DEVELOPMENT OF ULTRA MEGA POWER PROJECTS

Shyam Wadhera Director (Projects) Power Finance Corporation Ltd. 11th May, 2006

THE CONCEPT: DEVELOPMENT OF LARGE GENERATION PROJECTS THROUGH COMPETITIVE BIDDING

Setting up of large projects of 4000 MW at a single location: ensuring economies of scale Utilisation of super critical technology: ensuring higher efficiency and lower CO2 emissions Award of projects to developer through tariff based competitive bidding : ensuring cheaper power

THE APPROACH

Guidelines for determination of tariff through bidding process were issued on 19th January, 2005 under Section 63 of the Electricity Act, 2003. These provide for procurement of power by Distribution Licensees through competitive bidding Separate SPVs for each project to undertake project development activities including bid process management on behalf of procurers

TECHNICAL FEATURES
Utilisation of higher efficiency super critical technology with unit size of 800 MW

Station capacity of about 4000 MW (5x800 MW)

Flexibility re: unit size to be permitted, subject to meeting thermal efficiency requirements

SITE SELECTION

Site selection by CEA taking into consideration availability of fuel, land and water etc. 5 suitable locations identified based on preliminary scrutiny by CEA of a number of potential sites available in the country :

Two pithead locations based on domestic coal.

Sasan in MP Akaltara in Chhattisgarh

Three coastal locations based on imported coal.

Mundra in Gujarat Girye in Maharashtra Tadri in Karnataka

One additional pithead site in Orissa and one coastal site in Andhra Pradesh are also under consideration

LEARNING FROM PAST EXPERIENCE

IPP experience in the past highlights critical importance of availability of

Reliable fuel supply Environmental clearances

Power purchase agreement with payment security for achieving financial closure

Shell Companies to obtain statutory clearances and to tie-up inputs

THE SHELL COMPANY CONCEPT

PFC identified as the nodal agency Shell Companies set up as wholly owned subsidiaries of PFC. Each Company to work independently to reach a stage where major tie-ups, statutory clearances and linkages are in place. Selection of developer through tariff based ICB.

Shell companies will then be transferred to the successful bidders for execution of projects.

ROLE OF MINISTRY OF POWER

Ministry of Power to be facilitator Co-ordination with concerned Ministries/ Agencies and State Govts. for ensuring:

Coal block allotment/ coal linkage Environment/ forest clearances Facilitate acquisition of land Required support from State Govt. & its agencies on various issues Financial closure by Financial Institutions To facilitate PPA and proper payment security mechanism with State Govt./ State utilities Monitoring the progress of shell companies w.r.t predetermined timelines

ROLE OF SHELL COMPANIES

Shell Companies to take action for:

Appointment of Consultants to undertake preparation of Project Report Initiate land acquisition proceedings Obtain coal linkages/ allocation of captive coal blocks for pithead projects. Allocation of water by the State Govt. for pit-head locations Approval for use of seawater from Maritime Board/ other Govt. Agencies for coastal locations Appointment of Consultants for International Competitive Bidding (ICB), document preparation & evaluation.

Contd..

ROLE OF SHELL COMPANIES

.Contd.

Obtain various approvals and statutory clearances.

Tie up for off-take/ sale of power as per provisions of Section 63 of EA 2003.

Initiate action for development of the power evacuation system and undertake system studies considering the addition of capacity from these projects

BIDDING PROCESS

For the purpose of selection of a developer, a two stage selection process has been adopted.

The first stage of bidding will involve Request For Qualification (RFQ) containing qualifying criteria for selection of bidders to participate in the second stage. The second stage of bidding will invite Request For Proposals (RFP) from the qualified bidders which will further be evaluated by the SPVs with help of appointed consultants.

