AVENDUSINFRASIGHT

DearReader,
CONTENTS Summary KeyPerformanceIndicators Editorial:IndianPortsCalling InternationalPlayers MarketSnapshot TransactionsSnapshot Newsline AvendusPowerIndex Abbreviations Page 1 2 3 14 17 19 27 28

DECEMBER2011

Indian infrastructure sector saw M&A transactions aggregate to USD1.2bn over the last quarter with the USD203.9mn investment in ReNew Wind Power by Goldman Sachs being the highlight. Outbound dealactivitywasmostlyintheoil&gasandminingsectorsincludingstake acquisition in Carrizo Oil & Gas by GAIL India and the takeover of Coal MineConcessionbyMercatorLinesinIndonesia. In this second edition of Avendus Infrasight, we present to you an in depth look at the participation of global players in Indian ports sector. Indiahaswitnessedover9%yearonyeartrafficgrowthatitsportsover the last decade. With capacity growth lagging the traffic growth, overcrowding is already occurring with vessels jostling for berths. Cargo trafficissettoexplodefurtherwithsignificantvolumedriverssuchascoal imports and containerized cargo to come into play. With 90% of Indias trade happening through ports, there exists a pent up demand for new andimprovedportinfrastructure.Over80%oftheinvestmentinportsis projected to come from the private sector over the next few years. Surprisingly,thoughprivateparticipationhaspickedupinportsoverthe lastdecade,participationbyinternationalplayershasbeenlimitedmostly to container terminal operations. However, even their limited participationhasyieldedbetteroperatingefficiencies.Withlargenumber of global port operators scouting for investment opportunities, their participation in India could help transform Indian ports into world class facilities, while India offers them an attractive investment opportunity. Given the dynamics influencing the sector, it is only a matter of time beforethissegmentofIndianinfrastructureseesincreasedparticipation fromglobalportoperators. InfrastructureTeam,AvendusCapital

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KEYPERFORMANCEINDICATORS
AIRPORTS
8 6 1.1 4 2 0 Sep10 Nov10 Jan11 Mar11 May11 Domestic Source:DGCA International Jul11 Sep11 1.1 12.9% 3.9 4.8 22.5% 17.7% 4.9 1.1 1.1 21.2% 4.8

AirPassengerTraffic(Mn)
1.2

35%

60 50

AirCargoVolume('000Ton)
28.2% 25.6 22.4 20.0 21.1 24.3 23.3 18.2

30% 20% 10%

1.3 18.8%

1.2

25%

40 30

(1.7%) 1.8% 33.5 29.6 3.2% (3.1%) 29.9 32.2 (2.5%) 29.2 31.4 (12.2%)

11.8% 15.1% 5.4 5.0 4.5

15%

20 10

0% 10% 30.9 20% Sep11

5% YoYGrowth%(RHS)

0 Sep10 Nov10 Jan11 Mar11 May11 Jul11 Domestic Source:DGCA International

YoYGrowth%(RHS)

PORTS MajorPortsFreightTraffic(MT) Monthly

55 51 50 45 4.5% 40 35 (7.2%) (7.1%) 3.0% 49 42 50 47 44 7.0% 5.4% 3.8% 4% 12% 45 4% 550 500 450 2.2% FY09 FY10 531 5.7% 1.6% FY11 FY12E 20% 12% 650 600 561 570 10.5% 6% 2% 2%

MajorPortsFreightTraffic(MT) Annual
630 14% 10%

Oct10 Dec10 Feb11 Apr11 Jun11 Aug11 Oct11 CargoTraffic Source:IndianPortsAssociation YoYGrowth%(RHS)

CargoTraffic Source:IndianPortsAssociation

YoYGrowth%(RHS)

POWER
BU 100 75 50 8.3% 25 4.8% 0 Oct10 Dec10 Feb11 Apr11 Jun11 Aug11 Oct11 PowerGeneration Source:CentralElectricityAuthority YoYGrowth%(RHS) 7.2% 6.4% 7.9% 71

PowerGeneration
67 66 71 71 73 74

%p.a. 15% 10% 9.4% 5% 5.4% 0%

MU 8,000 6,000 4,000 2,000 0 3,776 4.0 2.8

TradedVolumeandPrice
7,451 4,622 4.2 4.0 5,304 4.8 3.8 3.5 2.8 2.9 3.9 5,513

INR/Unit 8 4,526 5.4 4.2 4 2 6

4,063 4.0 2.5

Oct10 Dec10 Feb11 Apr11 Jun11 Aug11 Oct11 ExchangeVolume BilateralVolume BilateralPrice(RHS) ExchangePrice(RHS) Source:CentralElectricityRegulatoryCommission

ROADS
INRBn 160 120 78 80 40 670 0 Q4FY11 Q1FY12 ProjectCost Source:NationalHighwayAuthorityofIndia Q2FY12 779 47 1,500 1,697 26 378 TillOct11 750 0 2,000 0 FY09 FY10 LengthAwarded Source:MinistryofRoadTransport&Highways FY11 FY12E LengthCompleted 643

ProjectLOAAwardedbyNHAI
151

Km 3,000 2,250

Km 8,000 6,000 4,000

NHDP:ProjectsAwardedandCompleted
7,300 5,059 3,360

2,205

2,693 1,784

2,500

Length(RHS)

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INDIANPORTSCALLINGINTERNATIONALPLAYERS
INTRODUCTION Trade in any commodity between regions is driven by the demandsupply imbalance and is influenced by the policy framework governing the markets and the infrastructure supporting the trade process. While the current global economic conditions do pose the risk of a second round of economic downturn, the long term view on global trade remainspositive,primarilydrivenbytheemergingmarketsofIndiaandChina. Growthininternationaltradehasforcedtheemergingmarketstoconcentratemoreontheimprovementofsupporting infrastructureseaports,roadsandairports.Consideringthatover80%(byvolume)ofworldtradeiscarriedoutthrough theinternationalshippingindustry,correspondingfigureforIndiabeing90%,thereislittledoubtthatdevelopmentof road and airport infrastructure without adequate investments in seaports would not contribute significantly to the economyofanation. Tradegrowthof18.8%CAGRandporttrafficgrowthof9.7%CAGRinIndiaoverFY0110,coupledwithunderinvestment inseaportinfrastructure,hasledtohighcapacityconstraintatIndianportstoday.Withporttrafficprojectedtogrowto morethan2,495MTbyFY20Efrom892MTinFY11,overINR2,800BnofinvestmentisenvisagedintheIndianseaport infrastructureoverthenextdecade.Giventhehugequantumofinvestmentrequiredinthesectorandtheconstrained financingcapabilityofGovernment,privateplayerswouldneedtoplayamajorroleinthedevelopmentofthesector. Indianseaportinfrastructurehaswitnessedincreasedprivateparticipationoverthelastfewyearsbutoveralltheports continuetounderperformwhencomparedwiththeleadingportsoftheworld.Globalportoperators,withthestrong knowhowofportoperations,couldholdthekeytobringingaboutefficienciesinIndianportoperations.Giventhatthere has been a limited participation of global players in Indias bulk cargo port operations till now, but even this limited participationhasbroughtaboutimprovementsinoperationalefficiency,increasedparticipationofGlobalPortOperators couldactasacatalystfortransformationofIndianportsintoworldclassfacilities. India offers strong trade growth prospects to international players and inturn is presenting an opportunity to participateindevelopingaworldclassseaportinfrastructureinIndia. INDIAATTHEFOREFRONTOFGLOBALTRADE Weaknessesinmajordevelopedeconomiescontinuetoprolongtheglobaleconomicrecoveryfromthe2008financial crisis. However, in contrast with the continuing subdued GDP outlook of the developed economies, some of the developingeconomieshaveshownresilientGDPgrowthandhavebeencontributingtomorethanhalfoftheexpansion ofworldeconomysincethirdquarterof2009.ThegrowthindevelopingeconomieshasbeenledparticularlybyChina, India,RussiaandBrazil.
RealGDPgrowthrateIndian&Chinaleadingthepack 10% 6% 2% 2% 6% 2008 Source:WorldEconomicOutlook,September2011 2009 2010 2011E 2012E 2016E World US Mexico Brazil UK Russia Germany China India Japan

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ThegrowingGDPpercapitaoftheworldeconomieshighlighttherisinglevelsofwealthintheBRICcountries.Risinglevel ofwealthinIndiaisexpectedtocontributetoaprivateconsumptiongrowthhigherthanitsindustrialproductiongrowth leading to increased import activity at its ports. International trade has had high correlation with GDP growth of a nation, and with BRICs GDP expected to continue growing at a fast pace, bulk of the growth in international trade is expectedtobecontributedbytheBRICcountries.
Exports(%ofWorldTotal)BRICsmovinguptheorder 40% 30% 20% 10% 0% 199194 200004 BRICs US 200509 OtherEMEs EuroArea 2015 Imports(%ofWorldTotal)BRICsmovinguptheorder 40% 30% 20% 10% 0% 199194 200004 BRICs US 200509 OtherEMEs EuroArea 2015

Source:IMFWorkingPaperLowIncomeCountriesBRICLinkage:Aretheirgrowthspillovers,September2011

With Indias trade volume of goods and services projected to grow at over 10% visvis less than 10% in Russia and Brazil,itscontributiontointernationaltradewouldsignificantlymoveup.Toputthingsinperspective,over20012010, seabornedrybulktrade(maindriverofglobalshippingindustry)grewat5%CAGR75%ofthisgrowthwascontributed byincreaseintradeofIronoreandCoaloutofwhichIndiacontributed26%ofincreasedtradeincoal. AsIndiascontributiontogrowthofglobaltradeincreases,itisexpectedtoseeheightenedpaceoftrafficgrowthatits ports. LARGEINVESTMENTREQUIREDATINDIANPORTSTOKEEPPACEWITHTRAFFICGROWTH AsofSeptember2011,Indianportinfrastructurecomprisedof13majorportswithcapacityof672.2MTand~200non majorports(withonly~60beingactive)withcapacityof391.7MT.Forhighproductivityofports,theoptimalcapacity utilizationstandardisestimatedat7075%,whichcurrentlystandsat89%atmajorports(someportsevenoperatingat over 100%) of India and 79% at minor ports of India. The existing capacity constraint along with low level of mechanization and inefficient processes (nonavailability of berth / equipment, documents not being ready, lack of storage space, waiting for barges etc.) is leading to underperformance of Indian ports. Just to highlight the state of affairs,thepreberthingdetentiontime,whichwasat11.96hours(underportaccount)formajorportsofIndiaduring FY2011,isnotevenaconceptinsomeoftheworldclassportsasthecapacityislargerthanthetraffic. Given that over 90% (by volume) of Indian trade is carried out through the shipping industry, development of Indian seaport infrastructure is critical to sustain the success of accelerated growth of the Indian economy. With port traffic projected to grow strongly in the medium to long term, existing scenario of Indian ports would only worsen if large investmentsarenotmadeinthesectorandutilizedefficiently.Developmentisrequirednotonlyintheformofcapacity creation but also in the form of mechanization, deeper draft, and hinterland connectivity of Indian ports. The exhibit belowshowstheprojectedtrafficgrowthatIndianportsandthecapacityrequiredatIndianports.

