CONCEPT PAPER
ON
ACCELERATION OF ENERGY EFFICIENT RENOVATION AND MODERNIZATION AND
LIFE EXTENSION (R&M & LE) OF OLDER COAL BASED THERMAL POWER UNITS, INTRODUCTION
OF CONCURRENT ENERGY EFFICIENT R&M AND LE (CEE R&M AND LE) OF COAL BASED
THERMAL POWER UNITS IN OPERATION, UNDER CONSTRUCTION AND NEW UNITS OF STATE POWER
UTILITIES AND THEIR FUNDING.
DECEMBER, 2013
PART-1
BY
Prahalad Rao, Consultant
(MOB:9212151469)
1.0 OLDER POWER PLANTS
1.1 INITIATION AND FINANCING R&M SCHEMES
i. The R&M program initially addressed
problems related to poor performance arising out of the operating conditions through
the intervention of Central Electricity Authority (CEA) and the Power Finance Corporation
Limited (PFC).
ii. The program (Phase I) covering core activities
for improving the performance spread over 34 power stations was successfully completed
during 7th Plan period. The R&M works related to environmental improvement were
accorded high priority and about 47% of the total investment was made on environmental
pollution control. The salient features are:
|
Total power stations covered
|
34
|
|
Total power capacity involved
|
13570 MW
|
|
Anticipated additional generation per
annum
|
7000 MU
|
|
Year of completion
|
1990-91
|
|
Central loan assistance
|
INR 4020 million
|
|
Actual addition of generation achieved
per annum
|
1000
|
iii. Phase-II of the program was taken up in
1990-91covering 44 thermal power stations. After detailed discussions with power
plant operators and manufacturers of equipment, R&M schemes were firmed up for
implementation. Power Finance Corporation (PFC) was assigned with responsibility
to provide loan assistance to Power Utilities under a set of guidelines and financial
norms. Phase-II gave direction to select R&M activities on a more scientific
basis and sound investment decisions. The salient features are:
|
Thermal power station covered
|
44
|
|
Total capacity involved
|
20870 MW
|
|
Additional anticipated generation per
annum
|
7864 MU
|
|
Total expenditure incurred up to March
1997
|
Rs. 8620 million
|
|
Thermal units covered
|
198
|
|
Estimated cost
|
Rs. 23850 million
|
|
Additional anticipated generation per
annum
|
5000 MU/annum
|
|
Capacity taken up for life extension
works
|
300
|
iv. CEA and PFC continued to accord special
attention and due priority for the Life Extension and R&M of older thermal units
in the country during the 10th plan (2002 – 2007). The National Electricity Policy
(NEP), 2005 noted that all the existing generation capacity should be brought to
minimum acceptable standards and R&M should be undertaken according to well
defined plans featuring necessary cost benefit analysis.
1.2 GOI NEW INITIATIVES
1.2.1 National Perspective Plan
Based on
the discussions held with Ministry of Power, various utilities, PFC and BHEL, CEA
prepared a “National Perspective Plan for Renovation & Modernization and Life
Extension and Up-rating (LE&U) of thermal power stations up to the year 2016-17”.
The revised guidelines for R&M of coal based thermal power station were also
issued.
1.2.2 Objective of R&M Program
The main
objective of Renovation & Modernization (R&M) of thermal generating units
is to make the operating units well equipped with modified / augmented with latest
technology equipment and systems with a view to improve their performance in terms
of output, reliability, availability, reduction in maintenance requirements, ease
of maintenance and minimizing inefficiencies.
1.2.3 Objective of Life Extension Program
The R&M
program is primarily aimed at generation sustenance and overcoming problems. The
Life Extension (LE) program on the other hand focuses on plant operation beyond
their original design life after carrying out specific life assessment studies of
critical components.
1.2.4 Policy Framework
Ministry
of Power and Central Electricity Authority are responsible for Policy Guidelines
and planning of R & M and LE activities in Indian Thermal Power Sector. CEA
has issued comprehensive Guidelines for Renovation and Modernization/ Life Extension
works of coal/lignite based Thermal Power Stations. The salient features of these
guidelines are:
i. Units over 15 years are considered due
for R&M and units over 25 years are considered as due for LE.
ii. The objective of R&M and LE have now
changed from 'generation maximization' to 'performance optimization and generation
maximization' with efficiency enhancement and plant up rating becoming an integral
part of the life extension program..
iii. The cost of LE & U works not to exceed
50% of the EPC cost of a new generating unit of indigenous origin.
iv. Investment decision on R&M/LE&U
scheme need to be driven by economic sensitivity analysis on cost of generation.
