Adani Power Ltd Management Discussions

Geopolitical instability, notably the ongoing conflict between Russia and Ukraine, disruptions in global supply chains, and trade tensions between major economies like the U.S. and China, continue to impact global economic stability. Additionally, climate change policies and shifting regulatory landscapes influence investment decisions across industries.

Despite these challenges, the US economy proved resilient, growing by 2.8% thanks to a strong labour market and easing inflation. The Eurozone, however, saw slower growth of 0.9%, including a slight decline in Germany. Emerging markets, especially in Asia, maintained stronger growth, reaching 5.3% overall, driven by technology and infrastructure investment. Chinas economy expanded by 5.0%, helped by government policies and a recovering property market.

Global inflation is improving, projected at 5.7% in 2024, down from 6.7% in 2023. Advanced economies are expected to reach this target faster than emerging markets and developing economies, where the decrease may be slower. Inflation in advanced economies should average 2.6% in 2024, likely reaching target levels by late 2025. Emerging markets will see a slower, though positive, trend.

Major central banks significantly cut interest rates to address economic challenges and stimulate growth. The Federal Reserve lowered its federal funds rate by 1%, landing between 4.75% and 5% by late 2024. The European Central Bank followed suit, reducing its deposit rate to 3.0% by December from a peak of 4.0% earlier in the year. The Bank of England also lowered its key interest rate to 4.5% in November, from 5.25%, to support the UK economy amidst uncertainty. December 2024 saw the largest wave of rate cuts among G10 central banks since the pandemic, totalling 825 basis points for the year, representing an aggressive easing cycle not seen since 2009.

Electricity demand continues to rise, primarily driven by increased industrial activity, urbanisation, and the adoption of energy-intensive technologies. Growth in electricity consumption varies by region:

The global energy landscape is undergoing significant changes, with renewable energy sources rapidly expanding to replace conventional fossil-fuel based sources and to meet increasing electricity demand. This growth in renewables is expected to stabilise global coal demand in the coming years. According to the International Energy Agency (IEA), after reaching a new high in 2024, global coal demand is projected to plateau through 2027, as the strong deployment of renewable energy curbs growth in coal use. Additionally, the World Bank notes that while global coal consumption reached an all-time high in 2022, both coal prices and demand are expected to decline in the medium term, reflecting a reshaping of global energy trade.

(Source: iea.org, blogs.worldbank.org)

The global push for sustainability was a central economic agenda in 2024, with international climate policies influencing investment strategies and government priorities. The COP29 summit, held in November 2024 in Abu Dhabi, aimed to expedite the transition to clean energy, reduce carbon emissions, and advance net-zero commitments. Nations unveiled enhanced climate action plans focused on expanding renewable energy, decarbonising industries, and adopting green financing models. However, discussions were clouded by the United States withdrawal from key international climate commitments, citing economic challenges and domestic priorities, raising concerns about global climate collaboration.

The US exit from the Paris Agreement created a significant void in global climate action. Just months earlier, at COP29, the US had pledged a substantial amount towards the $300 billion climate finance indicating renewed commitment to addressing the climate crisis. This abrupt reversal undermined collective efforts to combat climate change and raised critical questions about the stability of global climate finance.

Indias energy policy reflects a dual commitment of promoting renewable energy to achieve net-zero goals and ensuring coal-based power meets current and future energy needs. This balanced approach is essential for energy security and sustainable economic growth. To reach net-zero emissions by 2070, India must integrate renewable sources while acknowledging coals ongoing significance. Coal accounts for about 59% of the countrys primary energy supply, underscoring its vital role in addressing rising energy demands. With energy consumption set to triple in the coming decades due to economic growth and improved living standards, India has ambitious coal production targets of 1.31 billion tonnes by FY 2024-25 and 1.5 billion tonnes by 2030, ensuring a stable energy supply for industrial and infrastructure development.