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TrafficgrowthatIndianPorts(MT)

CapacitygrowthatIndianPorts(MT) 1,671

1,215 1,280 816 570 322 790 642 408

1,460 1,116 968

FY11 MajorPorts

FY15E

FY20E MinorPorts

FY11

FY15E MajorPorts

FY20E MinorPorts

Source:MaritimeAgenda20102020

PRIVATIZATIONOFINDIANPORTSHASPICKEDUPBUTOBJECTIVESOFPRIVATISATIONREMAINUNFULFILLED WithlargescaledevelopmentrequiredintheindustrytoenhancecapacityandtotransformIndianportsintoworldclass facilities,privatizationofIndianportswasinitiatedwiththe1996policydocumentwiththeobjectivesofgettingfinancing supportandofimprovingoperationalefficiencies(referBackgroundonneedforprivateparticipationinportsonPage 12).Sincethen,investmentsbyprivateparticipantsinthesectorhavepickedupconsiderably. IncreasingprivateinvestmentinIndianports(INRBillionat200607prices)sinceopeningupofthesector

1994Ministryof SurfaceTransport published document highlightingGovt. intentionof promotingport privatization

1998JV guidelinesaimed atattracting technology, strategicalliances andenhancing Pvt.participation issued

19961 policy guidelines announcedfor pvt.participation (domesticand foreign)inmajor ports

st

1997Port AmendmentAct introducedtolay downguidelines onpvt. participationin ports;TAMP establishedto regulatetariffsfor majorports

1999Gujarat Infrastructure Dvlpt.Actissued forport st privatization;1 Pvt.Container terminal(NSICTby P&OPorts) commenced operations

200210 Five yearplanlaid downthe proposalsfor modernizationof ports, introductionof costeffective services, enhancementof servicequality, andeffective privatization

th

2008 NMDP formulatedto improveport efficiencies

2000MoS formed;Model BiddingDocument &Licence Agreementissued

2009 1 project underPPPtobe contractedasper newMCA approvedby 2008NewModel cabinetandTariff frontfixedby Concession TAMPParadip Agreement ironoreberth; approved.Under thenewMCA,the Allareasofport porttrustcould operationopen directlyapproach forpvt.sector theinter participation ministerialPPP Appraisal Committeefor finalproject approvalwithout havingtofirst acquirein principleapproval

st

2010B.K. Chaturvedi committee constitutedto reviewMCA

2010Greenfield portpolicyof Maharashtra launchedwith envisaged investmentofINR 228Bn

2011 NMA launched: Outlines frameworkfor developmentof portsectorand initiativesfor efficiency improvement

2011DraftPorts Billcirculated: seekstobring tariffsand performanceof nonmajorports underregulatory purview

183

20011 corporateportset upatEnnore

st

2011Policies framedon monopoly regulation; Reviewoftariff settingprocess initiated;LandBill approved

35 19911997 19972002 20022007

th

39

57

66

76

2008

2009

2010E

2011E

Source:PlanningCommission,Midtermappraisalof11 fiveyearplan;InfrastructureDevelopmentinIndia:EmergingChallengesby RakeshMohan

Withfurther large scale investments required in Indianports,continued privateparticipation in the sector would be a mustforitsgrowth.

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 FundRequirementinIndianPorts(AmountinINRBillion) BudgetarySupport&InternalResources MajorPorts(FY11FY2020) Deepeningofchannels/berths Construction/reconstructionofberths Procurementofequipment Railandroadconnectivityworks Othersrelatedschemes Total MinorPorts(FY11FY2020) Deepeningofchannels/berths Construction/reconstructionofberths Procurementofequipment Railandroadconnectivityworks Othersrelatedschemes Total 7 8 8 22 8 53 107 1,237 86 72 111 1,613 115 1,248 103 93 121 1,679* 86 118 32 32 98 366 430 17 18 264 729 86 547 49 50 362 1,094 PrivateInvestment Total

Source:MaritimeAgenda20102020;*includesINR13Bnofothersourcesoffunding

Giventhescaleofinvestmentrequiredbytheprivatesector,theMinistryofShipping,GovernmentofIndiahasinitiated many pathbreaking measures which will facilitate enhanced private investment, improve the service quality and promote competitiveness, apart from achieving the expansion of capacities in the country. Such measures include openingupofsectorto100%FDI,formulationofMaritimePolicy,revisionofvariousoperationalpolicies,preparationof PerspectivePlansforthemajorports,commissioningoftwomoremajorportsoneeachontheEastCoast&theWest Coast,introductionofPortCommunitySystem,paperlessregime,etc. However, an analysis of the development of Indian seaports post the initiation of privatization reveals that while the financingobjectiveisbeingfulfilledbyincreasedparticipationofprivatesector,theoperationalefficiencyofportsareyet toachieveinternationalstandards. Indianportscontinuetolagbehindglobalportsinoperationalefficiency Port efficiency is often referred to in terms of parameters like vessel dwell time, vessel turnaround time, vessel pre berthing detention time, outputpershipberthday. When comparing the same with international world class ports, measures like preberthing detention time completely fall out of comparison as there is no concept of preberthing detentionintheseportssincethecapacityismuchmorethantheactualtraffic.Comparisonintermsofturnaroundtime anddwelltimecouldgetdistorteddependingupontheparcelsizeofthevesselcalling,lengthofthechannelinwhich pilotagetakesplace,typeofcommodity,modeofdischarge/loadingandothertimespentindocumentationworks.The parameterwhichcouldbeusedtoassessportsefficiencyisthequantumofcargothattheportdischarges/loadsfrom/ toashipinadayOutputpershipberthdayortheproductivityofequipmentssuchasCranes.Whilethesewouldalso differaccordingtothenatureofcommodity,comparisonscanbemadecommoditywise. The table below highlights the performance of Indian ports visvis international world class ports in terms of Berth productivityandCraneproductivity:

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 BerthProductivity(moves/hour) Port/Terminal SmallVessels IndiaNSICT IndiaJNPCT IndiaTuticorin SingaporePSA Shanghai BelgiumPorts ColomboSLPA ColomboSAGT KhorFakkan,Fujairah,UAE PortRashidandJabelAli,UAE Salalah Aden 30 24 14 45 23 25 32 40 LargeVessels 40 36 140 45 100 110 90 70 SmallVessels 18 16 14 23 14 13 20 22 LargeVessels 22 20 36 35 3035 18 2425 28 30 29 28 CraneProductivity(moves/hour)

Source:NationalMaritimeAgenda20102020

WhileIndianportshavebeenperformingbelowparintermsofbroadmeasuressuchasdwelltime,turnaroundtime etc., the berth and crane productivity performance highlight the inefficiencies in its core operations as well. The low productivity at Indian ports can only be explained through inefficient operational procedures, inferior quality of equipmentsetc.astheseproductivitymeasuresareunlikelytobeaffectedbyanyotherinfrastructureconstraint.Ifthe otheraspectsofportoperationareadded(pilotage,anchorage,documentationetc.)thentheproductivityofIndianports wouldlookfarworsethanitdoesintheabovefigures.Someofthereasonsbeing: LimitedavailabilityofphysicalinfrastructurelinearquaylengthatJNPTis680mforthreecontainerterminals comparedto11,754mforfourterminalsatPSASingapore;limitedlandavailabilityfortheterminals LimiteddraftatIndianportssizeofvesselenteringIndianportsisthereforelimited Lowlevelofmechanizationandinadequatenumberofequipments JNPThasjust8quaycranescomparedto 131 in PSA Singapore; Other equipments like reach stackers, trailers too present in limited numbers in Indian ports Inefficientworkflow(manualwithlowlevelofITpenetration)/documentationprocesses(limiteduseofERPfor containerhandling)

INTERNATIONALOPERATORSCANHELPINDIANPORTSACHIEVEINTERNATIONALSTANDARDS Asnotedintheearliersections,investmentbyprivatesectorhasincreasedinIndianseaportsoverthepastfewyears.Of the 642MT of major ports capacity, approximately 170MT is with the private sector with additional 135MT capacity projects currently under implementation. Most of the new capacities coming up under the state sector are also being createdbytheprivateparticipants.GiventheGovernmentsinitiativestowardsaddressingtheoutstandingconcernsand increased participation of private players, the only factor holding back the growth of sector seems to be the improvementinportefficiencies,whichismostlikelytobeimprovedthroughsignificantexpertiseoftheleadingglobal portoperators.Globalportoperatorsthroughtheirexperiencebringinseveralefficienciestothesystemas: Theyhaveadvancedknowhowontheconstructionandmanagementofterminalswhichhasalsohelpedthem createbarriersfornewentrants

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TheoutputofR&Dunitsstationedatvariouslocationsacrosstheworldistypicallysharedamongtheterminals oftheirglobalnetwork Global terminal operators often have central purchasing departments involved in making large contracts with the suppliers of terminal equipments such as gantry cranes or terminal tractors which provide them high bargainingpower Fixedcostsincontainerhandlingbusinessarecomparativelyhigherrelativetooperatingcostsandeconomiesof scalearefairlyhigh.Globalplayersseemtobebestplacedtomeetthehighcapitalrequirementstocoverinitial investmentsinaterminalofareasonablesize Scale of operations of some of the leading global terminal operators has created substantial surplus capital availableforinvestments Worldclassfacilitiescanoftenbesetupbyreplicatingbusinessmodelofotherports Relationshipswithgloballinersofglobalcontainerterminaloperatorscanhelpattractsteadyandstabletraffic fortheport

TheperformancefiguresofIndianports/terminalsrevealthattheinternationalplayershavemanagedtoachievehigh productivitylevelsthathadbeeneludingthepublicrunterminalsforalongtime.NSICT,thefirstcontainerterminaltobe setupbyaninternationalplayerinIndiabringsoutthecontraststarkly:

CraneProductivity(moves/hour)atIndianContainerTerminals Year 1999 2001 2003 2008 Source:Industryreports JNPCT 14.2 16.9 16.0 16.2 NSICT 17.2 23.5 24.7 23.0

NSICTcommencedoperationsinApril1999andrightfromthestartithasoutmatchedtheproductivityofJNPCTlocated in the same port. Further, over the years, while the berth productivity at JNPCT has improved marginally, berth productivity at NSICT has almost doubled. NSICTs productivity looks better in comparison even with other terminals operated by domestic private participants crane productivity at Kolkata container terminal during 2008 was 19.5 in comparisonwith23.0atNSICT. NSICT is not the only example where participation of international players has improved productivity to international benchmarks. VCTPL,Vishakapatnamaveragegrosscraneproductivityimprovedfrom19.7movesperhourintheyearFY2004 to24.6movesperhourintheyear200607,andhasstabilizedat~22moves/hoursincethen ChennaiContainerterminal(CCT)attainedasteep97%reductioninaveragepreberthwaitingtimewithinjust oneyearofcontrolbeingtakenoverbyP&OPorts(nowDPWorld).Eventheaverageturnaroundtimefell74% inoneyear;CraneproductivityatCCTis~21moves/hour Tuticorin Container terminal (TCT), taken up by PSASICAL, decreased the average turnaround time by 80% between FY2000 and FY2003. Even with respect to average preberth waiting time, the terminal achieved an appreciable reduction from 17 hours to 30 minutes in just three years. Crane productivity in TCT is also upto internationalstandardsat~27moves/hour

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Whencomparingtheproductivityofbulkcargooperations,withsomeexceptions,portsinIndiaingeneralunload/load cargoattherateof8,00010,000MT/daywhichisdismallylowcomparedtointernationalstandardsof50,00060,000 MT/day. GiventhesuccessofglobalportoperatorsinIndia,increasedparticipationbythemintheIndianseaportinfrastructure couldcontributesignificantlyintransformingIndianportsintoworldclassfacilities. PARTICIPATIONBYINTERNATIONALOPERATORSININDIAPRIMARILYLIMITEDTOCONTAINERTERMINALSTILLNOW AquicksnapshotofthedealsinIndianportsectoroverthelastcoupleofyearsrevealsthatofalltheprivateinvestments, participationbyinternationaloperatorshavestillbeenverylimitedbeyondcontainerterminaloperationstillnow.