The techno-economic viability to be established in terms of internal rate of return,
net present value, payback period etc. The payback period for R&M / LE&U
should be about 5-7 years
1.2.5 Methodology for Implementation
i. Either through developing a
rolling plan in which the whole scope of work is conceptualized based on condition
assessment, plant operation data & feedback from O&M engineers / OEM / Consultant
recommendations or compliance to statutory norms. Thereafter, the various activities/schemes,
so identified are implemented in phases depending on the availability of particular
system/unit shutdown Or
ii. A comprehensive scheme is
implemented in taking into account the unit's planned shutdown after ensuring all
inputs and supply of materials. In such a case, the process which should be followed
is as under:
a. Identification of the Unit(s)
at a plant which need to be considered for R&M.
b. Preparation of the terms of
reference for appointment of R&M Consultant
c. Preparation of Qualifying requirements
and Short listing of Consultants.
d. Tendering and appointment of
Consultant for Residual Life Assessment study of major sub-systems, condition assessment,
energy auditing, thermal performance test, environmental study, preparation of DPR.
e. Review and Acceptance of the
DPR by the client
f. Preparation of the Technical
and Commercial specifications which are to be included in the Request for Proposal(RFP)
g. Award of Contract for R&M
works
h. Unit Management with or without
assistance from Consultant
1.3 R&M AND LE ACHIEVEMENTS FROM 7TH PLAN TILL 11TH PLAN (STATE+CEMTRAL SECTOR)
|
S. No.
|
Plan
|
Year
|
No. of TPS / Units
|
Capacity
(MW)
|
Additional
Generation
Achieved
MU/
Annum*
|
Equivalent
MW**
|
|
1.
|
7th Plan &
2 Annual
Plans
|
85-86 to 89-
90 & 90-91,
91-92
|
34 / 163
|
13570
|
10000
|
2000
|
|
2.
|
8th Plan
(R&M)
(LEP)
|
92-93
to
96-97
|
44 / 198
43/(194)
1 /(4)
|
20869
(20569)
(300)
|
5085
|
763
|
|
3.
|
9th Plan
(R&M)
(LEP)
|
97-98
to
2001-02
|
37 / 152
29/ (127)
8/ (25)
|
18991
(17306)
(1685)
|
14500
|
2200
|
|
4.
|
10th Plan
(R&M)
(LEP)
|
2002-03 to
2006-07
|
9/25
5/(14)
4/(11)
|
3445
(2460)
(985)
|
2000
|
300
|
|
5.
|
11th Plan
(R&M)
(LEP)
|
2007-08 to
2011-12
|
21/72
15/(59)
6/(13)
|
16146
(14855)
(1291)
|
5400
|
820
|
Achievements during the 11th Plan shown above included
achievements under the State Sector as under:
|
Sl. No.
|
Particulars
|
No. of Units
|
Capacity (MW)
|
|
1
|
LE Works
|
10
|
1024
|
|
2
|
R&M Works
|
20
|
4485
|
|
Total
|
|
30
|
5509
|
(Source:
CEA Quarterly Review Report – Renovation, Modernization and Life Extension of Thermal
Power Stations 4th Quarter of 2011-12 (January –March, 2012)
1.4 R&M/LE PROGRAM DURING 12TH PLAN (2012 - 2017)
|
S. No.
|
Particulars
|
LE/R&M works identified
during 12th Plan No. of units & capacity (MW)
|
Total
(State Sector
+ Central
Sector)
|
|
|
State Sector
|
Central
Sector
|
|||
|
|
LE
|
38 (6820)
|
32 (5246)
|
70 (12066)
|
|
|
R&M
|
20 (4150)
|
45 (13151)
|
65 (17301)
|
|
Total
|
58 (10970)
|
77 (18397)
|
135 (29367)
|
|
(Source: CEA Quarterly Review Report – Renovation,
Modernization and Life Extension of Thermal Power Stations 4th Quarter of 2011-12
(January –March, 2012)
1.5 ROAD MAP FOR PARADIGM CHANGE
|
Past
Focus
|
Present
Focus
|
|
Generation
maximization
|
Plant
performance optimization
|
|
In-kind
replacement
|
Cost-effective
technology upgrades
|
|
Restoration
of lost capacity
|
Up-rating
of capacity
|
|
Attain
design efficiency
|
Ø Improve upon design
efficiency
Ø Use of higher cycle
parameters to take advantage of recent
metallurgical Concurrent merits
Ø State of the art turbine
steam path design
|
|
Reactive
R&M
|
Pro-active
R&M
|
|
Time-based
R&M
|
Condition
monitoring and R&M optimization through cost-benefit evaluation
|
1.6 CHALLENGES
·
Techno
economic viability of R&M
·
Design,
procurement, execution due to inherent complexities:
·
Environmental
compliances
·
Surprises
and provisioning
·
Efficacy
of RLA studies and selection of optimal design options
·
Contract
design and packaging
·
Two-stage
or Single Stage Bidding Process
·
Guarantees,
penalties, cost-overruns
·
Standardization
Technical and Commercial Specifications and procedures
·
Widening
R&M market to procure larger participation of R&M Consulting Engineers from
within and outside the country.
