2020 IEX Annual Report Summary

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Operational Performance:

  • In 2020, Company recorded a 3.3% YoY growth in electricity volumes and 6% YoY profit growth.
  • 53.8 billion Units of electricity traded in the fiscal year 2020.
  • The prices discovered on the exchange were 22% lower in FY 20 as compared to FY19. Average Market Clearing Prices were Rs. 3 per unit in FY20.
  • Owing to attractive prices, the procurement of power by commercial and industrial consumers increased by 31% during the fiscal year 2020.
  • The open-access volumes during the year increased by 30%.
  • A total of 49.1 BU were traded in the Day-Ahead Market (DAM) in FY20 as compared to 50 BU in FY19.
  • The average daily volume trade was 134 million units, about a 2% decline from 137 million units in the previous fiscal.
  • Total sell bids were 112 BU in FY20 as against 87 BU in FY 19, indicating growth of 29%.
  • In FY20 total of 4.8 BU were traded through TAM compared to 2.1 BU in FY19.
  • The Company adopted the lower Tax rate of 22%
  • The operating revenue of the company grew by 1.16% YoY to 257 crores.
  • Treasury and Other Income was flat at 40 crores.
  • The PAT grew by 7.8% YoY to 178 crores.
  • In volume terms, a total of 196 MU could not be traded in the fiscal year 2020 due to congestion while in the last fiscal 538 million units were lost.

 

Indian Power Sector:

  • India is ranked as the third-largest power consumer in the world and has the world’s largest transmission system.
  • The per capita electricity consumption is expected to go up from 1,181 units currently to 1,616 units over the next 5 years.
  • India’s power production is projected to grow to 1,905 billion units by the fiscal year 2022 from 1,383.3 in the fiscal year 2020.
  • The national electricity consumption increased only 1.3% YoY.
  • India’s total installed power capacity stood at 370 GW as on March 31, 2020, with thermal energy comprising the largest share at 62%.
  • Renewable capacity registered 12% YoY growth in the fiscal year 2020 to 87GW from 78GW in March 2019.
  • The overall generation in the country increased by 0.8% over last year with conventional power generation recording de-growth of 2.8% and renewable power generation clocking 8.4% growth.
  • The growth in installed capacity helped reduce India’s peak deficit from 0.8% in the fiscal year 2019 to 0.7% in the fiscal year 2020.
  • The size of India’s short-term power market declined by 8BU from 145 BU in 2019 to 137 BU in 2018.
  • Short Term Market Players: 1.) Bilateral- 42.4%, 2.) Power Exchanges- 41.2%, 3.) DSM- 16.5%.
  • The volumes traded through Bilateral decreased by 12.7% YoY to 58 BU.
  • The volumes traded through Power exchanges increased by 5.5% YoY to 56.5 BU.

 

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General Highlights:

  • The low power prices on the Exchange during the fiscal year 2020 led utilities to leverage the Exchange power market not only for meeting power demand but to also replace high-cost power.
  • IEX Ecosystem: 1.) Registered Participants- 6700+, 2.) Distribution Companies- 50+, 3.) Electricity Generators- 500+.
  • Worked towards investing in technology and deepening the power market through new products such as Real-Time Market (RTM) on June 1, 2020.
  • Several new initiatives were taken to improve liquidity in the term-ahead market which enabled market participants and clients to address power requirements even more efficiently.
  • Total registered participants increased from 6,429 in fiscal year 19 to 6,725 in the fiscal year 2020, reflecting growth of 4.6%
  • More than 4200+ commercial and industrial consumers across India representing varied industry sectors such as textiles, metals, chemicals, automobiles, home products, food, cement, institutions, commercial consumers, etc, leverage the day-ahead market on Exchange platform to buy low priced power.
  • New Products launches expected: Long-Duration Contracts, Cross Border Trade, Green TAM and DAM, Exchange-based ancillary market.
  • Launch of India’s first nation-wide delivery based automated gas trading platform, Indian Gas Exchange (IGX) which started operations on June 15, 2020.
  • The average Market Clearing Prices discovered at the exchange continues to be low as compared through Bilateral.
  • The surplus scenario with sell bids in much higher proportion overbuys bids almost 2 times in the fiscal year 2020 demonstrates the availability of ample liquidity for utilities to procure power competitively and reliably.
  • During the year the company completed buyback at Rs.185/share.