InternationalPlayerParticipationinIndianMajorPorts Year 2011 2010 2010 2010 2009 2009 2008 2008 2007 2006 2005 2004 2004 2002 2002 2002 2001 1998 1997 Port JNPT:fourthterminal Ennore:containerterminal Tuticorin:cargoberth Paradip:multipurposecleancargoberth Paradip:ironoreberth Vishakhapatnam:cargoberthmechanisation Kolkata:Containerterminal Ennore:coalterminal Chennai:secondcontainerterminal Mumbai Kandla:containerterminal(Phase1) Cochin:ICTT JNPT:thirdterminal Kolkata:multipurposeberth Kolkata:multipurposeberth Vishakapatnam:containerterminal Chennai:firstcontainerterminal Tuticorin:containerterminal JNPT:secondterminal SuccessfulBidder PSAABG EredeneCapitalPlc,GrupMaritimTCBSL,ObrasconHuarteLainSAand LancoInfratechLtd. ABGLDABulkHandling(49%stakeboughtbyLouisDrefusArmaters) SterliteLeighton NobleGammonMMTC SterliteLeighton ABGInfralogistics(49%stakeboughtbyPSA) ConsortiumofSICL,PortiaManagementServices,NavayugaGroup Chennai International Terminals Private Limited a JV of PSA InternationalPteLimitedandSicalLogisticsLimited GammonDragados ABGVoltri,PSA DubaiPortsInternational,CONCOR MaerskCONCOR SubsidiaryofInternationalSeaports,Singapore,formedbyL&T,Precious ShippingPublicCo.,SSAAsia Tata Martrade International Logistics (JV between Tata Steel and IQ Martrade) DubaiPortsInternational,JMBaxiGroup DPWorld PSA,SICAL DPWorld(erstwhileP&OPorts)

Source:Industryreports,Companywebsites

MostoftheparticipationbyinternationalplayersinIndianPortshasbeeninthemajorportswhereasalargershareof portinvestmentsisexpectedtobetowardsthestateports/nonmajorports.Someoftheinvestmentsbyinternational operatorsinnonmajorportsofIndiainclude:

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GujaratPipavavPort:APMTerminals MundraPort:DPWorld KaraikalPort:MargConstructions,PrembianaanRedzai Kakinada Port: Developed by Govt. of Andhra Pradesh, International Sea ports Ltd has been given the OMST concessionin1999

Apartfromtheaboveinvestments,DPWorldhadinvestedinKulpiPortsbuttheprojecthasnotseenanyprogressover thelastsixyears.Further,PSAexitedfromShellGaspromotedHPPLcitingstiffcommercialtermsparticularlywithregard towaterfrontroyalty. RecognizingthefactthatinvolvementofinternationalparticipantsinIndianseaportsisofutmostimportanceforefficient growth of sector, the government has been actively working towards resolving the concerns of domestic private and internationalparticipants.However,someofthefollowingconcernswouldneedquickattentionofthegovernmentto encourageparticipationbyglobalportoperatorsinIndia: DraftCaptivePolicy2011:ThePolicyisaimedatallowingportbasedindustriestosetuptheircaptiveberthsat the major ports on a nomination basis. This could significantly impact the traffic prospects of the nearby terminalsandenhancetheirbusinessrisk. TheDraftPortRegulatoryAuthorityBill2011:TheBillisaimedatprovidinglevelplayingfieldtomajorportsby bringingthefunctionsoftariffsettingandperformancemonitoringforthenonmajorportsundertheambitof the respective State port regulatory authorities. If enacted, the Bill would significantly impact the nonmajor portsastheywouldlosetheflexibilitytosettariffswhichcouldresultinlowercompetitivenessandincreased pressureonbusinessreturns(duetomismatchintariffrevisionsandcostincreases).Further,tariffsettingand revisioncouldcausedelaysinprojectsgoingbytheexperienceofmajorports. Hinterland connectivity: Moving away from the regulatory front, the hinterland connectivity is of prime importanceforthecompetitivenessofaport.However,mostoftheIndianportssufferfrompoorroadandrail connectivitytothehinterland.Whilelargeinvestmentsareproposedinthisarea,theactualinvestmentshave beenfarandfew. Limiteddraftavailability:Limiteddraftavailability(1012minmostmajorports)constrainsthesizeofvessels entering the Indian ports. Larger vessels enhance the productivity of port operations and thus its operating returns.LargeamountofinitialandmaintenancedredgingisrequiredtoincreasethedraftatIndianportsbut limitedactivityhasbeenobservedinthisarea. Cumbersomebiddingprocess:ThebiddingofseveralPPPprojectsatMajorportshastendedtobecumbersome andlongwithseveralbureaucraticproceduresleadingtocancellationsandrebidding,aswasrecentlyobserved inUpgradationofBargehandlingfacilitiesprojectatKandlaPort.

The current regulatory environment and some of the infrastructure constraints present challenges for the Indian regulatory authorities in attracting continued investment by domestic private and international operators in Indian seaports. Quick response to these challenges would go a long way in enhancing Indias reputation as an attractive investmentdestination.Onceaddressed,increasedparticipationbyglobalportoperatorswouldincreasetheprospects oftransformationofIndianportsintoworldclassfacilities. INDIAPRESENTSTHERIGHTGROWTHOPPORTUNITYTOLARGEGLOBALPORTOPERATORS Globally, terminal operators are becoming multinational enterprises with varying degrees of involvement in the main cargohandlingmarketsaroundtheworld.Someterminaloperatorshavestrategicallyexpandedglobally(PSA,DPWorlds, APM Terminals) while some focus on specific regions (Ports America, Eurogate, SSA and ICTSI). Indias trade potential offersallglobalportoperatorsanattractiveinvestmentopportunity.Further,withlargescaleinvestmentlinedupinthe sector, there are a number of opportunities for global players to participate in. Participation by a larger set of internationalplayersinIndianseaportswouldalsoinduceahigherlevelofcompetitionwhichwouldthenbedependent

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upon higher operational efficiencies, given that the equipments required by the industry is getting increasingly standardized(eg:ShanghaibasedZPMCsupplies~60%ofworldsdemandforquaycranes). The table below shows that of all the leading global port terminal operators, only a handful are currently present in Indiasportoperations.
PresenceinPortOperations Operator Asia PSAInternational APMTerminals DPWorld Dragados(ACSGroup) GrupTCB ICTSI CoscoPacific HutchisonPortHoldings EvergreenMarine SSAMarine NYKLine HanjinShippingCo.Ltd. KLine MOL OrientOverseasContainerLine HyundaiMerchantMarine YangMing Eurogate MediterraneanShippingCo. HHLA AmericanPresentLine CMACGM Source:Companywebsites x x x x x India x x x x x x x x x x x x x x x x PresenceinAsianCountries India,Singapore,China,Japan,Korea, Pakistan,SaudiArabia,Vietnam,Thailand India,Malaysia,China,Vietnam,Japan, Thailand,Malaysia India,China,Philippines,Indonesia,HK, Pakistan,SouthKorea,Thailand,Vietnam India India Philippines,Japan,Indonesia,China,India HK,China,Singapore China,HK,Indonesia,Korea,Malaysia, Myanmar,Pakistan,Thailand,Vietnam Taiwan,Thailand Vietnam Japan Vietnam,Taiwan,Korea,Japan Japan N.A. Taiwan China Taiwan PrimaryBusinessof Company PortOperation PortOperation& Shipping PortOperation PortOperation PortOperation PortOperation PortOperation& Shipping PortOperation Shipping PortOperation PortOperation& Shipping Shipping Shipping Shipping Shipping Shipping Shipping PortOperation Shipping PortOperation Shipping Shipping

Giventhenatureofglobalportbusiness,thelargeplayershavebeenscoutingforopportunitiestoscaleandconsolidate their operations. With most of the global terminal assets already part of the portfolio of global terminal operators, opportunitiesforthemtogrowtheirbusinessliesincountrieslikeIndia.Also,variousplayershaveemergedinthesector who are trying to build their international portfolio. While they have not been successful in neutralizing the power of leading global operators in other markets, the nascent and virgin market of India brings to them the right kind of

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opportunitytoexpand.ByinvestinginIndianports,theglobalportoperatorsalsohavetheopportunityofgettinginto favourabletieupswithshippinglinesalongthemostactivetraderegionsoftheworld. Indiasstrongtradepotentialandlargescaleinvestmentopportunityoffersallglobaloperatorstherightingredientsfor expandingtheirbusinesses.Inturn,Indiawouldbenefitthroughtransformationofitsseaportinfrastructureintoworld classfacilities. CONCLUSION SincetheopeningupofIndianseaportstoprivateandforeigninvestment,severalleadingglobalterminaloperatorshave taken part in the development of seaport infrastructure of India. Utilizing their inherent strengths, the global players havebeenabletosetupefficientoperationsatIndianports.Theimprovementsaretheretoseewhencomparedwith portsstillbeingrunbypublicorsomeofthedomesticprivateinstitutions.However,inthecontextofthepotentialscale ofIndiasseaportinfrastructureandthestrategyofglobaloperatorsexpandingglobally,investmentsbyglobaloperators have been limited in India, especially in the nonmajor ports. Increased participationby the existing and other leading globalportoperatorsishighlynecessarytosupportthelargescaledevelopmentenvisagedinIndianportsoverthenext decade.InvolvementofleadingglobalplayersisexpectedtoenhancethecompetitivenessofIndianportsthroughbetter operational efficiencies while the economic trends of India present an attractive investment opportunity to the global players. BACKGROUND PRIVATEPARTICIPATIONNECESSARYFORFASTANDEFFICIENTGROWTHOFSECTOR Globally,severalobjectiveshavepromptedGovernmentstoinitiateportprivatizationinvaryingdegrees.Financingand efficientoperationofportshavebeenamongthekeyreasonforbringingaboutprivatizationglobally.Theexhibitbelow showsacomparisonofselectedcountriesobjectivesforportprivatizationandtheapproachesadoptedtherein.
GovernmentObjectives DownsizeBureaucracy FinanceDeficit FinanceFacilities ImproveEfficiency LabourProblems CommercialiseManagement WidenShareOwnership ApproachesUsed Decentralise Corporatise PartialPrivatisation(Services) PartialPrivatisation(JV) LandlordPorts(Leases) LandlordPorts(Concessions) Capitalisation(Shareoffering) SellAssets
o o o o o o o o o o o o o

FR

UK

AU

CN
o o

HK
o

ID
o

IN
o o o

KR
o

MY
o

PH
o o

SG
o

TH
o o o

TW
o

VN
o o

US

o o o

ID
o o

KR
o o

MY
o

SG
o

IN
o

PH
o

TH
o o

TW
o

AU CN
o o

HK
o

VN
o o

FR

UK

US

o o

o o

Source:ADB,DevelopingBestPracticesforPromotingPrivateSectorInvestmentinInfrastructure,2000 AbbreviationFR:France;UK:Ukraine;AU:Australia;CN:China;HK:HongKong;ID:Indonesia;IN:India;KR:Korea;MY:Malaysia;PH: Philippines;SG:Singapore;TH:Thailand;TW:Taiwan;VN:Vietnam;US:UnitedStates

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Depending upon the approach used by different Governments, the ownership of port infrastructure between Government/Private player has varied, with Government divesting part/all of port operations and infrastructure to privateplayers.Typicalownershipandoperatingstructuresofportterminalsareasfollows:
ModeofOwnership 100%StateOwned& Operated LandArea State owned TerminalInfrastructure Owned&Constructedby portauthority TerminalSuperstructure Quayside Operations PortAuthority Private stevedores(on commonuser berths) Terminal Operator Terminal Operator Terminal Operator Terminal Operator Landside Operations Port Authority

Stateowned

SuitcaseStevedores

State owned

Owned&Constructedby portauthority

Stateowned

Port Authority

LeasedTerminal

State owned State owned State owned Privately owned

Owned&Constructedby portauthority Owned&Constructedby portauthority Constructionprivately funded Privatelyowned

Privatelyownedor Rentedfromport authority Privatelyowned

Terminal Operator Terminal Operator Terminal Operator Terminal Operator

ConcessionAgreement

BOTConcession

Privatelyowned

100%PrivatelyOwned

Privatelyowned

Source:RREEFResearchGlobalPorts:TrendsandOpportunities,April2009

IndiahasusedtheLandlordPortmodel,basedonBOTconcessionmodel,towardsprivatizationofitsmajorports.This hasbeenawidelyacceptedmodelgloballyinlargerandmediumsizedportsanditsprimeexamplesincludetheleading globalportsRotterdam,Antwerp,Hamburg,NewYork,Singapore,HongKong,China(ContainerTerminals),etc Under this model, the port authority acts as regulatory body, owns the land and basic infrastructure but allows the privatesectortoleaseoutberthsandbackupareaseitherthroughacapitalleaseorconcessionagreement.Whilethis modeldoesposetheriskofovercapacityasaresultofpressurefromvariousprivateoperators,theprivateoperatorsare betterabletocopewithmarketrequirements.OtherbenefitsofLandlordportconcessionsinclude: Betterandmoreefficientportmanagement(especiallyportoperations)performedbyprivateoperators Avoidanceofthedrawbacksassociatedwithmonopoliesthroughtheinclusionofdetailedconcessionconditions

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MARKETSNAPSHOT
AllfiguresinINRmillion;FinancialsareforFY11end(exceptasindicated);Financialsareonaconsolidatedbasis(except asindicated);MarketCapitalizationfiguresand1YrReturnareason09Dec11.

