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Document describes on Tata Mundra Power Project.
TATA MUNDRA POWER PROJECT
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TATA MUNDRA POWER PROJET
Table of Contents
INDIAN POWER SCENARIO..........................................................................................3 DEVELOPMENT OF ULTRA MEGA POWER PROJECTS....................................................7 MUNDRA POWER PROJECT........................................................................................14 PROJECT DESCRIPTION..........................................................................................16 POWER PLANT OPERATIONS..................................................................................19 ECONOMIC ASSESSMENT.......................................................................................25 PROJECT FINANCIALS................................................................................................29 ASSUMPTIONS....................................................................................................... 29 ANALYSIS – NPV & IRR...........................................................................................31 RISKS & MITIGATIONS (Sensitivity Analysis)..........................................................31 CONCLUSIONS.......................................................................................................... 33 REFERENCES:............................................................................................................33
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INDIAN POWER SCENARIO
? The power industry in India is divided into 3 major sectors: o o o State Sector Central Sector Private Sector
? The major types of power generation in India consist of thermal power, hydro power and nuclear power. ? The power sector in India is characterized by deficits with demand outstripping the supply. Going forward, it is likely that the same situation will continue till the end of XII plan. ? As per 'Eleventh Five Year Plan' of planning commission, India is world's 5th largest energy consumer accounting for 3.45% of global energy consumption. ? However, the per capita energy consumption in India remains low. ? Energy consumption includes electricity, petrol, gas, coal, firewood etc. ? The per capita consumption of electricity of 704 Kwh in India is quite low as compared to global average of 3240 Kwh. ? This shows a huge potential for rise in the demand for power. India’s generation alternatives ? Natural Gas ? Limited availability of indigenous gas; high price of LNG ? Gas shortages expected to persist despite new domestic production ? Hydro ? India has substantial hydro potential mainly in the North and Northeast ? High capital costs, long gestation periods and E&S issues ? Run-of-river hydros affected by seasonality of rainfall ? Wind ? Intermittent nature makes wind unsuitable for large scale base load demand ? India has a moderate wind regime with low load factors of 20-25%
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TATA MUNDRA POWER PROJET ? Nuclear ? India has ambitious plans for nuclear power but faces many challenges ? Coal ? Domestic coal resources are abundant in Eastern India ? Imported coal is reasonably accessible for coastal locations ? Coal is a viable alternative for meeting base load demand ? GoI is emphasizing the use of cleaner technologies
Demand – Supply Position ? India is facing energy shortages of 11% of demand and even higher peak shortages of 14% ? Demand-supply gap is more acute in Western region (where 70% of the Project’s power will be supplied) with energy deficit at 16% and peak deficit at 21% ? Capacity additions of 160,000 MW required in the next 10 years to satisfy India’s power needs ? New capacity will need to come from a combination of coal, hydro, gas, nuclear and wind projects Fiscal Requirement Availability Surplus/ Surplus/ Deficit (%) Year (Million Units) (Million Units) Deficit (Million Units) 2005 2006 2007 2008 2009 591,373 631,554 690,587 737,052 777,039 548,115 578,819 624,495 664,660 691,038 -43,258 -52,735 -66,092 -72,392 -86,001 -7.3% -8.4% -9.6% -9.8% -11.1%
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Installed Capacity ? Total installed capacity = 147,965 MW ? State has the highest share in the total installed capacity in the country. ? It is also highest in terms of capacity addition in the year 2008-09. ? Total Capacity added = 3,454 MW o State – 53% o Centre – 22%
o
Private – 25%
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Total InstalledCapacity (Mega Watt) , 0, As on March 31, 2009
0% Private 22879 MW 16%
Centre 48970 MW 33%
State 76116MW 51%
? About 52% of nation’s capacity is contributed by coal based stations. ? Hence coal remains a key fuel for power generation.
? Focus has been shifting to other sources of energy due to various environmental
factors like CO2 emissions.
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DEVELOPMENT OF ULTRA MEGA POWER PROJECTS
Provision of Electricity Act, 2003
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Section 63 of the Electricity Act, 2003 provides that the Regulatory Commissions shall adopt the tariff if it is determined through transparent process of bidding accordance with the guidelines issued by the Central Government. This aims at moving away from cost plus approach for tariff determination and it is expected to further encourage private sector investment. Launch of Ultra Mega Projects through tariff based competitive bidding Government of India has envisaged capacity addition of 100,000 MW by 2012 to meet its mission of power to all. It needs huge capacity addition during 10th & 11th plan, which is not feasible from the ongoing and proposed new projects already identified. As such there is need to develop large capacity projects at the national level to meet the requirements of a number of states under the competitive bidding guidelines dispensation. This will give a thrust to development of projects through competitive bidding. Ultra Mega Power Projects are steps in that direction. The projects will substantially reduce power shortage in future. Recognizing the fact that economies of scale leading to cheaper power can be secured through development of large size power projects using latest super critical technologies. Ministry of Power, CEA and Power Finance Corporation are working in tandem for development of five projects under tariff based competitive bidding route. The Ultra Mega Power Projects with each having a capacity of minimum 4,000 MW, would have scope for expansion in future as well. The size of these projects being large, they will meet the power needs of a number of states through transmission of power on regional and national grids. In the last six months several rounds of discussions were held with states who have agreed to support Ultra Mega Power Projects. Experience of this initiative would facilitate development of state specific projects in the range of 1000-2000 MW through competition on similar lines. In order to enhance investor confidence, reduce risk perception and gets a good response to competitive bidding, it was deemed necessary to provide the site, fuel linkage in captive mining blocks, water and obtain environment and forests clearance, substantial progress on land acquisition leading to possession of land, through a Shell Company. In addition, Shell companies would also be responsible for tying up necessary inputs from the likely buyers of power. In
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addition shell companies would also facilitate tying up of power off takes from these projects with appropriate terms and conditions and Payment Security Mechanism. Role of Ministry of Power The role of the Ministry of Power is basically to serve as a facilitator and to co-ordinate with concerned Ministry/ Agencies for ensuring: 1. Coal Block Allotment/ Coal Linkage 2. Environment/ Forest clearances 3. Required support from State Govt. Agencies 4. Financial Institutions towards financial closure.
5. To facilitate PPA and proper payment security mechanism - with State Govt./ State utilities
6.
Monitoring the progress of shell companies with respect to predetermined timelines.
Selection of sites Criteria for selection of sites • Pit head location with domestic coal, • Coastal location with imported coal,
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• Coastal location with domestic/blended coal, • Through a preliminary scrutiny by CEA of a number of potential sites identified in the country. In the first phase, two projects at pit head site and three projects at coastal locations have been identified for development of Ultra Mega Projects. Government approval has already been accorded on 16th January, 2006 for setting up of following five Shell companies under the Article No. 86 of Articles of Association of Power Finance Corporation. The five shell companies formed were as follows: (i) Sasan Power Limited (M.P.) (ii) Akaltara Power Limited (C.G.) (iii) Coastal Gujarat Power Limited (iv) Coastal Karnataka Power Limited (v) Maharashtra Ultra Mega Power Project Co. Functions of the Shell Companies Power Finance Corporation has initiated the process of registration of five shell companies with the Registrar. PFC has also set up a core group having Chief executives from NTPC and members from PFC and CEA for monitoring and expediting the process. The role of the Shell companies is to facilitate following activities: i. Preparation of project report ii. Land acquisition
iii. Allocation of fuel linkages/coal blocks iv. Allocation of water by the state Govt
v. Appointment of consultants for EIA & Project Report
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TATA MUNDRA POWER PROJET vi. Appointment of consultants for International Competitive Bidding (ICB) document
preparation & evaluation
vii. Various approvals and statutory clearances viii. Off-take/sale of power – section 63 of EA2003 provision ix. Power Evacuation/ (Transmission) System
x. Rating of Projects
Funds requirement The Ultra Mega Projects being developed on super critical technology would entail substantial investment to the tune of Rs. 15,000 crores for each project. From the initial rounds of discussions held with the financial institutions, it emerged that for good and credible developers and for power projects offering less expensive power debt funding may not emerge as a constraint at all. To keep the financial institutions update about the developments in setting up of Ultra Mega Projects, FIs are being involved at various stages including the final evaluation of the bids. However, development of these large projects would have to have the involvement of large private business groups in our country, who either on their own or through consortium, with parties and agencies from outside, could take implementation of these projects. Support of State Governments in development of Ultra Mega Power Projects The Government of India is facilitating development of very large size Ultra Mega Projects at coal pit-heads and at coastal locations (in future, some of the hydro projects would also be taken up). These projects are aimed at using the economies of scale, delivering comparatively cheaper power to the system. While all efforts are being made to coordinate with various agencies at the Government of India level and with the Financial Institutions to see that for smooth development of these projects, all the initial linkages and inputs are properly tied up, State Governments’ support in this matter would be extremely useful. State have a role cut out to provide required assistance in ensuring water availability to the project, land availability at reasonable price, environment clearance and all possible help by the district administration at the time of visit by
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the prospective developers. These points have also emerged during discussions with the heads of Financial Institutions as also with the top leaders of the industry. Wherever the state governments would be willing to participate by way of part equity in these projects, it should be possible to provide for the same in the bid conditions while inviting competitive bidding for selecting the developers. This route, of course, would be optional to the states. In the Shell Companies, which would deal with the initial issues of sanctions, clearances, land acquisition etc, the concerned States have been approached to ascertain about their willingness to become equity partners.
