Indian Energy Exchange – 2020 Annual Report takeaways. –

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Indian Energy Exchange History

Decarbonization, Decentralization, Digitization, and Democratization will drive the future of energy across the world. India will be no different.

These four megatrends will lead to sustainable, reliable, and affordable energy for the future. These shifts will also lead to a sectoral transformation from a system based on centralized generation, transmission, and distribution to one that integrates distributed generation, supply chain automation, and low carbon technologies. In addition, they will further the development of digital products that would optimize power flow to end consumers, thus making them more powerful.

Decarbonization – Renewable Energy (RE) will occupy a central role in the evolving energy dynamics in India, both from energy security and sustainability perspective. The Government has set aggressive RE targets of 175 GW by 2022 and 450 GW by 2030.

Decentralization – The Indian Government envisages 40 GW of decentralized solar energy solutions by 2022. The transformation of the automobile sector into electric mobility will be a key beneficiary of decentralization. With a capital outlay of Rs 10,000 crores, policies like FAME II are allowing for models such as virtual power plants through the integration of vehicles with grids. Innovative decentralized RE hybrid models for competitive charging stations will also emerge.

Digitization – 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

Democratization – The Indian Government is set to boost Renewables with a peer to peer (P2P) energy trading initiative.  Increasing urbanization as a key factor driving India’s growth story and migration towards Smart Cities, calls for a profound shift in how we power society.

As they move towards decarbonizing India and building a sustainable energy economy, 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.

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In fiscal year 2020, IEX recorded a 3.3% YoY growth in electricity volumes and 6% YoY profit growth.

About IEX –

IEX is the first and largest energy exchange in India providing a nationwide, automated trading platform for physical delivery of Electricity, Renewable Energy Certificates, and Energy Saving Certificates.

The exchange platform enables efficient price discovery and increases the accessibility and transparency of the power market in India while also enhancing the speed and efficiency of trade execution.

In August 2016, the Exchange received ISO Certifications for quality management, Information security management and environmental management. The Exchange is now a publicly listed company with NSE and BSE. IEX is approved and regulated by the Central Electricity Regulatory Commission (CERC).

Some Facts –

Commenced operations in 2008

53.8 billion units of electricity traded in fiscal year 20.

3.3% YoY growth in IEX’s electricity traded volume

Average daily trade 6,000+ MW

Record day volume: 193 Mus

IEX Eco-system

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. (IEX Annual report 2020)

Across India, the total generation was 1383.3 billion units of electricity in the fiscal year 2020, out of which 75% was generated from thermal, 11% from hydro, 10% from renewables, and 3% from nuclear.

Team at IEX

P&L

Risks and mitigation techniques –

Strategic Risk Mitigation – The Enterprise Risk Management Committee (ERMC) meetings are held on a half-yearly basis, where strategic and operational risks are presented along with mitigation measures. Also, from the regulatory perspective, Market Surveillance Committee & Risk Management Committees are formed as mandated by CERC and the committee meetings are held as per timelines fixed by CERC with reports submitted to the regulator at regular intervals. The state-level regulations are governed by State Electricity Regulatory Commissions (SERC). The Company also proactively engages in regular policy advocacy with CERC, SERCs, Ministry of Power (MoP), and other industry bodies for any change in regulation that may adversely affect its business.

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P&L –

Employee benefit cost increased mainly due to annual increments, hiring of additional manpower to meet the business requirements for the strengthening of IT team, creating a talent pool,  product development, market expansion, etc., remuneration of new MD & CEO,  payment of remuneration in the form of commission to the Non-executive Chairman of the Board (wef from July 21, 2019, as approved by the Shareholders in their meeting held on September 19, 2019).

The finance cost increased from Rs.73.42 lakh to Rs.156.56 lakhs during the year due to Rs. 51.57 lakh finance cost recognized on lease liability in accordance with IND AS 116 “Leases” adopted from April 01, 2019, and provision of Rs. 80.18 lakh towards refund of 70% of the return earned on the investment of initial security deposit received from members of the exchange, as per the directions of the CERC for full-year which was Rs. 50.85 lakh for the half-year during FY19.

As on March 31, 2020, the Company’s investments (Noncurrent and Current) and cash and bank balances stood at Rs. 54,281.45 lakh (including Rs. 1,000 lakh invested in Indian Gas Exchange Limited, wholly-owned subsidiary of the Company), as against Rs. 54,226.92 lakh as on March 31, 2019.

The Company’s trade receivable was of Rs. 18.54 lakh as on March 31, 2020, as against Rs. 4,588.65 lakh as at March 31, 2019, previous year trade receivable was high mainly because of non-clearing day on March 31, 2019, due to Sunday.

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Key Market highlights during fiscal 2019-20

Total Revenue of the Company was almost flat Rs. 29,715.22 lakh as compared to Rs. 29,415.86 lakh during the financial year 2018-19.

PAT increased by 7.8% from Rs. 16,503.67 lakh to Rs. 17,791.61 lakh.

Company paid an interim dividend of 250% in March 2020

Electricity volume increased by 3.2%, a total of 53,862 million units were traded in the electricity segment, compared to 52,189 million units traded in the fiscal year 2018-19.

Total volume traded across all market segments was down by 2% at 59,889 million units as compared 61,144 million units traded in fiscal year 2018-19.

One Nation, One Gird, One price was realized on 309 days i.e. 84.66% of the days this fiscal.

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.

Average Market Clearing Price in the fiscal year 2020 at Rs 3 per unit was 22% lower than the prices discovered in the previous year.

Owing to attractive prices, the procurement of power by commercial and industrial consumers increased by 31% during the fiscal year 2020

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JST Investments is a Mumbai-based investment firm that believes in long-term wealth creation. It's a brainchild of Aditya Kondawar, Aditya Shah, and Anish Moonka.
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