4
YOUR
T I M E
G003 - Rohit Agarwal H005 - Mohit BaglaG022 - Rohit Garg G050 - Sahil Goyal
The Power Sector in IndiaIndia’s power requirement by 2017 would be approximately 315 to 335 GW, and would require a generation capacity of 415 to 440 GW
This implies tripling the installed capacity from the current level of 140 GW, translating into an annual
addition of 20 to 40 GW
The Power Sector in India
47%
31%
21%
Installed Capacity
State SectorCentral SectorPrivate Sector
Installed Electricity Generation Growth
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
132 143 148 159 174200
223 238273
CAGR: 9.4%
Installed Electricity Generation Capacity (GW)
Jhajjar Power Plant, Haryana1320 MW (2*660 MW) supercritical coal-fired power plant in the village of Khanpur in the Jhajjar District of Haryana
Supercritical unit with pressure of the boiler is about 3530 psi and temperature is 1050°F (565°C)
Project facilities include Railway siding for transporting coal & a 14 km long water supply pipeline from the JLN feeder canal
• 214.5 ha for Plant & Equipment, Switch Yard, Coal handling system & related plant
• 109.3 ha for Ash Disposal• 137.0 ha for Greenbelt and Water storage
HPGCL had formed a Special Purpose Vehicle (SPV) called Jhajjar Power Limited (JPL)
China Light Power PIPL
Contract on Build, Own and Operate (BOO) basis awarded to CLP Power India Pvt. Ltd. through a tariff-
based competitive bidding process under the Electricity Act 2003
The overall cost of the project is ₹59,681 M which is part-financed by the promoters ₹20,661 M through a combination of equity and compulsorily convertible preference shares
Assets and Services of CLP India Group:• Power Generation• Transmission and
Distribution System• Retail• Gas Storage
Project Financing
CPL was the lowest bidder with levelised tariffs of 2.99/unit
As per the PPA, DISCOMs will buy 90% of power produced and 10% will be sold on merchant basis
Agreement was valid for 25 years and already executed between JPL and UHBVNL & DHBVNL
JPL and the Environment
Installed flue gas desulphurization (FGD) with financial implication, even though the Indian regulations do not require this
JPL was awarded the CNBC TV 18's Infrastructure Excellence Award for the year 2012 in the main category of
Energy & Power
Environmental Impact Assessment was completed by MECON Limited in January 2008 based on terms of reference approved by the MoEF
Implementation of effective Wastewater Management System produced in the form of blow-down from the closed
cooling water system
• Land Acquisition▫494.1 hectares of low-yield agricultural land ▫Uninhabited site hence no displacement of households▫Compensation rates were higher than the prevailing market prices at the time of
negotiation in 2007 under Land Acquisition Act, 1894▫ It consists of a cash payment plus a deposit that will yield an annuity for 33 years.
The deposit is designed to provide long-term livelihood support for each affected household
▫ JPL will work closely with communities to develop alternative livelihoods for those requiring new economic activities
Socio-Economic Analysis
• Employment▫ Workers will be recruited from adjacent villages to the greatest extent possible, and the
necessary social infrastructure will be provided for the workforce▫ Workers from outside the area will stay in temporary accommodations on the project site▫ The completion of construction activities will see a reduction in job opportunities in the project
area that could create local resentment▫ Employees and their families will reside in the plant residential site, where they will contribute
to demand for local food and services
Socio-Economic AnalysisPeriod Company
EmployeesContractor Employees
Total
Construction 50 2k-4k 2050-4050
Operation 275 50 325
• Induced Development▫Demand for food and services▫With an increase in employment opportunities, people will be encouraged to
take up skills development and technical training▫The level of literacy is expected to rise over time as a result▫ Improvement in road infrastructure.
Socio-Economic Analysis
• Electricity & Taxes▫ The state is expected to get around 60 lakh additional units of electricity per day from the
plant▫Payment of corporate income taxes to the central Government over the
Project’s life▫ indirect taxes during construction
• Other Initiatives by CLP▫ CLP India works with Wockhardt Hospital to provide free medication and consultation to
the community in four villages around Jhajjar▫ CLP India supports 10 trainees per year in their paramedical training▫ CLP India supports Anganwadis, the units in villages which record births, with nutritious
food for children and lactating mothers. The program also provides basic education for children
▫ CLP India runs programs on Personality Development and Retail Management which aim to provide skills training to youth to increase employability
▫ CLP India runs workshops for female empowerment through skills training. Courses include stitching training
▫ CLP India supports the supply of RO drinking water to school children and anganwaris in Khanpur-Kalan and Jharli villages
Socio-Economic Analysis
• The total funding for the project stands at > 6000 crores INR till date• The project had initially received sanctions amounting to Rs 3,900 crore in loans lead-arranged
by IDBI Bank and was funded by a group of banks including Power Finance Corporation (PFC), Rural Electrification Corporation (REC) and Infrastructure Development and Finance Corporation (IDFC) among others
• CLP India has signed a $288 million ECB (External Commercial Borrowing) agreement with five of Asia's top banks▫ Bank of Tokyo–Mitsubishi UFJ, Ltd.▫ China Development Bank Corporation▫ Export-Import Bank of China▫ Hong Kong And Shanghai Banking Corporation Ltd.▫ Standard Chartered Bank
Investments
•Usage of supercritical technology•Developing Economy – Industry & Personal Use
Revenue Drivers
Cost Drivers• Insufficient Coal Supply•Poor Financial Health of State Discoms•ECB
Indian coal sector under stress due to high demand & inadequate coal supply linkages for coal power plants in the country, leading to Indian power plants attempt to secure coal from countries such as Australia, Indonesia & South Africa
Increase in demand for coal due to the sanctioning of UMPP projects led to a need to establish an alternate source of coal. Two recently bid UMPP projects, Reliance Power & Tata Power, decided to build coal linkages with Indonesia due to high quality of coal, geographical proximity & lower price.Bidding for UMPP projects based on the coal linkages built for imported coal & the prices for imported coal.