Large/Diversified
Company Larsen&Toubro BHEL RelianceInfra GMRInfrastructure LancoInfratech GVKPower&Infra GammonIndia MCap EV NW 3,02,591 2,01,551 2,37,064 Revenue 5,32,044 4,36,913 1,61,029 60,851 80,419 19,432 88,971 EBITDA 76,930 96,684 14,981 7,569 18,905 5,140 5,652 EV/EBITDA 13.6x 5.7x 14.7x 37.2x 9.6x 13.4x 12.4x P/E 17.1x 3.3x 6.7x N.A. 6.2x 10.9x 5.7x P/B 2.5x 3.2x 0.4x 0.9x 0.5x 0.5x 0.4x 1YrReturn (36.2%) (39.8%) (49.3%) (57.6%) (80.4%) (71.5%) (69.9%) Revenue 27,787 25,026 41,274 38,526 23,561 81,870 72,035 49,266 62,521 68,548 3,424 34,988 8,026 17,529 22,039 10,544 12,841 10,021 8,284 EBITDA 18,110 10,939 11,549 7,347 3,434 4,111 5,981 4,998 7,150 7,374 2,020 4,848 928 1,508 1,531 1,514 2,288 1,376 805 EV/EBITDA 5.7x 7.6x 7.1x 7.4x 10.3x 11.9x 13.3x 5.2x 7.4x 6.8x 16.7x 5.9x N.A. 3.2x 4.5x 2.7x 6.4x 1.6x 3.2x P/E 4.1x 10.9x 7.5x 12.3x 18.2x N.A. N.A. 8.1x 4.4x 18.6x 51.9x 5.2x N.A. 6.0x 7.2x 4.3x 5.3x 2.9x 3.1x P/B 1.2x 2.0x 1.3x 3.4x 1.9x 0.5x 0.9x 1.1x 0.4x 0.3x 1.1x 0.5x 0.9x 1.3x 0.5x 0.7x 0.4x 11.8x 0.5x 1YrReturn (28.2%) (21.9%) (42.2%) (29.6%) (18.3%) (51.7%) (48.3%) (49.6%) (71.9%) (69.6%) (41.4%) (69.4%) (51.9%) (55.0%) (71.1%) (30.8%) (55.4%) (38.3%) (57.1%)

7,50,642 10,42,473 6,45,555 1,03,732 5,51,192 2,20,426

72,983 2,81,547 79,613 27,569 1,81,182 60,053 16,898 69,055 36,147

6,774 69,977 16,231

Roads,Construction,andEPC
Company JaypeeInfratech IRBInfraDevelopers IL&FSTransportation EraInfraEngineering SadbhavEngineering PunjLloyd HindustanConsCo SimplexInfra NCC IVRCLLimited GammonInfra PatelEngineering MadhuconProjects AhluwaliaContracts CCCL KNRConstructions C&CConstruction MBLInfrastructures SimplexProjects MCap 58,405 49,389 32,520 27,010 16,854 15,808 12,981 10,213 9,800 9,412 8,917 6,386 4,247 4,221 3,372 2,721 2,267 1,798 1,084 EV 1,03,217 83,645 81,914 54,159 35,518 49,083 79,824 25,755 52,680 49,968 33,793

NW 48,437 24,558 24,342 7,987 8,883 31,347 14,935 9,434 25,999 27,426 8,149

28,695 13,443 36,882 4,762 6,835 4,057 14,736 2,248 2,580 4,930 3,221 6,895 3,702 6,165 152 2,051

*indicatesuseoflastavailableBalanceSheetdata **indicatesuseofstandaloneP&L&lastavailableBalanceSheetdata

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PowerGeneration
Company NTPCLtd NHPCLtd ReliancePower TataPower AdaniPower JaiprakashPower Torrentpower JSWEnergy CESCLtd IndiabullsPower KSKEnergy MCap EV NW 7,00,663 2,83,152 1,68,344 1,46,086 65,993 54,794 56,153 58,327 61,498 42,223 29,677 Revenue EBITDA EV/EBITDA 12.7x 9.2x N.A. 9.8x 32.4x 29.3x 6.7x 10.1x 7.7x N.A. 13.4x P/E 14.7x 11.7x N.A. 11.0x 31.6x 65.8x 8.9x 8.4x 10.3x N.A. 9.7x P/B 2.0x 1.0x 1.4x 1.5x 2.5x 1.8x 1.7x 1.2x 0.5x 0.5x 0.6x 1YrReturn (9.0%) (16.9%) (44.1%) (24.9%) (40.1%) (22.9%) (27.4%) (54.6%) (35.0%) (62.4%) (64.2%)

13,69,572 16,98,522 2,70,001 2,36,893 2,25,917 1,62,413 99,872 93,805 70,932 28,735 20,230 17,551 3,94,864 2,91,080 4,51,475 3,94,889 2,11,049 1,19,723 1,57,530 57,722 27,112 74,439

6,00,082 134,256 51,437 19,180 1,98,613 21,532 8,407 69,197 44,275 51,568 446 11,593 42,876 2,291 45,956 12,205 7,207 17,976 15,642 7,525 (359) 5,555

PowerandInfraAncillary
Company ABBLtd CromptonGreaves EngineersIndia ArevaT&DIndiaLtd AlstomProjectsIndia BGREnergySystems KalpataruPowerTX KECInternational TecproSystems EleconEnggCo VGuard ShriramEPC JyotiStructuresLtd BharatBijleeLtd McnallyBharatEngg SunilHitech MCap 1,28,321 80,251 71,060 48,072 23,958 17,059 15,200 9,870 8,630 5,540 5,370 4,436 3,865 3,404 2,994 841 EV 1,22,450 81,970 53,079 55,830 16,573 19,984 21,645 22,652 13,104 11,747 6,696 13,779 8,330 3,296 7,371 3,281 NW 24,237 33,990 14,898 10,061 25,121 12,598 19,924 9,963 6,687 4,183 1,780 5,346 6,017 2,859 3,409 2,358 Revenue 66,799 1,01,193 28,481 42,549 18,036 47,721 44,118 44,767 19,828 12,954 7,283 16,817 23,881 7,117 22,669 8,080 EBITDA 2,225 13,465 6,547 4,743 2,465 5,363 5,248 4,308 3,245 1,914 746 2,027 2,822 616 1,411 1,530 EV/EBITDA N.A. 6.1x 8.1x 11.8x 6.7x 3.7x 4.1x 5.3x 4.0x 6.1x 9.0x 6.8x 3.0x 5.3x 5.2x 2.1x P/E N.A. 8.7x 13.4x 22.7x 14.2x 5.3x 0.8x 4.8x 6.5x 6.2x 12.6x 6.4x 3.5x 4.6x 4.5x 2.3x P/B 5.3x 2.4x 4.8x 4.8x 1.0x 1.4x 0.8x 1.0x 1.3x 1.3x 3.0x 0.8x 0.6x 1.2x 0.9x 0.4x 1YrReturn (20.1%) (61.5%) (35.4%) (33.8%) (44.5%) (62.2%) (37.2%) (55.4%) (53.0%) (21.0%) 12.2% (47.1%) (62.0%) (32.9%) (52.4%) (42.0%)

*indicatesuseoflastavailableBalanceSheetdata **indicatesuseofstandaloneP&L&lastavailableBalanceSheetdata

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PortsandShipbuilding
Company MundraPort&SEZ PipavavShipyard EssarPorts GujaratPipavavPort* ABGShipyard BharatiShipyard MCap 2,55,032 45,075 27,542 23,275 20,010 2,480 EV 2,80,744 61,005 70,787 29,299 38,784 37,252 NW 52,368 17,649 21,495 7,359 16,940 9,142 Revenue 19,348 8,676 19,408 8,546 21,369 16,115 EBITDA 13,100 1,695 7,667 1,197 5,181 4,776 EV/EBITDA 21.4x 36.0x 9.2x 24.5x 7.5x 7.8x P/E 25.9x N.A. 39.3x N.A. 10.3x 2.7x P/B 4.9x 2.6x 1.3x 3.2x 1.2x 0.3x 1YrReturn (6.4%) 3.9% (37.7%) (1.9%) 27.8% (58.0%) EBITDA 10,014 6,998 2,707 1,597 6,166 497 216 988 853 436 304 138 EV/EBITDA 9.4x 7.4x 7.6x 8.3x 5.0x 7.8x N.A. 2.3x 8.8x 2.7x 3.7x 4.3x P/E 13.3x 3.9x 10.9x 14.1x 10.9x 13.6x 17.8x 18.3x 7.6x 2.9x 4.5x 3.7x P/B 2.2x 0.4x 1.5x 1.9x 0.2x 1.6x 0.3x 0.3x 0.6x 0.1x 0.4x 0.4x 1YrReturn (29.6%) (59.2%) (4.4%) 30.4% (56.9%) (64.0%) (46.5%) (49.7%) (50.1%) (33.3%) (41.9%) (41.9%)

ShippingandLogistics
Company CONCOR ShippingCorpofIndia AllCargo* GatewayDistriparks Mercator AquaLogistics VarunShipping GATI* GlobalOffshore ChowguleSteamships ShreyasShipping SKSLogistics** MCap 1,16,855 26,340 18,127 13,622 5,120 3,885 2,630 2,580 1,680 800 570 150 EV 93,898 51,924 20,562 13,270 30,739 3,885 29,504 2,261 7,522 1,180 1,140 587 NW 52,064 71,681 12,220 7,019 22,966 2,365 8,192 7,743 2,829 5,649 1,497 391

Revenue 36,281 35,434 28,613 6,120 28,069 5,181 8,368 12,030 2,005 722 1,930 445

OtherSegments
Company RamkyInfrastructure VATechWabag SanghviMovers TriveniEngineering PratibhaIndustries HindustanDorrOliver IonExchangeIndia MCap 11,920 9,160 4,470 3,830 3,700 2,090 1,320 EV 22,634 5,915 10,675 15,502 6,807 4,412 1,487 NW 11,025 6,136 6,188 11,503 5,019 2,606 1,363 Revenue 32,345 12,418 3,735 22,443 12,740 10,884 6,133 EBITDA 3,718 1,122 2,558 2,012 1,720 848 199 EV/EBITDA 6.1x 5.3x 4.2x 7.7x 4.0x 5.2x 7.5x P/E 5.8x 17.4x 5.2x 7.6x 5.2x 5.4x 15.8x P/B 1.1x 1.5x 0.7x 0.3x 0.7x 0.8x 1.0x 1YrReturn (36.7%) (44.5%) (38.9%) (85.4%) (37.6%) (74.8%) (37.8%)

*indicatesuseoflastavailableBalanceSheetdata **indicatesuseofstandaloneP&L&lastavailableBalanceSheetdata

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TRANSACTIONSSNAPSHOT
TransactionsduringtheperiodSeptember2011toNovember2011

PrivateEquity
Date Nov2011 Target AzurePowerIndia Investor DEG NewSilkRoute,Bessemer VenturePartners,Argonaut Ventures SBIMacquarieInfraFund InfrastructureIndia IndiaVentureAdvisors TempletonStrategicEmerging MarketsFund GEEnergyFinancialServices Sector Power DealSize(USDMn) 14.0 Stake N.A.

Nov2011

KiranEnergySolarPower

Power

50.0

N.A.

Nov2011 Oct2011 Oct2011 Oct2011

SohamRenewableEnergy IndianEnergy C&CConstructions ShiVaniOil&Gas ExplorationServices MoserBaerCleanEnergy ItalySRL ShreeMaheshwarHydel PowerCorp HCCConcessions ReNewWindPower VishwaInfrastructuresand Services SMSParyavaran

Power Power Construction Oil&Gas

25.3 13.0 10.7 5.1

N.A. N.A. 8.1% 2.7%

Oct2011

Power

60.4

N.A.

Sep2011 Sep2011 Sep2011 Sep2011

InfrastructureIndia XanderGroup GoldmanSachs OlympusCapital,NEA

Power Construction Power Water&Waste Management Water&Waste Management

26.6 54.3 203.9 63.1

N.A. 14.5% N.A. 35.6%

Sep2011

AdityaBirlaCapitalAdvisors Acquirer GVKPower&Infrastructure

8.9

N.A.

