with 5-10% in
the developed markets which means out of every 100 units
produced, 30 are lost during transmission and distribution.
Technical losses are due to inadequate investments over the years
for system improvement works. Commercial losses are mainly due
to low metering efficiency, pilferage and theft of power. This is a

SUZLON
BASIC PROFILE
 Suzlon Energy Limited engages in the design, development,
manufacture, and supply of wind turbine generators in the Americas,
Asia, Australia, and Europe.
 The company’
s product portfolio includes drive systems, annular
generators, and grid connection systems, as well as towers and
foundations comprising tower constructions, tubular steel towers,
precast concrete towers, and foundation constructions.
 It also involves in the sale/sub-lease of land; infrastructure
development; sale of gear boxes, and foundry and forging
components; and power generation operations.
 In addition, the company offers land sourcing and permitting, wind
resource assessment, and erection and commissioning services, as
well as operations and maintenance services for projects. Suzlon
Energy Limited was founded in 1995 and is based in Pune, India.

Balance Sheet (figures in crores)

2)Leverage Ratios
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
Mar '11 Mar '10 Mar '09 Mar '08 Mar '07
Debt-Equity Ratio
Debt-Equity Ratio

 Dividend per share & Earning per share
0
10
20
30
40
50
60
Equity Dividend %
Earnings Per Share

Period Mar '11 Mar '10 Mar '09 Mar '08 Mar '07
Net Profit -260.49 -1,238.69 -539.96 1,319.79 1,119.58
Net Sales 4,921.75 3,725.61 7,481.25 7,254.52 5,537.07
Net Profit Ratio -5.2926 -33.248 -7.2175 18.1927 20.2197

Beta Estimation
file://localhost/Users/puneet/Desktop/Beta folder/Suzlon
Beta.xlsx
β = Covariance/VariancE
2.603653247
0
0.5
1
1.5
2
2.5
3
3.5
4
2008 2009 2010 2011 2012
Annual Betas
Annual Betas

National Thermal Power Corporation
Basic Profile
•NTPC Limited is the largest Indian state-owned electric utilities
company based in New Delhi, India. It is an Indian public sector
company listed on the Bombay Stock Exchange in which at present
the Government of India holds 84.5% of equity.
•NTPC Limited engages in the generation and sale of bulk
power to state power utilities in India. The company
generates power from coal, gas, liquid fuel, and hydel
sources.
•It also undertakes consultancy and turnkey project contracts
that comprise engineering, project management, construction
management, and operation and maintenance of power
plants.
•As of December 21, 2011, it had approximately 34,000

2)Leverage Ratio
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
2011 2010 2009 2008 2007
Debt-Equity Ratio
Debt-Equity Ratio

3)Activity Ratios
 Debtors’ Turnover ratio=Net credit sales ÷ Average receivables
 Working Capital Turnover=Net Sales ÷ Working Capital

Period Mar '11 Mar '10 Mar '09 Mar '08 Mar '07
Net Sales 57,464.16 49,250.50 44,988.00 40,210.70 35,507.30
Net Profit 10,713.99 10,822.60 9,491.30 10,536.80 8,904.70
Net Profit Ratio 18.6446 21.9746 21.0974 26.204 25.0785
0
5
10
15
20
25
30
35
40
Earning Per Share (Rs)
Equity Dividend (%)

Beta Estimation
file://localhost/Users/puneet/Desktop/Beta folder/NTPC Beta (1).xlsx
0
0.2
0.4
0.6
0.8
1
1.2
2004 2005 2006 2007 2008 2009 2010 2011 2012
Annual Betas
Annual Betas

TATA POWER
Founded in 1915 and based in Mumbai.
The company supplies power to central and western railways,
Mumbai port, refineries, textile mills, fertilizer factories, BARC.
Installed capacity of 3,127 MW.
Fuel source- thermal, hydroelectric power, wind, solar, and waste gas
sources.
The company also engages in the design and development of
defense systems, such as such as display consoles for C4I
applications
Its Electronic defense system products also include warfare control
centre for the army; combat systems for the navy; automatic data
handling air defence system for the air force; and automotive
electrical system for the army's battle tank

2)Leverage Ratios
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Debt-Equity Ratio
Debt-Equity Ratio

0
20
40
60
80
100
120
140
Earning Per Share (Rs)
Equity Dividend (%)

Beta Estimation
file://localhost/Users/puneet/Desktop/Beta folder/Tata
Beta.xlsx
-0.7
-0.6
-0.5
-0.4
-0.3
-0.2
-0.1
0
0.1
0.2
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Annual Betas
Annual Betas

RELIANCE POWER
Its power projects include seven coal-fired projects, two gas-
fired projects, and seven hydroelectric projects.
13 medium and large-sized power projects with a combined
planned installed capacity of 33,480
The company is also developing coal bed methane blocks to fuel
gas based power generation, as well as developing power
projects based on renewable energy resources, such as solar
and wind.
On February 2, 2011 United Nations registered Reliance
Power's Sasan Power Plant to be eligible for earning carbon
credits followed by Krishnapatanm Ultra Mega Power Project
and Tilaiya Ultra Mega Power Projects.

2)Leverage Ratios
0
0.02
0.04
0.06
0.08
0.1
0.12
Debt-Equity Ratio
Debt-Equity Ratio

Beta Estimation
file://localhost/Users/puneet/Desktop/Beta folder/Reliance
Beta.xlsx
-2
-1.5
-1
-0.5
0
0.5
2008 2009 2010 2011 2012
Annual Betas
Annual Betas

Relevant Budget Highlights and Noteworthy recent
developments
“In power generation, fuel supply constraints are affecting
production.To address this concern,Coal India Limited(CIL) has
been advised to sign fuel supply agreements.with power plants that
have entered into long-term Power Purchase Agreements with
DISCOMs ad would get commissioned on or before March
31,2015.An inter-ministerial group group is being constituted to
undertake periodic review of the allocated coal mines and make
recommendations on de-allocations,if so required.”
“I propose to allow External Commercial Borrowings to part finance
Rupee debt of existing power projects.”

Noteworthy developments
• The union disinvesment secretary recently stated that the govt.
plans to sell equity in its wholly owned nuclear power generation
company,the Nuclear Power Corp. of India Ltd(NPCIL)
• CIL is expected to enter the FSAs with as many as 50 power
producing firms including National Thermal Power Corporation
(NTPC) and Reliance Power for a total capacity of 28,000 MW.
• Larsen & Toubro Ltd. had commissioned India's largest solar photo
voltaic based power plant - 40 MWp - owned by Reliance Power
Ltd. at Dhursar Village, Jaisalmer district of Rajasthan.
• CAG draft reports estimate a loss of over Rs.10 lakh crore to the
exchequer due to free allocations of coal blocks.In light of this
report govt. has decided to auction coal blocks for the next round of
allocations in a bid to refute the CAG argument of such a high loss.

Sources
Yahoo Finance
National Stock Exchange
Bombay Stock Exchange
Marketwatch.com
www.powermin.nic.in
www.infraline.com

The energy sector 1

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