 

Megatrends for Energy:

  • The2030 Agenda for Sustainable Development Goals and the Paris Agreement to ensure 40 percent of installed power capacity in the form of non-fossil sources.
  • The Government has set aggressive RE targets of 175 GW by 2022 and 450 GW by 2030.
  • The Government also launched the ‘Kisan Urja Suraksha evam Uhaan Mahaabhiyan’ (KUSUM) scheme to replace diesel pumps and grid-connected electric tube wells for irrigation by solar irrigation pumps.
  • Large-scale up-gradation to Smart Metering, IoT based applications, and Smart Grid technologies are driving the digitization of power distribution. These will help reduce Aggregate Technical & Commercial (AT&C) losses and attain financial viability.
  • The Government of India’s proposal to shift to smart meters by 2022 to help minimize human intervention in metering, billing, and collection will aid ringing down commercial losses coupled with the choice of suppliers by consumers.

 

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Initiatives taken by Govt.:

  • 24×7 supply to all
  • Installation of smart pre-paid meters
  • Prompt payment by distribution utilities to generating companies
  • Making coal available to generators for selling power in short term market and power exchanges,
  • Capacity addition and grid integration of renewable energy
  • Increasing energy efficiency
  • E-mobility solutions, and power market reforms.
  • Draft Electricity Bill, 2020:
  • Easier privatization through sub-licensing/ franchise of distribution areas
  • A separate authority to adjudicate disputes
  • Promotion of renewable energy
  • Cross border trade of electricity
  • Payment security mechanism
  • Ministry of Power continued its thrust on flagship schemes such as Integrated Power Development Scheme (IPDS), Ujjwal DISCOM Assurance Yojana (UDAY), Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY), Saubhagya, UJALA, and Urban Jyoti Abhiyan (URJA) and achieved substantial progress in providing a reliable, affordable and quality electricity supply to the citizens of the country.
  • The concessional tax rate of 15% was extended to the power generation companies to boost investments in the sector.
  • A perceptible shift in the behavior of the distribution utilities has been there over the last few years since many have refrained from signing long-term power purchase agreements and opted for the short- and medium-term contracts instead.
  • India has signed Memorandum of Understanding with Bhutan, Bangladesh, Nepal, and Myanmar to inter-alia improve power connectivity with these neighboring countries for cross border trade of electricity.
  • Green Term-Ahead Market (GTAM) to facilitate trade in renewable energy, for approval of CERC. This market, when approved by CERC, will enable renewable energy trade on your Company’s platform.
  • With the addition of 5,700 MW Inter-regional transmission capacity, the loss of trade volume at Exchanges has further reduced to less than 1%.

 

Futures and Forward Contract in Electricity:

  • CERC will regulate the ready delivery and non-transferable specific delivery contracts.
  • Commodity derivatives other than non-transferable specific delivery contracts shall fall under the regulatory purview of SEBI.
  • Both SEBI and CERC have approached the Hon’ble Supreme Court to withdraw their appeals in terms of their agreement.
  • Once the above matter gets solved it will allow the launch of long duration physical deliverable contracts on the power exchanges.
  • The electricity derivatives shall also get introduced in the commodity exchanges and will provide hedging opportunities for the market participants.

 

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IGX:

  • The government aspires to increase the share of natural gas in the country’s energy basket from 6% to 15% by 2030 as well as undertake significant investments for expanding the gas pipeline infrastructure. IGX would be a beneficiary.
  • IGX state of the art technology is in partnership with GMEX, UK.
  • IGX will help India transition towards a gas-based economy, thus providing a fillip to growth in the gas market.
  • The Gas Exchange will facilitate trade in physical delivery of gas from designated hubs through world-class products, and thereby boost gas usage in India.

 

Management Changes:

  • Mr. Srivastava took over as Managing Director & CEO of the Company effective from July 21, 2019
  • The term of Mr. Satyanarayan Goel, Managing Director & CEO of the Company expired on July 20, 2019. Thereafter, he took over as Non-Executive Chairman w.e.f 20th July, 2020.
  • Mr. Dinesh Kumar Mehrotra, Chairman and Non-Executive Independent Director, resigned from the directorship of the Company w.e.f. May 22, 2019.
  • Ms. Renuka Ramnath, Non-Executive Director, retired by rotation w.e.f 18th Sept 2020
  • Mr. Gopal Srinivasan, Non-Executive Director, resigned from the directorship of the Company w.e.f 30th Jan 2020
  • Mr. Mahendra Singhi, Non-Executive Director resigned from the directorship of the Company w.e.f 13th March, 20.
  • Mr. Ajeet Kumar Agarwal, Non-Executive Director on the Board as the nominee of REC Limited (formally Rural Electrification Corporation Limited) has ceased to be Director of the Company with effect from June 1, 2020.
  • Mr. Amit Garg as an Additional Director (Non-Executive Non-Independent Director) with effect from May 14, 2020.

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Vishnu Kapadia
Vishnu Kapadia is the founder of MJK Finvestment
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