DomesticM&A
Date Oct2011 Target BangaloreInternational Airport MumbaiInternational Airport EnSearchPetroleum SicalLogistics ARSSBusTerminal YellowRenewableEnergy

Sector Airport

DealSize(USDMn) 134.8

Stake 14%

Oct2011 Oct2011 Sep2011 Sep2011 Sep2011

GVKPower&Infrastructure SaharaIndiaPariwar CoffeeDayResorts&Hotels WelspunInfratech SuranaTelecom&Power

Airport Oil&Gas Logistics UrbanInfra Power

231.0 N.A. 24.2 N.A. N.A.

13.5% 100% 21.1% N.A. 60%

InboundM&A
Date Oct2011 Target SunBorneEnergy

Acquirer EoxisEnergy

Sector Power DealSize(USDMn) N.A. Stake 49%

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OutboundM&A
Date Nov2011 Oct2011 Sep2011 Target CoalMines,Indonesia RepowerSystemsAG CarrizoOil&GasInc,Shale GasAssetsinTexas CoalMineConcession, Indonesia EPMMiningVenturesInc, Canada

Acquirer IndiaCements SuzlonEnergy GAILIndia

Sector Mining PowerAncillary Oil&Gas

DealSize(USDMn) 20.0 87.6 95.0

Stake N.A.

20%

Sep2011

MercatorLines

Mining

30.0

100%

Sep2011

TataChemicals

Mining

16.2

30.6%

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NEWSLINE
Power
CoalIndiaCutsTarget TheHindu,Dec08,2011
There is bad news for the power plants, which are currently struggling with inadequate coal stocks. Staterun Coal India Limited (CIL) on Wednesday announced that it had lowered its production target for the fiscal year to 440 million tonnes from 453 million tonnes outlined in its annualplan. A large number of coalbased power plants, including those of public sector undertakings, are faced with a shortage of coal stocks due to the inabilityofCILtomeetitsfuelsupplyobligations.Withpowerproducers already faced with a high cost of imported coal, the power scenario is likely to take a hit with the latest announcement of CIL. We have kept theproductiontargetofatleast440milliontonnes,CILChairmanN.C. Jha told reporters. Mr. Jha said heavy rainfall, strike and delays in the grantofforestryandenvironmentalclearancestocoalprojectswerethe reasonsforthedownwardrevisionintheproductiontarget.Hesaiditwas planning to mine between 556 million tonnes and 615 million tonnes in theterminalyearoftheXIIPlan.

UtilizationofHydroPowerCapacity PressInformationBureau,Govt.ofIndia,Dec07,2011
AsperthereassessmentofhydroelectricpotentialcarriedoutbyCentral Electricity Authority (197887), the hydro potential of the country has been estimated about 1,50,000 MW. As on 30.11.2011, the installed Hydro power capacity in the country (having station capacity above 25 MW)is38748.40MW. The installed hydro power capacity at the end of 10th Plan was about 34,654 MW. About 6200 MW hydro capacity addition is likely to be achievedduring11thPlan,whichwillmaketheinstalledhydrocapacityat the end of 11th Plan as 40,854 MW. During 12th Plan, about 9000 MW hydro capacity is planned to be added, which would make the likely installedhydrocapacityattheendof12thPlanasabout50,000MW.Itis expected that the full hydro potential would be developed in about 30 yeartime. As per the information available, India ranks 7th in the world in annual hydroelectricenergyproduction.

CCEAClearsRs6,500CrFDIProposalsOfTwoPowerEntities TheEconomicTimes,Dec07,2011
The government today approved the proposals of two power sector entities for bringing in foreign direct investment worth Rs 6,500 crore. TheCabinetCommitteeonEconomicAffairs(CCEA)gavethegreensignal toGridEquipmentforbringinginFDItothetuneofRs4,500crore. Energy Grid Automation Transformers and Switchgears India's proposal forRs2,000croreFDIwasalsoapproved. Theseproposalsarefor"downstreaminvestment"andtransferofentire equity shares of Grid Equipment and Energy Grid from Areva T&DIndiaLimitedandotherresidentshareholders. Equity shares of the two entities Grid Equipment and Energy Grid would be transferred to "Alstom Grid Finance and other foreign collaboratorsandtheirnominees,"saidanofficial.

IndiasNSMAuctionDrivesTariffsToRecordLows PVTech,Dec05,2011
Indias Ministry of New and Renewable Energy has awarded PV project contracts worth 350MW to 28 developers in its latest National Solar Mission(NSM)auction.ProjectsinbatchIIofphaseIIwereallottedbya reversebiddingprocessandhaveaninitialcompletiondeadlineofMarch 2013. The maximum capacity of systems in this latest auction was 20MW, althoughdeveloperswerepermittedtobidforanadditionaltwoprojects andafurther30MWofcapacity.WelspunSolarwastheonlysolobidder totakeupthisoption,securingone20MW (withatariffbidofINR7.97) andtwo15MWprojects(tariffsofINR8.05andINR8.14). OthersuccessfuldeveloperswereAzurePower,Solairedirect,GreenInfra Solar Farms and the joint venture of Mahindra Solar One and Kiran Energy. Together the latter two captured over 50MW of capacity a 20MW and 15MW project were won under Mahindras name while another20MWsystemwasawardedtoKiran.

IndiaToSeekIndonesianCoalBlocksUnder'SpecialStatus' TheEconomicTimes,Dec05,2011
Against a widening demandsupply gap that is likely to reach 265 MT in the next five years, the government today said it will seek Indonesia's cooperationforgrantofblockstoIndianfirmsundera'specialstatus'. The Ministry of Coal will "...impress upon provisional government/regional government to allocate blocks under their special status (most favoured nation type) to the Indian government coal companies...," Coal Ministry said. The decision to approach Indonesian government was taken in a joint working group meeting of India Indonesia on Coal. Seeking allocation of large greenfield (new) coal concession on nomination basis, the Ministry will also impress upon the Indonesian government for expeditious environmental and forest clearancesbesideslandacquisition. ThePSUhasputtogetherawarchestofRs6,000croreforacquisitionof themines.

StricterGridLawsForRenewableEnergySectorSoon:CERC BusinessStandard,Dec02,2011
Therenewableenergy(RE)sectorwillsoonbeinforstrictergridlawsand standardscomplianceregime,amemberofCentralElectricityRegulatory Commission(CERC)saidheretoday. The power sector regulator CERC also expressed concern over the high cost of wind power in the nation and blamed the wind equipment manufacturersfor'exploiting'themarket,owingtolackoftransparency. "The renewable energy sector must follow the grid laws and standards strictly. The metering at their end should be made proper, and they should follow the grid standards like unscheduled change charges etc.," CERCMemberVSVermasaid. "They must invest in technology to predict right outputs. Then they will havetofollowourschedulingandletusknowlikehowmuchpowerthey aregoingtoproducetomorrow,"hesaid."Certainmarginswillbegivento them, but not forever," Verma said adding that to start with we had relaxedthenorms,thetariffs,butthisisgoingtobetightened.

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 MinisterSeeksActionOnPoorCoalOutput TheTimesofIndia,Dec02,2011
Expressing dissatisfaction with the performance of governmentrun Central Coalfields Limited (CCL), Mahanadi Coalfields Ltd (MCL) and BharatCokingCoalLtd(BCCL),UnioncoalministerSriPrakashJaiswalon Thursdaywarnedoftakingactionagainsttheofficialsofthesecompanies, including those serving in the coal ministry found responsible for poor performance. Talking to newsmen after a review meeting at the CCL headquarters, he said,"ItwasonlybecauseofthepoorperformanceofCCLintermsofcoal offtakeandproductionthatheisreviewingitonaregularbasis.Weare concerned because of the increasing demand of coal from all over the country in the wake of the rising demand for power. The demand of existing power plants is growing each day and there is a long queue of new power sector units waiting for our commitment to fulfill their requirementofcoal."

'PowerSectorHasPotentialToCreate6LakhJobsIn201217' TheEconomicTimes,Nov29,2011
The country's fast growingpower sectorhas the potential to create as many as six lakh jobs during the 12th FiveYear Plan period (201217), a topgovernmentofficialsaid. The power sector, vital for good economic growth, is projected to see a capacityadditionofabout1,00,000MWduring201217period. "... to set up about 1,00,000 MW, we need about two lakh people for constructionofpowerplants.Foroperationandmaintenance,generation transmissionanddistribution,thereisarequirementoffourlakhpeople duringthe12thFiveYearPlan,"PowerSecretaryPUmaShankarsaid. Hewasspeakingat27thSkochSummithere.AccordingtoUmaShankar, thereisanestimatedrequirementoffourlakhtechnicalpersonsforthe powersectorduringthe13thFiveYearPlanperiod(201822). However, he noted that employment potential in the power sector is going to come down in the future due to automation and technical upgradation.

Karnataka Renewable Energy Receives 22 Bids For Setting Up SolarProjects TheHinduBusinessLine,Nov24,2011

Karnataka Renewable Energy Development Ltd (KREDL) has received 22 bidsforsettingupsolarpowerprojectsundertheKarnatakasolarpolicy. As part of its 350 MW programme, KREDL had floated a tender inviting bids for setting up projects that total to 80 MW. The projects would be allocated under reverse bidding process. They will be allocated to bidders who have quoted the steepest discounts to the tariff fixed by KREDL(Rs14.50). Theallocationofprojectswithrespecttothesetenderswouldstartsoon, hesaid.Thegovernmenthasidentifiedlandtosetupthe80MWofsolar plants,whichwouldbeallottedforaperiodof30yearsoflease. Apart from the projects under the solar policy, Mr. Kumar had recently said that projects with a total capacity of 200 MW would be taken up under the REC scheme of the Ministry of New and Renewable Energy (MNRE).

IndiaPowerInvestmentSlows,ChronicDeficitWorsens Reuters,Nov23,2011
Investments into India's power sector are slowing despite a chronic electricity shortage that threatens GDP growth, executives told the ReutersIndiaInvestmentSummit,duetocoalshortages,landhasslesand aninabilitybydistributioncompaniestoraisetariffs. Asia'sthirdlargesteconomy,whereblackoutsarecommon,facesapeak powershortageof13percentasrisingdemandfromindustry,homesand shoppingmallsoutstripscapacitygrowth. Theenergyhungrynationneedstoaddover75,000megawattsinthefive years to March 2017 to support its target of 9 percent GDP growth, accordingtoagovernmentreport.Thatwillcostroughly11trillionrupees ($210billion),withhalftheinvestmenttocomefromtheprivatesector. Butinvestorappetiteisweak. India's peak power deficit in October stood at 13.1%, according to data fromtheCentralElectricityAuthority,upfrom9.4%ayearpreviously.

BengalMayClearJSWSteel'sSalboniProjectVerySoon TheHinduBusinessLine,Oct30,2011
JSWSteelmaygetthefinalgoaheadfrom West Bengalgovernmentfor itsproposedgreenfieldintegratedsteelprojectatSalboniinWestBengal, inaweek'stime. The company has already promised to achieve financial closure for 3 milliontonneplantcoupledwith300MWcaptivepowerunitinphaseI, soonafterreceivingtheapprovalfromtheStateGovernment. According to sources close to the development, the Chief Minister, Ms Mamata Banerjee, has approved the proposal for regularising JSW's possessionof297acresofland,directlypurchasedfromthefarmers.The company was holding the land dispersed across the proposed project area of 4,334 acres without due notification under the Land Reforms Act,1955.Thenotificationisrequiredforholdingbeyond24acresinrural areasofBengal.

CoalMining:CentreDumpsGo,NoGo,DubsItIllegal DNA,Sep21,2011
Lessthantwoyearsaftersplittingcoalminingzonesintogoandnogo amovethathasstalledalmosteverybigticketcoalminingprojectinIndia thegovernmentisscrappingthepolicy. The Ministry of Environment and Forest (MoEF), which had framed the policy guidelines along with the Ministry of Coal, on Tuesday accepted thatthecategorisationofgoandnogodidnothaveanylegalsanctity. The move was expected after Jayanti Natarajan was given charge of the MoEF,replacingJairamRamesh,whosebrainchildthepolicywas. Had this happened in any other country, the government would have beensuedleft,rightandcentreforlossinbusinessandopportunitycost, nowthatthereisameaculpa,saidananalystwhotrackstheresources sectorwithaforeignbrokerage.Indiahasunnecessarilylosttwoyearsof crucialproductivitygainsandalsofixedcapitalformationopportunities.