Despite advancements in renewables, coal remains central to Indias energy strategy, with plans to add

30,000 MW of new coal-fired capacity, reinforcing its primary power source status. This pragmatic approach recognises coals reliability and affordability as crucial for sustaining economic momentum while renewable infrastructure develops.

The global economy is expected to grow steadily, with a projected 2.8% expansion in 2025 and 3.0% in 2026. This outlook is supported by strong performances from the United States and major emerging economies. Global economic conditions in the coming years will depend on several crucial elements. US import tariffs on goods from China and other nations may affect the cost and availability of Chinese manufacturing inputs and spare parts. This could lead to higher manufacturing costs and product prices, impacting global competitiveness and export patterns. These changes may also have repercussions for infrastructure projects worldwide. The interaction of these factors shows the complexity of the global economy, requiring careful consideration and strategic planning by policymakers and industry leaders to maintain growth and stability.

US growth is projected to peak at 1.8% in 2025, then to 1.7% in 2026 due to shifting labour markets and reduced consumer spending. Eurozone growth is expected to recover to 0.8% in 2025 and 1.2% in 2026, driven by stronger consumption and easing inflation. Overall advanced economy growth is forecast to stabilise around 1.8-1.9% in this period.

Global disinflation goal, continues, though some regions stagnate due to high inflation. Global inflation is projected to fall to 4.4% in 2025 and 3.5% in 2026, with advanced economies reaching targets first. Monetary policies remain divergent.

(Source: WEO)

The Governments strategic reforms, substantial investments in both physical and digital infrastructure, and initiatives such as Make in India and the Production-Linked Incentive (PLI) scheme have been instrumental in enhancing the countrys growth trajectory and self-reliance.

The services sector is projected to maintain strong growth at 7.2%, fuelled by healthy activity across financial, real estate, professional services, public administration, defence, and other service segments.

India is now the worlds fifth-largest economy nominal GDP and third-largest by Purchasing Power parity (PPP). The government aims for a $5 trillion economy by FY2027-28 and $30 trillion by 2047, driven by infrastructure investment, reforms, and technology adoption. Reflecting this commitment, the budget allocated for capital investment in the forthcoming financial year (2025-26) has risen to 11.21 lakh crore, which accounts for 3.1% of GDP.

India is projected to grow at 6.2% in FY 2025-26. India is on track to become the worlds third-largest economy by 2030, driven by infrastructure investment, private capital expenditure, and financial services expansion.

Ongoing reforms support long-term growth.

Indias positive outlook is underpinned by its demographic dividend, increased capital investment, proactive policies, and strong consumer demand. Improved rural consumption, driven by moderating inflation, further strengthens this trajectory. Government focuses on capital expenditure, fiscaldiscipline, and rising business/consumer confidence support investment and consumption.

Initiatives like Make in India 2.0, Ease of Doing Business reforms, and the PLI scheme aim to strengthen infrastructure, manufacturing, and exports, positioning India as a global manufacturing hub.

Anticipating inflation aligning with targets by 2025, a more accommodative monetary policy is expected. Infrastructure development and public policies will drive capital formation, while rural demand will be supported by initiatives like PMGKAY.

(Source: PIB, MoSPI, Economic Survey, IMF)

The budget also reflects a commitment to clean mobility and renewable energy through extended subsidies under the FAME India Phase II scheme and investments in EV charging infrastructure, promoting a greener economy.

With a targeted fiscaldeficit of 4.4% of GDP for FY

2025-26, down from 4.8%, the government emphasises fiscalby consolidation, ensuring that growth-oriented reforms are pursued on a stable and sustainable path.

The Indian power industry has witnessed a significant transformation, transitioning from a power-deficitscenario to achieving surplus capacity through the integration of a unifiednational grid, enhanced distribution networks, and universal household electrification. With a diverse energy mix spanning conventional sources such as coal, natural gas, and hydro, as well as renewable options like solar, wind, and biomass, India is steadily building a sustainable energy future.

