Analysis of Torrent Power

A thermal power station is a power plant in which the prime mover is steam driven. Water is heated, turns into steam and spins a steam turbine which drives an electrical generator. Sources for the heat can be burning of coal, gas, geothermal, nuclear etc. all generate electricity through heat.

In India, electricity is mainly generated through thermal power stations spread across the country. Here coal is used as a prime driver. NTPC is the largest energy service provider. Along with state run NTPC, there are many private power generation firms like Tata Power, Adani Power group, Torrent Power etc.

Torrent Power is one of the leading brands of power generation in India and is a subsidiary of Torrent Group: along with power generation it has interests in healthcare. Torrent Pharmaceuticals is flagship of this group. It has operations in Gujarat and Maharashtra. Total Income for the quarter ending on 30/09/2011 is Rs 2007.24 crores. Torrent Power has business ventures all the three areas of Power i.e in power generation, transmission and distribution. Presently, it has a generation capacity of 1647.5 MW (1147.5 MW gas based Sugen Plant, 400 MW coal based Sabarmati Plant, 100 MW gas based Vatva Plant)

SWOT Analysis of Torrent Power Ltd:

STRENGTHS:

* The integrated player across the entire value chain having all the three -generation, transmission and distribution


* Highly efficient management (e.g. An instance where The Surat Electricity Company Ltd and The Ahmedabad Electricity Company Ltd. Torrent turned them into first rate power utilities comparable with the best, in terms of operational efficiencies and reliability of power supply.)

* Zero reliance on Chinese equipment
(Despite being cheap, Chinese equipment have performance issues in Indian conditions)

* High levels of operational efficiency 90% with capacity utilization and below 10% Transmission and Distribution losses.

* Huge revenues earned for the quarter ending 30/09/2011 are Rs 2007.24 crores. One of the strongest balance sheets in the sector among private players

* Torrent has a generation capacity of 1647.5 MW and distributes power to more than 3 million customers annually in Ahmedabad, Gandhinagar, Surat, Bhiwandi and Agra.

* Kiran Karnik and Keki M. Mistry as Independent directors in the board.

WEAKNESSES:

* Key items in the annual report are not disclosed. For example, there is no break up of revenues between generation, transmission and distribution


* The Kanpur franchisee has still not started functioning as the local state electricity board is creating issues.

* Torrent having won the distribution contract Fuel tie up and financial closure for the near-term pipeline(1.5GW or ~96% of current installed capacity) is yet to take place

* Lack of coordination among various government departments constrains and delays the acquisition of scarce land, requisite environmental clearance, water availability and other clearances

* Inadequate transmission network leads to delay in commissioning of generation projects as proper evacuation facilities are not in place in time.

OPPORTUNITIES:

There is a huge opportunity for private sector power utilities in India.

* Private distribution franchisees is a big (and relatively untapped) opportunity in India given the poor financial position of the state electricity boards


* In India, T&D Given Torrent's presence in the T&D segment, the growing scope for private sector participation in this space offers a huge opportunity particularly as the Government's focus switches from power generation to power T&D.

* Non-renewable resources are being exhausted at a blistering pace, there is immense scope for renewable energy sector in India.

THREATS:

* The sector has also been grappling with shortage of fuel. The supply of both coal and natural gas has failed to match the growing demand

* Increase in fuel prices is another major concern

* Lack of availability of adequate technical personnel.

* distribution franchisees as opposition from the local State Electricity Boards (who do not want to see private sector distributors in their area) is very strong


* The problems in KG Basin gas basin are ramping up and the infrastructure bottlenecks in the transportation of imported LNG are proving costly for Torrent Power.

* Delays in the construction of the Dahej SEZ in Gujarat will also delay the upcoming 1.2GW project in Dahej (which accounts for 37% of Torrent's total capacity)

Value Chain Analysis:

PRIMARY ACTIVITES

Inbound Logistics:

Torrent power uses both coal and gas as raw material for Power generation. It acquires coal from various mining sources available in India and imports from Indonesia and China for its coal based thermal power plants. Once completed, thermal power plant at Pipavav, coal would be sourced from the Baitami coal mines and balance would be imported.

For its gas based Power plants LNG is sourced from Reliance`s KG Basin(Due irreguralties, currently facing a criminal case against the owner), PMT Gas fields and Petronet LNG`s plant.

Operations:

Power Generation:

Torrent Power currently has an aggregate capacity of 1646.5 MW. The following are the plants through which power is generated.

SUGEN Mega Power Plant near Surat

Out of its total capacity of 1147.5 MW, the power plant caters to the power needs of Ahmedabad, Gandhinagar and Surat to the extent of 835 MW. Additionally, 100 MW is sold on interstate basis, the surplus being sold to others including on short term basis.

400 MW Sabarmati Thermal Power Station (STPS):

The 400 MW Sabarmati Thermal Power Station (STPS) is one of the oldest operating power stations in the country. The first Power Plant at STPS became operational in 1934 with 37.5 MW capacity having configuration of 2x 3.75 MW and 4x7.5 MW.

100 MW Vatva CCPP:

Torrent Power has a 100 MW Combined Cycle Dual Fuel Power Plant located at Vatva in Ahmedabad. The station consists of two