Tentative allocation of power from the proposed Ultra Mega Power Projects
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In the meeting held on 16th February, 2006 at Ministry of Power, New Delhi with the Principal Secretaries (Power) / Energy Secretaries of NR, WR & SR States regarding allocation of power from the proposed Ultra Mega Power Projects, States were requested to indicate their requirement of power from the five proposed Ultra Mega Power Projects at Sasan (M.P), Mundra (Gujarat), Akaltara (Chhattisgarh), Coastal Karnataka and Ratanagiri (Maharashtra). The quantum of demand as projected by various States from Ultra Mega Projects is given in the Table below:
After detailed discussions on the above projected demand, tentative power allocation from the proposed five Ultra Mega Power Project was agreed which is summarized in the Table given below:
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MUNDRA POWER PROJECT
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INTRODUCTION The Mundra Ultra Mega Power Project (the Project) is developed by Coastal Gujarat Power Limited (CGPL).. in response to the plan of the Government of India (the Government) to increase the electricity production capacity of the country by 100,000 megawatts (MW) by the year 2012. To achieve economies of scale, the Government prefers large-scale projects that can meet the requirements of a number of states. The Project, awarded to CGPL on a build, own, and operate basis, is a supercritical coal-fired power plant with a total capacity of 4,000 MW. Various packages are currently at the bidding stage, and the Project is scheduled for full commercial operation in June 2012. The Project is located in a coastal area of Mundra Taluka,2 in Kutch3 District of Gujarat State. The project area covers 1,254 hectares (ha) of vacant land near the villages of Tunda and Wandh, including 202 ha of right of way outside the project boundary, and is about 2 km from the firstphase development area of the Mundra Special Economic Zone (MSEZ), where a 660 MW power plant project, the Adani Power Project, is being implemented by Adani Power Limited. The project area is about 1.5 kilometers (km) from the sea, with a portion of the MSEZ intervening between the sea and the project area. For logistics and accessibility, the Project relies on (i) Mundra Port (about 25 km from the project site); (ii) state highway SH-6 (about 6 km) connecting Mundra and Mandvi; (iii) national highway extension NH 8A (about 15 km), connecting Gandhidham and Anjar with Mandvi; (iv) Adipur railway station (85 km); and (v) Bhuj airport (75 km). An access road will be constructed to provide direct access to the project site from state highway SH-6, bypassing the two villages. The assessment of environmental and social impacts of the Project was conducted through the following six separate but related studies: (i) a rapid environmental impact assessment conducted by TCE Consulting Engineers Limited of India from March to May 2006, (ii) a comprehensive environmental impact assessment also conducted by TCE from March 2006 to August 2007, (iii) a socioeconomic assessment report also conducted by TCE from March to August 2006, (iv) a rapid marine impact assessment conducted by the National Institute of Oceanography from January 2006 to April 2007 and supplementary information provided in October 2007, (v) a
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supplementary investigation of the cumulative impacts on ambient air quality of the Project and the neighboring 660 MW power plant prepared by the Tata Power Company Limited from late October to early November 2007 in consultation with Vishudda Envirotech of India, and (vi) a rapid social impact assessment conducted by Saline Area Vitalization Enterprise Limited of India in October 2007. In the course of the environmental and social assessment, a public hearing was held on 19 September 2006, and further consultations were subsequently conducted in villages. The Project received environmental clearance from the Ministry of Environment and Forests (MOEF) on 25 April 2007 based on the rapid environmental impact assessment. All other clearances and permits required for various operations from the national and state authorities have also been obtained.
PROJECT DESCRIPTION
Project Facilities The project facilities to be constructed by CGPL include the power plant and support facilities within the complex. CGPL will also construct a housing complex for project staff. Associated facilities to be constructed by other entities include (i) a dedicated jetty and facilities for unloading and handling coal at Mundra Port, (ii) a merry-go-round (MGR) rail system for transporting coal from the port to the power plant, (iii) transmission lines to convey electricity from the power plant to various designated load centers, and (iv) an access road. These facilities are described below. Facilities to be Constructed by CGPL Power Plant The power plant will consist of five pulverized coal-fired, supercritical steam electricitygenerating stations, each with capacity of 830 MW. In addition to coal, fuel oil will be used for start-up, for flame stabilization, and during low-load operations. The main plant is arranged within the three interconnected structures, the (i) boiler structures, (ii) turbine building, and (iii)
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integrated control and electrical building. Map 3 shows the basic plant layout. Table 1 presents a summary of the main design and operational data of the power plant. Cooling Water System The power plant will have a once-through cooling system using seawater. The seawater requirement will be about 15.12 million cubic meters per day (m3/day) of which about 14.99 million m3/day will be for condenser cooling and 0.1278 million m3/day will be for producing freshwater. The seawater will be pumped at the end of an inlet channel connecting to Kotdi Creek. The spent cooling water, warmed to about 7 degrees Celsius (°C) above ambient sea water temperature, will be discharged back into the sea through a discharge channel opening to Mudhwa Creek. The inlet channel will be about 80 meters (m) wide at the bottom, 130 m wide at the top, 3 m deep, and 6.5 km long. Kotdi Creek, about 3.5 km long, will be dredged and trained to enhance its hydraulic capacity. The inlet system (inlet channel and Kotdi Creek) is designed to convey up to 630,000 cubic meters per hour (m3/hr), or somewhat more than the seawater requirement of 550,000 m3/hr, to meet peak cooling water demand as well as the volume required for freshwater production. The outlet discharge channel will have a base width of 60 m and a length of 4.9 km. It will be designed to cool water over the first 1,900 m from the power plant. The outlet channel will discharge into Mudhwa Creek, which is about 3 km long and will be dredged and trained to increase its hydraulic capacity. Water Production System The Project will require 25,710 m3/day of freshwater, consisting of 25,280 m3/day for processuses, including water for coal and ash handling, and 430 m3/day for domestic uses. The freshwater will be produced from seawater in a desalination plant. For boiler feed, a demineralization plant will further treat the freshwater supplied from the desalination plant. Site Drainage Rainwater runoff will be collected in a pond to use in spraying the coal stockyard and for landscaping.
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Wastewater Treatment System All process wastewaters will be treated to remove oil and stored in a pond for use in suppressing coal and ash dust and for landscaping. Reject from the desalination plant will be discharged into the sea through the discharge channel of the cooling water system. A sewage treatment plant will be provided to treat sewage from the housing complex. Residential Complex The operation of the power plant and support facilities will require about 718 people consisting of 255 CGPL staff and 463 outsourced staff. A housing complex consisting of 400 units will be developed on 182 ha of land to provide accommodation for about 255 CGPL staff and a few of the outsourced staff. Access Road An access road will be constructed from state highway SH-6 to the project site to bypass Wandh and Tunda villages. Associated Facilities to Be Constructed by Other Entities Transmission Lines The net power produced by the power plant will be fed to a 400 kilovolt (kV) switchyard. Three 400 kV double-circuit lines will be constructed to transmit electricity from the power plant’s switchyard to Limbdi (300 km), Ranchodpur (390 km), and Jetpur (330 km). Four additional transmission lines will be identified in due course. The Power Grid Corporation of India Limited will be responsible for acquiring ownership rights, rights of way, easements, and continued access rights necessary for the construction, operation, maintenance, and upgrading of the new transmission facilities. Coal Shipment and Unloading Facilities The power plant will require 11–13 million metric tons per annum (MTPA) of coal to be imported from sources such as Australia, Indonesia, and South Africa. Existing facilities at Mundra Port can handle only about 4 million MTPA of coal. Therefore, Mundra Port and Special
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Economic Zone Limited, the port owner, will construct a new berth and install mechanized coal-unloading facilities and a mechanized coal-stacking and reclaiming system specifically to meet the coal import requirements of the Project and the Adani Power Project. Rail System for Coal Transport Coal will be transported from Mundra Port to the power plant by a MGR rail system with bottom-open, bottom-release wagons. The active coal stock and the reserve stockpile at the power plant site will each be approximately 500,000 metric tons, providing a total of approximately 15 days’ coal supply in addition to the storage capacity of about 500,000 metric tons at the port.