1.7 MITIGATIVE MEASURES
1.7.1 The Sub-Group on “Efficiency
Enhancement in Fossil Based Power Plants” constituted under the Indo-German Energy
Forum, among other issues, identified Development of Standard Documents for R&M
Units in two phases.
1.7.2 Phase-I Task - assessment of tendering procedures
currently being followed by public utilities in India and a review of documents
used for standard R&M Units as well as the documents which have already been
developed for Units financed particularly by World Bank. The Phase-I Activity was
carried out by the consultant-M/s. Evonik Energy Services India (now STEAG) appointed
and funded by GIZ. Report on Phase-I activity was submitted September 2009.
1.7.3 Phase-II Task - preparation
of the model documents/templates for R&M Units in consultation with task force,
power utilities & financing agencies. It is intended to apply the documents
for the Energy Efficiency Program financed by KfW.
1.7.4 A Task Force on “Development
of Tender Procedures and Model Contracts for the Renovation & Modernization
(R&M) of Fossil Fuel Based Power Plants in India” under the Chairmanship of
Member (Thermal), CEA was constituted in October, 2009 comprising the members from
MOP, CEA, NTPC and various power utilities to carry out the Phase-II activity.
1.7.5 M/s Lahmeyer International
India Pvt. Ltd has been appointed as a Consultant in March, 2012 for carrying out
Phase -II activity. This is in progress.
1.7.6 The World Bank is providing technical assistance
of US $ 1.1 million as a part of GEF grant to CEA under “Coal Fired Generation Rehabilitation
Unit-India” for addressing the barriers to Energy Efficient R&M of coal fired
generating units in India. The Unit is being implemented by CEA through appointment
of consultants for carrying out studies - (a) Review of institutional capacity and
capacity strengthening interventions at CEA, (b) Study on reduction of barriers
to R&M interventions in thermal power stations in India. (c) Study on developing
markets for implementation of R&M in thermal power stations in India and (d)
Review of experience from Pilot R&M interventions in thermal power stations
in India.
1.7.4
European
Commission and STEAG Energy Services (India) Pvt. Ltd have signed a Contract for
implementation of the Unit - Workshop and Training program on Renovation &
Modernization and Operational Practices for the Indian Thermal Power Sector. Ministry
of Power has designated CEA as the Nodal Agency for this assignment. As per the
Contract, STEAG Energy Services (India) Pvt. Ltd. has to organize two workshops
(i) A Road Map for R & M and O & M of existing Indian coal Fired Power Plants
and (ii) Training program to enhance the capacity of the Indian Thermal Power Sector
mangers to plan and carry out R&M in a timely and efficient manner. The first
workshop concerning a Road Map for R & M and O & M of existing Indian coal
Fired Power Plants was held in May 2013. A study tour on R & M to Europe is
also planned to be organized.
1.8 REGULATORY STUDY TO ENCOURAGE ENERGY EFFICIENCY THROUGH INVESTMENT IN REHABILITATION OF COAL FIRED GENERATION PLANT IN INDIA -STUDY FUNDED BY ENERGY SECTOR MANAGEMENT ASSISTANCE PROGRAM(ESMAP) (Report submitted by KPMG)
1.8.1
The
findings as relevant for the present purpose are briefly stated below:
Ø The greatest opportunity for
EE R&M Units appears to be to undertake additional works in conjunction with
life extension (LE) works. Works designed to significantly enhance unit HR may not
be economically viable without LE, because LE provides an assurance that the plant
will be expected to operate at a high plant load factor for a number of years.
Ø Typical EE R&M works would
however include the following:
·
Full overhauls of the unit to original equipment manufacturer recommendations;
·
Reduction of air ingress to condenser and fitting of on-load cleaning
equipment;
·
Renewal of air heater elements and seals;
·
Renewal or repair of high pressure feed heaters;
·
Ensuring the correct water quality for the boiler make in order to
reduce boiler blow down; and
·
Reductions in leakage from passing valves
·
Redesign of furnace and super heater heat transfer area to ensure design
boiler pressures and temperature are achieved;
·
Replacement of turbine modules with improved high efficiency blade
design;
·
Improved and increased milling plant capacity and burners to burn lower
quality fuel;
·
Renovation of control and instrumentation equipment; and
·
Replacement of the furnace wall by membrane construction, including
skin casing to reduce the air ingress and other modifications to fans to increase
throughput.