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Roads,ConstructionandEPC
GovernmentToMeetBanksAndFinancialBodiesAfterIncrease InPremium BusinessStandard,Nov29,2011
Thegovernmentisconveningameetingoffinancialinstitutionsandbanks against the backdrop of a possible viability problem in the future, given that some of the road developers aggressive bidding has led to an increaseinthepremiumofprojectsforNHAI. We are glad that the premium amount is increasing. All the same, we needtoensurethattheprojectcompletiondoesnotbecomeanissuein the future, a senior road transport ministry official said. In the recent past,NHAIhasawarded14outofthearound45projectswithanannual premium of Rs 1,900 crore. This amount will increase at the rate of five percentperannumfor25years. The bankers, however, feel the high premium war is happening because oflesssupplyinthemarket.Thiswillbesoaslongasthecompanyhasa decentnumberofprojectsinitsportfolio,headds.Theonlywaytostop
aggressive bidding is to have enough projects in the market.

NHAIBidSystemFaulty:Experts

FinancialExpress,Nov25,2011
NHAI continues to award projects on premium despite banks and small playersraisingdoubtsonsustainabilityofthetrend. NHAI, the nodal agency to bid out national highway contracts, has awardedfournewprojectsatatotalannualpremiumofR250crore.The premium would increase 5% every year over the concession period. Ramky Infrastructure, IVRCL, Ashok Buildcon and Larsen & Toubro have won these projects. The trend is going to last for a while as no new projectisonofferinotherinfrastructuresectors,saidanNHAIofficial. With the award of these projects, 17 out of 24 projects awarded so far thisyearhavebeenbidoutonpremium.Thebalancehasgoneonviability gapfunding(VGF).Incaseofpremium,theprivateconcessionairepaysa particularamounttoNHAI,whileVGFdenotestheamountpaidbyNHAI to the concessionaire to bridge the gap between toll earnings and investmentsintheproject.

ElectronicTollingSystemWillSaveRs1,000Cr.WorthFuel:Crisil BusinessLine,Nov23,2011
Implementing an electronic toll collection system across the entire nationalandStatehighwayscouldsavefuelworthRs1,000croreannually byreducingwaitingtimeofvehiclesattollplazas,saysareportbyCrisil. TheNationalHighwaysAuthorityofIndiaproposestoreplacemanualtoll collection at highway toll plazas with Electronic Toll Collection, a nationwideautomatedcollectionsystem. Currently, there are close to 525 toll plazas, operating on national and State highways in India. Over 20,000 vehicles cross these plazas daily, each queuing up for approximately 510 minutes awaiting their turn to pay the toll fare. Each vehicle consumes almost 0.51 litre of fuel in an hour. Collectively, these vehicles spend around 1,8003,600 hours at toll plazas,whichaccountsforadailywastageofRs36croreandannually,Rs 1,000crore,statedMr.AjayD'Souza,Head,CrisilResearch.

2016DeadlineFor73BorderRoads ThePioneer,Nov23,2011
Defence Minister AK Antony assured Parliament on Wednesday that all the 73 strategic roads in States bordering China and Pakistan will be completed in phases by 2016. His reply comes in the backdrop of China rapidly improving its military infrastructure including roads all along the Line of Actual Control (LAC) and 58,000km long network in Tibetan plateau. Listing out the reasons for slow progress and resultant cost overruns, Antony said delay in forest and wildlife clearance, hard rock stretches, limitedworkingseasonandinadequateaireffortstomobiliseresources. The Border Roads Organisation (BRO) is entrusted with building these roads. Incidentally, Arunachal has 27 strategic road projects and Jammu and Kashmir15andAntonylastweekreviewedthepaceofprogresswiththe BorderRoadsOrganisation(BRO)topbrass.

NHAIAskedToStrictlyAdoptETendering BusinessStandard,Nov22,2011
TheMinistryofRoadTransportandHighwayshasaskedNHAIandstates to strictly adopt etendering system for better transparency in highways projects,sayingitisnotbeingproperlyimplemented. "Etenderingsystemwhichhasbeenproposedbytheministryforbetter transparencyofworksonthenationalhighwaysisnotbeingfollowedfor someoftheprojectsinsomestates,"theMinistryofRoadTransportand HighwayssaidinalettertoNHAI(NationalHighwaysAuthorityofIndia). The ministry has decided that all the executing agencies will have to follow the etendering system on mandatory basis for all NH works and forothercentrallysponsoredschemeswitheffectfromJanuary1,2012,it said. The etendering system would also apply to the National Highway Development Programme (NHDP), PPP (PublicPrivate Partnership) projectsontheNHs.

Fast Lane: Drive To Agra On Yamuna Expressway From December TheTribune,Nov16,2011

The muchawaited 165 km Yamuna Expressway between Greater Noida and Agra is expected to be completed by the end of December after which commuters will be able to drive to Agra at 100 kmph. The speed limitof100kmphforlightmotorvehiclesand60kmphforheavyvehicles has been fixed in consultation with the Uttar Pradesh government, Yamuna Expressway Industrial Development Authority and Jaypee Infratechofficials. Scheduled to open two years ahead of the target date, it has been projected that the Rs 11,000crore accesscontrolled and elevated Yamuna Expressway corridor would benefit an estimated 1.2 lakh commutersheadingtowardsAgraandbeyonddaily.Thesixlanetollroad between Greater Noida and Agra will provide commuters seamless connectivityalongasixlanemaincarriagewayandasinglelaneshoulder road,besidestheoptionforextendingtheexpresswaybyanotherlanein thefuture.

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PortsandShipping
MundraPortDeliversRecordCoalToAdaniPower TheHinduBusinessLine,Nov30,2011
The Mundra Port and SEZ, the country's top private multiport operator andasubsidiaryofAdaniEnterprisesLtd,hassaiditsWestBasinbulkcoal handling terminal in the Gulf of Kutch delivered 62,718 tonnes a day of coaltoAdaniPower'spowerplantlocatedadjacenttotheport. This large tranche of coal was delivered recently through a high speed conveyorbeltataspeedof6,000tonnesperhour.Thebeltrunsacross20 km from the port to the power plant, the company said in a statement here. Adani Power Ltd is setting up a 4,620megawatt imported coalfired power plant at Mundra, while Tata Power Company is constructing a 4,000MWultrapowerpowerproject(UMPP)nearby. Mundra Port also commenced doublestack container trains to help controltransportationcosts.ThetrainsarerunningfromMundraPortto PatlinearGurgaon,Haryana,thus,connectingNorthernIndiatothewest.

MajorPortsHeldBackOnLandLeasePolicy BusinessStandard,Nov25,2011
For the past nine months, the major ports of India are facing a policy hurdle.Theyhavebeenunabletogiveoutlandonleaseintheabsenceof anapprovedpolicy.Theresultisthatseveralprojectstherearefailingto start. Until now, major ports followed a land policy framed by the shipping ministry under the Major Ports Trust Act, 1963, since the legislation permitted lease of land on a longterm basis. In March 2011, to put a checkontheuseofnaturalresourceslikeland,water,spectrum,etc,the government instructed the shipping ministry to get its land policy approvedbythecabinet. Theministryisfinalisingadraftforcabinetapproval.Amongotherthings, itislikelytorecommendregularisationofleaseamountsandperiodsby bringingthisunderthejurisdictionoftheTariffAuthorityforMajorPorts.

JNPTToExpandCapacityFiveFoldIn810Yrs BusinessStandard,Nov08,2011
TheJawaharlalNehruPortTrust(JNPT),innaviMumbai,isintheprocess ofexpandingitscapacityfivefoldinthenexteightto10years,apartfrom itsmajorprojectssuchassettingupofaspecialeconomiczone(SEZ)ina public private partnership. The company is, in the process of floating a tender, seeking eligible partners for dredging of the Channel up to 14 metresatacostofRs1,600crore,inthenexttwo years,accordingtoa seniorofficialfromJNPT. Speaking to reporters on the sidelines of JNPTs agreement with Venice Port Authority to enhance direct shipping between the two ports, L Radhakrishnan,chairmansaid,Wewouldbeincreasingourcapacityfrom around4.5millionTEUs(TwentyFootEquivalentUnits)to20millionTEUs inthenexteightto10yearsinaphasedmanner. Atpresent,ithandles5560percentofthetotalcontainertradeinIndia.

AndhraPradeshLooksForwardToSecondMajorPort TheHinduBusinessLine,Nov08,2011
AndhraPradeshislookingforwardtohavingasecondmajor portinthe State, after Visakhapatnam, as announced by the Union Government in themaritimeagendaforthecurrentdecade(201020)andhasrequested theCentretoinitiatethenecessarysteps. The plea was made by the Principal Secretary (Investment and InfrastructureDept),AP,MrSutirthaBhattacharya,ataseminaronports andlogistics,organisedbytheConfederationofIndianIndustry(CII)and theStateGovernment. He said the nonmajor ports in the State were being developed in associationwiththeprivatesectorandtheywouldhavethemajorshare (54percent)ofthecargobeinghandledby2020. He said the State was formulating a development strategy for the non majorportsintheStateandwouldmakealleffortstoaddtocapacities.

JNPT Set To Get PIB Nod For Widening Of Mumbai Harbour Channel BusinessStandard,Oct17,2011
ThePublicInvestmentBoard(PIB)issettoapprovetheprojectJawaharlal Nehru Port Trust (JNPT) project for deepening and widening of the Mumbai harbour channel and JN port channel (PhaseII) with a revised estimatedcostofRs1546.30crore. A senior finance ministry official told Business Standard that JNPT had submittedtherevisedplanwhichwasexpectedtobeclearedbythePIB, headedbytheexpendituresecretary,thisweek.Headdedthatthefresh costestimatehadbeenworkedoutatRs1546.30croreinsteadofRs1347 croreatthetimetoprePIBbasingonestimatedcostinDecember2010. AnyprojectbeyondRs500crorerequiresamandatoryPIBclearance. JNPTcurrentlyhasadraftof11metersandthebiggestshipitcanreceive is partially laden 6,000 twenty equivalent units vessels. With the deepening of the draft to 14 meters it will beable to receive fully laden 6,000 Twentyfoot equivalent units (TEUs) vessels and up to 8,000 TEUs partiallyladenships.

MundraLoneBidderForChennaiTerminal Mint,Oct02,2011
Chennai ports proposed third terminal has received only one price bid after six groups backed out of the auction to build theRs.3,686 crore facility, posing a setback to Indias container terminal privatization programme. Thelone,singledigitbidisalsothelowesteverquotedforaterminalata Union governmentowned port. Chennai port is Indias second biggest afterJawaharlal Nehruport near Mumbai. Its new terminal will have a capacitytoloadfourmillionstandardcontainers(msc)ayearandbedeep enough to allow berthing of ultra large ships capable of carrying more than15,000containers. ButonlyMundraPortandSpecialEconomicZoneLtd(MPSEZ)submitted apricebidforthefacilitywhenthedeadlineendedonFriday.Itoffereda revenueshareof 1.5%toChennaiporttodevelopandoperatethenew terminal,aChennaiportofficialsaidonconditionofanonymitybecause thebidresultshavenotbeenmadepublicyet.

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Airports
NaviMumbaiInternationalAirportToThrowUpChallengesFor Bidders EconomicTimes,Nov26,2011
Navi Mumbai International Airport(NMIA) would be one of the last big PPPairportopportunitiesinIndiainthemediumtermand,hence,likely toseeintensecompetition.Cidcoprojectsthattheairportwillhandle10 millionpassengersinitsfirstyearofoperations. Airport bids are inherently more challenging than other infrastructure projectsastheyinvolveacomplexinterplayofnonaero(dutyfree,F&B, etc) businesses with the core aero (passenger, aircraft and cargo movement)business,andthecitysidepropertydevelopment.Inaddition, NaviMumbaibiddingbringsinauniquesetofchallengesforthebidders. The total airtraffic potential of the region and the quantum of shift are dependentoneventsthatarenotunderthecontrolofthedeveloper.For instance, the quantum of shift is inherently dependent upon MIAL's success at debottlenecking the Mumbai airport and progressively expandingitspassengercapacity.