POWER PLANT OPERATIONS
Coal Transport Coal will be transported daily by rail from Mundra Port to the power plant as described in paragraph 14. The volume will be about 30,000 to 40,000 metric tons per day. Fuel Oil Transport The total consumption of fuel oil will be about 50,000 kiloliters per annum during op uncanning erations. The fuel oil will be sourced from refineries in Jamnagar and Vadodara, etc., and will be transported to the power plant by rail or road tanker. The fuel oil will be stored in three tanks, two with 10,000 cubic meter (m3) capacity and one with 5,000 m3 capacity. Ash Transport and Storage The power plant will produce about 1.8 million MTPA of ash, of which bottom ash accounts for about 20% and fly ash 80%. Bottom ash collected in the bottom ash hopper below the boiler furnaces will be conveyed by jet pump up to the ash slurry sump for further disposal in wet form. Fly ash collected at various hoppers will be conveyed pneumatically to fly ash storage silos. Air vented out from the silos will pass through suitable control devices to remove fugitive fly ash.
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The dry fly ash collected in the fly ash silos will be given to fly ash users, and the remaining quantity will be disposed off in wet form. The Project has allocated about 241 ha of land for ash disposal. However, most of the ash will be utilized. Closed trucks will be used to haul the ash to utilization points. Seawater Abstraction During operations, about 15.12 million m3/day of seawater will be used for condenser cooling and freshwater production. The spent cooling water and the reject from the desalination plant will be discharged back into the sea. Alternatives
? Gujarat has a deficit in peak power demand of 1,785 MW in fiscal year (FY) 2007 and
3,656 MW by FY2011. ? For the region encompassing Gujarat, Maharashtra, Haryana, Punjab, Rajasthan, and Uttar Pradesh, the peak power demand would be 56,928 MW by FY2006 and 78,849 MW by FY2011. ? Even considering the installation of new plants, there would be a shortfall of 22,829 MW by FY2011 in the region.
? It is evident that the Project is desirable to close the demand-supply gaps.
? The alternative without the project is obviously undesirable, as the worsening power shortage would constrain economic growth. Alternative fuel
? Coal is still the most cost-effective fuel for generating electricity. Although coal has
greater pollution potential than natural gas, importing natural gas requires a large investment in infrastructure.
? As the western region has no potential large-scale hydropower sites, the only
alternatives are coal and nuclear energy.
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? Between coal and nuclear, coal is the preferred alternative given its shorter gestation period, lower costs, and relative safety. Alternative Project locations ? The location of a power plant is broadly determined by demand and capacity in the transmission system. ? Locating the power plant as close as possible to regional centres of demand reduces power losses in transmission. ? The project site therefore has to be in Gujarat to meet demand in Gujarat and other western states. ? At present, there is no power plant located near the project area. ? The nearest power plants are at Sikka, about 250 km away, and Akrimota, about 210 km away. ? However, the 660 MW Adani Power Project is being developed by Adani Power Limited near the project area to supply electricity to industries to be located in MSEZ. Alternative Cooling System o Two cooling system alternatives were considered: ? a closed or recirculation system and ? a open or once-through system. o In the closed system, warm cooling water is cooled in cooling towers before being recycled. The system needs make-up water to compensate for evaporation loss, and needs to discharge a certain portion of its water to maintain cooling water quality.
o A closed system for the Project would require about 55,000 m3/hr of make-up water and
would discharge about 31,000 m3/hr of cooling tower blow down into the sea.
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o In the once-through system, the entire volume of warm cooling water is directly discharged into a receiving water body. o For the Project, the once-through cooling water system will discharge 550,000 m/hr of warm cooling water into the sea. Alternative technologies ? The technology options for large pulverized coal-fired power plants are subcritical and supercritical.
? Supercritical plants operate at steam pressure above 22.1 mPa (about 3,200
pounds per square inch) and use once-through boilers. In the supercritical stage, water becomes gas. ? Subcritical plants operate at steam pressure below 19 mega pascals and use drum-type boilers. In the subcritical stage, the steam is a mix of liquid and gas.
ANTICIPATED ENVIRONMENTAL IMPACTS AND MITIGATION MEASURES Physical Environment: During Construction Constructing the power plant and its support facilities will create environmental disturbances normally encountered in major construction sites, such as noise, dust, and emissions from construction equipment and vehicles. These environmental disturbances can be minimized through good construction management practices and the use of construction methods that create lesser environmental disturbances. Further, environmental disturbances during construction are transient and confined to the construction site. For this Project, the project area is large and uninhabited, so the impacts of environmental disturbances on people and property will be negligible.
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Air Pollution The major sources of air pollution during the construction period are (i) emissions from vehicles, generator sets, and heavy construction equipment and (ii) fugitive dust from vehicle movement and soil excavation. The impacts of these air pollution sources will be minimized through established mitigation measures to be included in the construction contract, requiring contractors to strictly implement them. Such measures include the (i) suppression of fugitive dust by spraying water, (ii) use of low-emission vehicles and construction equipment, and (iii) good maintenance of engines. Noise Construction noise is created by vehicles, heavy equipment, and some construction activities such as erecting equipment and percussion piling. The noise will be reduced by using various appropriate measures such as noise enclosures, noise walls, and restricted vehicle speed. Construction workers in excessively noisy areas will wear ear protection equipment. Noise reduction and impact mitigation measures during construction will be prescribed in the construction contracts. Oil and Chemical Spills Fuel oil and chemical storage facilities at the construction site will be designed with adequate protection against spillage and fire. Runoff During the early stage of construction, site grading and excavation could add considerably to the silt load in surface runoff from the construction site, thereby contributing to the silting of receiving water bodies. This problem will be minimized through such measures as (i) undertaking site grading and excavation for foundation and backfilling during the dry season and (ii) retaining, if called for, the silt-laden runoff in a settling basin to remove silt before discharging runoff into receiving waters. Construction Wastes
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Construction wastes will be collected and disposed of in the most environmentally friendly way. Metal wastes will be sold as scrap. Concrete and other inert materials that cannot be recycled will be buried in appropriate locations. Waste oil will be incinerated or recycled as appropriate. Hazardous or toxic wastes, if any, will be stored for disposal by qualified contractors. These requirements will be prescribed in construction contracts. Excavated Materials Dredging of the two creeks and excavating to construct the intake and discharge channels will generate about 4.1 million m3 of excavated materials. The excavated materials will be used for filling the project area. Human Wastes Construction is expected to require up to 5,000–6,000 workers. However, most workers will be sourced from the nearby villages, so few workers will live on site. Toilets with septic tanks will be provided to take care of sewage. Solid wastes will be collected and disposed of in sanitary landfills. The cleanliness of worker camps, including kitchens and canteens, will be maintained. These waste management and sanitation requirements will be prescribed in construction contracts. During Operations The major pollution issues are air pollution and thermal pollution from the discharge of spent cooling water. The EIA assessed environmental impacts of the Project and prescribed appropriate mitigation measures to ensure that the project environmental performance meets national and international standards and guidelines for coal-fired power plants.
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Emissions Major pollutants generated by coal combustion include SO2, NOX, SPM, especially particulates smaller than 10 microns (respirable particulate matter, or RPM), and carbon dioxide (CO2), a major green house gas6. The power plant will use coal burners of proven, advanced design to reduce NOX production, and the boiler furnace will be provided with over-fire air ports to further reduce NOX production. To reduce SO2 emission, the power plant will use coal with low sulfur content, not exceeding 0.6%. To reduce particulates, electrostatic precipitators will be installed to remove fly ash in the flue gas.