Ø In practice EE R&M schemes
would be expected to return a station to near design levels of efficiency. Because
it would be expected to lead to performance beyond assumed/normative levels of efficiency,
it would provide the generator with a strong incentive to carry out EE R&M works.
Ø MOP guidelines suggest that
R&M and heat rate improvements should be considered, though they do not perhaps
focus strongly on heat rate improvements at the present time. Nevertheless, we see
no reason to assume that such investments would not be permitted by the relevant
Regulatory Commission, providing that benefits would also flow to customers. The
indicative level of benefit attainable over and beyond existing norms is represented
by typical savings in coal consumption of around 44,000 tonnes per annum for a 210MW
LMZ unit running at a design heat rate of 2375 kcal/kg and burning reference quality
coal, compared with the CERC norm of 2500 kcal/kg. This would equate to a financial
saving of around $1.65m per annum, assuming a delivered coal cost of $37.50 per
tonne.
Option 1-
Cost/Tariff on Actual
R&M Investments
Proposed by the Generator
Approved by the Regulator
Cost / Tariff based on Actual
Off take Commitment by Discoms – Up to Actual Generation
Supply Commitment by Generators – Up to Actual Generation
Option 2
– Normative
R&M Investments
Proposed by the Generator
Approved by the Regulator
Tariff based on Norms; Costs Based on Actual
Off
take Commitment by Discoms – Up to Actual Generation
Supply
Commitment by Generators – Up to Actual Generation
Option 3
A – Market (PPA Pre – R&M)
R&M Investments
Decided by Generator
Investment Approval from Regulator not Needed
Tariff based on a PPA – Pre R&M Quantum, Pre R&M Rate, Pre
R&M Life,
Firm Supply Commitment
Off
take Commitment by Discoms – Up to Committed Generation
Supply
Commitment by Generators – Up to Committed Generation
Option 3
B – Market (PPA Extended Life of Plant)
R&M Investments
Decided by Generator
Investment Approval from Regulator not Needed
Tariff based on a PPA – Pre R&M Quantum, Pre R&M Rate, Pre
R&M Life,
Firm Supply Commitment Off
take Commitment by Discoms – Up to Committed Generation
Supply
Commitment by Generators – Up to Committed Generation
Ø There is a high level policy
commitment to R&M Units in India and that this is supported with a considerable
central planning and Indian and international funding program. Whilst the framework
can be argued as supportive of R&M, it essentially leaves States with responsibility
for prescriptive actions that would force it to happen. The R&M program appears
to be enjoying somewhat mixed success, with reasonable progress achieved against
what might be seen as a relatively ambitious framework contained in the Tenth, Eleventh
and Twelfth Plans.
1.9 RENOVATION, MODERNIZATION AND LIFE EXTENSION OF POWER PLANTS - OPPORTUNITIES AND CHALLENGES (PwC REPORT)
1.9.1 Findings as relevant for the
present purpose are briefly stated below:
Ø Focus on financial health of
generating utility
Ø Incentivize R&M through
regulatory support
Ø Enhance O&M capability
in power generating utilities - adoption of R&M culture
Ø Create a framework for increased
tie up between state and central generating utility
Ø Modularize the R&M approach
through segmentation in key steps that are interlinked
Ø Enhance engagement of external
experts (from other utilities / market) for support in R&M decision making,
execution and post project benefit realization
Ø Create success stories for
replication
1.10 TECHNO-ECONOMIC CONSIDERATIONS
1.10.1 The older power plants of units sizes mentioned
earlier have outlived their life cycle and their revival largely depends upon meaningful
and realistic assessment of the healthiness of the existing plant from the technical
and economic points of view. This involves two main considerations, namely, technical
aspects and economic aspects.
1.10.2 Techno part is intended to study in all
respects the technical merits and demerits of the plant to establish whether the
plant merits or demerits revival including compatibility of newer technology with
existing overall operational system and utilization of best available technology
and technical solutions.
1.10.3 Economic part will be based mainly on technical
assessment in order to examine economical application of the available financial
resources and the best management system of the plant with due considerations to
existing systems and practices. It also involves selection and utilization of technology
so as to ensure optimization of the operation and optimal generation to enhance
revenue earning scope and capacity compared to the extant level of operation. Introduction
and installation of appropriate measures and mechanisms for minimization of operational
cost also constitutes an important component of the economic part. The underlying
essence of economic part aims at cost reduction through energy efficient management
and maximizing revenue generation and the profitability of the plant.
1.10.4 The implications that the R&M measures
have on energy efficiency makes investment in the sector attractive from the point
of the positive impact it has on climate change issues
1.11 ESTIMATED FUNDS REQUIREMENT FOR R&M & LE OF OLDER POWER PLANTS
1.11.1 Estimated funds requirement for EE R&M
and LE of Older Power Plants during 11th and 12th Plans (up to 2016-17) is as under:
|
Plan
|
R&M
Works
(@ Rs. 1
Cr.