AAIAndDistrictOfficialsDiscussLandAcquisition TheHindu,Nov23,Aug06,2011
TheproposalonthenextphaseofexpansionoftheTiruchiAirportcould soon move forward with officials of the Airports Authority of India (AAI) andthedistrictadministrationholdingpositivediscussionsontheland acquisitionfortheproject,hereonTuesday. Havingcompletedthefirstphaseofexpansionoftheairportrunwayand the construction of the new terminal building a few years back, the AAI haddrawnupplansforthenextphaseoftheexpansionoftheairport. Theproposalwaspartofamasterplanfortheairporttakingintoaccount futurerequirements.Oneofthemajorissuesthatcameupfordiscussion wasthetechnicalfeasibilityofbuildingtherunwayovertheUyyakondan River that runs behind the airport. It has been proposed that a bridge could be built across the river to lay the runway, in the same way the runwayexpansionhasbeentakenupacrosstheAdyarriverinChennai.

30AirportsToBeUpgradedViaPublicPvtPartnership TheHinduBusinessLine,Nov17,2011
Centre has so far identified 30 airports that needs to be modernised via public private partnership (PPP). This announcement has been made by MrNassemZaidi,CivilAviationSecretary. TheCivilAviationMinistryishopingtobag$130billioninvestmentinthe sectorintheupcoming10to15years.Centreisalsoplanningtoestablish anationalaviationuniversity. India and the US have formalised a Bilateral Aviation Safety Agreement (BASA) to offer airworthiness certification of these items. This move is expected to open up a huge market abroad for indigenously developed aeronauticalproducts,. At the IndiaUS Aviation Summit, both the countries would ink the Implementation Procedures for Airworthiness (IPA) which offers airworthiness technical cooperation between the US Federal Aviation Administration (FAA) and its Indian counterpart Directorate General of CivilAviation(DGCA).

AAIProposesToSpendRs17.5kCrDuring12thPlan TheFinancialExpress,Nov092011
The countrys largest airport operator, Airports Authority of India (AAI), has proposed to spend Rs 17,500 crore during the 12th FiveYear Plan (201217), up 40% from the 11th Plan period, in building and upgrading theairportinfrastructure. While AAI plans to fund major chunk of developmental works through internalaccrualsitexpectstogetRs5,000crorefromthegovernmentas gross budgetary support (GBS). We have presented our fiveyear expenditure plan to the MOCA. Major works include upgrade of communication and air navigation systems and sourcing of security equipments,saidanAAIofficial. AAI has projected domestic passenger demand to grow to 500 million annually by 2030, requiring dozens of greenfield airport facilities across the country. It plans to build 28 lowcost airports in the next few years besidesmodernisingtheexistingfacilities.

AirportsAuthoritySaysItWon'tFinanceDIALBailout BusinessStandard,Oct03,2011
The Airports Authority of India (AAI) has rejected a move to bail Delhi InternationalAirportLtd(DIAL)outofafinancialcrisisbyextendingitaRs 350croreloanatninepercentrateofinterest. The proposal was mooted at a Prime Ministers Office (PMO) meeting, chairedbytheprincipalsecretarytotheprimeministerinAugust. AAI has also not accepted another proposal to let DIAL pay its share of revenueonacashbasis,sayingitwasnotfoundtobeinconformitywith its accounting principles. Paying on a cash basis would mean the paymentwouldbemadebasedonactualrevenues,excludingduesfrom AirIndia. DIALhasbeenfacingacashcrunchbecausethestateownedAirIndiahas notpaidduesofoverRs250crore.However,thecompanyhastopayits 45.99 per cent revenue share to joint venture partner AAI at the beginningofthemonth,basedonnormalrevenueprojections.

AirportsAuthorityAsksKingfisherToClearRs210CrDues TheFinancialExpress,Oct25,2011
TheAirportsAuthorityofIndia(AAI)hassentnoticetoKingfisherAirlines for clearing dues worth Rs 210 crore. The public sector AAI has advised the airline to raise loans from banks to pay off the outstanding as the movewouldhelpthemsaveoninterestrate. The airline has said that it would secure bank loan shortly and clear the dues.Itmakessensesincetheduesisattractinganinterestrateof18%. Bankloancanberaisedataninterestof1112%.Itspureeconomics,a seniorAAIofficialtoldTheFinancialExpress. TheVijayMallyapromotedKingfisherAirlinesiscurrentlymakingupfront payment for using the airport infrastructure managed by the AAI across thecountry.Asperthemutuallyagreedcommercialterms,theairlineis paying15daysinadvanceforairportusagetotheoperator.

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InfrastructureFinance
BanksLend200%OfRoadProjectCosts,GovernmentWorried TheTimesofIndia,Nov28,2011
Onanaverage,bankslend39% morethantheprojectcostarrivedatby theNationalHighwaysAuthorityofIndia,theagencythathandsoutbids acrossthecountry.Akeyreasonisthehugegapbetweenthecostarrived at byNHAIand the estimate drawn up by developers who win the contracts. With private developers bidding aggressively for highway contracts and willingtoforkoutasignificantpremium,theroadtransportandhighways ministrydecidedtoexamine66projectswherefundinghasbeentiedup. In three projects, the developer's estimate was more than twice the projectcostcalculatedbyNHAI.Anotheronefourthoftheprojectssought loans50%100%higherthanNHAIfigures. Bankers,however,arguedthattherewasasixmonthgapbetweenNHAI finalizingtheprojectcostandawardingthecontract.Then,thedeveloper tookanotherthreefourmonthstomobilizefunds.Duringthisperiod,the costofmostrawmaterials,fromcementtosteel,asalsolabourwentup

Department Of Industrial Policy And Promotion Seeks Debate OnInfrastructureFunding TheEconomicTimes,Oct31,2011

TheDepartment of Industrial Policy and Promotion(Dipp) has put out a discussion paper on the 'Financing requirements of infrastructure and industry'tobeginadebateontheissue. The12th Fiveyear Planpegs the total funds requirement for infrastructuredevelopmentatover $1trillion,mostofwhichistocome from private sector. The manufacturing sector needs to grow at 1314% per annum for the economy to expand at 910% rate every year, the paper says, making a case for the need to attract global investors for buildingworldclassinfrastructure. "The Infrastructure finance market in India is characterised by the absence of an active longterm corporate debt market, asymmetric information on infrastructure projects, and inherent risks in financing infrastructureprojects,"thepapernotes.

AllBanksShouldFundInfrastructureProjects:Speaker TimesofIndia,Oct24,2011
"Corporate and public sector banks should have a focused approach towards funding infrastructure development projects that benefit local economies,"saidNYogishBhat,deputyspeakerofthestateassemblyat Vijaya Bank Founder's Day celebrations here on Sunday. "Such investmentscanbemadeaspartofcorporatesocialresponsibility(CSR).It will yield long term returns to investors and also help fund vital infrastructureprojects,"headded. Citing the example of publicprivate partnership that helped meet infrastructure needs of Calicut Airport, Bhat said banks in Karnataka, includingVijayaBank,shouldthinkonthoselines."Extensionofrunwayat Mangalore Airport, to enable the operations of widebodied jets, is hanging fire over cost involved," he said. Both Mangalore and Calicut airportsareinaraceagainsttimetoacquiretheinternationalairporttag andUnioncivilaviationministrywillbedisinclinedtogivethetagtoboth theairportsastheyarewithinadistanceof150km.

India'sFirstIDFLikelyInNext2Months:RGopalan TheEconomicTimes,Oct20,2011
Economic Affairs Secretary R Gopalan today said he expects India's first InfrastructureDevelopmentFundinthenexttwomonthsandthesizeof thefundisestimatedatUSD3billion. WhilediscussingtheIDFwithSingaporeinvestorshere,Gopalansaidthat itwasearlytostatethesizeofthefirstIDFbutitcouldbeasmuchasUSD 3billion.Gopalan,whoisonatwodayvisittopromoteIDFhere,saidthe fund could be launched within the next two months, and for now the fundwasgoingthroughtheinitialprocessofestablishment.Thedecision tosetupIDFs`FundwouldberegulatedbytheSecuritiesandExchange BoardofIndia(Sebi),theRBIwillbeinchargeoftheIDFNBFC. Gopalan said once the first fund is established with Indian investors' participation,othersimilarfundswouldbefollowedonwithparticipation fromforeigninvestors.

IndiaNeedsIslamicFinanceForInfrastructureDevelopment StandardandPoors,Oct13,2011
It is high time that India should develop Islamic Sukuk markets seeking guidance from Malaysia or Middle East experts. Finance Ministry and Reserve Bank of India has to coordinate with Accounting and Auditing Organizations of Islamic Financial Institute (AAOIFI), Bahrain and Islamic FinanceServiceBoard(IFSB),MalaysiatoamenditsBankingandFinancial regulations and provide a level playing field for Islamic Finance and Banking along with conventional financial banking as done in modern, secularandindustrializedcountrieslikeUK,Singapore,Japan,HongKong and France to become a developed country with 9.0 9.5% growth with the Islamic Finance in theinfrastructure development. China has already madeabaseinHongKongtobeanIslamicFinanceHubbyamendingits banking and financial regulation along with taxation policies thus, Hong Kong has become an effective corridor for Islamic Finance. It has also joinedIslamicFinanceServiceBoardofMalaysia. TheIndianGovernmenthasestimatedagapofUS$300(30%fundinggap) initstargettoachieveinfrastructureinvestmentofUS$1Trillionby2017.

SEBIRevisesBiddingNormsForFIIsInInfraBonds FinancialChronicle,Sep30,2011
Revising its norms for foreign institutional investors (FII) in the infrastructure debt bonds, the capital market regulator SEBI today loweredtheminimumbiddingandallocationamountsforsuchinvestors. Aspertherevisedguidelines,nosingleFIIshallbeallocatedmorethanRs 2,000 crore of the investment limitagainst the existing Rs 10,000 crore. The market regulator has also reduced the minimum bid size to Rs 50 crore from the existing Rs 250 crore, a SEBI circular said. Recently, the government allowed FIIs to invest up to $ 5 billion in infrastructure bonds with reduction of lockin period to one year from earlierthreeyears.Subsequently,theNationalStockExchange(NSE)will holdthebiddingprocessfortheallocationofentire$5billiononOctober 7,2011.TheserevisednormsarelikelytoattractahighernumberofFIIs into the infrastructure bond segment. Despite the last budget announcementofraisinginvestmentlimitto$25billionfrom$5billion earlier,therewascoldresponsefromFIIstosuchbonds.

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OtherSegments
101RailwayProjectsDelayed;153PercentCostOverrun TheTimesofIndia,Nov30,2011
Railways top the list among infrastructure projects that missed the deadline, causing huge cost overruns to the exchequer. Among the 134 rail projects monitored by the government, 101 were facing delays leading to cost overrun to the tune of Rs 56,609.3 crore, an increase of 153.5percent.Thereare26projectsrunningbehindscheduleranging fromtwoto213monthsleadingtotheriseincostbyRs20,575crore. Ofthese26projects,10arerunningover60monthsbehindschedule. Railwaysleadsfromthefront,whenitcomestothedurationofdelay.For instance, the GunaEtawahNew Delhi new line is running 213 months (around17years)behindthecompletiontarget. Data collected by the ministry of statistics and programme implementationtillJulyshowsthatroadsandhighwayprojectsarebehind railways,whose123projectsaredelayedand11arefacingcostoverrun. Out of 558 central projects, worth Rs 150 crore, monitored, 241 are delayed,140areonscheduleandsevenarerunningaheadofdeadline.

IndiaToNarrowlyMiss'0712InfrastructureTarget EconomicTimes,Nov26,2011
India is likely to narrowly miss its target of investing $500 billion in infrastructureunderthefiveyearplanendingin2012,aseniorofficialat thecountry'sPlanningCommissionsaid. "Provisional estimates suggest we will be in the region of $480 billion, which will be more than a doubling of investment compared to the previousplan,"GajendraHaldea,AdvisortotheDeputyChairmanofthe PlanningCommission,toldaninfrastructureconferenceinLondon. India's11thfiveyearplanhadraisedinfrastructureinvestmenttargetsto $500 billion from $216 billion during the previous plan. The next plan envisagesinvestmentof$1trilliontopushannualgrowthto10percent.