ECONOMIC ASSESSMENT
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Project Costs Financial Cost The development cost of the Project is estimated at $4.2 billion equivalent. Annual operations and maintenance expenses are estimated at $50 million equivalent in 2006 prices. Environmental Cost The environmental cost of the Project is related to the following: (i) 1,254 ha of land (including right of way outside the project boundary); (ii) about 15.12 million m3 of seawater to be used daily in the cooling system and for freshwater production; and (iii) the discharge of air pollutants into the atmosphere including 400 metric tons of SO2 per day, 237 metric tons of NOX per day and 83,200 metric tons of CO2 per day. These environmental costs are difficult to quantify. The environmental cost of the land is low as the project area is barren and has no ecological value. Project Socioeconomic Benefits Against the financial and environmental costs cited above, the Project will generate about 29,928 giga watt-hours of electricity per annum to support economic development in Gujarat and its neighboring states. Other socioeconomic benefits of the Project will include (i) employment, (ii) corporate income tax of about $396 million equivalent throughout the project life; and (iii) valueadded tax of about $50 million equivalent during construction. A separate and detailed economic analysis will be undertaken for the Project. Development Impact ? Access to electricity is essential for reduction in poverty and improved health, education and economic development
?
Project will increase India’s generation capacity by 3%; likely to impact about 16 million domestic consumers in the country and, hence, in line with our “inclusive” growth strategy for infrastructure
?
Creation of 5,000 construction jobs and 700 jobs during operations
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Project will sell competitively-priced power at US 5.65 cents per kWh and provide affordable energy to consumers
?
First private sector project in India using supercritical technology; most energy-efficient plant in India (40.5%) compared to existing assets (about 27%) & therefore lower GHG emissions
? ?
Project’s tax transfers of about US$790 million to GoI Growth in port and power transmission capacity will further create infrastructure and employment for the country
IFC Role & Additionality ? IFC requested by GoI to support this first private supercritical project in the country • • IFC participated in pre-bid consultations to improve Project’s bankability Success is important to boost confidence of domestic & international investors in India’s power sector ? Project has significant risks due to size and complexity • • First private project using supercritical coal technology in India Significantly larger than any previous project by the sponsor, tripling its generation capacity • • IFC played a key role in financial structuring on behalf of all lenders IFC’s presence contributes indirectly towards mitigation of political and regulatory risk ? Project requires very long maturities (20 years) to achieve a low tariff for consumers • IFC’s financing is critical to meet large debt financing needs
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•
Local banks are providing significant debt but are unable to meet entire debt needs due to exposure limits
•
International commercial banks have limited appetite for long maturities because of refinancing risks and poor creditworthiness of state-owned off-takers
? IFC’s involvement requires CGPL to comply with more stringent E&S standards than GoI’s
Fit with IFC’s Climate Change Strategy in the Electricity Sector ? India has few scalable alternatives to coal; IFC encourages use of more efficient coal technology which results in lower carbon emissions ? Project will have amongst the lowest GHG emission rates globally - lower by 40%, 18% and 16% compared to the average GHG emission rate of coal based plants in India, across the globe and OECD, respectively ? First supercritical project sets a precedent for efficient coal usage: consumes 1.7 million tons of coal less per year than traditional subcritical plants of comparable size ? IFC support for this project will have a strong demonstration effect for other developing countries that need to develop coal-fired generation
Project will be eligible to sell carbon credits under the Clean Development Mechanism
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Efficiency
Coal Consumption CO2 (million tons) (million tons) 23.4
CGPL Imported Coal Subcritical Indian Coal Subcritical Imported Coal
40.5%
10.8
35.0%
20.4
28.8
35.0%
12.5
27.0
PROJECT FINANCIALS
ASSUMPTIONS
• Project would be commissioned in 5 phases, where first phase would be completed by Sep 2011, next 3 phases in 2012, and last phase in Jan 2013. • Operating Assumptions:
2250 0.36 0.81 0.22
Fuel Cost Rs / ton Coal Consumption rate Kg/Kwh Coal cost Rs/unit Transportation & handling costs of coal / gas
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TATA MUNDRA POWER PROJET Plant Load Factor (PLF) Auxialary Consumption 85.00% 8.00%
Co2 savings in 10 years in Million Tonnes CER Rate (Euro / CER) Exchange Rate (Rs / Euro) CER Rate (Rs / CER)
28.30 12 66 792
•
Working Capital Assumptions:
2 1
Receivables (months) O&M Expenses (months)
•
Financial Assumptions:
127,500 42,500 170,000
Debt Equity Total Project Cost (Rs Million)
Debt Structure Korean Bank, ADB,IFC (in Billion Dollars) SBI(In $ Billion)
Interest rates 67734.375 59765.625 12.0% 13.5%
Interest On Debt Repayment Period for SBI (yrs) Repayment Period for Foreign Dev. Bank (yrs) Moratorium period (Years)
12.7% 12 20 3
Depreciation (% p.a.) Estimated Salvage Value Tax Rate
3.60% 10%
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TATA MUNDRA POWER PROJET MAT Rate Normal 15% 34.00%
ANALYSIS – NPV & IRR
Based on the above assumptions, we have calculated: • • • • Project IRR: 18.14% NPV – FCFF: Rs 7035.5 crore Equity IRR: 22.53% NPV – FCFE: Rs 1109.72 crore
RISKS & MITIGATIONS (Sensitivity Analysis)
The various economic risks associated with the project with the weightage and impact of the risks on the profitability of the project
The economic risks faced by this project are Regulatory, Competition, Input gas prices and financial risk which have been given the weightage respectively.
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TATA MUNDRA POWER PROJET 1. Regulatory risk: The risk that a change in laws and regulations will materially
impact a security, business, sector or market. A change in laws or regulations made by the government or a regulatory body can increase the costs of operating a business, reduce the attractiveness of investment and/or change the competitive landscape. The Minimum Alternate tax rate has an impact on the IRR and NPV of the project. If the MAT rate changes from 15% to 18% then NPV reduces by 0.42% respectively.
2. Financial Risk: Decrease in interest rate by 100 basis points would have given more
economic profit. This would mean reduction in profit by 7.90%.
3. Completion Risk: Completion risk is the risk that the project will not be completed
or that completion will be delayed. If the project gets delayed by 1 year then NPV reduces by 25.23%.
4. CER Rate Volatility Risk: Tata Power has a source of revenue in terms of selling
CERs, and hence it is exposed to the price fluctuations of CERs. If the price of CER decreases by 1 Euro, then NPV reduces by 1.02%.
5. Operational Risk: Operating risk, which includes technology risk, is the risk that the
project will fail to perform at levels sufficient to meet projected cash flows or that the costs of operating and maintaining the project will exceed budget forecasts. It may also include strikes and technology risk in terms that this type of project has never been set up on Indian terrain. If the cost of completion increases by 10%, then the NPV reduces by 17.97%.
6. Currency Risk: A form of risk that arises from the change in price of one currency
against another. As Tata Power has taken loan in foreign currency, it is also exposed to currency risk. If Indian currency depreciates, it would mean more interest payments. If Rupee depreciates by Rs 2, then NPV reduces by 0.54%.
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CONCLUSIONS
The Project is a green-field project initiated in response to the Government’s energy policy. Its large capacity and use of coal as its primary fuel make it the most cost-effective alternative for generating electricity to meet the demand backlog and support further economic growth in the state and the country. The power plant and its support facilities will be constructed on a marginal land that is not ecologically or culturally sensitive. The power plant will adopt supercritical steam technology, which is about 10% more efficient than a conventional, subcritical coal-fired power plant. The Project will have no major ecological impacts, as it will adopt the best practicable mitigation measures and technologies to minimize emissions and impacts on the environment. The Project will require the contractors to adopt best environmental management practices during construction to minimize environmental disturbances such as emissions from heavy construction equipment and trucks, noise, and dust. Residual impacts will not reach the two nearby villages. Contractors will provide appropriate training to their workers in environmental, safety, and health aspects of construction, and will provide necessary protective measures to workers to minimize safety risks. The Project will adopt the best process technology and designs as well as effective pollution control equipment to minimize emissions during operations. Emissions will meet national standards as well as World Bank emission guidelines for new power plants. Impacts on ambient air quality have been found to be insignificant.
REFERENCES:http://www.hdfcsec.com/CMT/Upload/ArticleAttachments/Tata Power - Nifty %20Series.pdfhttp://0101.netclime.net/1_5/352/258/338/NMR TTP.pdfhttp://powermin.nic.in/whats_new/pdf/development_of_project.pdf
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http://www.google.co.in/search?hl=en&rlz=1T4GUEA_enGBIN332IN334&q=mundra+power+project+irr&meta=&aq=f&oq=http://www.google.co.in/search?hl=en&rlz=1R2GUEA_enGBIN332&q=mundra+power+project+NPV+filetype
df&start=10&sa=N
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doc_938853552.doc
Document describes on Tata Mundra Power Project.