The RfQ and RfP documents will conform to Competitive Bidding Guidelines of the Govt. of India

TIME SCHEDULE FOR FIRST TWO PROJECTS Activity Notice for EoI for Sasan/ Mundra Date 31-1-06/ 1-2-06

Submission of EoI for Sasan/ Mundra

Issue of RFQ Documents for Sasan/ Mundra Submission of Bids (RFQ)

28-Feb-2006
31-Mar-2006 01-June-2006

Issue of RFP Documents

Submission of Bids (RFP) Selection of Developer/ Transfer of SPV

15-June-2006
15-Nov-2006 31-Dec-2006

ACTIONS TAKEN BY SHELL COMPANIES

Issuance of EOI:
Sasan (MP) Mundra (Gujarat) Girye (Maharashtra) Tadri (Karnataka) 31-Jan-2006 01-Feb-2006 28-Feb-2006 10-Mar-2006

Bidders Conference:
Sasan & Mundra at New Delhi Girye at Mumbai 21-Feb-2006 17-Apr-2006

Site visit for Bidders

Sasan and Mundra sites 22nd to 24th Feb 2006

The Conference attended by about 35 companies including Overseas Companies and representative of FIs/ Banks.

Contd..

ACTIONS TAKEN BY SHELL COMPANIES

.contd

Technical Consultants appointed for preparation of Project Reports for 5 projects Studies started by the consultants for Sasan and Mundra Projects. Consultant appointed for preparation of bidding documents and to advise regarding bid process management for the tariff based competitive bidding for Sasan and Mundra projects

SCOPE OF TECHNICAL CONSULTANCY

Scope of Work: Topographical Survey Geo Technical Study Area drainage Study EIA Study Socio Economic survey Hydrographic Study (for coastal projects)

Completion Schedule: 15-6-06 for Sasan & Mundra

SCOPE OF BIDDING CONSULTANCY

Scope of Work: To prepare documents for Request for Qualification To assist & advise in carrying out detailed evaluation of RFQ To prepare documents for Request for Proposal (RFP) To participate in all Bidders Conference To Prepare bid evaluation Financial models to carry out analysis of Bid including sensitivity analysis To assist & advise in detailed evaluation of RFP received To analyse project risks and advise on risk allocation matrix To assist & advise in selection of successful developers and participate in negotiations.

GOVERNMENT SUPPORT :
Support of State Govt: Periodic meetings by Ministry of Power with Senior State Govt. Officials to obtain their support on issues relating to land, water, environment issues
Support of Financial Institutions: Meeting taken by Secretary (Power) with Heads of Financial Institutions on 6-01-2006 Support of Industry: Meeting taken by Honble Finance Minister with Industry Leaders on 13-01-2006

GOVERNMENT SUPPORT :

.Contd.

Support of Govt. of India: Development of Ultra Mega Power Projects discussed in Meeting of Energy Co-ordination Committee Chaired by Honble Prime Minister on 10-02-2006 Purchase of Power: Meeting taken by Secretary (Power) with Principal Secretaries and Utility Chiefs of purchasing states on 16-02-2006 Transparent Bidding Process: Bidders Conference for Sasan and Mundra projects held at New Delhi on 21-02-2006 Broad Qualifying Requirements discussed and consensus evolved
Contd..

POWER OFF-TAKE
S.No.
1 2 3 4 5 6 7 8 9 10 11 12 13 14

State\ Project ->

Delhi Uttar Pradesh Uttaranchal Punjab Rajasthan Haryana Madhya Pradesh Chattisgarh Guajarat Maharashtra Karnataka Tamil Nadu Kerala Andhara Pradesh

Sasan (MP)
500 500 100 600 400 450 1200 250 -

Mundra(Gujarat)
300 500 400 400 1600 800 -

Girye(Mah.)
500 500 500 2000 500 -

Karnataka
300 1000 1500 1000 200 -

TOTAL

4000

4000

4000

4000

PAYMENT SECURITY MECHANISM

As condition in PPA

Letter of credit (LC) by distribution utilities Escrow on the receivables of distribution utilities Direct supply to HT consumers in the unlikely event of default as per provisions of the Electricity Act 2003 to be accepted upfront

INVOLVEMENT OF OTHER STAKEHOLDERS

Meeting with Secretary (Coal) on 01.03.2006 regarding allocation of captive coal blocks Meeting with Secretary (Environment) on 09.03.2006 to emphasise fast track environmental clearance for the Ultra Mega Power Projects Presentation given to Dy. Chairman, Planning Commission on 27.03.2006 Meeting with Bidders on 8.4.06 at New Delhi for clarification of RfQ issues Presentation to Expert Committee (Thermal) of MoEF on 20.04.2006 A presentation to Chairman and Members, CERC on 26.04.06
Contd..

..and the Process Continues

THANK YOU