NCRNeeds8InterCityRailCorridor BusinessLine,Nov22,2011
Eight intercity rail corridors in the National Capital Region (NCR) are requiredtofacilitatecommutersasperastudyreport. The total cost of the rail link proposed between Delhi and neighbouring cities covering a distance of 640 km has been calculated at Rs 1,41,470 million. Thelongestlegoftheraillinkwith158kmhasbeenproposedfromDelhi toAlwarinRajasthancoveringGurgaonandRewariinHaryanaatacostof Rs34,100million. The shortest link between Delhi and Baraut via Shahdara at a cost of Rs 12,500millionwillcoveradistanceof56km.Theotherrailcorridorshave beenproposedtoconnectcitiessuchasMeerut,Palwal,Panipat,Khurja, Rohtak,Hapur,BahadurgarhandSonipat.

MetroTravelStillADreamForManyCities BusinessStandard,Oct21,2011
A little less than a decade after the Delhi metro system came into operation, another mega city, Bangalore, gets rolling on the latest in urbantransport.Thepastdecadehasseenrapidexpansionofthemetro network,butmanyothercitieslikePatna,Ludhiana,KochiandPunewait inqueueforamorecomfortablecitytravelexperience. Expertsestimatetheinvestmentin metrosystems wouldreachas much asRs80,000croreintwoyears.Thefigurewillbemuchmore,oncemetro planstakeoffin20othercities. ThoughKolkatawasthefirstIndiancitytohaveametrosysteminplacein 1984,Delhibecamethetrendsetterin2002.Thereasonswerenotfarto see timely implementation and use of the latest technology. Metro systems have the tendency of breeding success after the first one, said ParveshMinocha,managingdirector,FeedbackInfrastructure.

India'sLongestRailwayTunnelUnveiledInJammu&Kashmir TheEconomicTimes,Oct14,2011
The northern railways on Friday opened India's longest railway tunnel piercingthroughthePirPanjalrangeinJammu&Kashmir.Thetunnelis partoftheambitiousUdhampurSrinagarBaramullaraillinkprojectof Northern Railways. At 10.96km long, the Pir Panjal Railway Tunnel is India'slongestandAsia's2ndlongesttunnel,aimedatreducingthetravel distance between Quazigund and Banihal to only 11 km and providing a hasslefreetraveluptoBaramulla. The10.96kmstunnel,whichisalignedstraightfromnorthtosouth,is100 percent waterproof and is also equipped with fire fighting system throughout its entire length. According to project manager Hindustan constructioncorporationSYala,theconstructionofthetunnelstartedin November 2005 and was complete in 2011. The total cost of the tunnel was Rs.391 crores. The train would take 6.6 minutes to travel this distance from Banihal in south side to Qazigund in north side of the mountain and thus would take passenger from Jammu region in to Kashmirregionjustsixminutes.

RouteEmergesForFirstHiSpeedRailCorridor BusinessStandard,Oct7,2011
PuneMumbaiAhmedabad would probably be the first rail line in the countrytohaveahighspeedcorridor,fromthesixbeingplanned. Tendering for creation of infrastructure for the corridor is expected to begin in 2014. French consultancy Systra recently gave a prefeasibility report on the project to Indian Railways (IR). The latter are considering financialoptionsfortheentireproject.Oneisonadesign,build,finance, operateandtransferbasis,throughasingleprivatedeveloperwhowillbe responsibleforconstruction,operationsandmaintenance. TherewillbenointerfaceriskonIRandallrevenueriskcanbetransferred to the private developer. The option is unbundling the project into components. This may make it attractive to more companies from the perspectiveofaffordability,intermsofsizeandriskallocation. TheestimatedcostfortheinfrastructuremightbearoundRs50,000crore andanother Rs 7,000crorefor rollingstock,averagingapproximatelyRs 100croreperkm.

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WorldInfrastructureNews
Coal Prices Not Likely To Recover In 2012 As China, India May LimitPurchases Bloomberg,Nov27,2011
Coal in Asia is unlikely to recover in 2012 from its first decline in three years as electricityprice controls prompt Chinese and Indian utilities to limitpurchasesofthefuel. PowerstationcoalattheAustralianportofNewcastle,abenchmarkprice forAsia,willaverageabout$118ametrictonnextyear,accordingtothe medianestimateofsixanalystsandtraderssurveyedbyBloombergNews. Prices have averaged $122 so far in 2011. Coal at Richards Bay in South Africa,whichsuppliesAsiaandEurope,willtradeatabout$111atonin 2012,downfrom$118thisyear,thesurveyshowed. Power providers in China and India, Asias biggest energy users, are struggling to recoup their costs as governments restrict prices to curb inflation, reducing the incentive to boost electricity generation from thermalcoal.

JapanStakeInDelhiMumbaiIndustrialSPV FinancialExpress,Nov14,2011
Indias$90billionurbanisationprojecttobuildaDelhiMumbaiindustrial corridor will get a boost with the government plan to offer 26% in the venture to Japan. The government also plans to sell some equity in the DelhiMumbaiIndustrialCorridorDevelopmentCorporation(DMICDC)to domesticpublicsectorfinancialinstitutionslikeLIC. Simultaneously,DMICDCsinitialequitywillberaisedtoRs100crorefrom thecurrentRs10crore.Thecorporationwillrunthetrustfundintowhich thegovernment,multilateralagenciesandJapaneseentitieswillinvestto financethecitybuildingprojectslikelyacrossdecades. A department of industrial policy and promotion official told FE that consideringthe$9billioncommitmentfromJapan,wewillbegiving26% in DMICDC to Japan. IL&FS and IDFC will transfer their combined 51% stake to governmentowned financial firms making DMICDC a deemed government company. Currently, IL&FS holds 41%, IDFC 10% while the balance49%isownedbythegovernmentinDMICDC.

MalaysiaCallsForInfrastructurePartnershipWithIndia BusinessStandard,Nov14,2011
The Malaysian Government said that about $ 30 billion (around Rs 1.35 lakh crore) could be sourced by creating an infrastructure investment based fund, which could be listed on the Malaysian stock exchange by bothIndianandMalaysiancompaniesandinstitutions. Speaking at the South India Infrastructure Investment Summit 2011, S Samy Vellu, Malaysias Special Envoy to India and South Asia on infrastructure said: Both, India and Malaysia, must work together to creative financial packages along with strategic alliance to realise the actualpotentialofthisvastinfrastructureopportunity. He unfolded a sixpoint forward looking strategy to finance Indias infrastructure.Healsosaid,Indiashouldrecogniseandrewardtheroleof the private sector which should participate actively in the Stakeholders inclusiveinvestmentmodel.

Canadian Pension Funds Interested In Indian Infrastructure Sector EconomicTimes,Nov13,2011

Canadian pension fundsare interested in investing in the infrastructure projectsinthecountry,providedregulatoryhurdlesareaddressedbythe government. "BigpensionfundsfromCanadaareinterestedtoinvestininfrastructure sector in India. But, the concerns relating to regulatory issues should be addressed by the government,"CanadaIndia Business Councilvice chairmanPeterSutherlandsaid.TherecentstepssuchasallowingFIIsto investininfrastructurearestepsintherightdirection. ThegovernmentplanstoinvestaroundUSD1trillionintheinfrastructure in the next five year plan beginning April. The government expects to garneraround50percentoftheproposedinvestmentfromprivatesector through publicprivate partnership projects. Referring to sectors, Sutherland said Canadian investors are looking at all infra sectors includingports,roadsandpower.

Canada Eyes India For Investment In TrillionDollar ItalyMayInkMoUOnInfrastructure InfrastructurePlan TheHindusBusinessLine,Oct2,2011 Italy is planning to sign a memorandum of understanding (MoU) with Reuters,Nov4,2011
India is on Canadas radar screen as it wishes to be a part of a trillion dollar infrastructure plan to consolidate trade and investment ties with Asias thirdlargest economy, Canadian international trade minister Ed Fastsaid.Indiawantsinfrastructureinvestmentof$1trillionoverthefive years starting in April 2012 as it aims to bolster economic growth and raise living standards. Indian infrastructure ranks 89th out of 133 countries,aWorldEconomicForumreportfound. India has a very ambitious infrastructure plan going forward worth $1 trillion and of course, Canada wants to be a part of it because we are a world leader in infrastructure development, Ed Fast told Reuters in an interview.TheCanadianministerisonaweeklongvisittoIndiatomeet with Indian government ministers and business leaders to attract Indian investment to Canada,and press on the commercial interests of businessesintherapidlygrowingmarketof1.2billion. India on infrastructure, primarily roads. The MoU will cover aspects of roadbuildingandmaintenanceaswellastechnicalcooperationbetween thetwonations,MrGiacomoSanfelicediMonteforte,ItalianAmbassador toIndia,saidhere. AninterministerialdelegationisexpectedtoarriveinIndiainOctober whereitwouldsignanMoUoninfrastructurewiththeUnionMinistryof RoadsandHighways,Montefortesaid,speakingataninteractivesession organised by the Confederation of Indian Industry (CII). The delegation will have industry representatives across various sectors such as renewableenergy.AccordingtoMrdiMonteforte,Italyhasalsodecided toparticipateattheKolkataBookFairtoexpanditsculturalties.

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AVENDUSPOWERINDEX
The Avendus Power Index is the first index designed to indicate the performance of major listed Power Generation companiesinIndia.WhilethereareaplethoraofindiceswhichtracktheperformanceofEnergy/PowersectorinIndia, wefelttheneedtocreateaseparateindexforthepowergenerationcompanies.

AvendusPowerIndex
3,000 2,800 2,600 2,400 2,200 2,000 1,800 1,600 Jan10

Mar10

May10

Jul10

Sep10

Nov10

Jan11

Mar11

May11

Jul11

Sep11

Nov11

KeyHighlights
ReturnsSummary(ending09Dec11) 1month 3month 6month 1year 2year YTD AvendusPowerIndex (9.9%) (9.0%) (22.3%) (33.5%) (37.3%) (36.1%) NSENifty (6.8%) (5.6%) (11.9%) (15.6%) (4.8%) (20.2%) BSESensex (6.6%) (5.6%) (11.8%) (15.7%) (5.3%) (20.5%)

Methodology TheindexisfreefloatmarketcapitalizationweightedandcomprisesthefollowingstocksAdaniPower,CESC,GMRInfra, GVKPower,IndiabullsPower,JaiprakashPower,JSWEnergy,KSKEnergy,LancoInfratech,NHPC,NTPC,ReliancePower, TataPowerandTorrentPower.Theindexbeginswithavalueof1000on01Jan06withonlyCESC,JaiprakashPower, NTPC and Tata Power. As and when more Power Generation Companies have got listed, we have added them to the indexaftermakingappropriateadjustments.Theindexhasalsobeenadjustedforvariouscorporateactions.Wehave usedfreefloatmarketcapitalizationdatatill09Dec11forthiseditionofthenewsletter.

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ABBREVIATIONS
Term BU BRIC BOT CYxx CAGR DGCA EBITDA EV FYxx FDI GDP JNPCT kWh MCA MCap MoS MU Description BillionUnits=1billionkWh Brazil,Russia,IndiaandChina Buildowntransfer CalendarYearending31Dec20xx CumulativeAnnualGrowthRate DirectorateGeneralofCivilAviation EarningsbeforeInterest,Tax,Depreciationand Amortization EnterpriseValue FinancialYearending31Mar20xx ForeignDirectInvestment GrossDomesticProduct JawaharlalNehruPortContainerTerminal KiloWattHour ModelConcessionAgreement MarketCapitalization MinistryofShipping MillionUnits=1millionkWh P/E PAT PPP SEZ TAMP YoY Yr YTD Term MT MW NHDP NHAI NMA NSICT NW OMST P/B Description MillionTon MegaWatt NationalHighwaysDevelopmentProject NationalHighwaysAuthorityofIndia NationalMaritimeAgenda NhavaShevaInternationalContainerTerminal NetWorth OperateManageShareTransfer PricetoBookRatio PricetoEarningsRatio(Earningsisrepresented byPAT) ProfitAfterTax PublicPrivatePartnership SpecialEconomicZone TariffAuthorityforMajorPorts YearonYear Year YearToDatefortheCalendarYear

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ABOUTAVENDUS
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