TATA MUNDRA POWER PROJECT
1 |Page
TATA MUNDRA POWER PROJET
Table of Contents
INDIAN POWER SCENARIO..........................................................................................3 DEVELOPMENT OF ULTRA MEGA POWER PROJECTS....................................................7 MUNDRA POWER PROJECT........................................................................................14 PROJECT DESCRIPTION..........................................................................................16 POWER PLANT OPERATIONS..................................................................................19 ECONOMIC ASSESSMENT.......................................................................................25 PROJECT FINANCIALS................................................................................................29 ASSUMPTIONS....................................................................................................... 29 ANALYSIS – NPV & IRR...........................................................................................31 RISKS & MITIGATIONS (Sensitivity Analysis)..........................................................31 CONCLUSIONS.......................................................................................................... 33 REFERENCES:............................................................................................................33
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INDIAN POWER SCENARIO
? The power industry in India is divided into 3 major sectors: o o o State Sector Central Sector Private Sector
? The major types of power generation in India consist of thermal power, hydro power and nuclear power. ? The power sector in India is characterized by deficits with demand outstripping the supply. Going forward, it is likely that the same situation will continue till the end of XII plan. ? As per 'Eleventh Five Year Plan' of planning commission, India is world's 5th largest energy consumer accounting for 3.45% of global energy consumption. ? However, the per capita energy consumption in India remains low. ? Energy consumption includes electricity, petrol, gas, coal, firewood etc. ? The per capita consumption of electricity of 704 Kwh in India is quite low as compared to global average of 3240 Kwh. ? This shows a huge potential for rise in the demand for power. India’s generation alternatives ? Natural Gas ? Limited availability of indigenous gas; high price of LNG ? Gas shortages expected to persist despite new domestic production ? Hydro ? India has substantial hydro potential mainly in the North and Northeast ? High capital costs, long gestation periods and E&S issues ? Run-of-river hydros affected by seasonality of rainfall ? Wind ? Intermittent nature makes wind unsuitable for large scale base load demand ? India has a moderate wind regime with low load factors of 20-25%
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TATA MUNDRA POWER PROJET ? Nuclear ? India has ambitious plans for nuclear power but faces many challenges ? Coal ? Domestic coal resources are abundant in Eastern India ? Imported coal is reasonably accessible for coastal locations ? Coal is a viable alternative for meeting base load demand ? GoI is emphasizing the use of cleaner technologies
Demand – Supply Position ? India is facing energy shortages of 11% of demand and even higher peak shortages of 14% ? Demand-supply gap is more acute in Western region (where 70% of the Project’s power will be supplied) with energy deficit at 16% and peak deficit at 21% ? Capacity additions of 160,000 MW required in the next 10 years to satisfy India’s power needs ? New capacity will need to come from a combination of coal, hydro, gas, nuclear and wind projects Fiscal Requirement Availability Surplus/ Surplus/ Deficit (%) Year (Million Units) (Million Units) Deficit (Million Units) 2005 2006 2007 2008 2009 591,373 631,554 690,587 737,052 777,039 548,115 578,819 624,495 664,660 691,038 -43,258 -52,735 -66,092 -72,392 -86,001 -7.3% -8.4% -9.6% -9.8% -11.1%
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Installed Capacity ? Total installed capacity = 147,965 MW ? State has the highest share in the total installed capacity in the country. ? It is also highest in terms of capacity addition in the year 2008-09. ? Total Capacity added = 3,454 MW o State – 53% o Centre – 22%
o
Private – 25%
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Total InstalledCapacity (Mega Watt) , 0, As on March 31, 2009
0% Private 22879 MW 16%
Centre 48970 MW 33%
State 76116MW 51%
? About 52% of nation’s capacity is contributed by coal based stations. ? Hence coal remains a key fuel for power generation.
? Focus has been shifting to other sources of energy due to various environmental
factors like CO2 emissions.
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DEVELOPMENT OF ULTRA MEGA POWER PROJECTS
Provision of Electricity Act, 2003
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Section 63 of the Electricity Act, 2003 provides that the Regulatory Commissions shall adopt the tariff if it is determined through transparent process of bidding accordance with the guidelines issued by the Central Government. This aims at moving away from cost plus approach for tariff determination and it is expected to further encourage private sector investment. Launch of Ultra Mega Projects through tariff based competitive bidding Government of India has envisaged capacity addition of 100,000 MW by 2012 to meet its mission of power to all. It needs huge capacity addition during 10th & 11th plan, which is not feasible from the ongoing and proposed new projects already identified. As such there is need to develop large capacity projects at the national level to meet the requirements of a number of states under the competitive bidding guidelines dispensation. This will give a thrust to development of projects through competitive bidding. Ultra Mega Power Projects are steps in that direction. The projects will substantially reduce power shortage in future. Recognizing the fact that economies of scale leading to cheaper power can be secured through development of large size power projects using latest super critical technologies. Ministry of Power, CEA and Power Finance Corporation are working in tandem for development of five projects under tariff based competitive bidding route. The Ultra Mega Power Projects with each having a capacity of minimum 4,000 MW, would have scope for expansion in future as well. The size of these projects being large, they will meet the power needs of a number of states through transmission of power on regional and national grids. In the last six months several rounds of discussions were held with states who have agreed to support Ultra Mega Power Projects. Experience of this initiative would facilitate development of state specific projects in the range of 1000-2000 MW through competition on similar lines. In order to enhance investor confidence, reduce risk perception and gets a good response to competitive bidding, it was deemed necessary to provide the site, fuel linkage in captive mining blocks, water and obtain environment and forests clearance, substantial progress on land acquisition leading to possession of land, through a Shell Company. In addition, Shell companies would also be responsible for tying up necessary inputs from the likely buyers of power. In
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addition shell companies would also facilitate tying up of power off takes from these projects with appropriate terms and conditions and Payment Security Mechanism. Role of Ministry of Power The role of the Ministry of Power is basically to serve as a facilitator and to co-ordinate with concerned Ministry/ Agencies for ensuring: 1. Coal Block Allotment/ Coal Linkage 2. Environment/ Forest clearances 3. Required support from State Govt. Agencies 4. Financial Institutions towards financial closure.
5. To facilitate PPA and proper payment security mechanism - with State Govt./ State utilities
6.
Monitoring the progress of shell companies with respect to predetermined timelines.
Selection of sites Criteria for selection of sites • Pit head location with domestic coal, • Coastal location with imported coal,
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• Coastal location with domestic/blended coal, • Through a preliminary scrutiny by CEA of a number of potential sites identified in the country. In the first phase, two projects at pit head site and three projects at coastal locations have been identified for development of Ultra Mega Projects. Government approval has already been accorded on 16th January, 2006 for setting up of following five Shell companies under the Article No. 86 of Articles of Association of Power Finance Corporation. The five shell companies formed were as follows: (i) Sasan Power Limited (M.P.) (ii) Akaltara Power Limited (C.G.) (iii) Coastal Gujarat Power Limited (iv) Coastal Karnataka Power Limited (v) Maharashtra Ultra Mega Power Project Co. Functions of the Shell Companies Power Finance Corporation has initiated the process of registration of five shell companies with the Registrar. PFC has also set up a core group having Chief executives from NTPC and members from PFC and CEA for monitoring and expediting the process. The role of the Shell companies is to facilitate following activities: i. Preparation of project report ii. Land acquisition
iii. Allocation of fuel linkages/coal blocks iv. Allocation of water by the state Govt
v. Appointment of consultants for EIA & Project Report
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TATA MUNDRA POWER PROJET vi. Appointment of consultants for International Competitive Bidding (ICB) document
preparation & evaluation
vii. Various approvals and statutory clearances viii. Off-take/sale of power – section 63 of EA2003 provision ix. Power Evacuation/ (Transmission) System
x. Rating of Projects
Funds requirement The Ultra Mega Projects being developed on super critical technology would entail substantial investment to the tune of Rs. 15,000 crores for each project. From the initial rounds of discussions held with the financial institutions, it emerged that for good and credible developers and for power projects offering less expensive power debt funding may not emerge as a constraint at all. To keep the financial institutions update about the developments in setting up of Ultra Mega Projects, FIs are being involved at various stages including the final evaluation of the bids. However, development of these large projects would have to have the involvement of large private business groups in our country, who either on their own or through consortium, with parties and agencies from outside, could take implementation of these projects. Support of State Governments in development of Ultra Mega Power Projects The Government of India is facilitating development of very large size Ultra Mega Projects at coal pit-heads and at coastal locations (in future, some of the hydro projects would also be taken up). These projects are aimed at using the economies of scale, delivering comparatively cheaper power to the system. While all efforts are being made to coordinate with various agencies at the Government of India level and with the Financial Institutions to see that for smooth development of these projects, all the initial linkages and inputs are properly tied up, State Governments’ support in this matter would be extremely useful. State have a role cut out to provide required assistance in ensuring water availability to the project, land availability at reasonable price, environment clearance and all possible help by the district administration at the time of visit by
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the prospective developers. These points have also emerged during discussions with the heads of Financial Institutions as also with the top leaders of the industry. Wherever the state governments would be willing to participate by way of part equity in these projects, it should be possible to provide for the same in the bid conditions while inviting competitive bidding for selecting the developers. This route, of course, would be optional to the states. In the Shell Companies, which would deal with the initial issues of sanctions, clearances, land acquisition etc, the concerned States have been approached to ascertain about their willingness to become equity partners.