/ MW)
(INR
Million)
|
Life
Extension Works
|
Total
(INR
Million)
|
|||
|
LE with out
Up-gradation
(@ Rs. 1.25-
1.5
Cr./MW)
(INR
Million)
|
LE with Up-gradation
(EE R&M) (@ Rs.
1.5 to 2.0 Cr./MW)
|
|||||
|
Indigenous
Funding
(INR
Million)
|
With External
Funding
(INR
Million)
|
|||||
|
11th Plan (April
2009 onwards)
|
9500
|
23340
|
23560
|
4500
|
60900
|
|
|
12th Plan
|
6300
|
-
|
46400
|
87600
|
14030
|
|
|
Total
|
1580
|
2334
|
6996
|
9210
|
20120 0
|
|
|
Funding from own resources (20% of estimated cost)
|
3160
|
4670
|
13990
|
18420
|
40240
|
|
|
Fund requirement
from Indian
Financial Institutions (IFIs) like
PFC/REC/ etc.
|
12400
|
18670
|
55970
|
-
|
87280
|
|
|
External
Assistance
|
-
|
-
|
-
|
73680 (~15350
Million USD**)
|
73680
|
|
** Assuming 1 USD = Rs. 48, 1 Euro = Rs.70.
Note :Excludes fund requirement for central
sector units of NTPC, NLC & NEEPCO
(Source: CEA National Perspective Plan for Renovation,
Modernization and Life Extension of Thermal Power Stations (up to 2016-17)
1.11.2 Status of total funds requirements, funds
committed and balance funds to be lined up:
(INR in Million)
|
Source
|
Total Funds Require
ments
|
Funds Committed
|
Funds to be lined up
|
Total
(3+4 = 2)
|
|
1
|
2
|
3
|
4
|
5
|
|
A. Utility Own Resources (20% of estimated cost)
|
4.0240
|
Not Available
|
40240
|
40240
|
|
Total A
|
40240
|
-
|
40240
|
40240
|
|
B. Indian Financial Institutions (IFIs)
|
|
|
|
|
|
a.
PFC (Assuming 70% of funds to be provided by IFIs)@
|
61096
|
35000 (57% of the total)
(Between 2009-2013)
(Source: Annual Reports)
|
26096
|
61096
|
|
b.
REC (Assuming 30% of funds to be provided by IFIs)@
|
26184
|
14925 (57% of the total).
This is based on assumption since REC has included the amount under Generation
and not shown under R&E and LE separately in its Annual Reports the same period
of PFC.
|
11259
|
26184
|
|
c.
Total B (a+b)
|
87280
|
49925
|
37355
|
87280
|
|
C. External Assistance
|
|
|
|
|
|
a.
KfW (3 Units of 630 MW)
|
6300*
|
6300
|
Nil
|
6300
|
|
b.
World Bank (4 Units of 640 MW)
|
8640
|
8640
|
Nil
|
8640
|
|
c.
Planned for 16 Units (3330 MW) from External Funding
|
58740
|
Nil
|
58740
|
58740
|
|
d.
Total C (a+ b )
|
73680
|
14940
|
58740
|
73680
|
|
Total (A+B+C)
|
201200
|
64865
|
136335
|
201200
|
*Euro 90 million
shown in CEA Quarterly Report on R&M (April-June, 2013) against Euro 96 million
shown in CEA National Perspective Plan on R&M, has been considered.
@ 70:30 ratio
assumed for funding by PFC and REC respectively is based on the ratio mentioned
in the Standing Committee on Energy Report.
1.11.3 Funds requirement for EE R&M and LE
of Older Power Plants covering spill over of 11th Plan and the program
for the 12th Plan works out INR 200540m, the available commitment for
which is INR 64865m with the need for lining up remaining INR 136335m. which, according
to position stated above, will be as under::
Utility Own
Resources INR 40240m
PFC INR 26096m
REC INR 11259m
Planned for
16 Units (External Funding) INR 58740m
Total INR 136335m
1.11.4 Funding pattern of EE R& M of Older
Units during 12th Plan represents 20% from Utility’s Own Resources, 43%
from Indian FIs like PFC/ REC and 37% from External Assistance such as KfW,/World
Bank etc.
1.11.5 Funds of the order of INR 136335m to be
lined up may be mobilized in the following manner::
(a) State Power Utilities whose Units are eligible
to be covered as approved by CEA may be requested to provide In-principle commitment
to meet 20% from Own Resources amounting to INR 40240m.