(Source: IBEF.org)

The Central Electricity Authority (CEA) has recorded an all-India peak power demand of 256.53 GW in FY 2024-25, rising sharply from FY 2023-24. This rise is attributed to increased industrial activity and an unusually dry August, which led to greater reliance on pump sets for irrigation due to insufficient rainfall. In terms of units, the energy requirement in 2024-25 is expected to touch 1,736,357 MUS.

(Source: CEA Report)

Significant progress was made in the distribution and transmission sectors in FY 2023-24. AT&C losses improved to 15.4% in FY 2022-23, driven by better billing efficiency (87.0%) and collection efficiency (97.

(Source: 12^th Annual Integrated Rating & Ranking: Power Distribution Utilities To meet rising energy demand and support renewable integration, India plans to add an extra 80 GW of coal-based thermal power by FY 2031-32. This new capacity will be crucial in stabilising the energy grid, especially during peak demand periods or when renewable generation is low. The adoption of ultra-supercritical and supercritical technologies ensures this expansion will be environmentally efficient, with lower emissions intensity per unit of electricity produced.

The demand for electricity has surged, particularly due to cooling requirements in the summer, leading to a record peak demand of 256.53 GW. Additionally, winter demand has also risen, reaching 235.45 GW this year, as reported by the Central Electricity Authority (CEA). These trends highlight the growing energy needs across the country. Indias electricity requirement is projected to reach 1,626 billion units (BU) in FY 2023-24, reflecting a 7.5% year-on-year growth. From April to September 2024, demand hit 888 BU, a 5% increase compared to the same period last year, with a minimal supply deficit of

In FY 2024-25, Indias coal industry is poised for significant growth, driven by increased production and a strong demand-supply scenario. The Ministry of Coal reported that the all-India coal production for FY 2023-24 reached 997.83 million tonnes (MT), marking an 11.71% increase from the previous year. Coal India Limited (CIL) and its subsidiaries contributed 773.81 MT to this total, reflecting a 10.04% growth. The Singareni Collieries Company Limited (SCCL) also saw a production increase of 4.30%, achieving 70.02 MT in the same period.

(Source: Ministry of Coal)

In India the Coal demand in FY 2023-24 increased by about 11% against FY 2022-23. the Government of India has set ambitious targets to enhance domestic coal production. The aim is to achieve 1.3 billion tonnes by the fiscal year

2026-27 and 1.5 billion tonnes by 2029-30. This initiative is part of the broader goal to advance energy self-reliance and reduce dependence on coal imports.

Brent crude oil prices have been volatile, driven largely by geopolitical tensions and supply chain disruptions. In early 2024, prices hovered around $80-$90 per barrel, with projections indicating potential fluctuations depending on global supply and demand dynamics. The ongoing conflict between Russia and Ukraine has exacerbated concerns over energy security, leading to fluctuations in oil prices. OPEC+ production cuts and uncertainties in Middle Eastern geopolitical affairs also contribute to price volatility.

(Source: EIA.gov)

The coal pricing outlook suggests a gradual decline in prices leading into 2024 and 2025. This trend is primarily driven by transitioning energy markets, a shift towards renewable energy, and decreasing global demand for coal. The long-term outlook indicates a softening market, influenced by geopolitical, regulatory, and environmental factors, reflecting a significant change in the coal landscape.

(Source: Refinitiv Research, KPMG Analysis)

To address the growing energy demand and support renewable energy integration, an additional 80 GW of coal-based thermal power capacity is projected to be added by FY 2031-32. This capacity will play a vital role in stabilising the energy grid, particularly during peak load conditions and times when renewable generation is low. The focus on adopting ultra-supercritical and supercritical technologies ensures that this capacity addition is environmentally efficient, with reduced emissions intensity per unit of electricity generated.

innovation, including smart grids, digital energy management systems, and advanced monitoring frameworks. Such developments enhance operational efficiency, reduce transmission losses, and support the integration of diverse energy sources into the grid. Additionally, improved project management practices are enabling faster execution of power generation and transmission projects.