Tentative allocation of power from the proposed Ultra Mega Power Projects
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In the meeting held on 16th February, 2006 at Ministry of Power, New Delhi with the Principal Secretaries (Power) / Energy Secretaries of NR, WR & SR States regarding allocation of power from the proposed Ultra Mega Power Projects, States were requested to indicate their requirement of power from the five proposed Ultra Mega Power Projects at Sasan (M.P), Mundra (Gujarat), Akaltara (Chhattisgarh), Coastal Karnataka and Ratanagiri (Maharashtra). The quantum of demand as projected by various States from Ultra Mega Projects is given in the Table below:
After detailed discussions on the above projected demand, tentative power allocation from the proposed five Ultra Mega Power Project was agreed which is summarized in the Table given below:
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MUNDRA POWER PROJECT
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INTRODUCTION The Mundra Ultra Mega Power Project (the Project) is developed by Coastal Gujarat Power Limited (CGPL).. in response to the plan of the Government of India (the Government) to increase the electricity production capacity of the country by 100,000 megawatts (MW) by the year 2012. To achieve economies of scale, the Government prefers large-scale projects that can meet the requirements of a number of states. The Project, awarded to CGPL on a build, own, and operate basis, is a supercritical coal-fired power plant with a total capacity of 4,000 MW. Various packages are currently at the bidding stage, and the Project is scheduled for full commercial operation in June 2012. The Project is located in a coastal area of Mundra Taluka,2 in Kutch3 District of Gujarat State. The project area covers 1,254 hectares (ha) of vacant land near the villages of Tunda and Wandh, including 202 ha of right of way outside the project boundary, and is about 2 km from the firstphase development area of the Mundra Special Economic Zone (MSEZ), where a 660 MW power plant project, the Adani Power Project, is being implemented by Adani Power Limited. The project area is about 1.5 kilometers (km) from the sea, with a portion of the MSEZ intervening between the sea and the project area. For logistics and accessibility, the Project relies on (i) Mundra Port (about 25 km from the project site); (ii) state highway SH-6 (about 6 km) connecting Mundra and Mandvi; (iii) national highway extension NH 8A (about 15 km), connecting Gandhidham and Anjar with Mandvi; (iv) Adipur railway station (85 km); and (v) Bhuj airport (75 km). An access road will be constructed to provide direct access to the project site from state highway SH-6, bypassing the two villages. The assessment of environmental and social impacts of the Project was conducted through the following six separate but related studies: (i) a rapid environmental impact assessment conducted by TCE Consulting Engineers Limited of India from March to May 2006, (ii) a comprehensive environmental impact assessment also conducted by TCE from March 2006 to August 2007, (iii) a socioeconomic assessment report also conducted by TCE from March to August 2006, (iv) a rapid marine impact assessment conducted by the National Institute of Oceanography from January 2006 to April 2007 and supplementary information provided in October 2007, (v) a
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supplementary investigation of the cumulative impacts on ambient air quality of the Project and the neighboring 660 MW power plant prepared by the Tata Power Company Limited from late October to early November 2007 in consultation with Vishudda Envirotech of India, and (vi) a rapid social impact assessment conducted by Saline Area Vitalization Enterprise Limited of India in October 2007. In the course of the environmental and social assessment, a public hearing was held on 19 September 2006, and further consultations were subsequently conducted in villages. The Project received environmental clearance from the Ministry of Environment and Forests (MOEF) on 25 April 2007 based on the rapid environmental impact assessment. All other clearances and permits required for various operations from the national and state authorities have also been obtained.
PROJECT DESCRIPTION
Project Facilities The project facilities to be constructed by CGPL include the power plant and support facilities within the complex. CGPL will also construct a housing complex for project staff. Associated facilities to be constructed by other entities include (i) a dedicated jetty and facilities for unloading and handling coal at Mundra Port, (ii) a merry-go-round (MGR) rail system for transporting coal from the port to the power plant, (iii) transmission lines to convey electricity from the power plant to various designated load centers, and (iv) an access road. These facilities are described below. Facilities to be Constructed by CGPL Power Plant The power plant will consist of five pulverized coal-fired, supercritical steam electricitygenerating stations, each with capacity of 830 MW. In addition to coal, fuel oil will be used for start-up, for flame stabilization, and during low-load operations. The main plant is arranged within the three interconnected structures, the (i) boiler structures, (ii) turbine building, and (iii)
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integrated control and electrical building. Map 3 shows the basic plant layout. Table 1 presents a summary of the main design and operational data of the power plant. Cooling Water System The power plant will have a once-through cooling system using seawater. The seawater requirement will be about 15.12 million cubic meters per day (m3/day) of which about 14.99 million m3/day will be for condenser cooling and 0.1278 million m3/day will be for producing freshwater. The seawater will be pumped at the end of an inlet channel connecting to Kotdi Creek. The spent cooling water, warmed to about 7 degrees Celsius (°C) above ambient sea water temperature, will be discharged back into the sea through a discharge channel opening to Mudhwa Creek. The inlet channel will be about 80 meters (m) wide at the bottom, 130 m wide at the top, 3 m deep, and 6.5 km long. Kotdi Creek, about 3.5 km long, will be dredged and trained to enhance its hydraulic capacity. The inlet system (inlet channel and Kotdi Creek) is designed to convey up to 630,000 cubic meters per hour (m3/hr), or somewhat more than the seawater requirement of 550,000 m3/hr, to meet peak cooling water demand as well as the volume required for freshwater production. The outlet discharge channel will have a base width of 60 m and a length of 4.9 km. It will be designed to cool water over the first 1,900 m from the power plant. The outlet channel will discharge into Mudhwa Creek, which is about 3 km long and will be dredged and trained to increase its hydraulic capacity. Water Production System The Project will require 25,710 m3/day of freshwater, consisting of 25,280 m3/day for processuses, including water for coal and ash handling, and 430 m3/day for domestic uses. The freshwater will be produced from seawater in a desalination plant. For boiler feed, a demineralization plant will further treat the freshwater supplied from the desalination plant. Site Drainage Rainwater runoff will be collected in a pond to use in spraying the coal stockyard and for landscaping.
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Wastewater Treatment System All process wastewaters will be treated to remove oil and stored in a pond for use in suppressing coal and ash dust and for landscaping. Reject from the desalination plant will be discharged into the sea through the discharge channel of the cooling water system. A sewage treatment plant will be provided to treat sewage from the housing complex. Residential Complex The operation of the power plant and support facilities will require about 718 people consisting of 255 CGPL staff and 463 outsourced staff. A housing complex consisting of 400 units will be developed on 182 ha of land to provide accommodation for about 255 CGPL staff and a few of the outsourced staff. Access Road An access road will be constructed from state highway SH-6 to the project site to bypass Wandh and Tunda villages. Associated Facilities to Be Constructed by Other Entities Transmission Lines The net power produced by the power plant will be fed to a 400 kilovolt (kV) switchyard. Three 400 kV double-circuit lines will be constructed to transmit electricity from the power plant’s switchyard to Limbdi (300 km), Ranchodpur (390 km), and Jetpur (330 km). Four additional transmission lines will be identified in due course. The Power Grid Corporation of India Limited will be responsible for acquiring ownership rights, rights of way, easements, and continued access rights necessary for the construction, operation, maintenance, and upgrading of the new transmission facilities. Coal Shipment and Unloading Facilities The power plant will require 11–13 million metric tons per annum (MTPA) of coal to be imported from sources such as Australia, Indonesia, and South Africa. Existing facilities at Mundra Port can handle only about 4 million MTPA of coal. Therefore, Mundra Port and Special
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Economic Zone Limited, the port owner, will construct a new berth and install mechanized coal-unloading facilities and a mechanized coal-stacking and reclaiming system specifically to meet the coal import requirements of the Project and the Adani Power Project. Rail System for Coal Transport Coal will be transported from Mundra Port to the power plant by a MGR rail system with bottom-open, bottom-release wagons. The active coal stock and the reserve stockpile at the power plant site will each be approximately 500,000 metric tons, providing a total of approximately 15 days’ coal supply in addition to the storage capacity of about 500,000 metric tons at the port.