(b) Funds amounting to INR 58740m is planned
to be mobilized for 16 Units through External Funding. External sources are yet
to be identified. It is felt that it would take much longer time to search for and
identify External sources for making up the gap of INR 58740m. Even after identification,
the loan processing procedure also takes considerable time as it involves approval
at various stages, project appraisal, loan sanctioning, loan documentation and disbursement.
It is considered that it could be advisable and feasible to mobilize the above funding
gap also from the Indian Financial Institutions, in addition to their existing commitment
as mentioned above so that the implementation of the program could be accelerated.
(c) It is accordingly proposed that of the
funding gap of INR 58740m, 70% or INR 41118m may be mobilized by PFC and balance
30% or INR 17622m may be mobilized by REC , the ratio being the same as assumed
above. Inclusive of this, total funds to be mobilized by PFC would be INR 67214m
and by REC INR 28881m.
(d) On the above basis, the revised funding
pattern of the funds amounting to INR 136335m yet to be lined up works out to 20%
by the State Power Utility, 49% by PFC, 21% by REC and 10% by KfW/WB.
(e) This is suggested keeping in view that
both PFC and REC have a good standing and are reputed FIs in the Power Sector within
and outside the country, have high operation volume and their financial fundamentals
and strength is reasonably strong. Thus, both the institutions are competent with
capabilities and capacity to mobilize additional funds requirements for the program
to make up the above funding gap, with the support of the GOI.. GOI has been providing
them needed support to facilitate them to mobilize sizable funds through Tax Free
Bonds and External Commercial Borrowings regularly on year to year basis for financing
the power projects in the country.
(f) GOI has permitted PFC and REC to mobilize
INR 50000 million 9% Tax Free Bonds each in FY 2013-14. With 9% Benchmark, the maximum
yield offered will be 8.45% for retail customers and 8.2% for others. Implied pre-tax
rate will be 11.79% for investors in 30% tax bracket.
(g) GOI may accordingly allow PFC and REC to
mop up funds as worked out above for on-lending to eligible State Power Utilities
for implementation of the resource gap over and above their existing commitment
in order to speed up implementation of EE R&M and LE Program as envisaged under
the 12th Plan, as under: :.
|
S
No.
|
Funding
Source
|
Total Ratio
(%)
|
EE R&M and LE Tax Free Bonds
|
External Commercial Borrowing (ECB)
|
Total INR Million
|
||||
|
Ratio (%) out of col.(3)
|
Amount INR Million
|
Tenor
(Years)
|
Ratio (%) out of col.(3)
|
Amount INR Million
|
Tenor
(Years)
|
||||
|
1
|
2
|
3
|
4
|
5
|
6
|
7
|
8
|
9
|
10
|
|
1
|
State Utility
|
20
|
-
|
-
|
-
|
-
|
-
|
-
|
40240
|
|
2
|
PFC
|
49
|
70
|
47050
|
7
|
30
|
20164
|
5
|
67214
|
|
3
|
REC
|
21
|
70
|
20217
|
7
|
30
|
8664
|
5
|
28881
|
|
4
|
Total
|
90*
|
|
|
|
|
|
|
136335*
|
*Excludes INR 49925m committed by PFC/REC
and INR 14940m committed by KfW/WB. ( Total = INR 136335m to be lined up + INR 49925m
committed by PFC/REC + INR 14940m committed by KfW/WB = INR 201200m)
(h) PFC and REC may be allowed to mop up the
above funds during FY 2014-15, 2015-16 and 2016-17, the average of which per FY
works out to INR 22404m for PFC and INR 9627m for REC.
Notes:
(i)
EE
R&M and LE Tax Free Bonds will be as per the applicable GOI Guidelines.
(ii)
Average
Tenor (Maturity) of Col.6 and 9 works out 6 years
(iii)
Foreign
Exchange Variation in case of ECB will be on back to back basis
(iv) Total funds requirement stated above may
be mobilized (Energy Efficiency Tax Free Bonds (EETFB) + ECB) in three tranches
each @ 33.33% in 2014-15, 2015-16 and 2016-17, rounded off to 100%.
1.11.6 The terms and conditions of financing by
PFC/REC may be as follows:
|
1.
Mode
|
·
Line of Credit covering the total funds requirement for
the number of Units, Capacity and the State Power Utilities identified and approved
by CEA for FY 2014-15, 2015-16 and 2016-17 under appropriate legal covenants and
documentation. instead Unit to Unit basis.
·
State Power Utilities will formulate Sub Project Reports
(SPR) for each Unit identified and included by CEA for EE R&M and LE in the
above mentioned FYs through the Consultant which should form the basis for consideration
and sanction of Line of Credit by PFC/REC.
·
Format of SPR will be prepared by the Consultant engaged
by the Utility in the first instance and to be finalized in consultation with
CEA and PFC/REC so that it becomes acceptable to and accelerate the process of
sanction of Line of Credit by PFC/REC.
