Q2FY20 CCT Notes Q2FY20.pdf (268.1 KB)
This one was very informative about the business segments and opportunity and is a must-read to understand the business.
Jan 1, 2020, launch date for real-time trading. The sizeable opportunity of 30-40 BU in the bilateral market which is 3-4 months contracts.
When demand is low, overdraw is minimal and hence DSM volume is less. With RE the uncertainty in availability is more. And more you overdraw you are charged 100% of DSM price. So conversion to spot will happen when real-time starts.
We are present in the LT (within the ST market) till the time the market is there. We expect it to shift to the shorter term.
Real-Time, long duration and the cross border will become a reality by FY end. The volume in these markets is bigger than what we do today. Green TAM will not be a reality this FY. In long-duration, we will have to work out the margin profile differently from where we are now. RT and CB will be similar to current.
Open Access has seen good growth this year due to good price discovery on our platform and this will bring in more liquidity and improve price discovery further. RTM will not wait for NOAR National OA Registry by POSOCO as CERC has agreed.
We have also seen a lot of traction in the weekly market as well because sometimes what happens is distribution companies when they procure power through DEEP platform under bilateral, we try to convert them to the spot market, so some distribution companies get converted directly into the spot market. Some take time and in between they want to try weekly market also because this gives them an opportunity to buy power in fixed quantum for week as a whole so once or twice, they buy there, and they start comparing their prices with the spot market and then they try to shift to the spot market also. So, we have seen traction in all the segments and overall growth.
The gas exchange market is as big as electricity. The market for gas is in fertilizer, CGD and some power producers. The situation is where electricity trading was 10-12 years back. We are leading the initiative to introduce this and this excites us.
Past growth was driven by growth in the overall electricity market and LT PPAs not being signed. We are calibrating ourself to the macro GDP picture and dealing with it. We are launching new products to increase our TAM and customer base.
Growth drivers - new products, new tenures, the shift from DSM, DEEP, 24/7 power, saubhagya, industrial growth with OA.
We welcome competition in the market as we are currently alone in trying to expand the market segments. Currently, we are at 4% in trading market and ST at 11% if it goes to 15-20 everyone will benefit.
Competition is for bilateral volumes, DSM not going to compete as we are trying to take through you.
Running of Business - Your first question was about how we guarantee, what we are doing is as you know the market is open at 10 in the morning and then the published final schedules are filed in by evening. Once the final schedules are published our job is over. Now all these regional load dispatch centres and state load dispatch centres will publish these results and the consumer is aware how much unit he has to draw from the grid. So open access consumer typically have supply from their own distribution company and parallelly they are also buying from exchange to take advantage of the lower prices. What they do is, some part they are buying from the exchange and some other part they are drawing from the grid, so the quantity that has been scheduled they will draw and they will pay to exchange and for the remaining part, they pay to the distribution company. Whatever decisions are there on account of distribution companies, they will settle it with the distribution company. So there is no risk on that front. Whatever final schedules are there they have to abide with and they have to follow that schedule. They have to meet those schedules. I think we should clarify the part as if sellers are defaulting electricity system, is a bit different from others. I do not know whether you are taking reference from gas. Here in this case if the seller is defaulting it means that he is not able to deliver, then he pays his deviation charge to the system operator, so we will connect with the state, then he handles then the system operator in the state like SLDC, settles with him the penalty for the deviation or the imbalance created by him. If he is connected to the interstate grid then the RLDC comes in, it is totally independent. In case SLDC schedules are issued to the seller is to be maintained by the seller and scheduled issued to the buyer needs to be maintained by the buyer and if the seller is defaulting there is no impact on the buyer.
OA is favourable in Gujarat, Haryana, TN, AP, Telangana and RJ. Open charges are not very high and we are seeing an increase in participation.
Medium-term PPAs auctions were floated in Mar 19, not a single PPA has been signed. Price discovered was Rs. 4.41. And everyone knows our prices. Last year volume growth was due to coal linkage problem.
Last FY Ecert was 11.5 lac. This year we expect 5 lacs in H2. The overall number is expected to be much bigger than last time but we do not know whether we will happen in Q3 or 4 or spillover to next year so we are taking only a part of it.
On CB final procedure approval is pending from CEA.
Gateway issue for RT market: It is sort of handled. The market model which they prepared about a year back when it was 100% only a paper where they were talking about the model itself they have made certain corrections so the initial model was this market would be one hour. It would be on hourly basis four-time block, so now they have reduced it to 30 minutes, which is two time block to address some of the concerns, which are related to gate closure, but the entire thing is still not covered in that, but I think the initial feelers that states are more or less okay with this and since the correction from 60 minutes to 30 minutes has been done they are sort of accepting it and we are expecting it to start very soon. Because of the Discoms concerns on the gate closure, which they said that right to recall should be very close so that part for taking care of that part only they have made it now half-hourly trading. Earlier they thought that will trade 24 times in a day and for each one hour and for every 15 minutes in one hour. Now they are reducing it to half an hour. The purpose was to take care of the concerns of the distribution company on right to recall period. Gate closure should not be a hurdle to the entire market.
IEX Vs DEEP
Also, how do you differentiate versus DEEP because I was just thinking DEEP gives the Discoms an option that you can pay after say 60 days or 30 days, but in your case, they will have to pay upfront, so why would a Discom want to shift to you?
We have various contracts in fact. One would be like DEEP also. We are thinking and we are also working on contracts, which are like our weekly contracts, so these are more standard contracts where you can have high participation coming from both buyer side and sell-side. I will give you one example. Suppose you are aware that there is a contract available for procurement of power for the month of December and it is going to close on this particular day so you will have participation coming from various sellers as well as various generators as well as various distribution companies. This is not happening on the platform. It is more of an RF through the sort of a thing where one distribution company is placing their bid and then multiple generators are coming and the price is being discovered and the reverse option is done and then these are executed. So ours would be more of a standardized contract and standardized product similar to what we have in our weekly market and globally also if you see it is like this only. More standardized and more liquidity. This is how it happens. Now your second question was whether the settlement would be done on a monthly basis, no. In our case, it would be done on a daily basis. We will take an advance, but that would be one day in advance. We will not ask them to make payment for 30 days in advance. They will make payments for the only day in advance and on a daily basis settlement will be done and then the value would be because there will be no financing cost. There will be no risk because today you have seen that various distribution companies when they come to DEEP the price discovered for all these distribution companies are very different, where their creditworthiness is not good they get very high prices. Some other distribution companies like Gujarat they get low prices. When you are coming to exchange you are treated at par because the entire risk is being absorbed by exchange, so the exchange is taking responsibility of paying to the seller and then the value would be reflected in the lower price that will be discovered at the exchange.
For instance, there is an overanxious customer and he pays some additional charges because of these additional surcharges and infrastructure and other things and so says for example gone for a long-term contract I mean less than one year contract and there is a change in the regulation so who bears that risk? Is it on the customer itself or that is on you for sure?
Not really. What happens is in all those contracts the price discovered is at regional beneficiary and we are responsible for that price only. All those charges are to be borne by respective whether it is generator or Discom their side of charges will be borne by themselves.
Uploading all previous CCTs in one place:
Q1FY19.pdf (277.5 KB) Q1FY20.pdf (366.7 KB) Q2FY18.PDF (289.9 KB) Q2FY19.pdf (331.3 KB) Q2FY20.pdf (268.1 KB) Q3FY18.pdf (286.9 KB) Q3FY19.pdf (344.1 KB) Q4FY18.pdf (313.7 KB) Q4FY19.pdf (355.8 KB)