POWER PLANT OPERATIONS
Coal Transport Coal will be transported daily by rail from Mundra Port to the power plant as described in paragraph 14. The volume will be about 30,000 to 40,000 metric tons per day. Fuel Oil Transport The total consumption of fuel oil will be about 50,000 kiloliters per annum during op uncanning erations. The fuel oil will be sourced from refineries in Jamnagar and Vadodara, etc., and will be transported to the power plant by rail or road tanker. The fuel oil will be stored in three tanks, two with 10,000 cubic meter (m3) capacity and one with 5,000 m3 capacity. Ash Transport and Storage The power plant will produce about 1.8 million MTPA of ash, of which bottom ash accounts for about 20% and fly ash 80%. Bottom ash collected in the bottom ash hopper below the boiler furnaces will be conveyed by jet pump up to the ash slurry sump for further disposal in wet form. Fly ash collected at various hoppers will be conveyed pneumatically to fly ash storage silos. Air vented out from the silos will pass through suitable control devices to remove fugitive fly ash.
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The dry fly ash collected in the fly ash silos will be given to fly ash users, and the remaining quantity will be disposed off in wet form. The Project has allocated about 241 ha of land for ash disposal. However, most of the ash will be utilized. Closed trucks will be used to haul the ash to utilization points. Seawater Abstraction During operations, about 15.12 million m3/day of seawater will be used for condenser cooling and freshwater production. The spent cooling water and the reject from the desalination plant will be discharged back into the sea. Alternatives
? Gujarat has a deficit in peak power demand of 1,785 MW in fiscal year (FY) 2007 and
3,656 MW by FY2011. ? For the region encompassing Gujarat, Maharashtra, Haryana, Punjab, Rajasthan, and Uttar Pradesh, the peak power demand would be 56,928 MW by FY2006 and 78,849 MW by FY2011. ? Even considering the installation of new plants, there would be a shortfall of 22,829 MW by FY2011 in the region.
? It is evident that the Project is desirable to close the demand-supply gaps.
? The alternative without the project is obviously undesirable, as the worsening power shortage would constrain economic growth. Alternative fuel
? Coal is still the most cost-effective fuel for generating electricity. Although coal has
greater pollution potential than natural gas, importing natural gas requires a large investment in infrastructure.
? As the western region has no potential large-scale hydropower sites, the only
alternatives are coal and nuclear energy.
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? Between coal and nuclear, coal is the preferred alternative given its shorter gestation period, lower costs, and relative safety. Alternative Project locations ? The location of a power plant is broadly determined by demand and capacity in the transmission system. ? Locating the power plant as close as possible to regional centres of demand reduces power losses in transmission. ? The project site therefore has to be in Gujarat to meet demand in Gujarat and other western states. ? At present, there is no power plant located near the project area. ? The nearest power plants are at Sikka, about 250 km away, and Akrimota, about 210 km away. ? However, the 660 MW Adani Power Project is being developed by Adani Power Limited near the project area to supply electricity to industries to be located in MSEZ. Alternative Cooling System o Two cooling system alternatives were considered: ? a closed or recirculation system and ? a open or once-through system. o In the closed system, warm cooling water is cooled in cooling towers before being recycled. The system needs make-up water to compensate for evaporation loss, and needs to discharge a certain portion of its water to maintain cooling water quality.
o A closed system for the Project would require about 55,000 m3/hr of make-up water and
would discharge about 31,000 m3/hr of cooling tower blow down into the sea.
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o In the once-through system, the entire volume of warm cooling water is directly discharged into a receiving water body. o For the Project, the once-through cooling water system will discharge 550,000 m/hr of warm cooling water into the sea. Alternative technologies ? The technology options for large pulverized coal-fired power plants are subcritical and supercritical.
? Supercritical plants operate at steam pressure above 22.1 mPa (about 3,200
pounds per square inch) and use once-through boilers. In the supercritical stage, water becomes gas. ? Subcritical plants operate at steam pressure below 19 mega pascals and use drum-type boilers. In the subcritical stage, the steam is a mix of liquid and gas.
ANTICIPATED ENVIRONMENTAL IMPACTS AND MITIGATION MEASURES Physical Environment: During Construction Constructing the power plant and its support facilities will create environmental disturbances normally encountered in major construction sites, such as noise, dust, and emissions from construction equipment and vehicles. These environmental disturbances can be minimized through good construction management practices and the use of construction methods that create lesser environmental disturbances. Further, environmental disturbances during construction are transient and confined to the construction site. For this Project, the project area is large and uninhabited, so the impacts of environmental disturbances on people and property will be negligible.
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Air Pollution The major sources of air pollution during the construction period are (i) emissions from vehicles, generator sets, and heavy construction equipment and (ii) fugitive dust from vehicle movement and soil excavation. The impacts of these air pollution sources will be minimized through established mitigation measures to be included in the construction contract, requiring contractors to strictly implement them. Such measures include the (i) suppression of fugitive dust by spraying water, (ii) use of low-emission vehicles and construction equipment, and (iii) good maintenance of engines. Noise Construction noise is created by vehicles, heavy equipment, and some construction activities such as erecting equipment and percussion piling. The noise will be reduced by using various appropriate measures such as noise enclosures, noise walls, and restricted vehicle speed. Construction workers in excessively noisy areas will wear ear protection equipment. Noise reduction and impact mitigation measures during construction will be prescribed in the construction contracts. Oil and Chemical Spills Fuel oil and chemical storage facilities at the construction site will be designed with adequate protection against spillage and fire. Runoff During the early stage of construction, site grading and excavation could add considerably to the silt load in surface runoff from the construction site, thereby contributing to the silting of receiving water bodies. This problem will be minimized through such measures as (i) undertaking site grading and excavation for foundation and backfilling during the dry season and (ii) retaining, if called for, the silt-laden runoff in a settling basin to remove silt before discharging runoff into receiving waters. Construction Wastes
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Construction wastes will be collected and disposed of in the most environmentally friendly way. Metal wastes will be sold as scrap. Concrete and other inert materials that cannot be recycled will be buried in appropriate locations. Waste oil will be incinerated or recycled as appropriate. Hazardous or toxic wastes, if any, will be stored for disposal by qualified contractors. These requirements will be prescribed in construction contracts. Excavated Materials Dredging of the two creeks and excavating to construct the intake and discharge channels will generate about 4.1 million m3 of excavated materials. The excavated materials will be used for filling the project area. Human Wastes Construction is expected to require up to 5,000–6,000 workers. However, most workers will be sourced from the nearby villages, so few workers will live on site. Toilets with septic tanks will be provided to take care of sewage. Solid wastes will be collected and disposed of in sanitary landfills. The cleanliness of worker camps, including kitchens and canteens, will be maintained. These waste management and sanitation requirements will be prescribed in construction contracts. During Operations The major pollution issues are air pollution and thermal pollution from the discharge of spent cooling water. The EIA assessed environmental impacts of the Project and prescribed appropriate mitigation measures to ensure that the project environmental performance meets national and international standards and guidelines for coal-fired power plants.
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Emissions Major pollutants generated by coal combustion include SO2, NOX, SPM, especially particulates smaller than 10 microns (respirable particulate matter, or RPM), and carbon dioxide (CO2), a major green house gas6. The power plant will use coal burners of proven, advanced design to reduce NOX production, and the boiler furnace will be provided with over-fire air ports to further reduce NOX production. To reduce SO2 emission, the power plant will use coal with low sulfur content, not exceeding 0.6%. To reduce particulates, electrostatic precipitators will be installed to remove fly ash in the flue gas.