·
This is suggested for the reason that sanction of Unit on
Unit to Unit basis would involve about an year in each case in processing, appraisal,
documentation and release of funds. Suggested approach is expected to substantially
facilitate expeditious completion of the entire process and implementation of
the Unit with the funds being assured and being readily available to the Utility
for utilization for the Unit.
|
|
2.
Size of Line of Credit
|
·
80% of the capital cost as per SPR of each Unit but limited
to 50% of EPC cost of new generating unit of indigenous origin for the same capacity
or the capacity expected to be enhanced on implementation of EE R&M and LE
measures of the Unit, whichever is higher
|
|
3.
Disbursement of sanctioned Line of Credit.
|
·
Sanctioned Line of Credit will be disbursed to the State
Power Utilities in one installment soon after compliance of legal covenants and
completion of loan documentation.
|
|
4.
Opening of Multi Option Deposit (MOD) Account by the State
Power Utilities with their Bankers.
|
·
Funds received as per (3) above will be deposited by the
Utility in Multi Option Deposit (MOD) Account by the State Power Utilities to
be opened with their Bankers..
·
MOD will be maintained for each Unit separately with the
amount to be deposited being equal to the amount for Unit included in the Line
of Credit sanctioned based on SPR..
·
The interest on the amount deposited will be not less than
Term Deposit interest rate to enable the Utility to lessen, if not, offset its
interest liability to PFC/REC.
·
The amount will be invested within three days of the date
of receipt from PFC/REC.
·
The period of deposit will be corresponding to the period
envisaged for completion of the Unit as per the SPR..
·
The State Power Utility may draw the funds from the MOD
according to its Financial Phasing Requirements and Procurement Plan prepared
and approved by the Board/Director (Finance).
·
Each drawl from the MOD will be authorized only after obtaining
the approval of GM (F) or Director (F) as per the internal systems and control
of the Utility.
|
|
5.
Rate of Interest (ROI)
|
·
Weighted Average Cost of Borrowing through Tax Free Bonds
and ECB plus minimum margin to be maintained by PFC/REC according to its internal
policy.
·
Interest may be payable to PFC/REC Quarterly/Half Yearly
corresponding to the periodicity of payment of interest applicable to PFC/REC
to its borrowings, as the case may be,, commencing from the date of disbursement
of the Line of Credit.
·
Interest liability payable to PFC/REC will be met by the
Utility from out of the interest earned on MOD. If the interest earned on MOD
A/c falls short of the amount of .interest liability to PFC/REC, the Utility will
meet such shortfall from own resources or through subsidization of differential
amount by MOP from out of the funds for R&M and LE under Restructured Accelerated
Power Development and Reforms Program (R-APDRP), if made available to the Utility.
|
|
6.
Subsidization of differential rate of interest between the
interest charged by PFC/REC and interest earned on the MOD maintained by the Utility
with its Bankers, if becomes necessary..
|
MOP may subsidize the
Utility differential rate out of the funds for R&M and LE under (R-APDRP).
|
|
7.
Repayment Period of Line of Credit
|
·
The amount of each Unit included in the Line of Credit and
disbursed by PFC/REC will be repayable within 5 years in equal installments commencing
from 1st April of succeeding Financial Year (FY) of the Commercial
Operation Date (COD) of each Unit considering the intent of Line of Credit..
·
This is suggested on the basis that the average maturity
period of funds borrowed by PFC/REC through EE R&M and LE Tax Free Bonds and
ECB works out to 6 years.
·
The proposed repayment period of Line of Credit as stated
above is well within the average repayment liability of the funds borrowed by
PFC/REC.
|
|
8.
Grace Period for Repayment of Line of Credit
|
·
PFC/REC may consider approving Grace Period for repayment
of Line of Credit in years equal to the period envisaged for completion of each
Unit considering the intent of Line of Credit...
|
|
9.
Line of Credit Processing Fee
|
PFC/REC
may consider waiving off the Processing Fee considering the intent of Line of
Credit.
|
|
10.
Commitment Charges
|
Line of
Credit being envisaged to be released in one installment to be deposited by the
Utility in MOD A/c with its Bankers in the manner as stated above does not attract
any commitment charges ..
|
1.12 PROJECTED BENEFITS
1.12.1 The projected benefits in terms of additional
generation and life extension capacity are as under:
|
Five Year
Plan
|
Increase in Annual Five
Year Generation (MU)
|
Equivalent capacity
addition at 80%
PLF (MW)
|
||
|
R&M
|
LEP
(incl. EE R&M)
|
Total
|
||
|
11th Plan
|
4250
|
9755
|
14005
|
2000
|
|
12th Plan
|
Generation
sustenance
|
6900
|
6900
|
985
|
|
Total
|
4250
|
16655
|
20905
|
2985
|
(Source: CEA National Perspective Plan for Renovation,
Modernization and Life Extension of Thermal Power Stations (up to 2016-17)
1.13 THE NEED AND JUSTIFICATION FOR SUSTAINED SUPPORT FOR FUNDING EE R&M AND LE OF OLDER UNITS
1.13.1 Brief background given above seeks for
increased support for funding EE R&M and LE Units. Cost effectiveness resulting
from benefits though EE R&M and LE Units is indicated below:
|
Parameters
|
Cost Effectiveness
resulting from Benefits through Energy Efficient Renovation & Modernization
and Life Extension
|
|
1.