The e-auction is still not openly starting a system of commercial mining. There is still too much regulatory control, it is still working on a system of allocations and quotas. They are still tying up coal blocks for allocation to end-users.
Why do we import coal? • Our coal is of a very poor quality, its ash content is very high.• We are transporting stones over great distances, across the length
and breadth of the country, and wasting fuel and energy.
High Demand & Inadequate Coal Supply
Linkages
E-Auction
Why Import?
Need to build alternate sources of
coal supply
KEY ISSUES – INDIAN POWER SECTOR
Quality of Coal
Distance between Coal Ports &
Terminals
Regulatory Aspects
Consistency of Delivery
• Australia is having the best quality coal with Highest GCV value (ARB) of around 6700-7000 kcal/kg,
• Next comes the turn of Russian coal & Mozambique Coal with somewhat closer GCV value to the Australian Coal.
• Indonesia is having the least GCV quality (4200 kcal/kg to 5800 kcal/kg),
• The Distance and numbers of days in transit has of Coal Terminals has been a major issue for Indian thermal power plants.
• African countries like 95 Mozambique, Botswana score over others. Number of days in transit is approximately 14-15 days as compared to other available options.
• Most of the countries introduce attractive regulatory policies during their developing stage
• Once they have attained their target level in that particular sector, in order to protect the domestic players, they will make strict regulations for the foreign players.
• Indonesia has been playing a major game here• African countries, Australia, Indonesia have enough reserves and as per the present consumption pattern the coal reserves in Indonesia will last for another 18 to 20 years.
• South Africa is good resources but the inland transportation facilities are the biggest constraint.
• African countries are the viable options for coal import for Indian thermal power plants
KEY CHALLENGES – IMPORTING COAL
Low Availability
Revenue Generation
• A lot of distribution companies (discom) are not supplying power to consumers
• It pulls down power generation at these power plants• Hindrances in continuous power generation• Occasional breakdown
Inability to take up ultra mega plants
• All power plants are inherently assumed to be base load. • But, the load varies throughout any given day • Power plants actually have the plants, but don’t have the gas• In a base load plant, output has to be cut when demand is low
• If at all they have ten years of great profit-making performance where their shareholders make decent returns
• CLP has got $20 billion in market cap and $1.4 million in profit last year.
• All of that could be wiped off by one UMPP gone bad.
• If the proposed capping of fixed cost is at a higher level, companies can still make money
• There are two things: Is the cap on fixed cost high enough to absorb the fuel cost?
• If it is not, companies will lose money. Survival becomes a concern for these companies
Lower Fixed Cost Cap
KEY CHALLENGES – REVENUE & COST
PRIVATE PARTICIPATION IN POWER SECTOR
ELECTRICITY LAWS 1991
• Establish Operate and Maintain as IPP
with 100 % ownership
• Long Term PPA with SEB
• Assured 16 % ROE• Foreign Currency
risk to be borne by SEB
ELECTRICITY ACT 2003(Amended)
• Promote competitive procurement of electricity
• Facilitate transparency and fairness in procurement processes
• Competitive tariffs ensure that operational and financial efficiencies
Bidder to Arrange:• Land• Domestic
Fuel • Technology• Clearance &
approvals
Procurer to Arrange:• Land• Domestic
Fuel • Technology• Clearance &
approvals
Bidder to arrange:Imported Fuel
Case 1 Case 2MEDIUM
TERM
ONE PART
TARIFF
LONG TERM
TWO PART
TARIFF
ESCALABLE(Base Price with Index)
NON ESCALABLE(Firm Price)
ENERGY CHARGE
CAPACITY CHARGE
NQHR
CERC
Base Price(With Index)
Energy Charges = Net quoted heat rate * Scheduled Generation * Monthly Weighted Average Price of
Fuel / Monthly Average Gross Calorific Value of Fuel.
TARIFF STRUCTURE
BIDDING UNDER CASE 2 METHOD
11 BIDDERS QUALIFIED TO SUBMIT FINANCIAL
BID ON 22 MAY 07
LETTER OF INTENT ISSUED ON CLP ON 23
JULY 2008
CLP - Rs.2.996 LANCO INFRATECH -
Rs.3.046TORRENT POWER -
Rs.3.82
FINANCIAL BIDS OF THREE BIDDERS
OPENED ON 17 MARCH 2008
19 BIDDERS SUBMITTED BID AFTER
RFQ
CLP POWER INIDA PVT LIMITED BID FOUND
TO BE MOST COMPETITIVE
BIDDING OF JHAJJAR POWER PLANT
Recommendations
Indian Thermal Power plants like JPL will not be able to fulfill their long-term coal requirement for adequate generation of electricity
Revisiting current Government regulations on sourcing Coal from South Africa, Indonesia and East African countries like
Mozambique and Botswana
Hedge upon the 90% committed power generation sale to State DISCOMs with other private players
The 10% Merchant sale Power generation needs to have a defined player to avoid any leakages or no-
sale scenarios
Welcoming