ECONOMIC ASSESSMENT
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Project Costs Financial Cost The development cost of the Project is estimated at $4.2 billion equivalent. Annual operations and maintenance expenses are estimated at $50 million equivalent in 2006 prices. Environmental Cost The environmental cost of the Project is related to the following: (i) 1,254 ha of land (including right of way outside the project boundary); (ii) about 15.12 million m3 of seawater to be used daily in the cooling system and for freshwater production; and (iii) the discharge of air pollutants into the atmosphere including 400 metric tons of SO2 per day, 237 metric tons of NOX per day and 83,200 metric tons of CO2 per day. These environmental costs are difficult to quantify. The environmental cost of the land is low as the project area is barren and has no ecological value. Project Socioeconomic Benefits Against the financial and environmental costs cited above, the Project will generate about 29,928 giga watt-hours of electricity per annum to support economic development in Gujarat and its neighboring states. Other socioeconomic benefits of the Project will include (i) employment, (ii) corporate income tax of about $396 million equivalent throughout the project life; and (iii) valueadded tax of about $50 million equivalent during construction. A separate and detailed economic analysis will be undertaken for the Project. Development Impact ? Access to electricity is essential for reduction in poverty and improved health, education and economic development
?
Project will increase India’s generation capacity by 3%; likely to impact about 16 million domestic consumers in the country and, hence, in line with our “inclusive” growth strategy for infrastructure
?
Creation of 5,000 construction jobs and 700 jobs during operations
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TATA MUNDRA POWER PROJET ?
Project will sell competitively-priced power at US 5.65 cents per kWh and provide affordable energy to consumers
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First private sector project in India using supercritical technology; most energy-efficient plant in India (40.5%) compared to existing assets (about 27%) & therefore lower GHG emissions
? ?
Project’s tax transfers of about US$790 million to GoI Growth in port and power transmission capacity will further create infrastructure and employment for the country
IFC Role & Additionality ? IFC requested by GoI to support this first private supercritical project in the country • • IFC participated in pre-bid consultations to improve Project’s bankability Success is important to boost confidence of domestic & international investors in India’s power sector ? Project has significant risks due to size and complexity • • First private project using supercritical coal technology in India Significantly larger than any previous project by the sponsor, tripling its generation capacity • • IFC played a key role in financial structuring on behalf of all lenders IFC’s presence contributes indirectly towards mitigation of political and regulatory risk ? Project requires very long maturities (20 years) to achieve a low tariff for consumers • IFC’s financing is critical to meet large debt financing needs
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•
Local banks are providing significant debt but are unable to meet entire debt needs due to exposure limits
•
International commercial banks have limited appetite for long maturities because of refinancing risks and poor creditworthiness of state-owned off-takers
? IFC’s involvement requires CGPL to comply with more stringent E&S standards than GoI’s
Fit with IFC’s Climate Change Strategy in the Electricity Sector ? India has few scalable alternatives to coal; IFC encourages use of more efficient coal technology which results in lower carbon emissions ? Project will have amongst the lowest GHG emission rates globally - lower by 40%, 18% and 16% compared to the average GHG emission rate of coal based plants in India, across the globe and OECD, respectively ? First supercritical project sets a precedent for efficient coal usage: consumes 1.7 million tons of coal less per year than traditional subcritical plants of comparable size ? IFC support for this project will have a strong demonstration effect for other developing countries that need to develop coal-fired generation
Project will be eligible to sell carbon credits under the Clean Development Mechanism
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Efficiency
Coal Consumption CO2 (million tons) (million tons) 23.4
CGPL Imported Coal Subcritical Indian Coal Subcritical Imported Coal
40.5%
10.8
35.0%
20.4
28.8
35.0%
12.5
27.0
PROJECT FINANCIALS
ASSUMPTIONS
• Project would be commissioned in 5 phases, where first phase would be completed by Sep 2011, next 3 phases in 2012, and last phase in Jan 2013. • Operating Assumptions:
2250 0.36 0.81 0.22
Fuel Cost Rs / ton Coal Consumption rate Kg/Kwh Coal cost Rs/unit Transportation & handling costs of coal / gas
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TATA MUNDRA POWER PROJET Plant Load Factor (PLF) Auxialary Consumption 85.00% 8.00%
Co2 savings in 10 years in Million Tonnes CER Rate (Euro / CER) Exchange Rate (Rs / Euro) CER Rate (Rs / CER)
28.30 12 66 792
•
Working Capital Assumptions:
2 1
Receivables (months) O&M Expenses (months)
•
Financial Assumptions:
127,500 42,500 170,000
Debt Equity Total Project Cost (Rs Million)
Debt Structure Korean Bank, ADB,IFC (in Billion Dollars) SBI(In $ Billion)
Interest rates 67734.375 59765.625 12.0% 13.5%
Interest On Debt Repayment Period for SBI (yrs) Repayment Period for Foreign Dev. Bank (yrs) Moratorium period (Years)
12.7% 12 20 3
Depreciation (% p.a.) Estimated Salvage Value Tax Rate
3.60% 10%
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TATA MUNDRA POWER PROJET MAT Rate Normal 15% 34.00%
ANALYSIS – NPV & IRR
Based on the above assumptions, we have calculated: • • • • Project IRR: 18.14% NPV – FCFF: Rs 7035.5 crore Equity IRR: 22.53% NPV – FCFE: Rs 1109.72 crore
RISKS & MITIGATIONS (Sensitivity Analysis)
The various economic risks associated with the project with the weightage and impact of the risks on the profitability of the project
The economic risks faced by this project are Regulatory, Competition, Input gas prices and financial risk which have been given the weightage respectively.
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TATA MUNDRA POWER PROJET 1. Regulatory risk: The risk that a change in laws and regulations will materially
impact a security, business, sector or market. A change in laws or regulations made by the government or a regulatory body can increase the costs of operating a business, reduce the attractiveness of investment and/or change the competitive landscape. The Minimum Alternate tax rate has an impact on the IRR and NPV of the project. If the MAT rate changes from 15% to 18% then NPV reduces by 0.42% respectively.
2. Financial Risk: Decrease in interest rate by 100 basis points would have given more
economic profit. This would mean reduction in profit by 7.90%.
3. Completion Risk: Completion risk is the risk that the project will not be completed
or that completion will be delayed. If the project gets delayed by 1 year then NPV reduces by 25.23%.
4. CER Rate Volatility Risk: Tata Power has a source of revenue in terms of selling
CERs, and hence it is exposed to the price fluctuations of CERs. If the price of CER decreases by 1 Euro, then NPV reduces by 1.02%.
5. Operational Risk: Operating risk, which includes technology risk, is the risk that the
project will fail to perform at levels sufficient to meet projected cash flows or that the costs of operating and maintaining the project will exceed budget forecasts. It may also include strikes and technology risk in terms that this type of project has never been set up on Indian terrain. If the cost of completion increases by 10%, then the NPV reduces by 17.97%.
6. Currency Risk: A form of risk that arises from the change in price of one currency
against another. As Tata Power has taken loan in foreign currency, it is also exposed to currency risk. If Indian currency depreciates, it would mean more interest payments. If Rupee depreciates by Rs 2, then NPV reduces by 0.54%.
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CONCLUSIONS
The Project is a green-field project initiated in response to the Government’s energy policy. Its large capacity and use of coal as its primary fuel make it the most cost-effective alternative for generating electricity to meet the demand backlog and support further economic growth in the state and the country. The power plant and its support facilities will be constructed on a marginal land that is not ecologically or culturally sensitive. The power plant will adopt supercritical steam technology, which is about 10% more efficient than a conventional, subcritical coal-fired power plant. The Project will have no major ecological impacts, as it will adopt the best practicable mitigation measures and technologies to minimize emissions and impacts on the environment. The Project will require the contractors to adopt best environmental management practices during construction to minimize environmental disturbances such as emissions from heavy construction equipment and trucks, noise, and dust. Residual impacts will not reach the two nearby villages. Contractors will provide appropriate training to their workers in environmental, safety, and health aspects of construction, and will provide necessary protective measures to workers to minimize safety risks. The Project will adopt the best process technology and designs as well as effective pollution control equipment to minimize emissions during operations. Emissions will meet national standards as well as World Bank emission guidelines for new power plants. Impacts on ambient air quality have been found to be insignificant.
REFERENCES:http://www.hdfcsec.com/CMT/Upload/ArticleAttachments/Tata Power - Nifty %20Series.pdfhttp://0101.netclime.net/1_5/352/258/338/NMR TTP.pdfhttp://powermin.nic.in/whats_new/pdf/development_of_project.pdf
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http://www.google.co.in/search?hl=en&rlz=1T4GUEA_enGBIN332IN334&q=mundra+power+project+irr&meta=&aq=f&oq=http://www.google.co.in/search?hl=en&rlz=1R2GUEA_enGBIN332&q=mundra+power+project+NPV+filetype
df&start=10&sa=NInfrastructure Project Finance
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doc_938853552.doc