Benefit to Power Plant
|
1.1
Enhancement in plant capacity
1.2
Reduction in auxiliary consumption
1.3
Increase in Plant Load Factor (PLF)
1.4
Increase in Generation
1.5
Increase in saleable energy
1.6
Decrease in Station Heat Rate (SHR)
1.7
Decrease in specific coal consumption
1.8
Decrease in specific oil consumption
1.9
Life extension by 15-20 years of the Plant.
|
|
2.
Economic viability of intended measures
|
2.1
Improvement in auxiliary consumption and PLF will result in availability of additional saleable energy to the utility.
2.2
Utility will be able to realize additional revenue from the sale of available additional energy.
2.3
Station Heat Rate will decrease resulting in fuel saving in coal consumption and saving in total operational expenditure of the plant.
2.4
Secondary Oil consumption will decrease resulting in secondary oil consumption and saving in total operational
expenditure of the plant.
2.5
Utility is expected to earn overall economic benefit annually from the additional saleable energy and savings in expenditure of coal and oil consumption.
2.6
Above measures are expected to increase Economic Internal Rate of Return (EIRR) of the Unit and may result in positive over the Weighted
Average Cost of Capital (WACC)
which will enable to establish the economic
viability of the Unit.
|
|
3.
Benefit Cost Ratio (BCR)
|
3..1
Benefit Cost Ratio will be higher on
the basis of Gross Revenue to Capital Cost compared as
per the existing capacity and enhanced capacity which justifies
capital investment under the proposed
measures for improvement of the performance
of plant through energy efficient
R&M and LE.
3.2 Benefit
Cost Ratio on the basis of R&M
cost to creation of new capacity cost will
have resultant economic benefits
under R&M and LE measures
– (a) savings in capital cost and (b)
savings in per MW capital cost.
|
|
4.
Financial position of Utility
|
4.1
Additional revenue availability, reduction
in expenditure on account of fuel consumption
and power purchase requirement will
provide adequate surplus comfort in its
financial position. Additional financial surplus becoming available is expected
to result in increased profitability before tax which, after meeting the debt
obligation over the amortized period, likely to leave sufficient reserve to provide
reasonable return on investment and to meet future capital investment program.
|
|
5.
Benefit to Indian/State Economy
|
5.1
Gap between Demand and Supply in terms of peak power and
energy will narrow down to the extent of availability of power and energy
5.2
Industries, agriculture
and commercial sectors will have availability of additional energy which enable
their contribution to economic growth
5.3
Minimizes power
purchase requirement from outside the State and results in saving of sizable expenditure
on that account.
5.4
Increase in revenue
availability, reduction in power purchase expenditure, savings in fuel consumption
and the differential cost between R&M measures and the need to create new
equal capacity for meeting shortages will lessen budgetary support burden to the
plant by the State besides ensuring conservation of coal resources.
|
1.13.2 R&M
comparison with New capacity addition
|
Particulars
|
R&M
|
New Capacity Addition
|
|
Timelines
|
10-12 months
|
38-42 months
|
|
Costs
|
Rs 2-2.5 Crore/MW
|
Rs 4-5 Crore/MW
|
|
Land acquisition issues
|
None
|
High
|
|
Environmental Clearances
|
Negligible
|
High
|
|
Fuel and water linkages
|
Already present
|
To be developed
|
|
Emissions
|
Only marginal addition/MW
|
0.94 Kg/unit of CO2
emissions*
|
|
Transmission Capacity
|
Network already present
|
To be developed
|
|
Labor costs
|
Only marginal addition/MW
|
15-20 % of average cost
of supply / unit *
|
|
Power purchase agreements
(PPAs)
|
Already present
|
To be developed
|
Source: Opportunities and challenges - PwC Report
PFC and REC need to recognize above essential
aspects and benefits of EE R&M and LE Program and place it on a different footing
for financing the Units under the program with reasonable terms and conditions and
relaxations as are called for as additional comfort to borrowing Utilities to enable
them to achieve end objectives of the program. Based on the above considerations,
certain relaxations are proposed in the above terms and conditions of Line of Credit.
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